UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN PROXY

STATEMENT SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

 

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☒		Definitive Proxy Statement
☐		Definitive Additional Materials
☐		Soliciting Material under §240.14a-12

Covanta Holding Corporation

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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COVANTA HOLDING CORPORATION

445 South Street

Morristown, New Jersey 07960

September 2, 2021

Dear Stockholder:

You are cordially invited to attend a special meeting of stockholders of Covanta Holding Corporation, a Delaware corporation (the “Company”), to be held virtually via live webcast on October 12, 2021, at 11:00 a.m. Eastern Time, at www.virtualshareholdermeeting.com/CVA2021SM (including any adjournments or postponements thereof, the “special meeting”). The purpose of the special meeting is to consider and vote on proposals relating to the proposed acquisition of the Company by Covert Intermediate, Inc., a Delaware corporation (“Parent”), for $20.25 per share, in cash. Parent is an indirect wholly owned subsidiary of funds affiliated with EQT Infrastructure. Regardless of whether you plan to attend the special meeting, we encourage you to vote your shares by mail, telephone or through the Internet following the procedures outlined below.

On July 14, 2021, the Company entered into an Agreement and Plan of Merger (as it may be amended, modified or supplemented from time to time, the “merger agreement”) with Parent and Covert Mergeco, Inc., a Delaware corporation and wholly owned subsidiary of Parent (“Merger Sub”), providing for, subject to the satisfaction or waiver of specified conditions, the acquisition of the Company by Parent at a price of $20.25 per share, in cash. Upon the terms and subject to the conditions of the merger agreement, Merger Sub will be merged with and into the Company (the “merger”), with the Company surviving the merger as a wholly owned subsidiary of Parent. At the special meeting, the Company will ask you to adopt the merger agreement.

At the effective time of the merger, each share of the Company’s common stock that is issued and outstanding immediately prior to the effective time of the merger (other than (i) shares owned, directly or indirectly, by Parent, the Company (including shares held as treasury stock or otherwise) or Merger Sub and (ii) shares held by stockholders who are entitled to demand and have properly exercised appraisal rights in respect of such shares in accordance with Section 262 of the Delaware General Corporation Law) will automatically be canceled and cease to exist and each holder of such shares will cease to have any rights with respect to such shares, except the right to receive $20.25 per share, in cash, without interest, less any required withholding taxes.

The proxy statement accompanying this letter provides you with more specific information concerning the special meeting, the merger agreement, the merger and the other transactions contemplated by the merger agreement. In light of the ongoing coronavirus (COVID-19) pandemic, the 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. You should carefully read the accompanying proxy statement and the copy of the merger agreement attached as Annex A to the accompanying proxy statement.

The board of directors of the Company (the “Board”) carefully reviewed and considered the terms and conditions of the merger agreement, the merger and the other transactions contemplated by the merger agreement. By a unanimous vote, the Board (i) determined that the terms of the merger agreement and the transactions contemplated thereby, including the merger, are fair to, and in the best interests of, the Company and its stockholders, (ii) determined that it is in the best interests of the Company and its stockholders and declared it

advisable for the Company to enter into the merger agreement, (iii) approved the execution and delivery by the Company of the merger agreement, the performance by the Company of its covenants and agreements contained therein and the consummation of the transactions contemplated by the merger agreement, including the merger, upon the terms and subject to the conditions contained therein, (iv) recommended that the Company’s stockholders approve the merger and adopt the merger agreement and (v) directed that such matter be submitted to the stockholders of the Company at a meeting of such stockholders. Accordingly, the Board unanimously recommends you vote “FOR” the proposal to adopt the merger agreement and the other proposals to be voted on at the special meeting, which are described in the proxy statement accompanying this letter.

Your vote is important. Whether or not you plan to virtually attend the special meeting and regardless of the number of shares you own, your careful consideration of, and vote on, the proposal to adopt the merger agreement and the other proposals to be voted on at the special meeting is important, and we encourage you to vote promptly. The merger cannot be completed unless the merger agreement is adopted by stockholders holding a majority of the outstanding shares of the Company’s common stock entitled to vote on such matter. The failure to vote on the proposal to adopt the merger agreement will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement.

After reading the accompanying proxy statement, please make sure to vote your shares promptly by completing, signing and dating the accompanying proxy card and returning it in the enclosed prepaid envelope or by voting by telephone or through the Internet by following the instructions on the accompanying proxy card. If you hold shares through an account with a bank, broker, trust or other nominee, please follow the instructions you receive from it to vote your shares.

Thank you in advance for your continued support and your consideration of this matter.

 

Samuel Zell		Michael W. Ranger
Chairman of the Board		President and Chief Executive Officer

Neither the United States Securities and Exchange Commission nor any state securities regulatory agency has approved or disapproved the merger or the other transactions contemplated by the merger agreement, passed upon the merits or fairness of the merger or the other transactions contemplated by the merger agreement or passed upon the adequacy or accuracy of the disclosure in this letter or the accompanying proxy statement. Any representation to the contrary is a criminal offense.

The accompanying proxy statement is dated September 2, 2021 and is first being mailed to the Company’s stockholders on or about September 2, 2021.

 

COVANTA HOLDING CORPORATION

445 South Street

Morristown, New Jersey 07960

 

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

 

 

To Be Held Virtually via the Internet on October 12, 2021

To the Stockholders of Covanta Holding Corporation:

A special meeting of stockholders of Covanta Holding Corporation, a Delaware corporation (the “Company”), will be held virtually via live webcast on October 12, 2021, at 11:00 a.m. Eastern Time, at www.virtualshareholdermeeting.com/CVA2021SM (including any postponements or adjournments thereof, the “special meeting”), for the following purposes:

 

1.

to consider and vote on a proposal to adopt the Agreement and Plan of Merger, dated as of July 14, 2021 (as it may be amended, modified or supplemented from time to time, the “merger agreement”), by and among the Company, Covert Intermediate, Inc., a Delaware corporation (“Parent”), and Covert Mergeco, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”), pursuant to which Merger Sub will be merged with and into the Company (the “merger”), with the Company surviving as a wholly owned subsidiary of Parent;

 

2.

to consider and vote on a proposal to approve, by a non-binding advisory vote, the compensation that will be paid or become payable to the Company’s named executive officers that is based on or otherwise relates to the merger; and

 

3.

to consider and vote on a proposal to adjourn the special meeting to a later date or time if necessary or appropriate, including to solicit additional proxies in favor of the proposal to adopt the merger agreement if there are insufficient votes at the time of the special meeting to adopt the merger agreement.

Stockholders of record at the close of business on August 31, 2021 are entitled to notice of, and to vote at, the special meeting. In light of the ongoing coronavirus (COVID-19) pandemic, the special meeting will be held in a virtual meeting format only, via live webcast, without a physical meeting location. You will be able to listen, vote, and submit questions from any remote location that has Internet connectivity. You may participate online by logging in at www.virtualshareholdermeeting.com/CVA2021SM and entering the 16-digit control number, or by following the instructions that accompanied your proxy materials. 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.

A list of the Company stockholders entitled to vote at the special meeting will be available for examination by any Company stockholder at the special meeting via the special meeting website at www.virtualshareholdermeeting.com/CVA2021SM. At least ten days prior to the date of the special meeting, this stockholder list will be available for inspection by the Company stockholders for any purpose germane to the special meeting during ordinary business hours at the Company’s principal executive offices located at 445 South Street, Morristown, New Jersey 07960.

For more information concerning the special meeting, the merger agreement, the merger and the other transactions contemplated by the merger agreement, please review the accompanying proxy statement and the copy of the merger agreement attached as Annex A to the accompanying proxy statement.

The board of directors of the Company (the “Board”) carefully reviewed and considered the terms and conditions of the merger agreement, the merger and the other transactions contemplated by the merger agreement. By a unanimous vote, the Board (i) determined that the terms of the merger agreement and the transactions contemplated thereby, including the merger, are fair to, and in the best interests of, the Company and its stockholders, (ii) determined that it is in the best interests of the Company and its stockholders and declared it advisable for the Company to enter into the merger agreement, (iii) approved the execution and delivery by the Company of the merger agreement, the performance by the Company of its covenants and agreements contained therein and the consummation of the transactions contemplated by the merger agreement, including the merger, upon the terms and subject to the conditions contained therein, (iv) recommended that the Company’s stockholders approve the merger and adopt the merger agreement and (v) directed that such matter be submitted to the stockholders of the Company at a meeting of such stockholders.

The Board unanimously recommends that at the special meeting you vote “FOR” the proposal to adopt the merger agreement, “FOR” the approval, by a non-binding advisory vote, of the compensation that will be paid or become payable to the Company’s named executive officers that is based on or otherwise relates to the merger and “FOR” the proposal to adjourn the special meeting if necessary or appropriate, including to solicit additional proxies.

To assure that your shares are represented at the special meeting, regardless of whether you plan to attend the special meeting virtually, please fill in your vote, sign and mail the enclosed proxy card as soon as possible. We have enclosed a return envelope, which requires no postage if mailed in the United States. Alternatively, you may vote by telephone or through the Internet. Instructions regarding each of the methods of voting are provided on the enclosed proxy card. If you are voting by telephone or through the Internet, then your voting instructions must be received by 11:59 p.m. Eastern Time on the day before the special meeting. Your proxy is being solicited by the Board and the other participants named in the accompanying proxy statement.

If you have any questions about the merger or how to submit your proxy, or if you need additional copies of this proxy statement or the enclosed proxy card or voting instructions, please call our proxy solicitor, Innisfree M&A Incorporated, toll free at 877-750-0926.

If you fail to return your proxy, vote by telephone or through the Internet or attend the special meeting virtually, your shares will not be counted for purposes of determining whether a quorum is present at the special meeting and will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement.

 

Morristown, New Jersey

September 2, 2021

Please Vote Today—Your Vote is Important

TABLE OF CONTENTS

 

SUMMARY TERM SHEET			1
The Parties			1
The Merger			1
The Special Meeting			2
Stockholders Entitled to Vote; Vote Required to Adopt the Merger Agreement			2
How to Vote			2
Recommendation of the Board; Reasons for Recommending the Adoption of the Merger Agreement			3
Opinion of BofA Securities, Inc.			3
Market Price and Dividend Data			4
Certain Effects of the Merger			4
Consequences if the Merger is Not Completed			4
Treatment of Company Equity Awards			5
Interests of Directors and Executive Officers in the Merger			7
The Voting Agreement			7
Conditions to the Merger			8
Regulatory Approvals			9
Financing of the Merger			10
Equity Commitment Letter			11
Restrictions on Solicitation of Acquisition Proposals			11
Obligation of the Board with Respect to Its Recommendation			12
Termination of the Merger Agreement			13
Expenses; Termination Fees; Limitations of Liability			15
Appraisal Rights			16
Litigation Related to the Merger			16
Material U.S. Federal Income Tax Consequences of the Merger			17
Additional Information			17
QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER			18
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS			27
PARTIES TO THE MERGER			29
The Company			29
Parent			29
Merger Sub			29
THE SPECIAL MEETING			31
PROPOSAL 1: ADOPTION OF THE MERGER AGREEMENT			36
PROPOSAL 2: NON-BINDING COMPENSATION ADVISORY PROPOSAL			37
PROPOSAL 3: AUTHORITY TO ADJOURN THE SPECIAL MEETING			38
THE MERGER			39
Overview			39
Background of the Merger			39
Recommendation of the Board			48
Reasons for Recommending the Adoption of the Merger Agreement			49
Forward-Looking Financial Information			54
Opinion of BofA Securities, Inc.			56
Interests of Directors and Executive Officers in the Merger			65
Certain Effects of the Merger			74
Consequences if the Merger is Not Completed			74

 

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Financing of the Merger			75
Material U.S. Federal Income Tax Consequences of the Merger			77
Regulatory Approvals Required for the Merger			80
Litigation Related to the Merger			82
THE AGREEMENT AND PLAN OF MERGER			83
THE VOTING AGREEMENT			112
APPRAISAL RIGHTS			115
MARKET PRICE AND DIVIDEND DATA			120
STOCK OWNERSHIP			122
OTHER MATTERS			126
FUTURE STOCKHOLDER PROPOSALS			127
HOUSEHOLDING OF PROXY MATERIAL			128
WHERE YOU CAN FIND MORE INFORMATION			129

 

Annex A—Agreement and Plan of Merger			A-1
Annex B—Voting Agreement			B-1
Annex C—Opinion of BofA Securities, Inc.			C-1
Annex D—Section 262 of the Delaware General Corporation Law			D-1

 

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QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER

The following questions and answers are intended to briefly address some commonly asked questions regarding the special meeting and the merger. These questions and answers may not address all questions that may be important to you as a Company stockholder. Please refer to the more detailed information contained elsewhere in this proxy statement, the Annexes to this proxy statement and the documents referred to in this proxy statement.

 

Q:	Why am I receiving this proxy statement?

 

A:

On July 14, 2021, the Company entered into the merger agreement with Parent and Merger Sub providing for the acquisition of the Company by Parent for a price of $20.25 per share, in cash, without interest, less any required withholding taxes. You are receiving this proxy statement in connection with the solicitation of proxies by the Board in favor of the proposal to adopt the merger agreement and to approve the other related proposals to be voted on at the special meeting.

 

Q:	As a stockholder of the Company, what will I receive in the merger?

 

A:

If the merger is completed, you will be entitled to receive $20.25 in cash, without interest, less any required withholding taxes, for each share of Company common stock you own as of immediately prior to the effective time of the merger, unless you have properly exercised and perfected your demand for appraisal rights in accordance with Section 262 of the DGCL with respect to such shares.

The receipt of cash in exchange for shares of Company common stock pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes. In general, a U.S. holder (as such term is defined below in the section entitled “The Merger—Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 77) will recognize gain or loss for U.S. federal income tax purposes equal to the difference, if any, between the amount of cash received in exchange for the U.S. holder’s shares pursuant to the merger and the holder’s adjusted tax basis in such shares. A non-U.S. holder (as such term is defined below in the section entitled “The Merger—Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 77) generally will not be required to recognize gain or loss for U.S. federal income tax purposes on the receipt of cash in exchange for the non-U.S. holder’s shares pursuant to the merger, unless the non-U.S. holder has certain connections to the United States or the Company is or has been a “United States real property holding corporation” (which is not expected, as discussed in the section entitled “The Merger—Material U.S. Federal Income Tax Consequences of the Merger—Tax Consequences to Non-U.S. Holders”) and certain other conditions are satisfied. The Company stockholders should consult their tax advisors regarding the particular tax consequences of the exchange of shares of Company common stock for the merger consideration pursuant to the merger in light of their particular circumstances (including the application and effect of any state, local or non-U.S. income and other tax laws).

For additional information, see the section entitled “The Merger—Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 77.

 

Q:	What will happen to my Company stock options in the merger?

 

A:

Unless otherwise agreed between Parent and the holder thereof, effective as of immediately prior to the effective time of the merger, each then-outstanding and unexercised Company stock option (whether vested or unvested) will automatically be canceled, and each holder of any such canceled Company stock option will be entitled to receive a lump-sum amount of cash equal to the product of (i) the total number of shares of Company common stock then underlying each such Company stock option and (ii) the excess, if any, of the merger consideration over the exercise price per share of each such canceled Company stock option, without any interest and subject to all applicable withholding. In the event that the exercise price of a Company stock option is equal to or greater than the merger consideration, such Company stock option will be canceled, without any consideration being payable in respect thereof, and have no further force or effect.

 

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For additional information regarding the treatment of outstanding Company equity awards, see the section entitled “The Agreement and Plan of Merger—Treatment of Company Equity Awards” beginning on page 84.

 

Q:	What will happen to my Company RSUs in the merger?

 

A:

Unless otherwise agreed between Parent and the holder thereof, effective as of immediately prior to the effective time of the merger, each then-outstanding Company RSU (whether vested or unvested) will automatically be canceled, and each holder of any such canceled Company RSU will be entitled to receive a lump-sum amount of cash equal to (a) the product of (i) the total number of shares of Company common stock underlying each such canceled Company RSU and (ii) the merger consideration, without any interest and subject to all applicable withholding, plus (b) all accrued but unpaid dividend equivalents. Parent and the Company have agreed that if the merger does not close by March 1, 2022 (or the date of the Company’s 2022 annual stockholder meeting, in the case of non-employee directors) and Company RSUs are granted in 2022, those Company RSUs will vest in the merger pro rata for the time elapsed between January 1, 2022 and the closing date, and the remainder of any such 2022 grants will be forfeited.

For additional information regarding the treatment of outstanding Company equity awards, see the section entitled “The Agreement and Plan of Merger—Treatment of Company Equity Awards” beginning on page 86.

 

Q:	What will happen to my Company PSUs in the merger?

 

A:

Unless otherwise agreed between Parent and the holder thereof, effective as of immediately prior to the effective time of the merger, each then-outstanding and unvested Company PSU will be (i) deemed earned based on the actual performance through the latest practicable date prior to the closing of the merger, which level of actual performance will be determined in good faith by the Company at or before the closing, and (ii) canceled and converted into the right to receive a lump-sum amount of cash equal to (a) the product of (x) the resulting total number of shares of Company common stock underlying each such canceled vested Company PSU and (y) the merger consideration, without any interest and subject to all applicable withholding, plus (b) all accrued but unpaid dividend equivalents. Parent and the Company have agreed that if the merger does not close by March 1, 2022 and Company PSUs are granted in 2022, those Company PSUs will vest in the merger at target levels pro rata for the time elapsed between January 1, 2022 and the closing date, and the remainder of any such 2022 grants will be forfeited.

For additional information regarding the treatment of outstanding Company equity awards, see the section entitled “The Agreement and Plan of Merger—Treatment of Company Equity Awards” beginning on page 86.

 

Q:	What will happen to my Company Restricted Stock in the merger?

 

A:

Unless otherwise agreed between Parent and the holder thereof, effective as of immediately prior to the effective time of the merger, each share of Company Restricted Stock that is outstanding immediately prior to the effective time of the merger will automatically vest in full and all restrictions (including forfeiture restrictions) otherwise applicable to each share of Company Restricted Stock will lapse, and each such share of Company Restricted Stock will be converted into the right to receive the merger consideration.

 

Q:	Where and when will the special meeting of stockholders be held?

 

A:

The special meeting of the Company stockholders will be held virtually via the Internet on October 12, 2021, at 11:00 a.m. Eastern Time, at www.virtualshareholdermeeting.com/CVA2021SM. The special meeting will be held solely via live webcast, and there will not be a physical meeting location. Company stockholders will be able to attend the special meeting by visiting the special meeting website. If you choose to attend the special meeting and vote your shares via the special meeting website, you will need the 16-digit control number included on your proxy card.

 

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Q:	Who is entitled to vote at the special meeting?

 

A:

Only holders of record of Company common stock as of the close of business on August 31, 2021, the record date for the special meeting, are entitled to receive these proxy materials and to vote at the special meeting. You will be entitled to one vote on each of the proposals presented in this proxy statement for each outstanding share of Company common stock that you held on the record date.

 

Q:	What proposals will be considered at the special meeting?

 

A:	At the special meeting, you will be asked to consider and vote on:

 

•

a proposal to adopt the merger agreement;

 

•

a proposal to approve, by a non-binding advisory vote, the compensation that will be paid or become payable to the Company’s named executive officers that is based on or otherwise relates to the merger, as discussed in the section entitled “The Merger—Interests of Directors and Executive Officers in the Merger” beginning on page 65; and

 

•

a proposal to adjourn the special meeting to a later date or time if necessary, including to solicit additional proxies in favor of the proposal to adopt the merger agreement if there are insufficient votes at the time of the special meeting to adopt the merger agreement.

 

Q:	What vote is required to approve each of the proposals?

 

A:

The proposal to adopt the merger agreement requires the affirmative vote of the holders of a majority of the issued and outstanding shares of Company common stock entitled to vote on such matter. Abstentions and failures to vote (including a failure to instruct your broker, bank or other nominee to vote shares held on your behalf) will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement.

The approval of the non-binding compensation advisory proposal requires the affirmative vote of holders of a majority of the shares of Company common stock present virtually or represented by proxy at the special meeting and entitled to vote on such matter. Although the Board intends to consider the vote resulting from this proposal, the vote is advisory only and, therefore, is not binding on the Company or Parent or any of their respective subsidiaries, and, if the merger agreement is adopted by the Company stockholders and the merger is completed, the compensation that is based on or otherwise relates to the merger will be payable to our named executive officers in accordance with the terms of their compensation agreements and arrangements even if this proposal is not approved. An abstention from voting will have the same effect as a vote “AGAINST” the non-binding compensation advisory proposal.

The approval of the proposal to adjourn the special meeting if necessary or appropriate requires the affirmative vote of holders of a majority of the shares of Company common stock present virtually or represented by proxy at the special meeting and entitled to vote on such matter. In addition, even if a quorum is not present at the special meeting, the chairman of the meeting may adjourn the meeting to another place, date or time, from time to time, until a quorum is present or represented. In each case, an abstention from voting will have the same effect as a vote “AGAINST” the proposal to adjourn the special meeting if necessary or appropriate.

The Company may not adjourn or postpone the special meeting except (a) with the consent of Parent, (b) for the absence of a quorum, (c) after consultation with Parent, to allow reasonable additional time for any supplemental or amended disclosure which the Company has determined in good faith (after consultation with outside counsel) is necessary under applicable law and for such supplemental or amended disclosure to be disseminated and reviewed by the Company’s stockholders prior to the special meeting or (d) to allow additional solicitation of votes to the extent necessary in order to obtain the Company stockholder approval at the special meeting. The Company must, upon the request of Parent, adjourn or postpone the special meeting in the event of clauses (b), (c) and (d) above.

 

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Q:	How does the Board recommend that I vote on the proposals?

 

A:

Upon careful consideration, the Board has unanimously determined that the transactions contemplated by the merger agreement, including the merger, are in the best interests of the Company and its stockholders, and unanimously recommends that you vote “FOR” the proposal to adopt the merger agreement, “FOR” the non-binding compensation advisory proposal and “FOR” the proposal to adjourn the special meeting if necessary or appropriate.

For a discussion of the factors that the Board considered in determining to recommend the adoption of the merger agreement, see the section entitled “The Merger—Reasons for Recommending the Adoption of the Merger Agreement” beginning on page 49. In addition, in considering the recommendation of the Board with respect to the merger agreement, you should be aware that some of our directors and executive officers have interests that may be different from, or in addition to, the interests of the Company stockholders generally. For additional information, see the section entitled “The Merger—Interests of Directors and Executive Officers in the Merger” beginning on page 65.

 

Q:	Have any of the Company’s stockholders already agreed to approve the proposal to adopt the merger agreement?

 

A:

Yes, pursuant to a voting agreement, entities associated with Samuel Zell, the chairman of the Board, including the Samuel Zell Revocable Trust, the Zell Family Foundation, SZ Investments, L.L.C. and its permitted transferees, the Zell Family Trusts, and EGI-Fund (05-07) Investors, L.L.C. have agreed, among other things, to vote a total of 13,186,845 shares of Company common stock, representing approximately 9.9% of the outstanding shares of the Company common stock as of July 14, 2021, in favor of (i) the proposal to adopt the merger agreement, (ii) the non-binding compensation advisory proposal and (iii) the proposal to adjourn the special meeting if necessary or appropriate, and against (a) any action or agreement that would reasonably be expected to result in a breach of the merger agreement or result in any condition to the closing of the merger not being satisfied on a timely basis, (b) any Company acquisition proposal, or any other proposal made in opposition to, in competition with, or inconsistent with, the merger agreement, the merger or the transactions contemplated by the merger agreement and (c) any other action, agreement or proposal that could reasonably be expected to delay, postpone or adversely affect the consummation of the merger or the other transactions contemplated by the merger agreement. The voting agreement allows the voting agreement stockholders to transfer as a gift up to 1,487,209 shares of Company common stock covered by the voting agreement to charitable foundations or organizations, free of restrictions under the voting agreement. If these transfers are made, approximately 8.8% of the outstanding shares of Company common stock will remain subject to the voting agreement. As of August 31, 2021, these transfers had been made to such charitable foundations and such shares are therefore free of restrictions under the voting agreement, but they do continue to be under the voting control of Chai Trust Company, LLC. For additional information, see the section entitled “The Voting Agreement” beginning on page 112.

 

Q:	Do I need to attend the special meeting?

 

A:	No. It is not necessary for you to virtually attend the special meeting via the special meeting website in order to vote your shares. You may vote by mail, by telephone or through the Internet, as described in more detail below.

 

Q:	How many shares are needed to constitute a quorum?

 

A:

The presence at the special meeting, virtually or by proxy, of the holders of a majority of the voting power of the issued and outstanding shares of Company common stock entitled to vote constitutes a quorum for the purpose of considering the proposals. As of the close of business on the record date, there were 133,009,182 shares of Company common stock outstanding. If you are a Company stockholder as of the close of business on the record date and you vote by mail, by telephone, through the Internet or virtually at the

 

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special meeting, you will be considered part of the quorum. If you are a “street name” holder of shares of Company common stock (i.e., you hold your shares in the name of a bank, broker, trust or other nominee) and you provide your bank, broker, trust or other nominee with voting instructions, then your shares will be counted in determining the presence of a quorum. If you are a “street name” holder of shares and you do not provide your bank, broker, trust or other nominee with voting instructions, then your shares will not be counted in determining the presence of a quorum.

All shares of Company common stock held by the Company stockholders that are present virtually, or represented by proxy, and entitled to vote at the special meeting, regardless of how such shares are voted or whether such stockholders have indicated on their proxy that they are abstaining from voting, will be counted in determining the presence of a quorum. In the absence of a quorum, the special meeting may be adjourned.

 

Q:	Why am I being asked to consider and cast a non-binding advisory vote to approve the compensation that will be paid or become payable to the Company’s named executive officers that is based on or otherwise relates to the merger?

 

A:

Under applicable SEC rules, companies are required to seek a non-binding advisory vote to approve certain compensation that will be paid or become payable to their named executive officers that is based on or otherwise relates to corporate transactions, such as the merger. In accordance with the rules promulgated under Section 14A of the Exchange Act, the Company is required to provide its stockholders with the opportunity to cast a non-binding advisory vote on compensation that will be paid or become payable to the Company’s named executive officers in connection with the merger. For additional information, see the section entitled “Proposal 2: Non-Binding Compensation Advisory Proposal” beginning on page 37.

 

Q:	What will happen if the Company stockholders do not approve the non-binding compensation advisory proposal?

 

A:

The vote to approve the non-binding compensation advisory proposal is a vote separate and apart from the vote to adopt the merger agreement. Approval of the non-binding compensation advisory proposal is not a condition to completion of the merger and is advisory in nature only, meaning that it will not be binding on the Company or Parent or any of their respective subsidiaries. Accordingly, if the merger agreement is adopted by the Company stockholders and the merger is completed, the compensation that is based on or otherwise relates to the merger will be payable to our named executive officers in accordance with, and subject to, the terms of their compensation agreements and arrangements even if the non-binding compensation advisory proposal is not approved.

 

Q:	What do I need to do now?

 

A:

After carefully reading and considering the information contained in this proxy statement and the Annexes attached to this proxy statement, please vote your shares of Company common stock in one of the ways described below as soon as possible. You will be entitled to one vote on each of the proposals presented in this proxy statement for each outstanding share of Company common stock that you owned on the record date.

 

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

 

A:	You may vote by:

 

•

submitting your proxy by completing, signing and dating each proxy card you receive and returning it by mail in the enclosed prepaid envelope;

 

•

submitting your proxy by using the telephone number printed on each proxy card you receive;

 

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•

submitting your proxy through the Internet voting instructions printed on each proxy card you receive; or

 

•

appearing virtually at the special meeting and voting electronically.

If you are submitting your proxy by telephone or through the Internet, your voting instructions must be received by 11:59 p.m. Eastern Time on the day before the special meeting.

Submitting your proxy by mail, by telephone or through the Internet will not prevent you from voting virtually at the special meeting. You are encouraged to submit a proxy by mail, by telephone or through the Internet even if you plan to virtually attend the special meeting to ensure that your shares of Company common stock are represented at the special meeting.

If you return your signed and dated proxy card, but do not mark the boxes showing how you wish to vote, your shares will be voted “FOR” the proposal to adopt the merger agreement, “FOR” the approval of the non-binding compensation advisory proposal and “FOR” the approval of the proposal to adjourn the special meeting if necessary or appropriate.

 

Q:	If my shares are held for me by a bank, broker, trust or other nominee, will my bank, broker, trust or other nominee vote those shares for me with respect to the proposals?

 

A:

Your bank, broker, trust or other nominee will NOT have the power to vote your shares of Company common stock at the special meeting unless you provide instructions to your bank, broker, trust or other nominee on how to vote. You should instruct your bank, broker, trust or other nominee on how to vote your shares with respect to the proposals, using the instructions provided by your bank, broker, trust or other nominee. You may be able to vote by telephone or through the Internet if your bank, broker, trust or other nominee offers these options.

 

Q:	What if I fail to instruct my bank, broker, trust or other nominee how to vote?

 

A:

Your bank, broker, trust or other nominee will NOT be able to vote your shares of Company common stock unless you have properly instructed your bank, broker, trust or other nominee on how to vote. Because the proposal to adopt the merger agreement requires the affirmative vote of a majority of the outstanding shares of Company common stock, the failure to provide your nominee with voting instructions will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement. Furthermore, your shares will not be included in the calculation of the number of shares of Company common stock present at the special meeting for purposes of determining whether a quorum is present.

 

Q:	May I change my vote after I have mailed my proxy card or after I have submitted my proxy by telephone or through the Internet?

 

A:	Yes. You may revoke your proxy or change your vote at any time before it is voted at the special meeting.

You may revoke your proxy by delivering a signed written notice of revocation stating that the proxy is revoked and bearing a date later than the date of the proxy to the Company’s Corporate Secretary at Covanta Holding Corporation, 445 South Street, Morristown, New Jersey 07960. You may also revoke your proxy or change your vote by submitting another proxy by telephone or through the Internet in accordance with the instructions on the enclosed proxy card. You may also submit a later-dated proxy card relating to the same shares of Company common stock. If you voted by completing, signing, dating and returning the enclosed proxy card, you should retain a copy of the voter control number found on the proxy card in the event that you later decide to revoke your proxy or change your vote by telephone or through the Internet. Alternatively, your proxy may be revoked or changed by attending the special meeting and voting virtually. However, simply attending the special meeting without voting will not revoke or change your proxy. “Street name” holders of shares of Company common stock should contact their bank, broker, trust or other nominee to obtain instructions as to how to revoke or change their proxies.

 

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If you have instructed a bank, broker, trust or other nominee to vote your shares, you must follow the instructions received from your bank, broker, trust or other nominee to change your vote.

All properly submitted proxies received by us before the special meeting that are not revoked or changed prior to being exercised at the special meeting will be voted at the special meeting in accordance with the instructions indicated on the proxies or, if no instructions were provided, “FOR” each of the proposals.

 

Q:	What does it mean if I receive more than one proxy card?

 

A:

If you receive more than one proxy card, it means that you hold shares of Company common stock that are registered in more than one account. For example, if you own your shares in various registered forms, such as jointly with your spouse, as trustee of a trust or as custodian for a minor, you will receive, and you will need to sign and return, a separate proxy card for those shares because they are held in a different form of record ownership. Therefore, to ensure that all of your shares are voted, you will need to submit your proxies by properly completing and mailing each proxy card you receive or by telephone or through the Internet by using the different voter control number(s) on each proxy card.

 

Q:	What happens if I transfer my shares of Company common stock before the special meeting?

 

A:

The record date for the special meeting is earlier than the date on which the merger is expected to be completed. If you own shares of Company common stock as of the close of business on the record date but transfer your shares prior to the special meeting, you will retain your right to vote at the special meeting, but the right to receive the merger consideration will pass to the person who holds such shares as of immediately prior to the effective time of the merger.

 

Q:	May I exercise dissenters’ rights or rights of appraisal in connection with the merger?

 

A:

Yes. In order to exercise your appraisal rights, you must follow the requirements set forth in Section 262 of the DGCL. Under Delaware law, holders of record of Company common stock who do not vote in favor of adopting the merger agreement will have the right to seek appraisal of the fair value of their shares as determined by the Court of Chancery if the merger is completed. Appraisal rights will be available to these holders only if they deliver a written demand for an appraisal to the Company prior to the vote on the proposal to adopt the merger agreement at the special meeting and they comply with the procedures and requirements set forth in Section 262 of the DGCL, which are summarized in this proxy statement. The appraisal amount could be more than, the same as or less than the amount a stockholder would be entitled to receive under the terms of the merger agreement. A copy of Section 262 of the DGCL is included as Annex D to this proxy statement. For additional information, see the section entitled “Appraisal Rights” beginning on page 115.

 

Q:	If I hold my shares in certificated form, should I send in my stock certificates now?

 

A:

No. Shortly after the merger is completed, stockholders holding certificated shares of Company common stock will be sent a letter of transmittal that includes detailed written instructions on how to return such stock certificates. You must return your stock certificates in accordance with such instructions in order to receive the merger consideration. PLEASE DO NOT SEND IN YOUR STOCK CERTIFICATE(S) NOW.

 

Q:	Should I do anything with respect to my Company equity awards now?

 

A:	No. There is no need for you to do anything with respect to your Company equity awards at this time. For additional information, see the section entitled “The Agreement and Plan of Merger—Treatment of Company Equity Awards” beginning on page 86.

 

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Q:	When is the merger expected to be completed?

 

A:

We and Parent are working toward completing the merger as quickly as possible. We currently anticipate that the merger will be completed in the fourth quarter of 2021 (but no earlier than November 1, 2021), but we cannot be certain when or if the conditions to the merger will be satisfied or, to the extent permitted, waived. The merger cannot be completed until the conditions to closing are satisfied (or, to the extent permitted, waived), including the adoption of the merger agreement by the Company stockholders and the receipt of certain regulatory approvals. For additional information, see the section entitled “The Agreement and Plan of Merger—Conditions to the Merger” beginning on page 105.

 

Q:	What happens if the merger is not completed?

 

A:

If the proposal to adopt the merger agreement is not approved by the holders of a majority of the outstanding shares of Company common stock entitled to vote on the matter or if the merger is not completed for any other reason, you will not receive any consideration from Parent or Merger Sub for your shares of Company common stock. Instead, the Company will remain a public company, and Company common stock will continue to be (i) registered under the Exchange Act and (ii) listed and traded on the NYSE. We expect that our management will operate our business in a manner similar to that in which it is being operated today and that holders of shares of Company common stock will continue to be subject to the same risks and opportunities to which they are currently subject with respect to their ownership of Company common stock.

In addition, upon termination of the merger agreement under certain circumstances, the Company would be obligated to pay Parent the Company termination fee of $81.3 million. If either the Company or Parent terminates the merger agreement as a result of the failure to obtain the Company stockholder approval, the Company will be required to reimburse Parent, Merger Sub and their respective affiliates for all fees and expenses incurred in connection with the merger agreement and the transactions contemplated thereby, up to $6 million.

In the event that the merger agreement is terminated under circumstances in which the reverse termination fee is payable to the Company, then, subject to the Company’s right to obtain specific performance to the extent permitted under the merger agreement, payment of the reverse termination fee and, if applicable, the enforcement expenses, will be the sole and exclusive remedy of the Company against Parent and Merger Sub (including in the event of fraud or willful breach by Parent or Merger Sub). The maximum aggregate liability of Parent and Merger Sub under the merger agreement in the event Parent or Merger Sub fails to consummate the transactions or otherwise fails to comply with or breaches any covenant or other obligation or representation or warranty in the merger agreement (including in the event of fraud or willful breach) shall not exceed an aggregate amount greater than the sum of (i) the amount of the reverse termination fee and (ii) $7 million.

For additional information, see the section entitled “The Merger—Consequences if the Merger is Not Completed” beginning on page 74.

 

Q:	Are there any requirements if I plan on attending the special meeting?

 

A:

If you wish to attend, you must be logged in and registered to virtually attend the special meeting and cast your vote before the announcement of the close of voting during the special meeting. Stockholders of record as of the record date for the special meeting can vote online at the special meeting. If your shares are held in “street name”, then you must ask your broker, bank or other nominee how you can vote at the special meeting. Even if you plan to attend the special meeting online, we encourage you to complete, sign, date and return the enclosed proxy or vote electronically over the Internet or via telephone to ensure that your shares will be represented at the special meeting. If you attend the special meeting and vote online, your vote by ballot at the special meeting will revoke any proxy previously submitted. Please note that no management presentations or other matters are planned for the special meeting, except as described in this proxy statement.

 

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Q:	Who is soliciting my vote?

 

A:

The Board is soliciting your proxy, and the Company will bear the cost of soliciting proxies. Innisfree M&A Incorporated has been retained to assist with the solicitation of proxies. Innisfree M&A Incorporated will be paid approximately $20,000 and will be reimbursed for specified out-of-pocket expenses for these and other advisory services in connection with the special meeting. Solicitation initially will be made by mail. Forms of proxies and proxy materials may also be distributed through brokers, custodians, and other like parties to the beneficial owners of shares of Company common stock, in which case these parties will be reimbursed for their reasonable out-of-pocket expenses. Proxies may also be solicited in person or by telephone, facsimile, electronic mail or other electronic medium by Innisfree M&A Incorporated or, without additional compensation, by the Company, Parent or Merger Sub and certain of the Company’s, Parent’s and Merger Sub’s directors, officers and employees.

 

Q:	Where can I find more information about the Company?

 

A:

The Company files periodic reports, proxy statements and other information with the SEC. You may read and copy any document we file at the SEC’s public reference room located at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. Our SEC filings are also available to the public at the SEC’s website at www.sec.gov. For a more detailed description of the information available, see the section entitled “Where You Can Find More Information” beginning on page 129.

 

Q:	Who can help answer my questions?

 

A:	For additional questions about the merger, assistance in submitting proxies or voting shares of Company common stock, or additional copies of this proxy statement or the enclosed proxy card(s), please contact our proxy solicitor:

 

 

501 Madison Avenue

New York, NY 10022

Toll-Free 877-750-0926

If your shares are held for you by a bank, broker, trust or other nominee, you should also call your bank, broker, trust or other nominee for additional information.

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Statements included in this proxy statement that are not historical in nature may constitute “forward-looking” statements as defined in Section 27A of the Securities Act of 1933 (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”), the Private Securities Litigation Reform Act of 1995 (the “PSLRA”) or in releases made by the Securities and Exchange Commission (“SEC”), all as may be amended from time to time. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of the Company and its subsidiaries or industry results, to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Statements that are not historical fact are forward-looking statements. Forward-looking statements can be identified by, among other things, the use of forward-looking language, such as the words “plan”, “believe”, “expect”, “anticipate”, “intend”, “estimate”, “project”, “may”, “will”, “would”, “could”, “should”, “seeks”, or “scheduled to”, or other similar words, or the negative of these terms or other variations of these terms or comparable language, or by discussion of strategy or intentions. These cautionary statements are being made pursuant to the Securities Act, the Exchange Act and the PSLRA with the intention of obtaining the benefits of the “safe harbor” provisions of such laws. The Company cautions investors that any forward-looking statements made by us are not guarantees or indicative of future performance. Important factors, risks and uncertainties that could cause actual results to differ materially from those forward-looking statements include, but are not limited to:

 

•

the satisfaction of the conditions precedent to the consummation of the merger, including, without limitation, the timely receipt of stockholder and regulatory approvals (or any conditions, limitations or restrictions placed on such approvals);

 

•

unanticipated difficulties or expenditures relating to the merger;

 

•

the occurrence of any event, change or other circumstance that could give rise to the termination of the merger agreement, including in circumstances that would require us to pay a termination fee or reimburse Parent for certain of its expenses;

 

•

legal proceedings, judgments or settlements, including those that may be instituted against us, our Board, our executive officers and others following the announcement of the merger;

 

•

the risk that our stock price may decline significantly if the merger is not consummated;

 

•

the impact of the COVID-19 pandemic on our employees, business, and operations, or on the economy in general, including commercial and financial markets;

 

•

our ability to identify opportunities and execute on strategies and transactions, including in connection with a strategic review of our business and including acquisitions, divestitures, and restructuring opportunities;

 

•

seasonal or long-term fluctuations in the prices of energy, waste disposal, scrap metal and commodities;

 

•

our ability to renew or replace expiring contracts at comparable prices and with other acceptable terms;

 

•

adoption of new laws and regulations in the United States and abroad, including energy laws, environmental laws, tax laws, labor laws and healthcare laws;

 

•

failure to maintain historical performance levels at our facilities and our ability to retain the rights to operate facilities we do not own;

 

•

our ability to avoid adverse publicity or reputational damage relating to our business;

 

•

advances in technology;

 

•

difficulties in the operation of our facilities, including fuel supply and energy delivery interruptions, failure to obtain regulatory approvals, equipment failures, labor disputes and work stoppages, and weather interference and catastrophic events;

 

27

•

difficulties in the financing, development and construction of new projects and expansions, including increased construction costs and delays;

 

•

our ability to realize the benefits of long-term business development and bear the cost of business development over time;

 

•

limits of insurance coverage;

 

•

our ability to avoid defaults under our long-term contracts;

 

•

performance of third parties under our contracts and such third parties’ observance of laws and regulations;

 

•

concentration of suppliers and customers;

 

•

geographic concentration of facilities;

 

•

increased competitiveness in the energy and waste industries;

 

•

changes in foreign currency exchange rates;

 

•

limitations imposed by our existing indebtedness, including limitations on strategic alternatives or transactions;

 

•

our ability to perform our financial obligations and guarantees and to refinance our existing indebtedness;

 

•

exposure to counterparty credit risk and instability of financial institutions in connection with financing transactions;

 

•

the scalability of our business;

 

•

our ability to attract and retain talented people;

 

•

failures of disclosure controls and procedures and internal controls over financial reporting;

 

•

our ability to utilize net operating loss carryforwards;

 

•

general economic conditions in the United States and abroad, including the availability of credit and debt financing; and

 

•

other risks and uncertainties affecting our business described in our annual report on Form 10-K for the fiscal year ended December 31, 2020 filed with the SEC on February 19, 2021 and the Company’s quarterly reports on Form 10-Q for the quarterly periods ended March 31, 2021 and June 30, 2021 filed with the SEC on April 30, 2021 and July 28, 2021, respectively (see the section entitled “Where You Can Find More Information” on page 129).

The Company can give no assurance that the expectations expressed or implied in the forward-looking statements contained herein will be attained. The forward-looking statements are made as of the date of this proxy statement, and the Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date hereof.

For additional information, see the section entitled “The Merger—Forward-Looking Financial Information” beginning on page 54.

 

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PARTIES TO THE MERGER

The Company

Covanta Holding Corporation, a Delaware corporation, is organized as a holding company and conducts all of its operations through subsidiaries, which are engaged predominantly in the business of waste and energy services. The Company’s mission is to provide sustainable waste and energy solutions, and it seeks to do this through a variety of services offerings, including its core business of owning and operating infrastructure for the conversion of waste-to-energy.

The Company’s annual operating revenue was approximately $1.9 billion for the fiscal year ended December 31, 2020. Shares of Company common stock are listed on the NYSE and trade under the symbol “CVA”.

The Company’s principal executive offices are located at 445 South Street, Morristown, New Jersey 07960, and its telephone number is 862-345-5000. Its website address is www.covanta.com. The information provided on the website is not part of this proxy statement and is not incorporated by reference in this proxy statement by this or any other reference to our website in this proxy statement.

Additional information about the Company is contained in the Company’s public filings, which are incorporated by reference in this proxy statement. For additional information, see the section entitled “Where You Can Find More Information” beginning on page 129.

Parent

Covert Intermediate, Inc.

c/o EQT Partners Inc.

1114 Avenue of the Americas, 45th Floor

New York, NY 10036

Covert Intermediate, Inc. is a Delaware corporation formed solely for the purpose of entering into the transactions contemplated by the merger agreement, and has not entered into any business activities other than in connection with the transactions contemplated by the merger agreement and arranging of the equity financing and the debt financing in connection with the merger. Upon completion of the merger, Parent will be the immediate parent company of the Company.

Merger Sub

Covert Mergeco, Inc.

c/o EQT Partners Inc.

1114 Avenue of the Americas, 45th Floor

New York, NY 10036

Covert Mergeco, Inc. is a Delaware corporation and wholly owned subsidiary of Parent formed solely for the purpose of entering into the transactions contemplated by the merger agreement, and has not entered into any business activities other than in connection with the transactions contemplated by the merger agreement and arranging of the equity financing and the debt financing in connection with the merger. Upon completion of the merger, Merger Sub will merge with and into the Company, with the Company surviving, and Merger Sub will cease to exist.

Parent and Merger Sub are each affiliated with (1) EQT Fund Management S.à r.l., which we refer to as “EQT” and (2) EQT Infrastructure V Collect EUR SCSp and EQT Infrastructure V Collect USD SCSp, which we

 

29

collectively refer to as the “EQT Investors”. At the effective time, the Company, as the surviving corporation, will be indirectly owned by, among others, EQT and the EQT Investors.

EQT and the EQT Investors are affiliates of the EQT Infrastructure V fund and EQT AB, a leading investment firm with more than EUR 67 billion in assets under management across 26 active funds and with portfolio companies in Europe, Asia-Pacific and the Americas with total sales of approximately EUR 29 billion and more than 175,000 employees.

 

30

THE SPECIAL MEETING

We are furnishing this proxy statement as part of the solicitation of proxies by the Board for use at the special meeting and at any properly convened meeting following an adjournment or postponement of the special meeting.

Date, Time and Place of the Special Meeting

The special meeting will be held virtually via live webcast on October 12, 2021, at 11:00 a.m. Eastern Time, at www.virtualshareholdermeeting.com/CVA2021SM.

Company stockholders who wish to attend the special meeting must be logged in and registered to virtually attend the special meeting and cast their vote before the announcement of the close of voting during the special meeting. Stockholders of record as of the record date for the special meeting can vote online at the special meeting. Please note that if your shares are held in “street name”, then you must ask your broker, bank or other nominee how you can vote at the special meeting. Even if you plan to attend the special meeting online, we encourage you to complete, sign, date and return the enclosed proxy or vote electronically over the Internet or via telephone to ensure that your shares will be represented at the special meeting. If you attend the special meeting and vote online, your vote by ballot at the special meeting will revoke any proxy previously submitted. Please note that no management presentations or other matters are planned for the special meeting, except as described in this proxy statement.

Purpose of the Special Meeting

At the special meeting, the Company stockholders of record will be asked to consider and vote on:

 

•

a proposal to adopt the merger agreement, pursuant to which, subject to the satisfaction or waiver of certain specified conditions, Merger Sub will merge with and into the Company, with the Company continuing as the surviving corporation and a wholly owned subsidiary of Parent;

 

•

a proposal to approve, by a non-binding advisory vote, the compensation that will be paid or become payable to the Company’s named executive officers that is based on or otherwise relates to the merger, as discussed in the section entitled “The Merger—Interests of Directors and Executive Officers in the Merger” beginning on page 65; and

 

•

a proposal to adjourn the special meeting to a later date or time if necessary or appropriate, including to solicit additional proxies in favor of the proposal to adopt the merger agreement if there are insufficient votes at the time of the special meeting to adopt the merger agreement.

Recommendation of the Board

 

•

The Board carefully reviewed and considered the terms and conditions of the merger agreement, the merger and the other transactions contemplated by the merger agreement. By a unanimous vote, the Board (i) determined that the terms of the merger agreement and the transactions contemplated thereby, including the merger, are fair to, and in the best interests of, the Company and its stockholders, (ii) determined that it is in the best interests of the Company and its stockholders and declared it advisable to enter into the merger agreement, (iii) approved the execution and delivery by the Company of the merger agreement, the performance by the Company of its covenants and agreements contained therein and the consummation of the transactions contemplated thereby, including the merger, upon the terms and subject to the conditions contained therein, (iv) recommended that the Company’s stockholders approve the merger and adopt the merger agreement and (v) directed that the merger agreement be submitted to the Company’s stockholders for their adoption. Accordingly, the Board unanimously recommends you vote “FOR” the proposal to adopt the merger agreement.

 

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•

The Board also unanimously recommends you vote “FOR” the non-binding compensation advisory proposal and “FOR” the approval of the proposal to adjourn the special meeting, if necessary or appropriate, including to solicit additional proxies in favor of the proposal to adopt the merger agreement if there are insufficient votes at the time of the special meeting to adopt the merger agreement.

Record Date and Quorum

Each holder of record of shares of Company common stock as of the close of business on August 31, 2021, which is the record date for the special meeting, is entitled to receive notice of, and to vote at, the special meeting. You will be entitled to one vote on each of the proposals presented in this proxy statement for each outstanding share of Company common stock that you owned on the record date. As of the record date, there were 133,009,182 shares of Company common stock issued and outstanding and entitled to vote at the special meeting. The presence at the special meeting, virtually or by proxy, of the holders of the majority of the voting power of the issued and outstanding stock of the Company entitled to vote constitutes a quorum for the special meeting.

If you are a Company stockholder of record and you vote by mail, by telephone or through the Internet or virtually at the special meeting, then your shares of Company common stock will be counted as part of the quorum. If you are a “street name” holder of shares of Company common stock and you provide your bank, broker, trust or other nominee with voting instructions, then your shares will be counted in determining the presence of a quorum. If you are a “street name” holder of shares and you do not provide your bank, broker, trust or other nominee with voting instructions, then your shares will not be counted in determining the presence of a quorum.

All shares of Company common stock held by stockholders of record that are present virtually or represented by proxy and entitled to vote at the special meeting, regardless of how such shares are voted or whether such stockholders abstain from voting, will be counted in determining the presence of a quorum. In the absence of a quorum, the special meeting may be adjourned.

Vote Required for Approval

Merger Agreement Proposal. The proposal to adopt the merger agreement requires the affirmative vote of the holders of a majority of the issued and outstanding shares of Company common stock entitled to vote on such matter.

Non-Binding Compensation Advisory Proposal. The approval of the non-binding compensation advisory proposal requires the affirmative vote of holders of a majority of the shares of Company common stock present virtually or represented by proxy at the special meeting and entitled to vote on such matter. The vote is advisory only and, therefore, is not binding on the Company or Parent or any of their respective subsidiaries, and, if the merger agreement is adopted by the Company stockholders and the merger is completed, the compensation that is based on or otherwise relates to the merger will be payable to our named executive officers in accordance with, and subject to, the terms of their compensation agreements and arrangements even if the non-binding compensation advisory proposal is not approved.

Adjournment Proposal. The approval of the proposal to adjourn the special meeting if necessary or appropriate requires the affirmative vote of holders of a majority of the shares of Company common stock present virtually or represented by proxy at the special meeting and entitled to vote on such matter. In addition, even if a quorum is not present at the special meeting, the chairman of the meeting shall have the power to adjourn the meeting to another place, date or time, from time to time, until a quorum is present or represented.

The Company may not adjourn or postpone the special meeting except (a) with the consent of Parent, (b) for the absence of a quorum, (c) after consultation with Parent, to allow reasonable additional time for any supplemental

 

32

or amended disclosure which the Company has determined in good faith (after consultation with outside counsel) is necessary under applicable law and for such supplemental or amended disclosure to be disseminated and reviewed by the Company’s stockholders prior to the special meeting or (d) to allow additional solicitation of votes to the extent necessary in order to obtain the Company stockholder approval at the special meeting. The Company must, upon the request of Parent, adjourn or postpone the special meeting in the event of clauses (b), (c) and (d) above.

Effect of Abstentions and Broker Non-Votes

The proposal to adopt the merger agreement requires the affirmative vote of the holders of a majority of the outstanding shares of Company common stock entitled to vote on such matter. Therefore, the failure to vote or the abstention from voting will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement.

The approval of the non-binding compensation advisory proposal requires the affirmative vote of holders of a majority of the shares of Company common stock present virtually or represented by proxy at the special meeting entitled to vote on such matter. Consequently, the abstention from voting will have the same effect as a vote “AGAINST” the proposal.

The proposal to adjourn the special meeting if necessary or appropriate requires the affirmative vote of holders of a majority of the shares of Company common stock present virtually or represented by proxy at the special meeting entitled to vote on such matter. Consequently, the abstention from voting will have the same effect as a vote “AGAINST” the proposal. In addition, even if a quorum is not present at the special meeting, the chairman of the meeting shall have the power to adjourn the meeting to another place, date or time, from time to time, until a quorum is present or represented. In each case, the abstention from voting will have the same effect as a vote “AGAINST” the proposal.

Under NYSE rules, all of the proposals in this proxy statement are non-routine matters, so there can be no broker non-votes at the special meeting. A broker non-vote occurs when shares held by a bank, broker, trust or other nominee are represented at a meeting, but the bank, broker, trust or other nominee has not received voting instructions from the beneficial owner and does not have the discretion to direct the voting of the shares on a particular proposal but has discretionary voting power on other proposals at such meeting. Accordingly, if your shares are held in “street name”, your bank, broker, trust or other nominee will NOT be able to vote your shares of Company common stock on any of the proposals, and your shares will not be counted in determining the presence of a quorum unless you have properly instructed your bank, broker, trust or other nominee on how to vote. Because the proposal to adopt the merger agreement requires the affirmative vote of a majority of the outstanding shares of Company common stock, the failure to provide your bank, broker, trust or other nominee with voting instructions will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement. Because the approval of (i) the non-binding compensation advisory proposal and (ii) the proposal to adjourn the special meeting if necessary or appropriate requires the affirmative vote of holders of a majority of the shares of Company common stock present virtually or represented by proxy at the special meeting entitled to vote on such matter, and because your bank, broker, trust or other nominee does not have discretionary authority to vote on either proposal, the failure to provide your bank, broker, trust or other nominee with voting instructions will have no effect on approval of that proposal.

How to Vote

Stockholders have a choice of voting by proxy by completing a proxy card and mailing it in the prepaid envelope provided, by calling a toll-free telephone number or through the Internet. Please refer to your proxy card or the information forwarded by your bank, broker, trust or other nominee to see which options are available to you. The telephone and Internet voting facilities for stockholders of record will close at 11:59 p.m. Eastern Time on the day before the special meeting.

 

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If you submit your proxy by mail, by telephone or through the Internet voting procedures, but do not include “FOR”, “AGAINST” or “ABSTAIN” on a proposal to be voted, your shares of Company common stock will be voted in favor of that proposal. If you indicate “ABSTAIN” on a proposal to be voted, it will have the same effect as a vote “AGAINST” that proposal. If you wish to vote by proxy and your shares are held by a bank, broker, trust or other nominee, you must follow the voting instructions provided to you by your bank, broker, trust or other nominee. Unless you give your bank, broker, trust or other nominee instructions on how to vote your shares of Company common stock, your bank, broker, trust or other nominee will not be able to vote your shares on any of the proposals.

If you wish to vote virtually at the special meeting and your shares are held in the name of a bank, broker or other holder of record, you must obtain a legal proxy, executed in your favor, from the bank, broker or other holder of record authorizing you to vote at the special meeting.

If you do not submit a proxy or otherwise vote your shares of Company common stock in any of the ways described above, it will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement, but will have no effect on approval of the non-binding compensation advisory proposal or the approval of the proposal to adjourn the special meeting if necessary or appropriate.

If you have any questions about how to vote or direct a vote in respect of your shares of Company common stock, please call our proxy solicitor, Innisfree M&A Incorporated toll free at 877-750-0926.

YOU SHOULD NOT SEND IN YOUR STOCK CERTIFICATE(S) WITH YOUR PROXY CARD. A letter of transmittal with instructions for the surrender of certificates representing shares of Company common stock will be mailed to stockholders if the merger is completed.

Revocation of Proxies

Any proxy given by a Company stockholder may be revoked at any time before it is voted at the special meeting by doing any of the following:

 

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by submitting another proxy by telephone or through the Internet, in accordance with the instructions on the accompanying proxy card;

 

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by delivering a signed written notice of revocation bearing a date later than the date of the proxy to the Company’s Corporate Secretary at 445 South Street, Morristown, New Jersey 07960, stating that the proxy is revoked;

 

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by submitting a later-dated proxy card relating to the same shares of Company common stock; or

 

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by attending the special meeting and voting virtually (your attendance at the special meeting will not, by itself, revoke your proxy; you must vote virtually at the special meeting).

“Street name” holders of shares of Company common stock should contact their bank, broker, trust or other nominee to obtain instructions as to how to revoke or change their proxies.

Adjournments and Postponements

Although it is not currently expected, the special meeting may be adjourned or postponed one or more times to a later day or time if necessary or appropriate, including to solicit additional proxies in favor of the proposal to adopt the merger agreement. Your shares will be voted on any adjournment proposal in accordance with the instructions indicated in your proxy or, if you return a properly executed proxy card but do not indicate instructions on your proxy card, “FOR” the proposal to adjourn the special meeting if necessary or appropriate.

Regardless of whether a quorum is present at the special meeting, the chairman of the meeting shall have the power to adjourn the meeting to another place, date or time, from time to time, until a quorum is present or

 

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represented. The adjourned meeting may take place without further notice other than by an announcement made at the special meeting unless the adjournment is for more than 30 days or, if, after the adjournment, a new record date is fixed for the adjourned meeting, in which case a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the special meeting.

The Company may not adjourn or postpone the special meeting, and may not change the record date, except (a) with the consent of Parent, (b) for the absence of a quorum, (c) after consultation with Parent, to allow reasonable additional time for any supplemental or amended disclosure which the Company has determined in good faith (after consultation with outside counsel) is necessary under applicable law and for such supplemental or amended disclosure to be disseminated and reviewed by the Company’s stockholders prior to the special meeting or (d) to allow additional solicitation of votes to the extent necessary in order to obtain the Company stockholder approval at the special meeting. The Company must, upon the request of Parent, adjourn or postpone the special meeting in the event of clauses (b), (c) and (d) above.

Solicitation of Proxies

The Company is soliciting the enclosed proxy card on behalf of the Board, and the Company will bear the expenses in connection with the solicitation of proxies. In addition to solicitation by mail, the Company and its directors, officers and employees may solicit proxies in person, by telephone or by electronic means. These persons will not be specifically compensated for doing this.

The Company has retained Innisfree M&A Incorporated to assist in the solicitation process. The Company will pay Innisfree M&A Incorporated a fee of approximately $20,000 plus reimbursement of certain specified out-of-pocket expenses. The Company also has agreed to indemnify Innisfree M&A Incorporated against various liabilities and expenses that relate to or arise out of its solicitation of proxies (subject to certain exceptions).

The Company will ask banks, brokers, trusts and other nominees to forward the Company’s proxy solicitation materials to the beneficial owners of shares of Company common stock held of record by such banks, brokers, trusts or other nominees. The Company will reimburse these banks, brokers, trusts or other nominees for their customary clerical and mailing expenses incurred in forwarding the proxy solicitation materials to the beneficial owners.

Stockholder List

A list of the Company stockholders entitled to vote at the special meeting will be available for examination by any Company stockholder at the special meeting via the special meeting website at www.virtualshareholdermeeting.com/CVA2021SM. At least ten days prior to the date of the special meeting, this stockholder list will be available for inspection by the Company stockholders, subject to compliance with applicable provisions of Delaware law, during ordinary business hours at 445 South Street, Morristown, New Jersey 07960.

Questions and Additional Information

If you have more questions about the merger or how to submit your proxy, or if you need additional copies of this proxy statement or the enclosed proxy card or voting instructions, please call our proxy solicitor, Innisfree M&A Incorporated toll free at 877-750-0926.

 

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PROPOSAL 1: ADOPTION OF THE MERGER AGREEMENT

As discussed elsewhere in this proxy statement, the Company stockholders will consider and vote on a proposal to adopt the merger agreement. You should carefully read this proxy statement in its entirety for more detailed information concerning the merger agreement and the merger. In particular, you should read in its entirety the merger agreement, which is attached as Annex A to this proxy statement. For additional information, see the sections entitled “The Merger” beginning on page 39, and “The Agreement and Plan of Merger” beginning on page 83.

The Board unanimously recommends that the Company stockholders vote “FOR” the proposal to adopt the merger agreement.

If you return a properly executed proxy card, but do not indicate instructions on your proxy card, your shares of Company common stock represented by such proxy card will be voted “FOR” the proposal to adopt the merger agreement.

The approval of the proposal to adopt the merger agreement requires the affirmative vote of the holders of a majority of the outstanding shares of Company common stock entitled to vote on such proposal.

 

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PROPOSAL 2: NON-BINDING COMPENSATION ADVISORY PROPOSAL

Under Section 14A of the Exchange Act, we are required to provide stockholders with the opportunity to vote to approve, on a non-binding, advisory basis, the compensation that will be paid or become payable to the Company’s named executive officers that is based on or otherwise relates to the merger, as disclosed in the section entitled “The Merger—Interests of Directors and Executive Officers in the Merger—Quantification of Potential Golden Parachute Compensation in Connection with the Merger” beginning on page 71, including the table entitled “Golden Parachute Payments” and accompanying footnotes. Accordingly, the Company stockholders are being provided with the opportunity to cast an advisory vote on such payments, and the Company is requesting that its stockholders adopt the following resolution, on a non-binding advisory basis:

“RESOLVED, that the stockholders of Covanta Holding Corporation approve, on a non-binding advisory basis, the compensation that will be paid or become payable to the named executive officers of Covanta Holding Corporation that is based on or otherwise relates to the merger, as disclosed pursuant to Item 402(t) of Regulation S-K in the section entitled “The Merger—Interests of Directors and Executive Officers in the Merger—Quantification of Potential Golden Parachute Compensation in Connection with the Merger” beginning on page 71 (which disclosure includes the Golden Parachute Compensation Table required pursuant to Item 402(t) of Regulation S-K)”.

As an advisory vote, this proposal is not binding upon the Company, the Board, the Compensation Committee or Parent, or any of the Company’s or Parent’s subsidiaries, and approval of this proposal is not a condition to completion of the merger. Because the merger-related executive compensation to be paid in connection with the merger is based on the terms of the merger agreement as well as the contractual arrangements with the named executive officers, such compensation will be payable to our named executive officers in accordance with, and subject to, the terms of their compensation agreements and arrangements, regardless of the outcome of this advisory vote, if the merger agreement is adopted and the merger is completed (subject only to the contractual conditions applicable thereto).

The Board unanimously recommends that the Company stockholders vote “FOR” the non-binding compensation advisory proposal.

If you return a properly executed proxy card, but do not indicate instructions on your proxy card, your shares of Company common stock represented by such proxy card will be voted “FOR” the non-binding compensation advisory proposal.

The approval of the non-binding compensation advisory proposal requires the affirmative vote of holders of a majority of the shares of Company common stock present virtually or represented by proxy at the special meeting entitled to vote on such matter. The vote is advisory only and, therefore, not binding on the Company or Parent or any of their respective subsidiaries, and, if the merger agreement is adopted by the Company stockholders and the merger is completed, the compensation that is based on or otherwise relates to the merger will be payable to our named executive officers in accordance with the terms of their compensation agreements and arrangements even if this proposal is not approved.

 

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PROPOSAL 3: AUTHORITY TO ADJOURN THE SPECIAL MEETING

Company stockholders may be asked to adjourn the special meeting to a later date or time if necessary or appropriate, including to solicit additional proxies in favor of the proposal to adopt the merger agreement if there are insufficient votes at the time of the special meeting to adopt the merger agreement.

The Board unanimously recommends that stockholders vote “FOR” the proposal to adjourn the special meeting to a later date or time if necessary or appropriate, including to solicit additional proxies in favor of the proposal to adopt the merger agreement if there are insufficient votes at the time of the special meeting to adopt the merger agreement.

If you return a properly executed proxy card, but do not indicate instructions on your proxy card, your shares of Company common stock represented by such proxy card will be voted “FOR” the proposal to adjourn the special meeting to a later date or time if necessary or appropriate.

The approval of the proposal to adjourn the special meeting if necessary requires the affirmative vote of holders of a majority of the shares of Company common stock present virtually or represented by proxy at the special meeting entitled to vote on such matter. In addition, even if a quorum is not present at the special meeting, the chairman of the meeting shall have the power to adjourn the meeting to another place, date or time, from time to time, until a quorum is present or represented.

The Company may not adjourn or postpone the special meeting, and may not change the record date, except (a) with the consent of Parent, (b) for the absence of a quorum, (c) after consultation with Parent, to allow reasonable additional time for any supplemental or amended disclosure which the Company has determined in good faith (after consultation with outside counsel) is necessary under applicable law and for such supplemental or amended disclosure to be disseminated and reviewed by the Company’s stockholders prior to the special meeting or (d) to allow additional solicitation of votes to the extent necessary in order to obtain the Company stockholder approval at the special meeting. The Company must, upon the request of Parent, adjourn or postpone the special meeting in the event of clauses (b), (c) and (d) above.

 

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THE MERGER

Overview

The Company is seeking the adoption by the Company stockholders of the merger agreement the Company entered into on July 14, 2021 with Parent and Merger Sub. Under the terms of the merger agreement, subject to the satisfaction or waiver of specified conditions, Merger Sub will merge with and into the Company, and the Company will survive the merger as a wholly owned subsidiary of Parent. The Board has approved the merger agreement and unanimously recommends that the Company stockholders vote “FOR” the proposal to adopt the merger agreement.

At the effective time of the merger, each share of the Company’s common stock that is issued and outstanding immediately prior to the effective time of the merger (other than the excluded shares) will automatically be canceled and cease to exist and each holder of such shares will cease to have any rights with respect to such shares, except the right to receive $20.25 per share, in cash, without interest, less any required withholding taxes.

Following the completion of the merger, the Company will cease to be a publicly traded company and will become a wholly owned subsidiary of Parent.

Background of the Merger

The Board and the Company’s management regularly review the Company’s business strategy and strategic plan and evaluate opportunities to enhance stockholder value. In addition, the Board and the Company’s management periodically review and assess the Company’s competitive position and actively monitor and assess industry trends, the Company’s short- and long-term performance, and the Company’s stock price performance. The Board and the Company’s management also periodically discuss potential challenges that the Company faces in executing its strategic plans.

On September 17, 2020, the Board held a virtual meeting at which it discussed a range of business issues. During and following an executive session of the meeting, the directors discussed continuing concerns regarding the Company’s operating performance and stock price, which was then trading around 15-year lows, and the Board’s belief that the Company’s stock price did not reflect the intrinsic value of the Company’s operating business and assets.

On October 26, 2020, the Board held a virtual meeting at which it discussed the Company’s current plan and its recent performance. The Board discussed the need to evaluate and pursue different strategies to enhance stockholder value. These discussions led to the Company’s announcement after the closing of U.S. financial markets on October 29, 2020 that the Board had initiated a comprehensive strategic review of the Company’s operations, growth priorities, lines of business and capital structure, which we refer to as the “strategic review”, that the Company’s then current Chief Executive Officer was departing effective immediately, and that the Board had appointed Michael W. Ranger as President and Chief Executive Officer of the Company. Mr. Ranger was tasked by the Board with leading the strategic review and the execution of initiatives identified as a result. The closing price of the Company’s common stock was $7.62 per share on October 29, 2020, the last full trading day prior to the Company’s announcement. Throughout November 2020, in connection with the strategic review, Mr. Ranger and other members of the Company’s management worked on developing a plan to enhance stockholder value, which would eventually be presented to the Board, which we refer to as the “strategic plan”.

On November 11, 2020, Mr. Ranger received a telephone call from a representative of a private equity firm, which we refer to as “Party A”, seeking to make an introduction and to determine whether the Company would be willing to discuss the strategic review.

On November 18, 2020, Mr. Ranger and Timothy J. Simpson, Executive Vice President and Chief Administrative Officer of the Company, spoke by telephone with representatives of Party A to discuss the

 

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strategic review. During the course of the discussion, Party A expressed an interest in potentially acquiring the Company. However, the discussion did not lead to any proposals with respect to such a transaction, and ended without the Company or Party A agreeing on potential next steps. The next day, Mr. Ranger updated Sam Zell, the Chairman of the Board, and Robert Silberman, the lead independent director of the Board and chairman of the Board’s nominating and governance committee, about his conversation with Party A. Messrs. Zell and Silberman responded that management should focus on the strategic review at this time, and that the Company could engage further with Party A at a later date if the circumstances warranted it. Mr. Ranger spoke with representatives of Party A the next day to notify them of the same.

On November 23, 2020, an industrial advisor to EQT informed Mr. Silberman that EQT already had been following the Company’s business prior to the Company’s announcement of the strategic review, and indicated that EQT would be interested in exploring a potential acquisition of the Company. No specific transaction was discussed and no proposal was made by EQT at that time. On November 25, 2020, Mr. Silberman informed EQT’s industrial advisor that the Company was currently focusing on its strategic review, but that the Company had noted EQT’s interest in a transaction in the event the Company determined to evaluate one.

On December 2, 2020, the nominating and governance committee of the Board held a virtual meeting at which Mr. Silberman proposed the creation of an executive committee. Mr. Silberman proposed that the executive committee be given a broad delegation of authority, to be formalized by a charter adopted by the Board, and would provide support to management and the Board in connection with the strategic review and handle time sensitive matters between regularly scheduled meetings of the Board. The nominating and governance committee passed a resolution recommending that the full Board form such an executive committee, which recommendation was subsequently discussed at a meeting of the Board on December 3, 2020.

On December 3, 2020, the Board held a virtual meeting at which Mr. Ranger presented the strategic plan developed by the management team over the preceding month. Mr. Ranger reviewed the key elements of the strategic plan, which included cost-saving measures such as reviewing and seeking to restructure service agreements for the Company’s client-owned facilities and seeking to renegotiate certain other contracts on more favorable terms, implementing SG&A cost-saving measures, improving capital spending efficiencies and optimizing the Company’s portfolio in the United Kingdom and Ireland, as well as considering the potential sale, at an appropriate time, of certain of the Company’s assets and lines of business in North America, Ireland and the United Kingdom. Mr. Ranger noted that among the first steps would be to explore the potential sale of some or all of the Company’s environmental solutions business, which we refer to as the “CES business”. The Board discussed the potential merits and risks of the strategic plan, including complexities presented by potential sales of assets and lines of business, and thereafter authorized management to initiate a formal process to explore a potential sale of some or all of the CES business. At the December 3, 2020 meeting, the Board also adopted the recommendation of the nominating and governance committee and formed an executive committee, which we refer to as the “executive committee”, consisting of Messrs. Zell, Silberman and Ranger and David Barse, an independent director, including a delegation of authority to the executive committee and its members to commence a process to explore the potential sale of the CES business.

On December 15, 2021, the Company retained Houlihan Lokey Capital, Inc., which we refer to as “Houlihan Lokey”, as its financial advisor in connection with the potential sale of the CES business.

On December 21, 2020, Messrs. Ranger and Simpson and Matthew Mulcahy, Executive Vice President and Head of Corporate Development of the Company, provided Messrs. Zell and Silberman with an update on the potential sale of the CES business. Messrs. Zell and Silberman, acting with the authority delegated to them by the Board at the December 3, 2020 meeting, authorized the Company’s management to commence a process to explore such a sale.

Over the course of the process to explore a sale of the CES business, at the request of the Company, Houlihan Lokey contacted 62 strategic and financial parties with respect to a potential sale of the CES business, including

 

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Party A, Party E (as defined below) and EQT. The Company entered into confidentiality agreements with 53 strategic and financial parties interested in evaluating the CES business. Houlihan Lokey contacted EQT as part of this process on December 23, 2020. EQT declined to sign a confidentiality agreement in connection with the process, but indicated to Houlihan Lokey that it would be interested in potentially acquiring the entire Company.

On January 25, 2021, Messrs. Ranger, Simpson and Mulcahy spoke by telephone with representatives of Party A to discuss the potential sale of the CES business. During the call, Party A reiterated its interest in potentially acquiring the entire Company. The parties to the call did not discuss specific prices, but representatives of Party A indicated that a proposal would be at a substantial premium to the then current market price of the Company’s common stock.

On January 29, 2021, representatives of EQT had an introductory call with Mr. Ranger in which they indicated EQT would be submitting a proposal to acquire all of the outstanding shares of the Company’s common stock. Later that day, Mr. Ranger received a non-binding written proposal from EQT, which we refer to as the “Initial EQT Proposal”, in which EQT proposed to acquire all of the outstanding shares of the Company’s common stock in an all-cash transaction at a price between $16.00 and $18.00 per share, representing a premium of between 13.1% and 27.2% above the closing price of the Company common stock of $14.15 per share on January 28, 2021, the last trading day prior to the Initial EQT Proposal. EQT requested a period of exclusivity to negotiate a transaction.

On February 1, 2021, Mr. Ranger spoke by telephone with representatives of EQT in order to allow Mr. Ranger to understand the essential features of the Initial EQT Proposal, in anticipation of his discussions with the Board.

On February 9, 2021 the executive committee held a virtual meeting at which Messrs. Simpson and Mulcahy and Thomas L. Kenyon, Executive Vice President and General Counsel of the Company, were also present. At that meeting, Mr. Ranger provided an overview of the unsolicited expressions of interest in acquiring the entire Company from Party A and EQT. The executive committee discussed how a process to explore the sale of the entire Company might be coordinated with the ongoing process to explore a sale of the CES business, and concluded that both processes could be run in parallel and adjusted depending on developments. The executive committee discussed engaging BofA Securities as the Company’s financial advisor. Based on BofA Securities’ industry experience and knowledge, Mr. Ranger had previously sought guidance from BofA Securities following the unsolicited expressions of interest from Party A and EQT in acquiring the entire Company. After reviewing a proposed work plan from BofA Securities and its proposed fee structure, the executive committee recommended that the Board authorize the Company to engage BofA Securities as the Company’s financial advisor to assist the Company with exploring strategic alternatives, including a potential sale of the entire Company. This recommendation was subsequently discussed at a meeting of the Board on February 15, 2021.

On February 10 and February 12, 2021 Mr. Mulcahy spoke by telephone with representatives of EQT at Mr. Ranger’s request. On those calls, representatives of EQT provided an overview of their firm and its recent fundraising activities and discussed their interest in the Company and its businesses, which predated the Company’s announcement of the strategic review. Representatives of EQT also inquired about the possibility of entering into a confidentiality agreement that would permit the Company to share certain non-public information in connection with a potential sale of the entire Company, as well as EQT’s desire to engage consultants to assist it in conducting a due diligence investigation of the Company. Mr. Mulcahy indicated that the Board was still evaluating the potential sale of the CES business as well as other strategic alternatives, and noted that he would be able to reengage with EQT after the Board’s upcoming meeting on February 15, 2021.

On February 15, 2021, the Board held a virtual meeting at which Messrs. Simpson, Mulcahy and Kenyon were also present. Mr. Ranger provided an update on the strategic review in general and the process to explore the sale of the CES business in particular, noting that 53 strategic and financial parties had entered into confidentiality agreements and that the Company’s management team given presentations to more than 20 of those parties. Mr. Ranger also reported that the Company had received two unsolicited expressions of interest to purchase the

 

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entire Company from Party A and EQT, and reviewed with the Board the terms of the Initial EQT Proposal. Mr. Ranger expressed his view that both parties were credible potential buyers, but said that he viewed the price reflected in the Initial EQT Proposal as too low. Mr. Ranger noted that the Company’s management team had done a significant amount of work in connection with the strategic review, including evaluating the potential sale of the CES business. Given the existing unsolicited expressions of interest in an acquisition of the entire Company, and the possibility of others to come, Mr. Ranger reported that the executive committee recommended that the Board consider engaging BofA Securities to conduct a structured process to explore a sale of the entire Company as a potential alternative to management’s strategic plan, to run in parallel with the existing process with respect to the CES business. Mr. Ranger reviewed discussions with BofA Securities, including their qualifications, the terms on which it proposed to serve as the Company’s financial advisor, and BofA Securities’ proposed approach with respect to exploring a potential sale of the Company, including potential buyers identified by BofA Securities. Mr. Kenyon then provided an overview of the Board’s fiduciary obligations in the context of a potential sale of the entire Company. The Board discussed the potential value that might be realized through the implementation of the strategic plan developed and outlined by the Company’s management team relative to the potential value of a sale of the entire Company. The Board also discussed the potential risks and benefits associated with the strategic plan, including execution risks associated with sales of assets or material lines of business, compared to the potential risks and benefits associated with a single transaction to sell the entire Company. The Board viewed the valuation estimated in the strategic plan as a “best case” outcome, which assumed no issues with execution. The Board then discussed how to manage a process to evaluate a sale of the entire Company while also managing the process for the potential sale of the CES business, concluding that running simultaneous processes would provide a greater opportunity for price discovery. Thereafter, the Board authorized the executive committee to explore strategic transactions, including a potential sale of the entire Company, and to engage BofA Securities as the Company’s financial advisor in connection therewith.

From and after February 16, 2021, at the request of the executive committee, BofA Securities contacted 15 strategic and financial parties, including EQT, identified by BofA Securities as the most likely interested parties with respect to a potential acquisition of the entire Company, based on the industry expertise and judgment of BofA Securities and input from the Company’s management. During the remainder of February 2021 through the beginning of April 2021, the Company entered into confidentiality agreements with 12 parties, including EQT. These confidentiality agreements contained customary “standstill” provisions, but permitted counterparties to privately request that the Board grant waivers or amendments and, in the event the Company entered into a definitive agreement with respect to a transaction that would result in the acquisition by any other person or group of a majority of the Company’s voting securities, to make private proposals to the Board.

On February 25, 2021, BofA Securities provided a relationship disclosure letter to the Company.

On March 4, 2021, the Board held a virtual meeting at which certain members of the Company’s management, including Braford Helgeson, Executive Vice President and Chief Financial Officer of the Company, were also in attendance. In executive session, Mr. Ranger provided an update on the strategic review, including an update on the Company’s four distinct segments (Company-owned waste-to-energy facilities, Company-operated waste-to-energy facilities, the CES business and the Company’s facilities in the UK and Ireland). Mr. Ranger then led a discussion of the Board reviewing the status of the processes to explore the sale of the CES business and the Company, including the expected timeline for each. The Board then reviewed the relationship disclosure letter provided by BofA Securities on February 25, 2021, and discussed the matters described therein, concluding that such relationships were not disqualifying. Following the executive session, Mr. Ranger provided another update on the strategic review, including work being done to evaluate and reduce the Company’s overhead and maintenance spending. Mr. Helgeson then provided a general business update, including a discussion of the tax costs associated with any sale of the CES business. The Board adopted a charter for the executive committee, with effect as of January 1, 2021, which delegated to the executive committee the full authority of the Board, subject to certain customary exceptions.

 

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On March 12, 2021, members of the Company’s management and representatives of BofA Securities met with representatives of Party A to discuss the Company’s business and certain diligence matters related to a potential sale of the entire Company.

On March 17, 2021, members of the Company’s management and representatives of BofA Securities met with representatives of a private equity firm, which we refer to as “Party B”, to discuss the Company’s business and certain diligence matters related to a potential sale of the entire Company.

On March 22, 2021, the Company and BofA Securities granted access to a virtual data room containing due diligence information relating to the Company to each of the 12 parties that had entered into a confidentiality agreement with the Company. The virtual data room contained projections of the future financial performance of the Company prepared by the Company’s management, which are summarized in the section entitled “Forward-Looking Financial Information” beginning on page 54. The financial projections reflected the proposed stand-alone measures included in management’s strategic plan to improve the financial performance of the business, but did not include the effects of any potential sales of assets or lines of business. The same day, certain members of the Company’s management and representatives of BofA Securities met with representatives of a private equity firm, which we refer to as “Party C”, to discuss the Company’s business and certain diligence matters related to a potential sale of the entire Company.

On March 30, 2021, members of the Company’s management and representatives of BofA Securities met with representatives of EQT to discuss the Company’s business and certain diligence matters related to a potential sale of the entire Company.

Throughout March and April, members of the Company’s management provided presentations regarding the Company’s business to each of the 12 parties that had entered into confidentiality agreements. During this period, members of the Company’s management and representatives of BofA Securities continued to meet and speak by telephone and videoconference with interested parties, including EQT, Party A, Party B, Party C and Party D (as defined below), to discuss the Company’s business and certain diligence matters related to a potential sale of the entire Company.

On April 1, 2021, the executive committee held a virtual meeting, at which Messrs. Mulcahy and Simpson were also present, to discuss the strategic review, including the potential sale of the Company’s CES business and the potential sale of the entire Company. Mr. Ranger expressed the view that, although there was a high level of interest with respect to the potential sale of the CES business, including preliminary bids from 15 potential buyers, the prices offered were unsatisfactory and the bids included terms likely to be commercially unacceptable to the Company. Mr. Ranger also reported that BofA Securities had advised that the potential sale of the CES business had created some uncertainty on the part of potential buyers of the entire Company, which had indicated a clear preference that the CES business remain part of the Company. After discussion, the executive committee determined that it would be advisable to pause the process to explore the sale of the CES business. The executive committee then discussed the process to explore the sale of the entire Company. Mr. Ranger noted that there appeared to be interest from up to ten qualified bidders and summarized the meetings held to date with potential buyers. The executive committee discussed the financial projections, which were provided to potential buyers of the entire Company on March 22, 2021, the timeline for receiving preliminary indications of interest, and preliminary valuation work undertaken by BofA Securities.

On April 6, 2021, an instruction letter requesting non-binding indications of interest by April 26, 2021 with respect to the acquisition of the entire Company was provided by BofA Securities to the 11 parties that had indicated ongoing interest in the process to such date, including each of EQT, Party A, Party B, Party C and Party D.

On April 8, 2021, members of the Company’s management and representatives of BofA Securities met with representatives of a private equity firm, to which we refer as “Party D”, to discuss the Company’s business and certain diligence matters related to a potential transaction.

 

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On April 26, 2021, the Company received from each of EQT, Party A and Party D an initial, non-binding indication of interest to acquire the entire Company. EQT submitted an indication of $19.00 in cash per share of Company common stock. Party A submitted an indication with a range of between $16.00 and $16.50 in cash per share of Company common stock. Party D submitted an indication of $16.50 in cash per share of Company common stock.

On April 27, 2021, the Company received from Party B an initial, non-binding indication of interest to acquire the entire Company for $16.50 in cash per share of Company common stock. The same day, representatives of Party C notified representatives of BofA Securities that, although it had not submitted an indication of interest, it would be interested in potentially partnering with an eventual buyer in connection with a potential transaction.

On April 28, 2021, the executive committee held a virtual meeting to discuss with Messrs. Ranger, Simpson, Mulcahy and Kenyon the indications of interest that the Company had received from EQT, Party A, Party B and Party D. The executive committee discussed themes that emerged from the Company’s meetings and discussions with interested parties, including key areas of further diligence identified by potential buyers and timing considerations regarding the next round of offers. The executive committee then determined to invite each of EQT, Party A, Party B and Party D to participate in the second round of the process and instructed BofA Securities to hold discussions with each of those parties to inform them that they were being invited to participate in the second round of the process and to provide feedback on their offers based upon the discussions at the meeting. BofA Securities held these discussions following the meeting. With the benefit of 2021 first quarter results and increased 2021 guidance for adjusted EBITDA and free cash flow that the Company would release the following day, the executive committee made the decision to continue with the process to explore the sale of the entire Company, determining that the indications of interest could reasonably be expected to result in superior value to the Company’s stockholders as compared to the risk-adjusted value that could reasonably be achieved through continued execution of management’s strategic plan.

On May 5, 2021, BofA Securities provided an updated relationship disclosure letter to the Company.

On May 10, 2021, the Company and BofA Securities granted access to a virtual data room containing more detailed diligence information relating to the Company to each of the four parties that remained interested in a potential transaction.

Between May 12 and May 19, 2021, certain members of the Company’s management and representatives of BofA Securities met with representatives of EQT, Party A, Party B and Party D to discuss the Company’s business in greater detail as well as to discuss certain diligence items related to a potential transaction. Throughout May and June, representatives of the Company and representatives of BofA Securities continued to meet and speak by telephone with representatives of these parties to discuss the Company’s business and to address diligence items in response to requests from these parties.

On May 13, 2021, the Board held a virtual meeting at which Mr. Ranger provided an update on the strategic review. Mr. Ranger focused on feedback and reactions from potential buyers to information and diligence shared to date in the process to explore a potential sale of the CES business, as well as themes that had arisen in the Company’s meetings and diligence sessions with potential buyers in the process to explore a potential sale of the entire Company. Mr. Ranger explained how these market signals had affected management’s view of the strategic plan it had developed, in particular the implementation, sequencing and risk-adjusted value represented by each element of management’s strategic plan. The Board then discussed how it might take these dynamics into account when conducting a comparative analysis of management’s strategic plan, including the potential sale of the CES business, with any offers received from potential buyers in connection with the potential sale of the entire Company. The Board reviewed the updated relationship disclosure letter provided by BofA Securities on May 5, 2021, and discussed the matters described therein, concluding that such relationships were not disqualifying.

 

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On June 3, 2021, the chief executive officer of a strategic party, which we refer to as “Party E”, contacted Mr. Ranger to discuss the possibility of a potential acquisition by Party E of the entire Company, including Party E’s strategic rationale and preliminary views on valuation.

On June 7, 2021, representatives of BofA Securities spoke by telephone with representatives of Party E to discuss timing and process considerations with respect to a potential transaction, and emphasized the importance of price and certainty of closing.

On June 8, 2021, representatives of Party A contacted representatives of BofA Securities to indicate that Party A was no longer interested in pursuing an acquisition of the Company. The same day, the Company entered into a confidentiality agreement with Party E, which contained substantially similar “standstill” provisions as the other confidentiality agreements entered into in connection with the process to explore the sale of the entire business, and the Company and BofA Securities granted Party E access to a limited virtual data room containing certain due diligence information relating to the Company to Party E. Because Party E is a competitor of the Company, this virtual data room excluded competitively sensitive information regarding the Company pending the entry by Party E and the Company into a “clean team” confidentiality agreement. However, Party E withdrew from the process on June 15, 2021, before such an agreement was finalized. Also on June 8, 2021, Debevoise & Plimpton LLP, the Company’s outside counsel, which we refer to as “Debevoise”, provided a draft merger agreement to BofA Securities, which was subsequently uploaded to the virtual data room and accessed by each of EQT, Party B, Party D and Party E.

During the evening of June 8, 2021, various media outlets reported that the Company was being represented by BofA Securities in connection with a potential sale of the Company, and that negotiations were “in the middle of the second round” with a “handful of financial buyers” remaining interested. The Company did not comment on these reports. On June 9, 2021, following publication of these reports, the price per share of the Company’s common stock closed at $17.64 per share (approximately 18.7% above the closing price of $14.86 per share on June 8, 2021).

On June 10, 2021, Messrs. Ranger, Simpson, Mulcahy and other members of the Company’s management, accompanied by representatives of BofA Securities, met with representatives of EQT and discussed the Company’s business, including its growth strategy, its projects in the United Kingdom, its customer contracts and its philosophy and activities with respect to environmental justice and sustainability. Representatives of EQT also provided an overview of their firm, its organization, its prior investments and its investment philosophy.

On June 11, 2021, the Company’s management and representatives of BofA Securities met with Party E to discuss the Company’s business and certain diligence matters related to a potential transaction. That day, representatives of Debevoise discussed with members of the Company’s management potential antitrust risks associated with a transaction with Party E. The Debevoise representatives suggested arranging a call with Party E’s outside counsel to discuss antitrust matters, including the level of efforts Party E would be willing to undertake to obtain antitrust approvals. However, Party E withdrew from the process on June 15, 2021, before such a call could be held.

Also on June 11, 2021, Messrs. Ranger, Simpson, Mulcahy and other members of the Company’s management, accompanied by representatives of BofA Securities, met with representatives of Party D and discussed the Company’s business, including its growth strategy and organizational structure, as well as Party D’s investment philosophy and approach to management of its portfolio companies.

On June 14, 2021, the executive committee held a virtual meeting, also attended by Messrs. Simpson and Mulcahy, at which Mr. Ranger provided an update on the strategic review, focusing in particular on the process to explore a potential sale of the Company. Mr. Ranger noted that of the four bidders that had initially been invited to participate the second round of that process, three – EQT, Party B and Party D – remained. Mr. Ranger then described the Company’s discussions with Party E, and noted that BofA Securities had requested a

 

45

non-binding purchase price indication by June 21, 2021, as well as an indicative timeline for a potential transaction and a plan for addressing the antitrust risk that such a transaction would present. Mr. Ranger then summarized the recent media reports regarding a potential transaction involving the Company, and noted that the Company had not commented on any of the reports.

During the week of June 14, 2021, representatives of EQT and Party D separately toured the Company’s SEMASS, Delaware Valley, Indianapolis, Fairless, Rookery, Hempstead, Essex, Haverhill, Fairfax and Union plants.

On June 15, 2021, representatives of Party E contacted representatives of BofA Securities to inform them that Party E was not interested in pursuing further discussions with respect to a potential transaction with the Company because of the significant antitrust risk such a transaction would present.

On June 16, 2021, BofA Securities provided to EQT and Party D an instruction letter requesting final binding offers for an acquisition of the Company by July 7, 2021.

On June 18, 2021, the Company signed the engagement letter with BofA Securities.

On June 23 and 24, 2021, representatives of EQT toured the Company’s Fairless, Indianapolis and Niagara plants.

On June 28, 2021, representatives of Party B informed representatives of BofA Securities that Party B was not interested in pursuing further discussions with respect to a potential acquisition of the entire Company.

On July 2, 2021, representatives of EQT submitted an initial markup of the draft merger agreement, which, among other things, included CFIUS approval as a closing condition with narrow limitations on EQT’s obligations with respect to obtaining this approval, added a marketing period before which the transaction could close to allow EQT to market its debt financing for the transaction, reduced the proposed reverse termination fee from 10% to 4.5% of the Company’s equity value, increased the Company termination fee from 2.5% to 3.5% of the Company’s equity value, expanded the scope of the Company’s representations and warranties, and imposed greater restrictions on the Company’s ability to operate in the ordinary course of business in between signing and closing. EQT’s initial markup also included a proposal that certain Company stockholders associated with Mr. Zell enter into a voting agreement with Parent in support of the proposed transaction.

On July 6, 2021, representatives of Debevoise spoke with representatives of EQT’s outside counsel, Kirkland & Ellis LLP, which we refer to as “Kirkland”, to provide feedback on EQT’s markup of the merger agreement including, among other things, with respect to the commencement of the marketing period, the termination fee amounts and triggers, the level of efforts EQT would be required to undertake to obtain CFIUS approval, the scope of the Company’s representations and warranties, and the restrictions on the Company’s ability to operate in the ordinary course of business between the date of the merger agreement and the effective time of the merger. At the end of the call, Debevoise requested that Kirkland provide a revised markup of the merger agreement together with EQT’s bid.

On July 7, 2021, a bid was received from EQT, together with a revised draft of the merger agreement, an equity commitment letter, and debt commitment letters executed by Parent’s lenders. EQT proposed to acquire the entire Company at a price of $19.50 in cash per share of Company common stock. EQT’s revised merger agreement addressed certain issues raised by Debevoise on the July 6 call with respect to the termination fee triggers, the level of efforts EQT would be required to undertake to obtain CFIUS approval, the scope of the Company’s representations and warranties, and the restrictions on the Company’s ability to operate in the ordinary course of business between the date of the merger agreement and the effective time of the merger. Also on July 7, 2021, Party D submitted a markup of the merger agreement and a bid to acquire the entire Company at a price of $19.00 in cash per share of Company common stock.

 

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On July 8, 2021 the executive committee met, with Messrs. Simpson and Mulcahy in attendance, to review the offers received from EQT and Party D. Mr. Ranger noted that Party D’s bid was lower than EQT’s and contingent on Party D’s ability to secure an equity co-investor and therefore represented higher execution risk than EQT’s bid. Mr. Ranger provided a summary of preliminary valuation analyses conducted by BofA Securities, noting that BofA Securities had not yet completed its work. Focusing on the EQT offer, the attendees discussed the price offered, deal certainty and possible timing to closing, in particular the fact that EQT had requested CFIUS approval as a condition to closing. The executive committee discussed the Board’s alternatives, including the potential impact of a decision not to accept the EQT offer on the price of the Company’s common stock. After discussion, the executive committee concluded that it would not support a deal at $19.50 per share and authorized Mr. Ranger to instruct BofA Securities to make a counter-offer to EQT at $21.00 per share along with other terms that the committee believed would improve certainty of closing including, in particular, the level of efforts EQT would be required to undertake to obtain CFIUS approval.

On July 9, 2021, BofA Securities held discussions with EQT requesting a revised bid as instructed by the executive committee at the July 8, 2021 meeting. Later that day, EQT submitted a revised proposal to acquire the

entire Company at a price of $20.25 in cash per share of Company common stock, which EQT indicated was its best and final price, and requested exclusivity to finalize the merger agreement with the Company.

On the morning of July 10, 2021, the Board held a virtual meeting including representatives of BofA Securities and Debevoise. At this meeting, representatives of Debevoise discussed with members of the Board their fiduciary duties under Delaware law. Representatives of BofA Securities provided an overview of the process to date and summarized the proposals received from Party D and EQT. Representatives of BofA Securities then provided BofA Securities’ preliminary financial analysis of the Company and the merger consideration proposed by each of Party D and EQT. Representatives of Debevoise reviewed with the Board a summary of the merger agreement markup submitted by EQT and related documents, focusing on the no-shop and fiduciary out provisions, the size and triggers for the payment of any termination fees, closing conditions, termination rights, provisions relating to EQT’s debt financing, and EQT’s obligations to obtain regulatory approvals. After discussion, the Board determined that, given its higher price and fully committed financing, EQT’s offer represented the best opportunity to achieve the greatest value for the Company’s stockholders. The Board directed management to finalize the merger agreement promptly, noting its belief that negotiating a separate exclusivity agreement would slow down negotiations and diminish the Company’s negotiating leverage and flexibility. As a result, the Board instructed BofA Securities and Debevoise to decline EQT’s request for an exclusivity agreement, but to continue negotiating the merger agreement and to finalize it as quickly as possible. On July 11, 2021, Mr. Ranger spoke by telephone with a representative of EQT to discuss EQT’s request for exclusivity. Mr. Ranger conveyed the Company’s willingness to work expeditiously with EQT to seek to finalize a merger agreement, but declined to enter into an exclusivity agreement.

Between July 10 and July 13, 2021, representatives of Debevoise and Kirkland exchanged drafts of the merger agreement and related documents and spoke by telephone and corresponded by email to discuss those drafts. During that period, representatives of Debevoise and Kirkland reached agreement with respect to the size and triggers for the payment of the reverse termination fee and the Company termination fee, the level of efforts EQT would be required to undertake to obtain CFIUS approval, the scope of the Company’s representations and warranties, and the majority of remaining issues with respect to restrictions on the Company’s ability to operate in the ordinary course of business between the date of the merger agreement and the effective time of the merger. Representatives of Debevoise and Kirkland continued to negotiate the trigger for the commencement of the marketing period. Between July 10 and July 13, 2021, representatives of Kirkland, Debevoise and the voting agreement stockholders exchanged drafts of the voting agreement and spoke by telephone and corresponded by email to discuss those drafts.

On July 12, 2021, BofA Securities provided an updated relationship disclosure letter to the Company.

During the evening of July 13, 2021, the Board held a virtual meeting including representatives of BofA Securities and Debevoise. Representatives of Debevoise provided the Board with the most recent draft of the

 

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merger agreement and summarized its terms, the negotiations to date, and the few issues remaining open, including the specific date by which EQT would be required to begin marketing its debt and certain restrictions on the Company’s ability to incur incremental indebtedness between the date of the merger agreement and the effective time of the merger. The Board reviewed the updated relationship disclosure letter provided by BofA Securities on July 12, 2021, and discussed the matters described therein, concluding that such relationships were not disqualifying. BofA Securities reviewed with the Board its financial analysis of the Company and the merger consideration and, at the request of the Board, BofA Securities rendered its oral opinion, which was subsequently confirmed by delivery of a written opinion dated July 13, 2021, to the effect that, as of the date of the opinion and based on and subject to various assumptions and limitations described in the written opinion, the merger consideration to be received in the merger by holders of Company common stock (other than shares owned, directly or indirectly, by the Company, Parent or Merger Sub) was fair, from a financial point of view, to such holders. Following further discussion with BofA Securities and Debevoise, the Board unanimously adopted resolutions approving the merger agreement and the transactions contemplated thereby and recommending that the Company’s stockholders adopt the merger agreement. The Board instructed Debevoise and management to finalize the merger agreement based on the Board’s feedback.

Later that evening, the parties finalized the merger agreement and, prior to the opening of U.S. financial markets on July 14, 2021, the Company, Parent and Merger Sub executed the merger agreement and the other ancillary agreements, and Parent and the voting agreement stockholders executed the voting agreement. Later that morning, the Company and Parent issued a joint press release announcing the transaction.

Recommendation of the Board

At the special meeting of the Board held on July 13, 2021, after careful consideration, including detailed discussions with the Company’s management and its legal and financial advisors, the Board unanimously:

 

•

determined that the terms of the merger agreement and the transactions contemplated thereby, including the merger, are fair to, and in the best interests of, the Company and its stockholders;

 

•

determined that it is in the best interests of the Company and its stockholders and declared it advisable for the Company to enter into the merger agreement;

 

•

approved the execution and delivery by the Company of the merger agreement, the performance by the Company of its covenants and agreements contained therein and the consummation of the transactions contemplated by the merger agreement, including the merger, upon the terms and subject to the conditions contained therein;

 

•

recommended that the Company’s stockholders approve the merger and adopt the merger agreement; and

 

•

directed that the proposal to adopt the merger agreement be submitted to the stockholders of the Company for their adoption.

 

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Reasons for Recommending the Adoption of the Merger Agreement

In evaluating the merger agreement and the transactions contemplated thereby, including the merger, the Board consulted with the Company’s management and outside legal and financial advisors to the Company and evaluated a variety of factors over the course of over eight months since the Company announced its strategic review in October 2020, including the following material factors, each of which the Board believed supported a unanimous determination to approve the merger agreement and the transactions contemplated thereby, including the merger, and a unanimous recommendation that the Company stockholders vote in favor of adopting the merger agreement and the other proposals to be voted on at the special meeting:

 

•

Financial Terms; Certainty of Value

 

•

Recent and historical market prices, volatility and trading information with respect to the Company common stock, including the fact that the merger consideration of $20.25 per share of Company common stock to be paid by Parent in cash represents:

 

•

a premium of approximately 9.0% over the closing price of the Company’s common stock on July 13, 2021, the last full trading day before the public announcement of the merger;

 

•

a premium of approximately 36.3% over the closing price of the Company’s common stock on June 8, 2021, the last full trading day before the publication of media reports concerning a potential transaction involving the Company;

 

•

a premium of approximately 35.7% over the 30-day volume weighted average closing price of the Company’s common stock as of June 8, 2021, the last full trading day before the publication of media reports concerning a potential transaction involving the Company;

 

•

a premium of approximately 40.8% over the 90-day volume weighted average closing price of the Company’s common stock as of June 8, 2021, the last full trading day before the publication of media reports concerning a potential transaction involving the Company;

 

•

a premium of approximately 32.0% over the highest closing price of the Company’s common stock during the 52-week period ended June 8, 2021, the last full trading day before the publication of media reports concerning a potential transaction involving the Company; and

 

•

a premium of approximately 165.7% over the closing price of the Company’s common stock on October 29, 2020, the last full trading day before the Company publicly announced it was commencing the strategic review.

 

•

The fact that the merger consideration is all cash, which provides certainty of value and immediate liquidity to the Company stockholders while eliminating the effect of long-term business, market and execution risks to the Company stockholders.

 

•

The belief of the Board that, at this time, the merger consideration of $20.25 per share is more favorable to the Company stockholders on a risk-adjusted basis than the potential value that might result from the alternatives reasonably available to the Company (including the alternative of remaining a stand-alone public company and other strategic alternatives that might be pursued as a stand-alone public company) given the potential rewards, risks, timing and uncertainties associated with pursuing those other potential alternatives.

 

•

The view of the Board that the transaction is likely to be consummated, taking into account, among other things, the limited number of conditions to closing in the merger agreement, the fact that no Parent stockholder vote is required to approve the transaction, the equity commitment delivered by an affiliate of Parent, the debt financing commitments delivered by lenders to Parent, the commitments made by Parent in the merger agreement relating to obtaining required regulatory clearances, and the reverse termination fee payable by Parent in the event the merger agreement is terminated under certain circumstances.

 

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•

The fact that the merger agreement permits the Company to continue to pay to the Company stockholders up to four regular quarterly cash dividends in an amount not to exceed $0.08 per share per quarter (with record and payment dates consistent with past practice).

 

•

Prospects of the Company

 

•

The Company’s current and historical business, financial condition, results of operations, competitive position, strategic options and prospects, the risks and challenges associated with remaining a stand-alone public company, and the potential impact of those factors on the future trading price of Company common stock, including risks related to:

 

•

the general business environment for, and impact of general economic conditions on, the waste industry, including a potential failure of the economy to sustain its recovery and a potential decline in the profitability of the waste industry, which could lead to reduced revenues and gross margins and negatively affect the Company’s results of operations;

 

•

the competitive landscape and the Company’s relationships with customers, vendors and suppliers, including in respect of uncertainty being experienced by the Company and the waste industry as a whole, and the potential impact of those factors on the future trading price of shares of Company common stock and the Company’s ability to execute its stand-alone strategic plan if the Company remained a stand-alone public company;

 

•

the large amounts of capital needed to sustain growth in the Company’s businesses, and the Company’s limited access to attractive sources of capital as a stand-alone public company;

 

•

the additional costs and burdens involved with being a stand-alone public company; and

 

•

the achievability of meeting financial projections and the potential risk associated with the possibility that even if the strategic plan of the Company’s management is successfully executed, the market may not reflect such execution in the Company’s stock price.

 

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The belief of the Board, after reviewing the 2021 first quarter results and increased 2021 guidance for adjusted EBITDA and free cash flow, that the merger consideration enabled the Company’s stockholders to realize a substantial portion of the Company’s potential future value as compared to the risk-adjusted value that could reasonably be achieved through continued execution of management’s strategic plan, without the market, business or execution risks associated with continued independence.

 

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The fact that certain stockholders of the Company associated with Samuel Zell, the Chairman of the Board, collectively holding approximately 9.9% of the outstanding shares of Company common stock, and who will receive the same consideration as the Company’s other stockholders, are supportive of the transactions and were willing to execute a voting agreement in support of the transaction.

The Board considered the following additional factors as generally supporting its determination and recommendation:

 

•

that the merger consideration to be paid by Parent was the result of arms’-length negotiations between the parties and their respective advisors and followed a competitive bid process, which included a price increase of (i) $4.25 per share from the $16.00 per share included as the low end of the initial valuation range included in the Initial EQT Proposal, (ii) $1.25 per share from the $19.00 per share included in the non-binding indication of interest submitted by Parent on April 26, 2021 and (iii) $0.75 per share from the $19.50 per share included in the bid submitted by Parent on July 7, 2021, and the Board’s belief, after concluding the competitive bid process and extensive discussions with Parent, that the merger consideration of $20.25 per share represented the best price reasonably available for the Company and which Parent was willing to pay;

 

•

the Board conducted a robust, competitive, multi-round process, reaching out to 15 potential buyers, bringing 12 under non-disclosure agreements, and ultimately receiving multiple indications of interest;

 

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•

the financial presentation by BofA Securities and the oral opinion of BofA Securities rendered to the Board, subsequently confirmed by delivery of a written opinion dated July 13, 2021, to the effect that, as of the date of the opinion and based on and subject to various assumptions and limitations described in the written opinion, the merger consideration to be received in the merger by holders of Company common stock (other than shares owned, directly or indirectly, by the Company, Parent or Merger Sub), was fair, from a financial point of view, to such holders, as more fully described below under the section entitled “The Merger—Opinion of BofA Securities, Inc.” beginning on page 56”;

 

•

the fact that a debt commitment letter was provided by Barclays Bank Plc, Credit Suisse AG, Cayman Islands Branch, Credit Suisse Loan Funding LLC, The Toronto Dominion Bank, New York Branch, TD Securities (USA) LLC, BNP Paribas Securities Corp., Goldman Sachs Bank USA and Credit Agricole Corporate & Investment Bank to Parent for the full amount of the debt financing required for the transaction, and that the transaction is not subject to a debt financing condition and that, under the merger agreement, Parent is obligated to use reasonable best efforts to obtain alternative debt financing if all or any portion of the committed financing becomes unavailable for any reason;

 

•

the belief of the Board that Parent is reasonably likely to receive all required regulatory approvals in connection with the merger; and

 

•

certain terms and conditions of the merger agreement, including:

 

•

Parent’s and Merger Sub’s representations, warranties and covenants, including the covenants obligating Parent and Merger Sub to use reasonable best efforts (subject to certain limitations) to obtain required regulatory approvals and cause the merger to be consummated;

 

•

the fact that Parent’s obligation to complete the merger is not subject to receipt or availability of any funds or financing, the limited number and nature of the conditions to funding set forth in the debt commitment letter and equity commitment letter and the obligation of Parent to use its reasonable best efforts to obtain the financing;

 

•

the right of the Company to negotiate with a third party that submits a bona fide unsolicited alternative acquisition proposal if the Board determines in good faith, after consultation with the Company’s outside financial advisors and outside legal counsel, that such alternative acquisition proposal is or would reasonably be expected to lead to a superior proposal and the failure to take such action would reasonably be expected to be inconsistent with the Board’s fiduciary duties under applicable law;

 

•

the fact that, in certain circumstances and subject to compliance with certain procedural requirements, prior to the adoption of the merger agreement by the Company’s stockholders, the Board is permitted to change its recommendation that the Company stockholders adopt the merger agreement and to terminate the merger agreement to accept a superior proposal, subject to the payment to Parent of a termination fee;

 

•

the Board’s belief, after consulting with the Company’s outside legal and financial advisors, that the deal protection provisions of the merger agreement, including the Company termination fee of $81.3 million (representing approximately 2.875% of the aggregate merger consideration) and the Company’s obligation to reimburse Parent for its fees and expenses incurred in connection with the merger agreement and the transactions contemplated thereby, in an amount not to exceed $6 million and creditable against any Company termination fee that may be due, if either the Company or Parent terminates the merger agreement as a result of the failure to obtain the Company stockholder approval, are customary and reasonable and would not preclude a willing and financially capable third party, were one to exist, from making a superior proposal for the Company following the announcement of a transaction with Parent;

 

•

the requirement that, in the event of a failure of the merger to be consummated in certain circumstances, including a breach of the representations, warranties or covenants of Parent or

 

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Merger Sub or the failure of Parent or Merger Sub to consummate the merger if required to do so, Parent will pay to the Company a reverse termination fee of $162.6 million (representing approximately 5.75% of the aggregate merger consideration) when obligated to do so;

 

•

the fact that the consummation of the merger would be subject to the approval of the stockholders holding a majority of the outstanding shares of the Company’s common stock entitled to vote on such matter, who will have the opportunity to adopt or reject the merger agreement;

 

•

the fact that appraisal rights will be available to the stockholders of Company who properly exercise such rights under the DGCL, which would give these stockholders the ability to seek and be paid a judicially determined appraisal of the “fair value” of their shares of Company common stock if they do not wish to accept the merger consideration;

 

•

the obligation of each of the Company and Parent to use its reasonable best efforts to consummate the transaction as promptly as practicable;

 

•

the fact that the definition of “Company Material Adverse Effect” has a number of customary exceptions and is generally a very high standard applied by courts;

 

•

the Company’s ability to seek specific performance of Parent’s obligation to cause the equity financing sources to fund their contribution if Parent’s debt financing is available, as contemplated by the merger agreement and the equity commitment letter; and

 

•

the Board’s belief that the outside date of July 13, 2022 allows for sufficient time to complete the merger.

In the course of its deliberations, the Board also considered certain risks and other potentially negative factors concerning the transactions contemplated by the merger agreement, including:

 

•

the fact that Company stockholders will not participate in the future earnings or growth of the Company and will not benefit from any appreciation in value of the Company, including any appreciation in value that could be realized as a result of the acquisition of the Company by Parent;

 

•

the risk that the conditions to closing of the transaction will not be satisfied, including as a result of (i) the Company’s stockholders failing to vote to adopt the merger agreement or (ii) the failure to obtain the required regulatory clearances for the transaction;

 

•

the risk that regulatory agencies may condition their clearances on divestitures or other actions that may materially delay or prevent the closing of the transaction;

 

•

the amount of time it could take to complete the transaction, including the fact that the closing of the transaction depends on factors outside the Company’s and Parent’s control;

 

•

the possibility that Parent will be unable to obtain all or a portion of the debt financing contemplated by the debt commitment;

 

•

the fact that Parent is a newly formed shell company without any assets other than the debt and equity financing commitments, and the Company’s principal remedy if the closing conditions are satisfied, but the debt financing is unavailable, will be a reverse termination fee of $162.6 million (representing approximately 5.75% of the aggregate merger consideration);

 

•

the fact that Parent is a wholly owned subsidiary of funds affiliated with EQT, non-U.S. entities with assets located primarily in non-U.S. jurisdictions and the potential challenges of successfully pursuing claims against such entities in the event of a breach by Parent or its affiliates of the merger agreement or any other transaction agreements;

 

•

the possibility that the transaction is not completed and the potential consequences of not completing the transaction, including the potential negative impact on the Company’s business and the trading price of the shares of Company common stock;

 

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•

the risks, costs and disruptions to the Company’s operations during the pendency of the merger and if the merger is not completed, including the diversion of management and employee attention, potential employee attrition, and the potential effect on the Company’s business and its customer, supplier and vendor relationships;

 

•

the fact that certain of the Company’s directors and executive officers may receive certain benefits that are different from, and in addition to, those received by the Company’s other stockholders (see the section entitled “The Merger—Interests of the Company’s Directors and Executive Officers in the Merger” beginning on page 65);

 

•

the fact that, for United States federal tax purposes, the merger is expected to be a taxable transaction to the Company stockholders who are entitled to receive merger consideration; and

 

•

certain terms of the merger agreement, including:

 

•

the restrictions on the Company’s ability to solicit alternative acquisition proposals;

 

•

the termination fee of $81.3 million that the Company would be required to pay if the merger agreement is terminated under certain circumstances;

 

•

the Company’s obligation to reimburse Parent for its fees and expenses incurred in connection with the merger agreement and the transactions contemplated thereby, in an amount not to exceed $6 million, if either the Company or Parent terminates the merger agreement as a result of the failure to obtain the Company stockholder approval;

 

•

the restrictions on the Company’s operations until the consummation of the transaction (or the termination of the merger agreement), which restrictions could delay or prevent the Company from undertaking business opportunities that might arise prior to the closing of the transaction to the detriment of Company stockholders, in particular if the merger is not completed;

 

•

the requirement that the Company and Parent obtain regulatory clearance in the U.S. and Ireland in order to complete the transaction; and

 

•

the requirement that the Company and Parent obtain the CFIUS approval in order to complete the transaction, and the fact that Parent would not be required to take any action in connection with obtaining the CFIUS approval that would have a material adverse effect on the Company and its subsidiaries, taken as a whole.

After considering the foregoing factors, the Board concluded that, overall, the potential benefits of the proposed transaction to Company and the Company stockholders outweighed the risks relevant to the merger, many of which are mentioned above. The Board realized, however, that there can be no assurance about future results, including results considered or expected as described in the factors listed above. The factors considered by the Board and all other information in this section are forward-looking in nature and, therefore, should be read in light of the factors discussed in the section entitled “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 27.

This discussion of the factors considered by the Board in approving the merger agreement and the merger and recommending that the Company stockholders approve the proposals at the special meeting described in this proxy statement includes the material factors considered by the Board, but it is not intended to be exhaustive and does not include all of the factors considered. In view of the variety of factors described above and the quality and amount of information considered, the Board did not find it practicable to quantify or otherwise assign relative weight to, and did not make any specific assessments of, the specific factors considered in reaching its determination. In addition, individual members of the Board may have given different weights to different factors.

The board based its recommendation that the Company stockholders vote in favor of adopting the merger agreement and the other proposals to be voted on at the special meeting on the totality of the information presented, including the factors described above.

 

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Forward-Looking Financial Information

Given the unpredictability of the underlying assumptions and estimates inherent in preparing financial projections, the Company does not as a matter of general practice publicly disclose detailed projections as to its anticipated financial position or results of operations other than providing, from time to time, an outlook in its regular earnings press releases and other investor materials. However, in the ordinary course of their duties, the Company’s management prepared certain forward-looking financial information for fiscal years 2021 through 2030, which is summarized below. We refer to these projections as the “financial projections”. The financial projections were made available by the Company’s management to the Board in connection with its evaluation of the merger. The financial projections were also made available to BofA for its use and reliance in connection with its financial analyses and opinion summarized below under “—Opinion of Our Financial Advisor”. In connection with Parent’s due diligence investigation, the Company made available to Parent the financial projections. None of the financial projections were intended for public disclosure. A summary of the financial projections is included in this proxy statement only because the financial projections were made available to the Board, BofA and Parent. The financial projections are not included in this proxy statement to influence any stockholder to make any investment decision with respect to the merger, including whether or not to seek appraisal rights with respect to the shares of Company common stock.

Although the financial projections are presented with numerical specificity, they reflect numerous estimates and assumptions made by the Company with respect to industry performance, general business, economic, regulatory, market and financial conditions and other future events, as well as matters specific to the Company’s business, all of which are difficult or impossible to predict accurately and many of which are beyond the Company’s control. The financial projections reflect assumptions as to certain potential business decisions that are subject to change. The financial projections do not reflect changes in general business or economic conditions since the time they were prepared, changes in the Company’s businesses or its prospects or any other transactions or events that have occurred or that may occur and that were not anticipated at the time the financial projections were prepared, and the financial projections are not necessarily indicative of current values or necessarily predictive of future performance, which may be significantly more favorable or less favorable than as set forth therein and should not be regarded as a representation that the financial forecasts, projected results or other estimates and assumptions therein will be achieved. Without limiting the generality of the foregoing, the financial projections include assumptions relating to waste industry demands, which are uncertain and dependent, among other things, upon the COVID-19 recovery. The financial projections were prepared on a standalone basis without giving effect to the merger. Furthermore, the financial projections do not take into account the effect of any failure of the merger to be completed and should not be viewed as accurate or continuing in that context.

In the view of the Company’s management, the financial projections were prepared on a reasonable basis and reflect the best estimates and judgments regarding the Company’s future financial performance that were available to the Company’s management at the time. However, this information is not fact and should not be relied upon as being necessarily indicative of future results. The financial projections reflect subjective judgments and assumptions in many respects and thus are susceptible to multiple interpretations and periodic revisions based on actual experience and business developments. The financial projections also cover multiple fiscal years, and such information by its nature becomes less reliable with each succeeding fiscal year. As such, the financial projections constitute forward-looking information and are subject to many risks and uncertainties that could cause actual results to differ materially from the results forecasted in the financial projections, including the risks and uncertainties described in the section entitled “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 27. Accordingly, there can be no assurance that the financial projections will be realized or that actual results will not differ materially from those forecasted. In addition, the financial projections will be affected by our ability to achieve strategic goals, objectives and targets over the applicable periods. The financial projections cannot, therefore, be considered a guarantee of future operating results, and this information should not be relied on as such.

The inclusion of the financial projections should not be regarded as an indication that the Company, Parent, BofA, any of their respective affiliates, officers, directors, advisors or other representatives or anyone who

 

54

received this information then considered, or now considers, them to be a reliable prediction of future events, and this information should not be relied upon as such. The inclusion of the financial projections herein should not be deemed an admission or representation by the Company that it views the financial projections as material information. The inclusion of the financial projections in this proxy statement should not be regarded as an indication that the financial projections will necessarily be predictive of actual future events given the inherent risks and uncertainties associated with such long-range forecasts. No representation is made by the Company, Parent, BofA or any of their respective affiliates, officers, directors, advisors or other representatives or any other person regarding the validity, reasonableness, accuracy or completeness of the financial projections or the Company’s ultimate performance compared to such information. The financial projections have not been updated or revised to reflect information or results after the date they were prepared or as of the date of this proxy statement, and none of the Company, Parent, BofA or any of their respective affiliates intends to, and each of them expressly disclaims any obligation to, update, correct, revise or otherwise review the financial projections to reflect circumstances existing after the date when made or to reflect the occurrence of future events, even if any or all of the financial projections or underlying assumptions have changed or change or otherwise have become or are inappropriate or incorrect (even in the short term). The financial projections should be evaluated, if at all, in conjunction with the historical financial statements and other information about the Company contained in its public filings with the SEC. For additional information, see the section entitled “Where You Can Find More Information” beginning on page 129. In light of the foregoing factors, and the uncertainties inherent in the financial projections, the Company’s stockholders are cautioned not to place undue, if any, reliance on the financial projections.

The financial projections included in this document have been prepared by, and are solely the responsibility of, the Company’s management. Neither the Company’s independent auditor nor any other independent accountant has compiled, examined or performed any procedures with respect to the financial projections, nor have they or BofA expressed any opinion or any other form of assurance on the financial projections, the assumptions on which they were based or their achievability. The financial projections are unaudited and were not prepared with a view toward public disclosure or compliance with the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information or generally accepted accounting principles as applied in the United States (“GAAP”). Some of the financial projections are “non-GAAP financial measures”, which are financial performance measures that are not calculated in accordance with the published guidelines of the SEC regarding projections or GAAP. These non-GAAP financial measures should not be viewed as a substitute for GAAP financial measures, and may be different from non-GAAP financial measures used by other companies. Furthermore, there are limitations inherent in non-GAAP financial measures, because they exclude charges and credits that are required to be included in a GAAP presentation. Accordingly, these non-GAAP financial measures should be considered together with, and not as an alternative to, financial measures prepared in accordance with GAAP.

The following table presents a summary of the financial projections:

Financial Projections

 

(US$ in millions)		2021E				2022E				2023E				2024E				2025E				2026E				2027E				2028E				2029E				2030E
Total Revenue		$	2,033			$	2,092			$	2,097			$	2,156			$	2,123			$	2,135			$	2,158			$	2,191			$	2,241			$	2,276
Adjusted EBITDA(1)		$	460			$	545			$	580			$	619			$	637			$	657			$	677			$	689			$	708			$	725
Free Cash Flow(2)		$	137			$	201			$	245			$	263			$	287			$	302			$	321			$	349			$	363			$	377

 

(1)

“Adjusted EBITDA” is defined as earnings before interest, provision for income taxes, and depreciation and amortization expense (“EBITDA”), adjusted to (i) include the proportional EBITDA of unconsolidated subsidiaries of the Company, (ii) exclude certain capital expenditures that are expensed under service concession accounting guidance (ASC 853) and (iii) exclude certain non-cash and non-recurring items.

(2)	“Free Cash Flow” is defined as the Company’s cash flow from operations less maintenance capital expenditures and changes in operating restricted funds.

 

55

The Company approved the following free cash flow projections for use by BofA Securities in connection with its analysis and opinion, which were calculated as set forth below.

The North American unlevered free cash flows were computed by taking adjusted EBITDA and subtracting taxes, changes in net working capital and capital expenditures, and adding depreciation and amortization, in each case attributable to such North American waste-to-energy operations and as provided by the Company’s management.

 

(US$ in millions)		H2 2021E				2022E				2023E				2024E				2025E				2026E				2027E				2028E				2029E				2030E
North American Unlevered Free Cash Flows		$	140			$	285			$	267			$	288			$	295			$	328			$	309			$	326			$	345			$	342

The European levered free cash flows were computed by taking the Company’s contributions to the Company’s equity investments in its projects in the United Kingdom and Ireland as an outflow in cash and by taking distributions from such investments as an inflow in cash.

 

(US$ in millions)		H2 2021E				2022E				2023E				2024E				2025E				2026E				2027E				2028E				2029E				2030E
European Levered Free Cash Flows		($	23	)		($	90	)		$	9			$	31			$	47			$	54			$	56			$	61			$	63			$	67

Opinion of BofA Securities, Inc.

The Company retained BofA Securities to act as a financial advisor to the Company in connection with the merger. BofA Securities is an internationally recognized investment banking firm which is regularly engaged in the valuation of businesses and securities in connection with mergers and acquisitions, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements and valuations for corporate and other purposes. The Company selected BofA Securities to act as a financial advisor to the Company in connection with the merger on the basis of BofA Securities’ experience in transactions similar to the merger, its reputation in the investment community and its familiarity with the Company and its business.

On July 13, 2021, at a meeting of the Board held to evaluate the merger, representatives of BofA Securities delivered to the Board the oral opinion of BofA Securities, which was confirmed by delivery of a written opinion dated July 13, 2021, to the effect that, as of the date of the opinion and based on and subject to various assumptions and limitations described in the written opinion, the merger consideration to be received in the merger by holders of Company common stock (other than holders of shares owned, directly or indirectly, by the Company, Parent or Merger Sub), was fair, from a financial point of view, to such holders.

The full text of BofA Securities’ written opinion to the 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 proxy statement and is incorporated by reference herein in its entirety. The following summary of BofA Securities’ opinion is qualified in its entirety by reference to the full text of the written opinion. BofA Securities delivered its opinion to the Board for the benefit and use of the 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 aspect or implication of the merger other than the merger consideration to the extent expressly specified in such opinion, and no opinion or view was expressed by BofA Securities as to the relative merits of the merger in comparison to other strategies or transactions that might be available to the Company or in which the Company might engage or as to the underlying business decision of the Company to proceed with or effect the merger. BofA Securities’ opinion does not constitute a recommendation as to how any stockholder should vote or act in connection with the merger or any related matter.

In connection with rendering its opinion, BofA Securities has, among other things:

 

(1)

reviewed certain publicly available business and financial information relating to the Company;

 

56

(2)

reviewed certain internal financial and operating information with respect to the business, operations and prospects of the Company furnished to or discussed with BofA Securities by the management of the Company, including certain financial forecasts relating to the Company prepared by the management of the Company (which we refer to as the “financial projections”, as defined and summarized above under the caption “—Forward-Looking Financial Information”);

 

(3)

reviewed and discussed with the management of the Company its estimates of the amount and utilization of certain net operating losses of the Company (collectively, “NOLs”, as defined and summarized above under the caption “—Forward-Looking Financial Information”);

 

(4)

discussed the past and current business, operations, financial condition and prospects of the Company with members of senior management of the Company;

 

(5)

reviewed the trading history for Company common stock and a comparison of that trading history with the trading histories of other companies BofA Securities deemed relevant;

 

(6)

compared certain financial and stock market information of the Company with similar information of other companies BofA Securities deemed relevant;

 

(7)

compared certain financial terms of the merger to financial terms, to the extent publicly available, of other transactions BofA Securities deemed relevant;

 

(8)

considered the results of BofA Securities’ efforts on behalf of the Company to solicit, at the direction of the Company, indications of interest and definitive proposals from third parties with respect to a possible acquisition of the Company;

 

(9)

reviewed a draft, dated July 12, 2021, of the merger agreement (which we refer to as the “draft agreement”); and

 

(10)

performed such other analyses and studies and considered such other information and factors as BofA Securities deemed appropriate.

In arriving at its opinion, BofA Securities assumed and relied upon, without independent verification, the accuracy and completeness of the financial and other information and data publicly available or provided to or otherwise reviewed by or discussed with it and relied upon the assurances of the management of the Company that it was not aware of any facts or circumstances that would make such information or data inaccurate or misleading in any material respect. With respect to the financial projections and the NOLs, BofA Securities was advised by the Company, and assumed, at the direction of the Board, that they were reasonably prepared on bases reflecting the best currently available estimates and good faith judgments of the management of the Company as to the future financial performance of the Company. BofA Securities relied, at the direction of the Company, on the assessments of the management of the Company as to the ability of the Company to utilize the NOLs. BofA Securities did not make and has not been provided with any independent evaluation or appraisal of the assets or liabilities (contingent or otherwise) of the Company or any other entity, nor has BofA Securities made any physical inspection of the properties or assets of the Company. BofA Securities did not evaluate the solvency or fair value of the Company or Parent under any state, federal or other laws relating to bankruptcy, insolvency or similar matters. BofA Securities assumed, at the direction of the Company, that the merger will be consummated in accordance with its terms and in compliance with all applicable laws, relevant documents and other requirements, without waiver, modification or amendment of any material term, condition or agreement and that, in the course of obtaining the necessary governmental, regulatory and other approvals, consents, releases and waivers for the merger, no delay, limitation, restriction or condition, including any divestiture requirements or amendments or modifications, will be imposed that would have an adverse effect on the Company or the contemplated benefits of the merger. BofA Securities also assumed, at the direction of the Company, that the final executed merger agreement did not differ in any material respect from the draft agreement reviewed by BofA Securities.

BofA Securities expressed no view or opinion as to any terms or other aspects or implications of the merger (other than the merger consideration to the extent expressly specified in its opinion), including, without

 

57

limitation, the form or structure of the merger or any other agreement, arrangement or understanding entered into in connection with or related to the merger or otherwise. BofA Securities’ opinion was limited to the fairness, from a financial point of view, of the merger consideration to be received by holders of shares of Company common stock (other than shares owned, directly or indirectly, by the Company, Parent or Merger Sub) and no opinion or view was expressed with respect to any consideration received in connection with the merger by the holders of any class of securities, creditors or other constituencies of any party. In addition, no opinion or view was expressed with respect to the fairness (financial or otherwise) of the amount, nature or any other aspect of any compensation to any of the officers, directors or employees of any party to the merger, or class of such persons, relative to the merger consideration. Furthermore, 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 the Company or in which the Company might engage or as to the underlying business decision of the Company to proceed with or effect the merger. In addition, BofA Securities expressed no view or opinion with respect to, and it relied, with the consent of the Company, upon the assessments of the Company and its representatives regarding, legal, regulatory, accounting, tax and similar matters relating to the Company or any other entity and the merger (including the contemplated benefits thereof) as to which it understood that the Company obtained such advice as it deemed necessary from qualified professionals. BofA Securities further expressed no opinion or recommendation as to how any stockholder should vote or act in connection with the merger or any related matter.

BofA Securities’ opinion was necessarily based on financial, economic, monetary, market, and other conditions and circumstances as in effect on, and the information made available to BofA Securities as of, the date of its opinion. It should be understood that subsequent developments may affect BofA Securities’ opinion, and BofA Securities does not have any obligation to update, revise or reaffirm its opinion. The issuance of BofA Securities’ opinion was approved by a fairness opinion review committee of BofA Securities. Except as described in this summary, the Company imposed no instructions or limitations on the investigations made or procedures followed by BofA Securities in rendering its opinion.

The discussion set forth below in the section entitled “Summary of Material Company Financial Analyses” represents a summary of the material financial analyses presented by BofA Securities to the Board in connection with its opinion. The financial analyses summarized below include information presented in tabular format. In order to fully understand the financial analyses performed by BofA Securities, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses performed by BofA Securities. Considering the data set forth in the tables below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of the financial analyses performed by BofA Securities. Future results may differ from those described and such differences may be material. The order in which the financial analyses summarized below appear does not necessarily reflect the relative importance or weight given to such analyses.

Summary of Material Company Financial Analyses

Selected Publicly Traded Companies Analysis

BofA Securities reviewed publicly available financial and stock market information of the following nine selected publicly traded companies in the environmental services industry and the independent power producer (“IPP”) industry:

Environmental Services Industry

 

•

Waste Management, Inc.

 

•

Republic Services, Inc.

 

•

Waste Connections, Inc.

 

58

•

Stericycle, Inc.

 

•

Clean Harbors, Inc.

 

•

Harsco Corporation

 

•

US Ecology, Inc.

IPP Industry

 

•

Vistra Corp.

 

•

NRG Energy Inc.

BofA Securities reviewed, among other things, the enterprise values for each of the selected companies and for the Company, calculated by multiplying the closing share price of each applicable company as of July 9, 2021 by the number of fully-diluted shares outstanding of the applicable company (determined on a treasury stock method basis based on information in the public filings of the applicable company), and adding to (or subtracting from, as applicable) the result the amount of the applicable company’s net debt (or net cash) (defined as debt, preferred equity and non-controlling interest (as applicable) less cash, cash equivalents and marketable securities (as applicable)), as a multiple of Wall Street analyst consensus estimates of earnings before interest, taxes, depreciation and amortization (“EBITDA”) for each of calendar years 2021 and 2022 for the applicable company (referred to in this section as “2021E EV / EBITDA” and “2022E EV / EBITDA”, respectively). Financial data of the selected companies were derived from their public filings and publicly available Wall Street research analysts’ estimates published by FactSet as of July 9, 2021. Financial data of the Company were derived from the financial projections and equity information provided by the management of the Company. The overall low to high 2021E EV / EBITDA multiples observed for the selected companies were (i) 9.2x to 18.7x for the environmental services companies (with an average of 13.0x) and (ii) 9.0x to 12.7x for the IPP companies (with an average of 10.9x). The overall low to high 2022E EV / EBITDA multiples observed for the selected companies were (i) 8.0x to 17.3x for the environmental services companies (with an average of 12.1x) and (ii) 6.5x to 7.0x for the IPP companies (with an average of 6.8x). BofA Securities noted that the 2021E EV / EBITDA multiple observed for the Company was 9.9x and that the 2022E EV / EBITDA multiple observed for the Company was 9.1x, in each case, based on the financial projections.

 

59

Based on BofA Securities’ review of the enterprise values to EBITDA multiples for the selected companies and the Company and on its professional judgment and experience, BofA Securities applied a 2021E EV / EBITDA multiple reference range of 10.0x to 11.0x to Company management’s estimates of the Company’s calendar year 2021 EBITDA, adjusted by the management of the Company for stock-based compensation expense, service concession expense, part expense valuation adjustment, equity investment adjustment to proportional EBITDA and non-recurring items, asset write-offs / impairments and other one-time items (which we refer to as “adjusted EBITDA”), as reflected in the financial projections, and a 2022E EV / EBITDA multiple reference range of 9.0x to 10.0x to Company management’s estimates of calendar year 2022 adjusted EBITDA as reflected in the financial projections to calculate ranges of implied enterprise values for the Company. BofA Securities then calculated implied equity value reference ranges per share of Company common stock (rounded to the nearest $0.25) for the Company by subtracting from the resulting ranges of implied enterprise values it calculated an estimate of the net debt of the Company as of June 30, 2021 (calculated as debt, less cash (including short term restricted funds held in trust), as of June 30, 2021), as provided by the management of the Company, and dividing the result by the number of fully diluted-shares of the Company common stock outstanding as of April 23, 2021 (calculated on a treasury stock method basis, based on information provided by the management of the Company). This analysis indicated the following approximate implied equity value reference ranges per share of Company common stock (rounded to the nearest $0.25), as compared to the merger consideration:

 

Implied Equity Value Reference Range Per Share of Company Common Stock
2021E Adjusted EBITDA		2022E Adjusted EBITDA		Merger Consideration
$18.00 - $21.75		$17.25 - $21.25		$20.25

No selected publicly traded company used in this analysis is identical or directly comparable to the Company. Accordingly, an evaluation of the results of this analysis is not entirely mathematical. Rather, this analysis involves complex considerations and judgments concerning differences in financial and operating characteristics and other factors that could affect the public trading or other values of the companies to which the Company was compared.

 

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Selected Precedent Transactions Analysis

BofA Securities reviewed, to the extent publicly available, financial information relating to the following 29 selected transactions involving 17 acquisitions of publicly traded environmental services and 12 acquisitions of publicly traded IPP companies that BofA Securities considered generally relevant for purposes of its analysis (collectively, the “selected transactions”).

 

Environmental Services Selected Transactions
Date		Acquiror		Target
2/7/2020		Harsco Corporation		ESOL Topco LLC (Environmental Solutions Business of Stericycle)
1/10/2020		American Waste		GFL Environmental
4/15/2019		Waste Management		Advanced Disposal Services
6/26/2018		Hennessy Capital Acquisition Corp III		NRC Group Holdings LLC
6/6/2018		Investor Consortium		Cory Riverside Energy
2/4/2016		Beijing Enterprises Group Co Ltd		EEW Energy from Waste GmbH
1/19/2016		Progressive Waste Solutions Ltd		Waste Connections Inc
11/19/2015		EnergySolutions Inc		Waste Control Specialists LLC
12/19/2014		Republic Services Inc		Tervita LLC
6/2/2014		HanKore Environment Tech Group Ltd		China Everbright Water Investments Ltd
4/22/2014		Stericycle Inc		Psc Environmental Services LLC
4/7/2014		US Ecology Inc		Environmental Quality Co
3/3/2014		Beijing Capital Group Ltd		Transpacific Industries Group Ltd
4/24/2013		EQT Partners AB		Synagro Technologies Inc
4/18/2013		Triton Advisers Ltd		Befesa Medio Ambiente SA
1/7/2013		Energy Capital Partners		Energy Solutions
10/29/2012		Clean Harbors		Safety-Kleen Inc

 

IPP Selected Transactions
Date		Acquiror		Target
10/30/2017		Vistra Energy Corp.		Dynegy Inc.
8/18/2017		Energy Capital Partners LLC		Calpine Corp.
6/3/2016		Riverstone Holdings LLC		Talen Energy Corp.
2/25/2016		Dynegy/ECP		Engie US Merchant Portfolio
7/20/2015		Talen		MachGen
8/22/2014		Dynegy		Equipower
10/18/2013		NRG		Edison Mission Energy
7/22/2012		NRG		GenOn
4/21/2010		Calpine		Conectiv
4/11/2010		Reliant		Mirant
2/26/2007		Investor Consortium		TXU
10/2/2005		NRG		Texas Genco

 

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For each of these selected transactions, BofA Securities reviewed the enterprise values implied for each target company based on the consideration payable in the selected transaction, as multiples of estimates of the target company’s last twelve months EBITDA, or “LTM EBITDA”, as of the announcement of the relevant transaction and based on publicly available information at that time. The overall low to high enterprise value to LTM EBITDA multiples of the target companies in the environmental services selected transactions were 6.2x to 11.6x (with an average of 8.8x). The overall low to high enterprise value to LTM EBITDA multiples of the target companies in the IPP selected transactions were 5.7x to 9.6x (with an average of 8.0x).

Based on BofA Securities’ review of the enterprise values to LTM EBITDA multiples for the selected transactions and on its professional judgment and experience, BofA Securities applied an enterprise value to LTM EBITDA multiple reference range of 9.0x to 11.5x to Company management’s estimates of adjusted EBITDA for the twelve-month period ended June 30, 2021, as reflected in the financial projections, to calculate a range of implied enterprise values for the Company. BofA Securities then calculated an implied equity value reference range per share of Company common stock (rounded to the nearest $0.25) for the Company by subtracting from this range of implied enterprise values an estimate of the net debt of the Company as of June 30, 2021 (calculated as debt, less cash, as of June 30, 2021), as provided by the management of the Company, and dividing the result by a number of fully-diluted shares of Company common stock outstanding as of April 23, 2021 (calculated on a treasury stock method basis, based on information provided by the management of the Company). This analysis indicated the following approximate implied equity value reference ranges per share of Company common stock (rounded to the nearest $0.25), as compared to the merger consideration:

 

Implied Equity Value Reference Range Per Share of Company Common Stock		Merger Consideration
$10.50 - $18.25		$20.25

No selected transaction used in this analysis or the applicable business or target company is identical or directly comparable to the Company or the merger. Accordingly, an evaluation of the results of this analysis is not entirely mathematical. Rather, this analysis involves complex considerations and judgments concerning differences in financial and operating characteristics, market conditions and other factors that could affect the acquisition or other values of the companies or transactions to which the Company and the merger were compared.

Discounted Cash Flow Analysis

BofA Securities performed a discounted cash flow analysis of the Company to calculate a range of implied present values per share of Company common stock utilizing estimates of the standalone, unlevered, after-tax free cash flows the Company expects to generate from WtE operations located in North America over the period from July 1, 2021 through December 31, 2030 based on the financial projections. BofA Securities calculated terminal values for the Company (excluding equity investments in WtE projects outside of North America and the non-perpetuity plants) by applying a range of assumed perpetuity growth rates of 1.5% to 2.5%, based on BofA Securities’ professional judgment and experience, to the unlevered free cash flows (excluding unlevered free cash flows the Company was expected to generate from certain client-owned plants that management of the Company has directed BofA Securities to assume have definite terms of operation (which we refer to as the “non-perpetuity plants”)) in the year ending on December 31, 2030. BofA Securities then calculated implied enterprise values for the Company by discounting to present value as of June 30, 2021, the unlevered free cash flows and the terminal values for the Company (excluding equity investments in WtE projects outside of North America and the non-perpetuity plants), utilizing the mid-period discounting convention, and using discount rates ranging from 6.25% to 7.25%, which were based on an estimate of the Company’s weighted average cost of capital, derived using the capital asset pricing model and adding to these ranges (i) the present value of the levered free cash flows the Company was expected to generate from equity investments in WtE projects outside of North America over the period from July 1, 2021 through December 31, 2030 discounted to June 30, 2021,

 

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utilizing the mid-period discounting convention, and using discount rates ranging from 9.50% to 12.50%, which were based on an estimate of the Company’s cost of equity, derived using the capital asset pricing model, and an assumed perpetuity growth rate of 2%, based on BofA Securities’ professional judgment and experience, applied to the levered free cash flows in the year ending on December 31, 2030, and (ii) the present value of the unlevered free cash flows the Company was expected to generate from the non-perpetuity plants over the period from January 1, 2031 through the expected end of operations of such plants, as per Company management’s judgment, discounted to June 30 2021, utilizing the mid-period discounting convention, and using discount rates ranging from 6.25% to 7.25%, which were based on an estimate of the Company’s weighted average cost of capital, derived using the capital asset pricing model. BofA Securities then calculated implied equity value reference ranges per share of Company common stock (rounded to the nearest $0.25) for the Company by deducting from the ranges of enterprise values the Company’s projected net debt as of as of June 30, 2021 (calculated as debt, less cash, as of June 30, 2021), as provided by Company management, and dividing the result by a number of fully-diluted shares of Company common stock outstanding as of April 23, 2021 (calculated on a treasury stock method basis, based on information provided by the management of the Company). This analysis indicated the following approximate implied equity value reference range per share of Company common stock (rounded to the nearest $0.25) for the Company, as compared to the merger consideration:

 

Implied Equity Value Reference Range Per share of Company Common Stock		Merger Consideration
$14.25 - $25.00		$20.25

Other Factors

BofA Securities also noted certain additional factors that were not considered part of BofA Securities’ financial analyses with respect to its opinion but were referenced for informational purposes, including, among other things, the following:

52-Week Trading Range. BofA Securities reviewed the trading range of the shares of Company common stock for the 52-week period ended July 9, 2021, which was $7.50 to $18.00. BofA Securities noted that, excluding share price performance for the period following the publication in Bloomberg on June 8, 2021 with respect to a possible transaction, the trading range of the shares of Company common stock would have been $7.50 to $14.34.

Wall Street Analysts Price Targets. BofA Securities reviewed certain publicly available equity research analyst price targets for the shares of Company common stock available as of July 9, 2021, and noted that the range of such price targets (discounted by one year at the Company’s mid-point cost of equity of 11.0%) was $14.50 to $16.25.

Leveraged Buyout Analysis. BofA Securities also analyzed the Company from the perspective of a potential purchaser that was not a strategic buyer, but rather was primarily a financial buyer that would effect a hypothetical leveraged buyout of the Company. BofA Securities based its analysis on the financial projections. BofA Securities made certain assumptions, based on its professional judgment and experience, including (i) an LTM terminal EBITDA multiple range of 8.0x to 10.0x and (ii) a target range of annualized internal rates of return for the financial sponsor of 14.0% to 16.0%. Based on this analysis, BofA Securities derived a range of estimated values per share of Company common stock of $15.25 to $20.00 per share (rounded to the nearest $0.25), as compared to the value of the merger consideration of $20.25 per share.

Miscellaneous

As noted above, the discussion set forth above in the section entitled “Summary of Material Company Financial Analyses” represents a brief summary of the material financial analyses presented by BofA Securities to the Board in connection with its opinion and is not a comprehensive description of all analyses undertaken or

 

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factors considered by BofA Securities in connection with its opinion. The preparation of a financial opinion is a complex analytical process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, a financial opinion is not readily susceptible to partial analysis or summary description. BofA Securities believes that its analyses summarized above must be considered as a whole. BofA Securities further believes that selecting portions of its analyses and the factors considered or focusing on information presented in tabular format, without considering all analyses and factors or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying BofA Securities’ analyses and opinion. The fact that any specific analysis has been referred to in the summary above is not meant to indicate that such analysis was given greater weight than any other analysis referred to in the summary.

In performing its analyses, BofA Securities considered industry performance, general business and economic conditions and other matters, many of which are beyond the control of the Company. The estimates of the future performance of the Company in or underlying BofA Securities analyses are not necessarily indicative of actual values or actual future results, which may be significantly more or less favorable than those estimates or those suggested by BofA Securities’ analyses. These analyses were prepared solely as part of BofA Securities’ analysis of the fairness, from a financial point of view, to the holders of shares of Company common stock of the merger consideration to be received by such holders in the merger and were provided to the Board in connection with the delivery of BofA Securities’ opinion. The analyses do not purport to be appraisals or to reflect the prices at which a company might actually be sold or acquired or the prices at which any securities have traded or may trade at any time in the future. Accordingly, the estimates used in, and the ranges of valuations resulting from, any particular analysis described above are inherently subject to substantial uncertainty and should not be taken to be BofA Securities’ view of the actual values of the Company or its shares.

The type and amount of consideration payable in the merger was determined through negotiations between the Company and Parent, rather than by any financial advisor, and was approved by the Board. The decision to enter into the merger agreement was solely that of the Board. As described above, BofA Securities’ opinion and analyses were only one of many factors considered by the Board in its evaluation of the merger and should not be viewed as determinative of the views of the Board, management or any other party with respect to the merger or the merger consideration.

The Company has agreed to pay BofA Securities for its services in connection with the merger a fee of approximately $37.5 million, $2.5 million of which was payable upon delivery of its opinion and the remainder of which is contingent upon consummation of the merger. The Company also has agreed to reimburse BofA Securities for its expenses incurred in connection with BofA Securities’ engagement and to indemnify BofA Securities, any of its affiliates, its and their respective directors, officers, employees and agents and each other person controlling BofA Securities or any of its affiliates against certain liabilities, including liabilities under the federal securities laws, arising out of BofA Securities’ engagement.

BofA Securities and its affiliates comprise a full service securities firm and commercial bank engaged in securities, commodities and derivatives trading, foreign exchange and other brokerage activities, and principal investing as well as providing investment, corporate and private banking, asset and investment management, financing and financial advisory services and other commercial services and products to a wide range of companies, governments and individuals. In the ordinary course of their businesses, BofA Securities and its affiliates may invest on a principal basis or on behalf of customers or manage funds that invest, make or hold long or short positions, finance positions or trade or otherwise effect transactions in the equity, debt or other securities or financial instruments (including derivatives, bank loans or other obligations) of the Company and certain of its affiliates and Parent and certain of its affiliates and certain portfolio companies of its affiliates.

BofA Securities and its affiliates in the past have provided, currently are providing, and in the future may provide, investment banking, commercial banking and other financial services to the Company and have received or in the future may receive compensation for the rendering of these services, including (i) having acted or acting

 

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as an administrative agent, co-lead arranger and joint bookrunner for, and as a lender (including a swing line and letter of credit lender under) a credit facility for the Company, (ii) having acted as a joint bookrunner on a notes offering, and (iii) having provided or providing certain treasury and trade management services and products. From June 1, 2019 through May 31, 2021, BofA Securities and its affiliates derived aggregate revenues from the Company of approximately $8.6 million for corporate and/or investment banking services.

In addition, BofA Securities and its affiliates in the past have provided, currently are providing, and in the future may provide, investment banking, commercial banking and other financial services to EQT AB, an affiliate of Parent which we refer to as “EQT AB”, and certain of its affiliates and portfolio companies (other than Parent or Merger Sub) and have received or in the future may receive compensation for the rendering of these services, including (i) having acted or acting as financial advisor to EQT AB and certain of its affiliates and portfolio companies (other than Parent or Merger Sub) in connection with certain mergers and acquisition transactions, (ii) having acted or acting as administrative agent, collateral agent, arranger, bookrunner and/or lender for EQT AB and/or certain of its affiliates and portfolio companies (other than Parent or Merger Sub), including in connection with the financing for various acquisition transactions, (iii) having acted or acting as underwriter, initial purchaser and/or placement agent for various equity and debt offerings undertaken by EQT AB and/or certain of its affiliates and portfolio companies (other than Parent or Merger Sub) and (iv) having provided or providing certain treasury and trade management services and certain derivatives and foreign exchange trading services to EQT AB and/or certain of its affiliates and portfolio companies (other than Parent or Merger Sub). From June 1, 2019 through May 31, 2021, BofA Securities and its affiliates derived aggregate revenues from EQT AB and certain of its affiliates and portfolio companies (other than Parent or Merger Sub) of approximately $50 million for corporate and/or investment banking services.

In addition, BofA Securities and its affiliates may in the future provide investment banking, commercial banking and other financial services to Parent or Merger Sub and may receive compensation for the rendering of these services.

Interests of Directors and Executive Officers in the Merger

Members of the Board and our executive officers have various interests in the merger described in this section that may be in addition to, or different from, the interests of the Company stockholders generally. You should keep this in mind when considering the recommendation of the Board for the adoption of the merger agreement. The members of the Board were aware of these interests and considered them at the time they approved the merger agreement and in making their recommendation that the Company stockholders adopt the merger agreement. These interests are described below and in the section entitled “The Agreement and Plan of Merger—Treatment of Company Equity Awards” beginning on page 86.

Certain Assumptions

Except as otherwise specifically noted, for purposes of quantifying the potential payment and benefits described in this section, the following assumptions, as well as those described in the footnotes to the table titled “ —Golden Parachute Payments” below, were used:

 

•

the relevant price per share of Company common stock is $20.25 per share, which is the fixed price per share to be received by Company stockholders as merger consideration in respect of their shares of Company common stock;

 

•

the effective time of the merger is November 1, 2021, which is the assumed date of the effective time of the merger solely for purposes of the disclosure in this section (which we refer to as the “assumed effective time”);

 

•

a cash dividend in the amount of $0.08 per share, reflecting the consistent practice of paying quarterly dividends at such rate, will be declared and paid by the Company prior to November 1, 2021 and that such dividend in the form of a dividend equivalent payment will be paid to holders of equity awards being settled and cashed out in connection with the merger;

 

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•

estimates of the performance of outstanding Company PSUs in the form of cumulative free cash flow per share (“FCF/share”) and total stockholder return (“TSR”), which performance is to be determined in good faith by the Company at or before the closing based upon actual performance through the effective time of the merger;

 

•

assumes execution of restrictive covenant agreements by all participants in the Gross-Up Plan;

 

•

the employment of each executive officer is terminated without “cause” (as such term is defined in the severance plan), in each case immediately following the assumed effective time; and

 

•

the executive officers will be entitled to make-whole payments under the Gross-Up Plan for taxes incurred under Section 4999 of the Code in connection with their transaction payments and benefits, based upon the assumed effective time.

The amounts indicated below are estimates based on multiple assumptions that may or may not actually occur or be accurate on the relevant date, including the assumptions described above, and do not reflect certain compensation actions or events that may occur before completion of the merger (including, without limitation, possible grants by the Company of 2022 annual equity awards to executive officers) and events that are not expected, such as the termination of employment of the executive officers, other than Mr. Simpson.

Treatment of Outstanding Equity Awards

Company Stock Options

The merger agreement provides that, unless otherwise agreed between Parent and the relevant holder of Company stock options, effective immediately prior to the effective time of the merger:

 

•

each outstanding and unexercised Company stock option will be automatically canceled; and

 

•

each holder of any such canceled Company stock option will be entitled to receive, in consideration of and in full settlement for the cancellation of each such Company stock option, a lump-sum cash payment, without interest and subject to all applicable tax withholding of an amount equal to the product of (i) the total number of shares of Company common stock underlying each such canceled Company stock option and (ii) the excess, if any, of the merger consideration over the exercise price per share of each such Company stock option.

If any such Company stock option has an exercise price per share that is greater than or equal to the merger consideration, then such Company stock option will be canceled in exchange for no consideration and will have no further force and effect.

Restricted Stock Units

The merger agreement provides that, unless otherwise agreed between Parent and the relevant holder of the RSU, effective as of immediately prior to the effective time of the merger:

 

•

each outstanding Company RSU (whether vested or unvested), will be automatically canceled; and

 

•

each holder of any such canceled Company RSU will be entitled to receive, in consideration of and in full settlement for the cancellation of each such Company RSU, a lump-sum cash payment, without interest and subject to all applicable tax withholding, of an amount equal to (a) the product of (i) the total number of shares of Company common stock underlying each such canceled Company RSU and (ii) the merger consideration, plus (b) all accrued but unpaid dividend equivalents.

 

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Performance Stock Units

The merger agreement provides that, unless otherwise agreed between Parent and the relevant holder of the PSU, effective as of immediately prior to the effective time of the merger:

 

•

each outstanding and unvested Company PSU will vest based on actual performance through the latest practicable date prior to the closing of the merger, which level of actual performance will be determined in good faith by the Company at or before the closing of the merger, and be canceled; and

 

•

each holder of any such vested Company PSU will be entitled to receive, in consideration of and in full settlement for the cancellation of each such vested Company PSU, a lump-sum cash payment, without interest and subject to all applicable tax withholding, of an amount equal to (a) the product of (i) the total number of shares of Company common stock underlying each such canceled vested Company PSU and (ii) the merger consideration, plus (b) all accrued but unpaid dividend equivalents.

Company Restricted Stock

The merger agreement provides that, unless otherwise agreed between Parent and the holder of Company Restricted Stock, effective as of immediately prior to the effective time of the merger, each share of Company Restricted Stock that is outstanding immediately prior to the effective time of the merger shall automatically vest in full and all restrictions (including forfeiture restrictions) otherwise applicable to such vested Company Restricted Stock shall lapse, and each such share of Company Restricted Stock will be treated such that (i) all Company Restricted Stock will be automatically canceled and (ii) be converted into the right to receive the merger consideration; provided that any payment in respect of Company Restricted Stock held by an employee (or other person subject to compensatory withholding) will be paid through the surviving corporation’s regular payroll process and subject to all applicable withholding.

2022 Awards

If the effective time does not occur by March 1, 2022 (or the date of the Company’s 2022 annual stockholder meeting, in the case of the chairman of the Board and non-employee directors), then Parent and the Company have agreed that, solely with respect to annual awards of Company RSUs or Company PSUs (or only Company RSUs to the chairman of the Board and non-employee directors) granted in 2022 prior to the effective time, such awards will vest pro rata upon the effective time, based on the service of the relevant holder from January 1, 2022 through the effective time (with any Company PSUs vesting based on deemed achievement of applicable performance targets), and the remaining and unvested portion of such awards being forfeited effective as of the effective time.

Treatment of Outstanding Equity Awards

Directors

The following table sets forth the cash proceeds that each director would receive in respect of the outstanding equity awards held by each such director as of the assumed effective time, in accordance with the treatment of outstanding Company equity awards described above and in the section entitled “The Agreement and Plan of Merger—Treatment of Company Equity Awards” beginning on page 86. As of August 31, 2021, the chairman of the Board and non-employee directors held an aggregate of 477,752 unconverted Company RSUs, and Messrs. Ranger and Michaelson held an aggregate of 80,627 unconverted Company RSUs issued during the time that they were non-employee directors, for which settlement into shares of Company common stock was deferred until the earlier of a specified date or the director’s separation of service from the Board for any reason. As a result of the merger, it is assumed that all of the directors will separate from service from the Board and result in the conversion, settlement and cash-out of the directors’ Company equity awards. Total consideration payable for Company equity awards, including unconverted Company RSUs and unvested Company equity awards, held by all directors is estimated to be approximately $13.11 million.

 

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All unit numbers and dollar values have been rounded to the nearest whole number.

Director Equity Award Summary Table

 

Director		Unconverted Vested Company RSUs (#)				Unvested Company Equity Awards (#)				Total Cash Proceeds at Closing ($)
David M. Barse			62,082				7,373			$	1,406,464
Ronald Broglio			—				7,373	*		$	149,303
Peter C.B. Bynoe			44,833				7,373			$	1,058,184
Linda J. Fisher			33,595				7,373			$	829,602
Joseph M. Holsten			34,700				7,373			$	851,978
Owen Michaelson			22,925				—			$	464,231
Danielle Pletka			35,813				7,373			$	874,517
Michael W. Ranger			57,702				—			$	1,168,466
Robert S. Silberman			37,538				7,373			$	909,448
Jean Smith			18,711				7,373	*		$	528,201
Samuel Zell			210,430				30,161			$	4,871,968

 

*	Company Restricted Stock

Executive Officers

The following table sets forth the cash proceeds that each of our named executive officers would receive in respect of the Company equity awards held by each named executive officer as of the assumed effective time, including in respect of awards that may vest prior to the completion of the merger based upon the completion of continued service and/or the prior achievement of the applicable performance goals, in either case, independent of the occurrence of the merger. For purposes of this disclosure, the named executive officers are assumed to be terminated without cause on the assumed effective time with Company PSUs paid out at the deemed actual performance.

All unit numbers and dollar values have been rounded to the nearest whole number.

Named Executive Officer Equity Award Summary Table

 

Executive Officers		Company RSUs (#)				Value of Company RSUs ($)				Company PSUs (#)				Value of Company PSUs ($)				Company Stock Options (#)				Value of Company Stock Options ($)				Estimated Total Cash Consideration ($)
Michael W. Ranger			57,702			$	1,168,466				—			$	—				1,000,000			$	12,630,000			$	13,798,466
Bradford Helgeson			55,761			$	1,129,160				186,035			$	3,767,209				250,000			$	3,157,500			$	8,053,869
Derek Veenhof			54,033			$	1,094,168				177,895			$	3,602,374				250,000			$	3,157,500			$	7,854,042
Timothy J. Simpson			40,573			$	821,603				135,340			$	2,740,635				200,000			$	2,526,000			$	6,088,238
Thomas L. Kenyon			46,912			$	949,968				82,348			$	1,667,547				50,000			$	631,500			$	3,249,015

 

(1)	This table does not include Stephen J. Jones, former President and Chief Executive Officer, whose employment terminated effective on November 28, 2020 and who is not entitled to any enhanced compensation and benefits in connection with the merger.

(2)	See “Interests of Company Directors and Executive Officers in the Merger—Treatment of Outstanding Equity Awards” above for further details regarding the treatment of Company equity awards in connection with the merger.

(3)	Company stock options have an assumed value equal to $12.63 per stock option based upon the difference between the purchase price of $20.25 per share and the exercise price per share of $7.62.

 

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(4)	Mr. Ranger’s Company RSUs were acquired as compensation for his services as a member of the Company board of directors and are subject to an irrevocable election to defer conversion until his termination of service on the Board.

Total cash proceeds that our five executive officers, other than the named executive officers, would receive in respect of the Company stock options, Company RSUs and Company PSUs held by such executive officer as of the assumed effective time and in connection with the closing of the merger, including in respect of awards that may vest prior to the completion of the merger based upon the completion of continued service and/or the prior achievement of the applicable performance goals, is estimated to be approximately $11.56 million.

Tax Reimbursements—Gross Up Plan

In connection with the merger, the Board approved the Gross-Up Plan and authorized the Company to enter into participation agreements with eligible participants, including certain of the Company’s executive officers and directors. The Gross-Up Plan provides that if an eligible participant will become entitled to payments and benefits in connection with the merger, including accelerated vesting of Company equity awards, that are deemed “excess parachute payments” under Sections 280G and 4999 of the Code, the eligible participants will be entitled to receive an additional payment from the Company in an amount such that, after payment by the individual of all applicable taxes on the parachute payments and this additional payment (including any excise tax that could be imposed under Section 4999 of the Code), the individual will be in the same after-tax position as if no excise tax were imposed on the parachute payments.

See the section entitled “—Quantification of Potential Golden Parachute Payments in Connection with the Merger” beginning on page 71 for an estimate of the amounts that would become payable to each of the Company’s named executive officers pursuant to the Gross Up Plan. Based on the assumptions described in the section entitled “—Certain Assumptions” beginning on page 65, the estimated aggregate amounts that would become payable to (a) the Company’s five executive officers who are not named executive officers under the Gross Up Plan is $4.02 million and (b) all participants is $13.35 million.

Severance Plan

The Company maintains the Covanta Energy Corporation Senior Officers Severance Plan (which we refer to as the “severance plan”), which provides for severance payments and benefits upon the involuntary termination of specified senior officers, including an executive officer’s employment, other than for “cause” (as defined in the severance plan), with the Company or any of its subsidiaries, in each case conditioned upon the execution and non-revocation of an effective general release of claims against the Company Group (as defined in the severance plan) by the participating officer, including any executive officer. For purposes of the following disclosure, while not currently intended by Parent, other than with respect to Mr. Simpson, whose employment is expected to be terminated following the merger, and for him to be paid the severance described below, the named executive officers are assumed to be terminated without cause on the assumed effective time since payments are applicable for any involuntary termination without cause or any termination for good reason within one year following a change in control.

Pursuant to the severance plan, if an executive officer (other than Mr. Ranger) is involuntarily terminated (other than for “cause”) within one year following a “change in control” (as defined in the severance plan), the executive officer will be entitled to receive:

 

•

an amount equal to 1.5 multiplied by the sum of the executive officer’s then-current annual base salary plus the average annual cash bonus received by the executive officer during the prior two full years of employment, with 50% this severance payable on the 90th day following termination from the Company or one of its subsidiaries and the remaining 50% payable over the 18-month severance period;

 

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•

a pro rata annual cash bonus, to be paid to the executive officer at the time that cash bonuses are paid to other senior-level executives of the Company for such employment year; and

 

•

continuation of medical, dental and life insurance coverage for 18 months.

Restrictive Covenants

Per the terms of the relevant Company equity award agreement and restrictive covenant agreement to be entered into by each participant as a requirement under the Gross-Up Plan, each of the executive officers is (or will be in the case of Mr. Ranger upon his execution of a restrictive covenant agreement as a requirement to participating in the Gross Up Plan) subject to the following restrictive covenants: (i) non-competition; (ii) non-solicitation of customers and employees; and (iii) confidentiality, each of which is applicable during the period of employment and for 18 months following the termination of their services with the Company (or 60 months in the case of the confidentiality covenant). Under the terms of the restrictive covenants, each executive officer is restricted from competing with the business of the Company within the United States or any foreign country in which the Company conducts any aspect of the business. The “business” is defined to mean the development, ownership and/or operation of businesses engaged in waste-to-energy and other renewable energy facilities, waste management and/or waste procurement; provided, however, that after termination of an executive officer’s employment for any reason, the executive officer shall be permitted to work for any business that owns and operates independent power generation projects or that provides services to competitors or customers of the Company and its subsidiaries and affiliates, so long as such business, as determined in the good faith judgment of the Board, does not compete with the Company and its subsidiaries and affiliates. The restrictive covenants also prohibit the solicitation of employees of the Company or its subsidiaries or affiliates or otherwise interfere to the detriment of the Company and its subsidiaries and affiliates in the relationship between the Company and its subsidiaries and affiliates and its employees. The covenant not to solicit customers prohibits contact or solicitation, for the purpose of competing with the Company and its subsidiaries and affiliates, of any person, entity, municipality or other governmental entity that has a contract with or is actively being solicited by the Company and its subsidiaries and affiliates to deliver waste, receive services or purchase energy during the period of such executive officer’s employment. The covenant of confidentiality prohibits in any form or manner, directly or indirectly, the disclosure or communication to any third party, or the use for executive officer’s personal benefit or for the benefit of any competitor of the Company and its subsidiaries and affiliates, of any confidential information of the Company and its subsidiaries and affiliates.

Annual Equity Awards

Parent and the Company have agreed that if the effective time of the merger does not occur by March 1, 2022 (or the date of the Company’s 2022 annual stockholder meeting, in the case of the chairman of the Board and non-employee directors), then solely with respect to annual awards of Company RSUs and Company PSUs (or only Company RSUs to the chairman of the Board and non-employee directors) granted in 2022 prior to the effective time (having forfeiture provisions substantially similar to annual awards granted in previous years), such 2022 awards will vest pro rata upon the effective time, based on the service of the relevant holder from January 1, 2022 through the effective time (with any performance awards vesting based on deemed achievement of applicable performance targets), and the remaining and unvested portion of such awards being forfeited effective as of the effective time. Because the “assumed effective time” is November 1, 2021, the below disclosure does not include any grants that may be made in 2022.    

Supplemental Retirement Plan

Mr. Simpson participates in our non-qualified supplemental defined benefit plan for employees who participated in the Covanta Energy Pension Plan, a qualified defined benefit pension plan that was terminated in 2012. This non-qualified supplemental plan represents an unfunded and unsecured obligation to pay a calculated benefit to Mr. Simpson as and when he would otherwise have been eligible to receive a benefit under the now-terminated Covanta Energy Pension Plan. Mr. Simpson is the only remaining named executive officer participating in the Supplemental Benefit Plan as of December 31, 2020.

 

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Quantification of Potential Golden Parachute Compensation in Connection with the Merger

In accordance with Item 402(t) of Regulation S-K, the tables below (and the accompanying footnotes) present the estimated amounts of compensation that each of the Company’s named executive officers could receive that are based on or otherwise relate to the merger. This compensation relates to prior contracted agreements and other arrangements, and no part of this compensation, other than payments under the Gross-Up Plan, was conferred as a part of the merger. This compensation is referred to as “golden parachute” compensation by the applicable SEC disclosure rules, and in this section we use such term to describe the merger-related compensation payable to the Company’s named executive officers. This merger-related compensation is subject to a non-binding advisory vote of the Company stockholders, as set forth in proposal 2 to this proxy statement. For additional information, see the section entitled “Proposal 2: Non-Binding Compensation Advisory Proposal” beginning on page 37.

The amounts set forth below for the named executive officers are estimates of the amounts that would be payable to the Company’s named executive officers using the assumptions described in the section entitled “—Certain Assumptions” beginning on page 65. These estimates are based on multiple assumptions that may or may not actually occur, including assumptions described in this proxy statement. Some of the assumptions are based on information not currently available, and as a result, the actual amounts, if any, to be received by a named executive officer may differ in material respects from the amounts set forth below. All dollar amounts set forth below have been rounded to the nearest whole number.

 

Name(1)		Cash ($)(2)				Equity ($)(3)				Pension/ NQDC ($)(4)				Perquisites/ Benefits ($)(5)				Tax Reimbursement ($)(6)				Other ($)(7)				Total ($)
Michael W. Ranger		$	2			$	13,798,466			$	0			$	0			$	450,267			$	4,616			$	14,253,351
Bradford J. Helgeson		$	1,662,240			$	8,053,869			$	0			$	47,117			$	2,696,899			$	157,010			$	12,617,135
Derek W. Veenhof		$	1,762,425			$	7,854,042			$	0			$	42,646			$	2,457,879			$	140,549			$	12,257,541
Timothy J. Simpson		$	1,268,741			$	6,088,238			$	641,179			$	34,056			$	1,601,637			$	115,419			$	9,749,270
Thomas L. Kenyon		$	1,162,000			$	3,249,015			$	0			$	46,784			$	1,067,694			$	60,734			$	5,586,227

 

(1)	This table does not include Stephen J. Jones, the Company’s former President and Chief Executive Officer, whose employment terminated effective on November 28, 2020 and who is not entitled to any enhanced compensation and benefits in connection with the merger.

(2)

Cash. For all named executive officers other than Mr. Ranger and Mr. Kenyon, consists of (a) a cash severance payment equal to 1.5 multiplied by the sum of the executive officer’s then-current annual base salary plus the average annual cash bonus received by the executive officer during the prior two full years of employment, 50% of which would be payable on the 90th day following termination from the Company or one of its subsidiaries and the remaining 50% of which would be payable over the 18-month severance period; and (b) a pro rata annual cash bonus, to be paid to the terminated executive officer at the time that cash bonuses are paid to other senior-level executives of the Company for such employment year and for purposes of this estimated calculation are assumed to be at target. As Mr. Kenyon was not employed by the Company for two full years, his actual 2020 cash bonus was used for purposes of this calculation. The cash severance and prorated bonus payments under the severance plan are “double trigger” and become payable only upon a change in control, as defined in the severance plan, and an involuntary termination of the executive officer’s employment by the Company and its subsidiaries other than for cause (as defined in the severance plan) within one year following the change in control. The estimated amount of each such payment is shown in the following table:

 

Named Executive Officer		Severance ($)				Cash LTIP Pro-Rated Bonus ($)				Total ($)
Michael W. Ranger		$	2				—			$	2
Bradford J. Helgeson		$	1,296,233			$	366,007			$	1,662,240
Derek W. Veenhof		$	1,366,425			$	396,000			$	1,762,425
Timothy J. Simpson		$	1,017,716			$	251,025			$	1,268,741
Thomas L. Kenyon		$	942,000			$	220,000			$	1,162,000

 

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(3)

Equity. Consists of accelerated vesting of unvested Company stock options, Company RSUs and Company PSUs in connection with the change in the control and the agreement of Parent and the Company as Parent to accelerate and vest such awards. While the award agreements under which the Company RSUs and Company PSUs were issued contain “double trigger” requirements for acceleration in connection with a change in control, Parent will not be assuming and converting the Company RSUs and Company PSUs into securities of Parent in connection with the merger as required by such agreements in order for the “double trigger” to apply. The Company stock options do not contain a double trigger and will accelerate and become fully vested and exercisable in connection with a change in control. Parent and the Company have agreed that each outstanding and unexercised Company stock option will be automatically canceled and each holder of any such canceled Company stock option will be entitled to receive, in consideration of and in full settlement for the cancellation of each such Company stock option, a lump-sum cash payment, without interest and subject to applicable tax withholding of an amount equal to the product of (i) the total number of shares of Company common stock underlying each such canceled Company stock option and (ii) the excess, if any, of the merger consideration over the exercise price per share of each such Company stock option. For further details regarding the treatment of Company equity awards in connection with the merger, see “Interests of Company Directors and Executive Officers in the Merger—Treatment of Outstanding Equity Awards” beginning on page 66. The estimated value of each such benefit is shown in the following table:

 

Named Executive Officer		Company Stock Options ($)				Company RSUs ($)				Company PSUs – TSR ($)				Company PSUs – FCF ($)				Total ($)
Michael W. Ranger		$	12,630,000			$	1,168,466	*			—				—			$	13,798,466
Bradford J. Helgeson		$	3,157,500			$	1,129,160			$	1,611,758			$	2,155,451			$	8,053,869
Derek W. Veenhof		$	3,157,500			$	1,094,168			$	1,571,987			$	2,030,387			$	7,854,042
Timothy J. Simpson		$	2,526,000			$	821,603			$	1,172,657			$	1,567,978			$	6,088,238
Thomas L. Kenyon		$	631,500			$	949,968			$	758,039			$	909,508			$	3,249,015

 

*

Mr. Ranger’s Company RSUs were acquired as compensation for his services as a member of the Company board of directors and are subject to an irrevocable election to defer conversion until his termination of service on the Company board.

(4)	Pension/NQDC. Mr. Simpson is the only remaining named executive officer participant in the Covanta Energy Pension Plan, a qualified defined benefit pension plan that was terminated in 2012.

(5)

Perquisites/Benefits. Consists of estimated value of continuation coverage of medical, dental and life insurance coverage at active employee rates for a benefits continuation period of up to 18 months for executive officers other than Mr. Ranger. Such benefits are “double trigger” and are provided only upon a change in control, as defined in the severance plan, and an involuntary termination of the executive officer’s employment by the Company and its subsidiaries other than for cause (as defined in the severance plan). For additional information, see the section entitled “Interests of Company’s Directors and Executive Officers in the Merger—Severance Plan” beginning on page 69.

(6)

Tax Reimbursements. Consists of estimated amounts of make-whole payments under the Gross Up Plan to reimburse eligible participants, including the named executive officers, for the excise tax imposed on the payments and benefits to the eligible participants, including the named executive officers, in connection with a change of control by reason of Section 4999 of the Code. The Gross-Up Plan provides that if an eligible participant will become entitled to payments and benefits in connection with the merger, including accelerated vesting of Company equity awards, that are deemed “excess parachute payments” under Sections 280G and 4999 of the Code, the eligible participants will be entitled to receive an additional payment from the Company in an amount such that, after payment by the individual of all applicable taxes on the parachute payments and this additional payment (including any excise tax that could be imposed under Section 4999 of the Code), the individual will be in the same after-tax position as if no excise tax were imposed on the parachute payments. For Mr. Ranger, his estimated tax reimbursement amount under the Gross Up Plan shown in this table assumes that he will enter into a restrictive covenant agreement including a non-competition covenant as a condition of his tax reimbursement under the Gross Up Plan, and

 

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that this tax reimbursement amount will be reasonable compensation (under Section 280G of the Code) for the restrictive covenant agreement in an amount equal to the grant date fair value estimated for his 2020 option award based on the Black-Scholes assumptions contained in the Company’s most recent annual report on Form 10-K. If his anticipated non-competition covenant does not have this estimated value, Mr. Ranger’s tax reimbursement amount is estimated to equal $751,449. For each of the other named executive officers, his estimated tax reimbursement amounts under the Gross Up Plan shown in this table assumes that his severance payments and/or equity payments would be viewed as reasonable compensation (under Section 280G of the Code) for his existing restrictive covenant arrangements in an amount equal to at least the sum of his base salary plus target annual bonus. If these named executive officers’ non-competition covenants do not have this estimated value, the tax reimbursement amounts of Messrs. Helgeson, Veenhof, Simpson and Kenyon would be estimated to equal $3,108,047, $2,066,587 and $1,408,300, respectively.

(7)

Other—Includes accrued and payable dividend equivalent payments related to Company RSUs and Company PSUs and assuming declaration and payment by the Company of a quarterly dividend for the third quarter of 2021 in the amount of $0.08 per share and a merger effective as of the assumed effective time.

 

•

Based on the assumptions described in the section entitled “—Certain Assumptions” beginning on page 65, (i) the estimated aggregate amounts that would become payable to the Company’s five executive officers who are not named executive officers in respect of their unvested Company equity awards is as follows: unvested Company Stock Options—$3.16 million; unvested Company RSUs—$3.71 million; and unvested Company PSUs—$4.69 million; and (ii) the estimated aggregate amount that would become payable to the Company’s chairman of the Board and non-employee directors in respect of their unconverted vested and unvested equity awards is as follows: unconverted vested Company RSUs—$11.31 million and unvested Company RSUs—$1.81 million.

Director and Officer Indemnification and Insurance

The merger agreement provides that, for a period of not less than six years after the effective time of the merger, the surviving corporation will, and Parent will cause the surviving corporation to, indemnify and hold harmless each former and present director or officer of the Company or any of its subsidiaries with respect to acts or omissions occurring or alleged to have occurred at or prior to the effective time of the merger to the fullest extent permitted by law and as provided in the respective organizational documents of the Company or its subsidiaries or any indemnification agreement in effect as of the date of the merger agreement (including advancing attorneys’ fees and expenses to the fullest extent permitted by law upon receipt, if required by applicable law, the organizational documents of the Company or its subsidiaries or any applicable indemnification agreement in effect as of the date of the merger agreement, of a written undertaking to repay the amount paid or reimbursed if it is ultimately determined that such person is not permitted to be indemnified under applicable law, organizational documents or indemnification agreement).

The merger agreement also provides that a “tail” directors’ and officers’ liability insurance policy will be purchased prior to the effective time of the merger with respect to individuals covered by the directors’ and officers’ liability insurance policy of the Company and its subsidiaries prior to the effective time of the merger, on terms, conditions, retentions and levels of coverage at least as favorable as the Company’s current policy. The “tail” policy will cover a period of at least six years following the effective time of the merger; however, the company is not permitted to obtain any policy with an aggregate or total premium amount exceeding 350% of the amount per annum the Company paid in its last full fiscal year.

For additional information, see the section entitled “The Agreement and Plan of Merger—Indemnification; Directors’ and Officers’ Insurance” beginning on page 100.

Compensation Arrangements with Parent

As of the date of this Proxy Statement, none of the Company’s executive officers have entered into any agreement with Parent or any of its affiliates regarding employment with, or the right to purchase or participate

 

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in the equity of, Parent, the surviving corporation or one or more of their affiliates. Prior to, or following the closing of the merger, however, some or all of the Company’s executive officers may discuss or enter into agreements with Parent regarding employment with, or the right to purchase or participate in the equity of, Parent or one or more of its affiliates (including the surviving corporation).

Certain Effects of the Merger

If the proposal to adopt the merger agreement is approved by the holders of a majority of the issued and outstanding shares of Company common stock entitled to vote on such matter and the other conditions to the closing of the merger are either satisfied or (to the extent permitted by applicable law) waived, Merger Sub will be merged with and into the Company upon the terms set forth in the merger agreement. As the surviving corporation in the merger, the Company will continue to exist following the merger as a wholly owned subsidiary of Parent.

Following the merger, all of the Company’s equity interests will be beneficially owned by Parent, and none of the Company’s current stockholders will, by virtue of the merger, have any ownership interest in, or be a stockholder of, the Company, the surviving corporation or Parent. As a result, the Company’s current stockholders will no longer benefit from any increase in the value, nor will they bear the risk of any decrease in the value, of Company common stock. Following the merger, Parent will benefit from any increase in the Company’s value and also will bear the risk of any decrease in the Company’s value.

At the effective time of the merger, each share of the Company’s common stock that is issued and outstanding immediately prior to the effective time of the merger (other than the excluded shares) will automatically be canceled and cease to exist and each holder of such shares will cease to have any rights with respect to such shares, except the right to receive $20.25 per share, in cash, without interest, less any required withholding taxes.

For information regarding the effects of the merger on the Company’s outstanding equity awards, please see the sections entitled “—Interests of Directors and Executive Officers in the Merger” beginning on page 65, and “The Agreement and Plan of Merger—Treatment of Company Equity Awards” beginning on page 86.

The Company common stock is currently registered under the Exchange Act and trades on the NYSE under the symbol “CVA”. Following the completion of the merger, shares of Company common stock will no longer be traded on the NYSE or any other public market. In addition, the registration of shares of Company common stock under the Exchange Act will be terminated and the Company will no longer be required to file periodic and other reports with the SEC with respect to Company common stock. Termination of registration of Company common stock under the Exchange Act will reduce the information required to be furnished by the Company to the Company stockholders and the SEC, and would make certain provisions of the Exchange Act, such as the requirement to file annual and quarterly reports pursuant to Section 13(a) or 15(d) of the Exchange Act, the short-swing trading provisions of Section 16(b) of the Exchange Act and the requirement to furnish a proxy statement in connection with stockholders’ meetings pursuant to Section 14(a) of the Exchange Act, no longer applicable to the Company, to the extent that such provisions apply solely as a result of the registration of Company common stock under the Exchange Act.

Consequences if the Merger is Not Completed

If the proposal to adopt the merger agreement does not receive the required approval from the Company stockholders, or if the merger is not completed for any other reason, you will not receive any consideration from Parent or Merger Sub for your shares of Company common stock. Instead, the Company will remain a public company, and Company common stock will continue to be (i) registered under the Exchange Act and (ii) listed and traded on the NYSE. Holders of shares of Company common stock will continue to be subject to the same risks and opportunities as they currently are subject to with respect to their ownership of Company common stock. If the merger is not completed, there can be no assurance as to the effect of these risks and opportunities

 

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on the future value of Company common stock, including the risk that the market price of Company common stock may decline to the extent that the current market price of Company common stock reflects a market assumption that the merger will be completed. If the proposal to adopt the merger agreement is not approved by the holders of a majority of the outstanding shares of Company common stock entitled to vote on such matter or if the merger is not completed for any other reason, there can be no assurance that any other transaction acceptable to us will be offered or that our business, prospects or results of operations will not be adversely impacted.

In addition, upon termination of the merger agreement under certain circumstances, the Company would be obligated to pay Parent a termination fee of $81.3 million. If either the Company or Parent terminates the merger agreement as a result of the failure to obtain the Company stockholder approval, the Company will be required to reimburse Parent, Merger Sub and their respective affiliates for all fees and expenses incurred in connection with the merger agreement and the transactions contemplated thereby, up to $6 million. For additional information, see the section entitled “The Agreement and Plan of Merger—Expenses; Termination Fees; Limitations of Liability” beginning on page 108.

In the event the merger agreement is terminated as a result of (i) a Parent breach termination, (ii) a financing failure termination or (iii) an end date termination and, at such time, the Company could have terminated the merger agreement pursuant to clause (i) or (ii) above, then, in each case, the Company will be entitled to receive from Parent payment of a reverse termination fee of $162.6 million, as described in the section entitled “—Expenses; Termination Fees; Limitations of Liability” beginning on page 108. In the event that the merger agreement is terminated under circumstances in which the reverse termination fee is payable to the Company, then, subject to the Company’s right to obtain specific performance to the extent permitted under the merger agreement, payment of the reverse termination fee and, if applicable, the enforcement expenses, will be the sole and exclusive remedy of the Company against Parent and Merger Sub (including in the event of fraud or willful breach by Parent or Merger Sub). The maximum aggregate liability of Parent and Merger Sub under the merger agreement in the event Parent or Merger Sub fails to consummate the transactions or otherwise fails to comply with or breaches any covenant or other obligation or representation or warranty in the merger agreement (including in the event of fraud or willful breach) shall not exceed an aggregate amount greater than the sum of (A) the amount of the reverse termination fee and (B) $7 million.

Financing of the Merger

Parent estimates that the total amount required to complete the merger and the related transactions and to pay related fees and expenses will be approximately $5,178.0 million. Parent expects this amount to be funded through a combination of the following:

 

•

Debt Financing. Debt financing in an aggregate principal amount of (i) up to $3,000.0 million consisting of (a) senior secured term loan facilities in an aggregate principal amount equal to $1,375.0 million (which consist of a $1,275.0 million term loan B facility, which includes a backstop delayed draw term sub-facility in an aggregate principal amount equal to $400.0 million, and a term loan C sub-facility in an aggregate principal amount equal to $100.0 million for purpose of cash collateralizing existing letters of credit) and (b) a senior unsecured bridge facility in an aggregate principal amount equal to $1,625.0 million (including a backstop delayed draw bridge sub-facility in an aggregate principal amount equal to $1,100.0 million) and (ii) up to $440.0 million of revolving credit facility, which we collectively refer to as the “debt financing”.

 

•

Equity Financing. Equity financing to be provided by the EQT Investors (which we refer to as the “equity financing sources”, when acting in such capacities), in an aggregate amount of up to approximately $2,178.0 million to be funded at the closing of merger, which we refer to as the “equity financing”.

 

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Debt Financing

Merger Sub has entered into a commitment letter dated July 14, 2021, which we refer to as the “debt commitment letter”, with Barclays Bank Plc, Credit Suisse AG, Cayman Islands Branch, Credit Suisse Loan Funding LLC, The Toronto Dominion Bank, New York Branch, TD Securities (USA) LLC, BNP Paribas, BNP Paribas Securities Corp., Credit Agricole Corporate and Investment Bank, Goldman Sachs Bank USA, Royal Bank of Canada, RBC Capital Markets, Citigroup Global Markets Inc., Stifel Bank & Trust, Stifel, Nicolaus & Company, Incorporated, MUFG Union Bank, N.A., Fifth Third Bank, National Association, and Citizens Bank, N.A. Pursuant to the debt commitment letter, the lenders have committed to provide (i) senior secured term loan facilities in an aggregate principal amount equal to $1,500.0 million (including a backstop delayed draw term sub-facility in an aggregate principal amount equal to $400.0 million and a sub-facility facility for the purpose of cash collateralizing existing letters of credit in an aggregate principal amount equal to $100.0 million), (ii) a senior unsecured bridge facility in an aggregate principal amount equal to $1,500.0 million (including a backstop delayed draw bridge sub-facility in an aggregate principal amount equal to $1,100.0 million), and (iii) a revolving credit facility in an aggregate principal amount equal to $440.0 million. Subject to the terms of the debt commitment letter, Merger Sub or the Company has the option to reallocate a portion of the commitments of the unsecured bridge facility to the senior secured term loan facility or vice versa. The backstop delayed draw term loan sub-facility and the backstop delayed draw bridge sub-facility are expected to fund the repurchase price of any change of control offer required to be made under the indentures governing the Company’s existing debt securities.

The proceeds of the debt financing are expected to be used (i) to finance, in part, the payment of the amounts payable under the merger agreement, (ii) to repay the existing term loans and revolving loans of the Company, (iii) to repurchase any existing debt securities of the Company that have been tendered pursuant to a change of control offer as required under the applicable indenture or similar tender offer and (iv) to pay related fees and expenses. Such proceeds may also be used to redeem, at Parent’s sole option, the Company’s existing debt securities. Under the debt commitment letter, the Company is not obligated to redeem, repurchase or otherwise refinance the Company’s existing debt securities (other than the Company’s 5.875% Senior Notes due 2025), which may remain outstanding following the consummation of the merger. The Company has the right to reduce the amount of the term loan and bridge facilities for any reason, including because the amount of the term loan and bridge commitments exceed the amount of the existing debt securities that will be required to be redeemed pursuant to a change of control offer as required under the applicable indenture or similar tender offer. Proceeds from loans under the revolving credit facility may be used for general corporate purposes.

Equity Financing

In connection with the execution of the merger agreement, the EQT Investors have committed to capitalize Parent, on the date of closing of the merger, with an aggregate equity investment of up to $2,178.0 million, subject to the terms and conditions set forth in the equity commitment letter, dated as of July 14, 2021, which we refer to as the “equity commitment letter”. Funding of the equity financing at the closing of the merger is subject to the conditions provided in the equity commitment letter, which include: (i) the satisfaction or waiver, on or before the closing of the merger, of all of the conditions precedent to Parent’s obligations to consummate the merger (other than those conditions that by their terms are to be satisfied by actions taken at the closing of the merger, each of which must be capable of being satisfied and be satisfied at the closing of the merger) and (ii) the prior or substantially concurrent receipt by Parent of the proceeds of the debt financing.

In addition, pursuant to the equity commitment letter, the EQT Investors have committed to provide funds to Parent for the purpose of (i) reimbursing the Company for certain expenses incurred with respect to the debt financing (which reimbursement amount is capped at $2 million) and (ii) paying the reverse termination fee if the merger agreement is terminated by the Company under certain specified circumstances, in each case, if such expenses and fees become payable under the merger agreement. For additional information regarding the reverse termination fee, please refer to the section entitled “The Agreement and Plan of Merger—Expenses; Termination

 

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Fees; Limitations of Liability” beginning on page 108. The obligation of the EQT Investors under the equity commitment letter with respect to the reverse termination fee is subject to an aggregate cap equal to the amount of $167.6 million, including certain costs and expenses of enforcement, if applicable.

The equity commitment letter and the EQT Investors’ obligation to fund all or any portion of the equity financing, reimbursement of the Company’s expenses or the reverse termination fee as set out in the equity commitment letter will terminate automatically and immediately on the first to occur of (i) the consummation of the closing of the merger, (ii) the assertion, directly or indirectly, by the Company or its subsidiaries and any of their respective former, current or future stockholders, directors, officers, employees, affiliates or representatives of any claim against the EQT Investors, Parent, Merger Sub, the debt financing source parties or any of their respective affiliates and any of their respective, former, current or future stockholders, directors, officers, employees, affiliates or representatives with respect to the equity commitment letter, the merger agreement, the debt commitment letter or any of the transactions contemplated thereby, other than any claim by the Company (x) against Parent or Merger Sub under and in accordance with the merger agreement, (y) to enforce its rights under the confidentiality agreement or (z) to enforce its rights under the equity commitment letter and (iii) the date on which the merger agreement is terminated in accordance with its terms (provided that if the merger agreement is terminated under certain circumstances, such date shall be the date that is 90 days after the date the merger agreement is terminated), so long as on such date the Company does not have any proceeding pending before a court of competent jurisdiction to seek specific performance of Parent’s obligation to cause the equity financing to be funded to Parent in accordance with the merger agreement and/or to seek payment of any amounts payable by Parent pursuant to the merger agreement, in which case the equity commitment letter will terminate upon the earlier of (1) the consummation of the closing of the merger or (2) a final, non-appealable resolution of such proceeding. Upon the valid termination of the equity commitment letter, the EQT Investors will not have any further obligations or liabilities under the equity commitment letter.

The Company is an express third-party beneficiary of the equity commitment letter for the purpose of, in accordance with the terms and conditions of the merger agreement, seeking specific performance of the EQT Investors’ obligations to fund the equity commitment to Parent, among other reasons. For additional information regarding the Company’s remedies under the merger agreement, please refer to the section entitled “The Agreement and Plan of Merger—Specific Performance” beginning on page 110.

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

The following is a general discussion of the material U.S. federal income tax consequences to U.S. holders and non-U.S. holders (in each case, as defined below) of the receipt of the merger consideration in exchange for shares of Company common stock pursuant to the merger. This discussion is based upon the Internal Revenue Code of 1986, as amended (which we refer to as the “Code”), the U.S. Treasury regulations promulgated thereunder, and judicial and administrative authorities, rulings and decisions, all as in effect as of the date of this proxy statement. These authorities may change, possibly with retroactive effect, and any such change could affect the accuracy of the statements and conclusions set forth in this discussion. This discussion does not address any state, local or non-U.S. tax consequences, the Medicare tax on net investment income (under Section 1411 of the Code) or any U.S. federal tax consequences other than those pertaining to the U.S. federal income tax. This discussion is not binding on the Internal Revenue Service, which we refer to as the “IRS”, or the courts and, therefore, could be subject to challenge, which could be sustained. This summary does not address the tax consequences of any transaction other than the merger, including transactions occurring before, after, or at the same time as the merger (whether or not such transactions are in connection with the merger).

This discussion applies only to holders of Company common stock that hold such shares as capital assets within the meaning of Section 1221 of the Code (generally, property held for investment). Further, this discussion does not purport to consider all aspects of U.S. federal income taxation that might be relevant to holders in light of their particular circumstances and does not apply to holders subject to special treatment under the U.S. federal income tax laws (such as, but not limited to, dealers or brokers in securities, commodities or non-U.S. currencies,

 

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traders in securities that elect to apply a mark-to-market method of accounting, banks and certain other financial institutions, insurance companies, mutual funds, tax-exempt organizations, holders liable for the alternative minimum tax, partnerships, S corporations or other pass-through entities or investors therein, regulated investment companies, real estate investment trusts, controlled foreign corporations, passive foreign investment companies, former citizens or residents of the United States, U.S. expatriates, governmental organizations and their controlled entities, holders whose functional currency is not the U.S. dollar, holders who hold shares of Company common stock as part of a hedge, straddle, constructive sale or conversion transaction or other integrated investment, holders who own an equity interest, actually or constructively, in Parent or the surviving corporation following the merger, holders that do not vote in favor of the merger and who properly demand appraisal of their shares under Section 262 of the DCGL or holders who acquired shares of Company common stock pursuant to the exercise of employee stock options, through a tax qualified retirement plan or otherwise as compensation). If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds shares of Company common stock, the tax treatment of a partner in such partnership will depend on the status and activities of the partner and the partnership, and certain determinations made at the partner level. Any such entity and its partners or members should consult their own tax advisor regarding the tax consequences of the receipt of the merger consideration in exchange for shares of Company common stock pursuant to the merger.

Holders of shares of Company common stock should consult their tax advisors as to the specific tax consequences to them of the receipt of the merger consideration in exchange for shares of Company common stock pursuant to the merger including the applicability and effect of the alternative minimum tax and any state, local, non-U.S. and other tax laws, in light of their particular circumstances.

Tax Consequences to U.S. Holders

For purposes of this discussion, the term “U.S. holder” means a beneficial owner of shares of Company common stock that is:

 

•

an individual who is a citizen or resident of the United States, as defined in the Code;

 

•

a corporation (or any other entity or arrangement treated as a corporation for U.S. federal income tax purposes) created or organized under the laws of the United States, any state thereof, or the District of Columbia;

 

•

a trust if (i) a court within the United States is able to exercise primary supervision over the trust’s administration and one or more United States persons (within the meaning of Section 7701(a)(30) of the Code) are authorized to control all substantial decisions of the trust or (ii) it was in existence on August 20, 1996, and it has a valid election in effect under applicable U.S. Treasury regulations to be treated as a domestic trust for U.S. federal income tax purposes; or

 

•

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

The receipt of the merger consideration by U.S. holders in exchange for shares of Company common stock pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes. In general, a U.S. holder who receives the merger consideration in exchange for shares of Company common stock pursuant to the merger will recognize gain or loss for U.S. federal income tax purposes in an amount equal to the difference, if any, between (A) the amount of any cash received (determined before the deduction of any applicable withholding taxes, including as described below in the sections titled “—Information Reporting and Backup Withholding” and “—FATCA”) and (B) the U.S. holder’s adjusted tax basis in such shares of Company common stock. Gain or loss must be determined separately for each block of shares of Company common stock (i.e., shares acquired for the same cost in a single transaction) disposed of pursuant to the merger. Such gain or loss generally will be capital gain or loss and generally will be long-term capital gain or loss if the U.S. holder’s holding period for such block of shares of Company common stock is more than one year as of the date of the merger. Long-term capital gains of certain non-corporate U.S. holders, including individuals, are generally subject to U.S. federal income tax at preferential rates. The deductibility of capital losses is subject to limitations.

 

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The Biden Administration has proposed that the long-term capital gains of certain non-corporate U.S. holders (generally, those with an adjusted gross income in excess of $1 million) be taxed at ordinary (and not preferential) rates. The Biden Administration proposes that the rate increase be effective currently. It is not possible to predict whether, or in what form, the Biden Administration’s proposal will be enacted into law or what the effective date of any such rate increase might be.

Tax Consequences to Non-U.S. Holders

For purposes of this discussion, the term “non-U.S. holder” means a beneficial owner of shares of Company common stock that is not a U.S. holder and is not an entity or arrangement treated as a partnership (or a partner therein) for U.S. federal income tax purposes.

Subject to the discussions below in the sections titled “—Information Reporting and Backup Withholding” and “—FATCA”, the receipt of the merger consideration by non-U.S. holders in exchange for shares of Company common stock pursuant to the merger generally will not be subject to U.S. federal income tax unless:

 

•

the gain, if any, on such shares is effectively connected with the conduct by the non-U.S. holder of a trade or business in the United States (and, if required by an applicable income tax treaty, is attributable to the non-U.S. holder’s permanent establishment or fixed base in the United States), in which event (A) the non-U.S. holder generally will be subject to U.S. federal income tax on a net income basis at graduated rates in substantially the same manner as if it were a U.S. holder and (B) if the non-U.S. holder is a corporation, it may also be subject to a branch profits tax at a rate of 30% (or such lower rate as may be specified under an applicable income tax treaty) on its effectively connected earnings and profits that are not reinvested in the United States for the taxable year, subject to certain adjustments;

 

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the non-U.S. holder is an individual who was present in the United States for 183 days or more in the taxable year of the exchange of shares of Company common stock for the merger consideration pursuant to the merger and certain other conditions are met, in which event the non-U.S. holder will generally be subject to tax at a rate of 30% (or such lower rate as may be specified under an applicable income tax treaty) on the gain from the exchange of shares of Company common stock, which may be offset by certain U.S. source capital losses of the non-U.S. holder (even though the individual is not considered a resident of the United States), provided the non-U.S. holder has timely filed U.S. federal income tax returns with respect to such losses; or

 

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the Company is or has been a U.S. real property holding corporation (a “USRPHC”) as defined in Section 897 of the Code at any time during the shorter of (x) the five-year period ending on the date of the merger and (y) the non-U.S. holder’s holding period with respect to the shares of Company common stock and certain other conditions are satisfied. The Company believes that, as of the effective time of the merger, the Company will not have been a USRPHC at any time within the five-year period ending on the date thereof.

Information Reporting and Backup Withholding

The receipt of the merger consideration by holders in exchange for shares of Company common stock pursuant to the merger may be subject to information reporting and backup withholding. To avoid backup withholding, a U.S. holder should timely complete and return IRS Form W-9, certifying that such U.S. holder is a United States person, the taxpayer identification number provided is correct and such U.S. holder is not subject to backup withholding, or otherwise establish a basis for exemption from backup withholding. Certain types of U.S. holders (including, with respect to certain types of payments, corporations) generally are not subject to backup withholding. In general, a non-U.S. holder will not be subject to information reporting and backup withholding if the non-U.S. holder has complied with certification requirements and identification procedures in order to establish an exemption by providing an IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable (or an IRS

 

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Form W-8ECI if the non-U.S. holder’s gain is effectively connected with the conduct of a trade or business in the United States), or the non-U.S. holder otherwise establishes an exemption. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules generally will be allowed as a refund or a credit against a holder’s U.S. federal income tax liability if the required information is furnished by such holder on a timely basis to the IRS. Copies of information returns that are filed with the IRS may be made available under the provisions of an applicable treaty or agreement to the tax authorities of the country in which a non-U.S. holder resides or is established.

FATCA

Subject to the proposed U.S. Treasury regulations discussed below, under the U.S. tax rules known as the Foreign Account Tax Compliance Act (which we refer to as “FATCA”), a holder of Company common stock would generally be subject to a 30% U.S. withholding tax on gross proceeds from its exchange of Company common stock for merger consideration pursuant to the merger if the holder is, or holds its Company common stock through, (i) a “foreign financial institution” that has not entered into and complied with an agreement with the U.S. government to report, on an annual basis, certain information regarding accounts with or interests in the institution held by certain United States persons and by certain non-U.S. entities that are wholly or partially owned by United States persons and to withhold on certain payments, or (ii) a “non-financial foreign entity” that fails to provide certain documentation (usually an IRS Form W-8BEN or W-8BEN-E) containing information about its identity, its FATCA status, and if required, containing certain information regarding certain of its direct and indirect U.S. owners or certifying that it does not have any such owners, unless an exemption otherwise applies. The adoption of, or implementation of, an intergovernmental agreement between the United States and an applicable foreign country, or future U.S. Treasury regulations, may modify these requirements. Documentation that holders provide in order to be treated as FATCA compliant may be reported to the IRS and other tax authorities, including information about a holder’s identity, its FATCA status, and if applicable, certain of its direct and indirect U.S. owners. Notwithstanding the foregoing, proposed U.S. Treasury regulations have been issued that, if finalized, would provide for the repeal of the 30% withholding tax that would have otherwise applied to gross proceeds from a holder’s exchange of Company common stock for merger consideration pursuant to the merger. The preamble to the proposed U.S. Treasury regulations provides that taxpayers may rely upon this repeal until the issuance of final U.S. Treasury regulations. Holders of Company common stock should consult their own tax advisors on how these rules may apply to the receipt of the merger consideration by holders in exchange for shares of Company common stock pursuant to the merger.

THIS DISCUSSION IS PROVIDED FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. EACH HOLDER SHOULD CONSULT ITS TAX ADVISORS CONCERNING THE U.S. FEDERAL INCOME TAX CONSEQUENCES RELATING TO THE MERGER IN LIGHT OF SUCH HOLDER’S PARTICULAR CIRCUMSTANCES AND ANY CONSEQUENCES ARISING UNDER U.S. FEDERAL NON-INCOME TAX LAWS OR THE LAWS OF ANY STATE, LOCAL OR NON-U.S. TAXING JURISDICTION OR UNDER ANY APPLICABLE INCOME TAX TREATY.

Regulatory Approvals Required for the Merger

Completion of the merger is conditioned on:

 

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the termination or expiration of any waiting period (or extension thereof) applicable to the transactions contemplated by the merger agreement under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”);

 

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authorization from the Federal Energy Regulatory Commission (which we refer to as “FERC”) pursuant to Section 203 of the Federal Power Act of 1935, as amended, of the transactions contemplated by the merger agreement (we refer to this approval as the “FERC approval”);

 

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issuance of an order by the New Jersey Department of Environmental Protection (which we refer to as the “NJDEP”) authorizing the transactions contemplated by the merger agreement pursuant to N.J.A.C. 7:26H-1 et seq. (we refer to this order as the “NJDEP approval”);

 

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•

the Committee on Foreign Investment in the United States and each member agency thereof acting in such capacity (which we refer to as “CFIUS”) has concluded that none of the transactions contemplated by the merger agreement are “covered transactions” and not subject to review under Section 721 of the Defense Production Act of 1950, as amended, and all rules and regulations thereunder (which we refer to as the “DPA”), written notice from CFIUS that it has completed a review or investigation of the notification voluntarily provided under the DPA with respect to such transactions, or, if CFIUS has sent a report to the President of the United States requesting the President’s decision, (i) the President has announced a decision not to take any action to suspend or prohibit such transactions, or (ii) having received a report from CFIUS requesting the President’s decision, the President has not taken any action after 15 days from the earlier of the date the President received such report from CFIUS or the end of the investigation period (which we refer to as the “CFIUS approval”);

 

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consent from the Federal Communications Commission (which we refer to as the “FCC”) under the Communications Act of 1934, as amended, for the transfer of control over certain licenses held by the Company and its subsidiaries (we refer to these approvals as the “FCC consents”); and

 

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the obtaining of approvals or clearances, or the expiration, termination or waiver of the waiting periods under the antitrust laws of Ireland (which we refer to as the “Irish consent”).

The Company and Parent filed their respective notification and report forms under the HSR Act with the Antitrust Division of the United States Department of Justice (which we refer to as the “Antitrust Division”) and the Federal Trade Commission (which we refer to as the “FTC”) on July 28, 2021, which triggered the start of the HSR Act waiting period. The HSR Act waiting period expired at 11:59 p.m. on August 27, 2021, thereby satisfying the condition. The application required for the NJDEP approval was filed on August 6, 2021 (we refer to this application as the “NJDEP application”). The application required for FERC approval was filed on August 11, 2021 (we refer to this application as the “FERC application”). The notification required for the Irish consent was filed on August 12, 2021 (we refer to this notification as the “Irish filing”). The Irish consent was obtained on August 30, 2021, thereby satisfying the condition. A draft voluntary notice was submitted to CFIUS on August 13, 2021 (we refer to this notice as the “draft CFIUS notice”). We anticipate that the filings required for the FCC consents (we refer to these filings as the “FCC filings”) will be made by the end of the third quarter or early in the fourth quarter of 2021.

In addition to the foregoing, Parent, the Company and/or Merger Sub are required under the merger agreement to make certain other filings with governmental authorities in connection with the merger, such as the filing of this proxy statement with the SEC and the certificate of merger with the Secretary of State of the State of Delaware.

At any time before or after the effective time of the merger, the Antitrust Division, the FTC, antitrust authorities outside the United States, United States state attorneys general or other governmental authorities could take action under applicable laws, including seeking to enjoin the completion of the merger, conditionally approving the merger upon the divestiture of the Company’s or Parent’s assets, subjecting the completion of the merger to regulatory conditions or seeking other remedies. Private parties may also seek to take legal action under certain circumstances.

While we believe that the Company and Parent will receive the requisite approvals and clearances for the merger, the Company and Parent may not obtain the regulatory consents necessary to consummate the merger. Each of the parties has agreed, upon the terms and subject to the conditions of the merger agreement, to cooperate with each other and use its reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable under applicable law to consummate and make effective the merger and the other transactions contemplated by the merger agreement as promptly as practicable after the date of the merger agreement and, in any event, prior to the end date.

In furtherance thereof, Parent will, and will cause its subsidiaries to, take any action to avoid or eliminate each and every impediment that may be asserted by any governmental authority with respect to the transactions

 

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contemplated by the merger agreement, including defending any legal proceedings challenging the consummation of the transactions contemplated by the merger agreement, except that, solely in connection with the CFIUS notice, Parent will not be required to take any action that would have a material adverse effect on the Company and its subsidiaries, taken as a whole.

Other than the filings described above and certain actions required to be taken in connection with the Jones Act, neither the Company nor Parent is aware of any governmental or regulatory filings or consents required to be made or obtained, or waiting periods required to expire or terminate after the making of a filing prior to the closing of the merger. If the parties discover that other filings, consents or waiting periods are necessary, then the parties will seek to make such other filings and obtain such other approvals.

We currently expect to obtain all antitrust and other regulatory approvals that are required for the completion of the merger by the end of the fourth quarter of 2021. However, there can be no assurance that any antitrust or regulatory filings will be made, that any related waiting periods will expire or that any required governmental or regulatory consents will be obtained on a timely basis, if at all.

Litigation Related to the Merger

As of September 1, 2021, four lawsuits have been filed by purported Company stockholders against the Company and members of the Board related to the proposed merger. A complaint captioned O’Dell v. Covanta Holding Corporation, et al., Case No. 1:21-cv-7061, was filed in the United States District Court for the Southern District of New York on August 20, 2021. A complaint captioned Raul v. Covanta Holding Corporation, et al., Case No. 1:21-cv-07225, was filed in the United States District Court for the Southern District of New York on August 27, 2021. A complaint captioned Waterman v. Covanta Holding Corporation, et al., Case No. 1:21-cv-07245, was filed in the United States District Court for the Southern District of New York on August 27, 2021. A complaint captioned Colomberti v. Covanta Holding Corporation, et al., Case No. 1:21-cv-04859, was filed in the United States District Court for the Eastern District of New York on August 27, 2021. The complaints assert claims under Sections 14(a) and 20(a) of the Exchange Act and Rule 14a-9 promulgated thereunder against the Company and the members of the Board alleging, among other things, that the Company’s preliminary proxy statement on Schedule 14A filed with the SEC on August 18, 2021 was materially incomplete and misleading in various respects. Among other remedies, the plaintiffs in each of the foregoing actions seek injunctive relief preventing the consummation of the merger and money damages. The Company believes that the claims asserted in the complaints are without merit. It is possible and we are aware that additional lawsuits may be filed between the date of this proxy statement and the consummation of the merger against the Company, the Board or the Company’s officers in connection with the merger, which could prevent or delay completion of the merger and result in substantial costs to the Company, including any costs associated with indemnification.

 

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THE AGREEMENT AND PLAN OF MERGER

Explanatory Note Regarding the Merger Agreement

The summary of the material provisions of the merger agreement set forth below and elsewhere in this proxy statement is qualified in its entirety by reference to the merger agreement, a copy of which is attached to this proxy statement as Annex A and which is incorporated by reference in this proxy statement. This summary does not purport to be complete and may not contain all of the information about the merger agreement that is important to you. We encourage you to read the merger agreement carefully in its entirety.

The merger agreement is described in this proxy statement and included as Annex A only to provide you with information regarding its terms and conditions and not to provide any other factual information regarding the Company, Parent or Merger Sub or their respective businesses. Such information can be found elsewhere in this proxy statement or, in the case of the Company, in the public filings that the Company makes with the SEC, which are available without charge through the SEC’s website at www.sec.gov. For additional information, see the section entitled “Where You Can Find More Information” beginning on page 129.

The representations, warranties and covenants made in the merger agreement by and among the Company, Parent and Merger Sub are qualified and subject to important limitations agreed to by the Company, Parent and Merger Sub in connection with negotiating the terms of the merger agreement. In particular, in your review of the representations and warranties contained in the merger agreement and described in this summary, it is important to bear in mind that the representations and warranties were made solely for the benefit of the parties to the merger agreement and were negotiated with the principal purposes of establishing the circumstances in which a party to the merger agreement may have the right not to close the merger if the representations and warranties of the other party prove to be untrue (subject to applicable materiality standards) due to a change in circumstance or otherwise, and allocating risk between the parties to the merger agreement. The representations and warranties may also be subject to a contractual standard of materiality different from those generally applicable to stockholders and reports and documents filed with the SEC and in some cases were qualified by confidential disclosures that were made by the Company, which disclosures are not reflected in the merger agreement. The representations and warranties in the merger agreement will not survive completion of the merger. Moreover, information concerning the subject matter of the representations and warranties, which do not purport to be accurate as of the date of this proxy statement, may have changed since the date of the merger agreement and subsequent developments or new information qualifying a representation or warranty may or may not have been included in the Company’s periodic and current reports, this proxy statement and other documents filed with the SEC. For the foregoing reasons, the representations, warranties and covenants or any descriptions of those provisions should not be read alone, but instead should be read together with the information provided elsewhere in this proxy statement and in the documents incorporated by reference in this proxy statement.

Date of the Merger Agreement

The merger agreement was executed by the Company, Parent and Merger Sub on July 14, 2021, which we refer to as the “date of the merger agreement”.

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

Upon the terms and subject to the conditions set forth in the merger agreement, and in accordance with the DGCL, at the effective time of the merger, Merger Sub, a direct wholly owned subsidiary of Parent and a party to the merger agreement, will be merged with and into the Company. As a result of the merger, the separate corporate existence of Merger Sub will cease, and the Company will be the surviving corporation in the merger and will continue its corporate existence as a wholly owned subsidiary of Parent.

The certificate of incorporation of the surviving corporation will be amended at the effective time of the merger to read in the form of Exhibit A to the merger agreement and, as so amended, will be the certificate of

 

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incorporation of the surviving corporation until thereafter changed or amended as provided therein or by law. The bylaws of Merger Sub will be the bylaws of the surviving corporation, except the references to Merger Sub’s name will be replaced by references to “Covanta Holding Corporation”, until thereafter changed or amended as provided therein or by law.

The directors of Merger Sub immediately prior to the effective time of the merger will become the initial directors of the surviving corporation, until the earlier of their death, resignation, incapacity or removal or until their respective successors are duly elected or appointed and qualified, as the case may be. The officers of the Company immediately prior to the effective time of the merger will become the initial officers of the surviving corporation, until the earlier of their death, resignation, incapacity or removal or until their respective successors are duly elected or appointed and qualified, as the case may be.

Closing; Effective Time of the Merger

The closing of the merger will occur no later than the third business day following the date on which each of the conditions to the merger is satisfied or, to the extent permitted by law, waived (other than those conditions that by their nature can be satisfied only on the closing date of the merger, but subject to the satisfaction or waiver of those conditions by the party entitled to waive such conditions), or such other date that is mutually agreed between Parent and the Company, provided that if the marketing period (as defined in the section entitled “—Marketing Period” beginning on page 84) has not ended as of such date, the closing of the merger will occur on the earlier of (i) a date during the marketing period specified by Parent in writing on no fewer than three business days’ notice to the Company and (ii) the third business day immediately following the last day of the marketing period, in each case, subject to the satisfaction or, to the extent permitted by applicable law, waiver of the conditions to the merger (except for any conditions that by their nature can only be satisfied on the closing date of the merger, but subject to the satisfaction of such conditions or waiver by the party entitled to waive such conditions); provided, further, that the closing date of the merger will in no event occur prior to November 1, 2021 without Parent’s written consent. See the section entitled “—Conditions to the Merger” beginning on page 105, for further discussion of the conditions to the closing of the merger.

The merger will become effective at such time as the certificate of merger is duly filed with the Secretary of State of the State of Delaware, or at such later time as Parent and the Company agree and specify in the certificate of merger.

Parent and the Company currently expect to complete the merger by the end of the fourth quarter of 2021 (but no earlier than November 1, 2021), subject to receipt of the Company stockholder approval, regulatory approvals and the satisfaction or waiver of the other conditions to the closing of the merger.

Marketing Period

Pursuant to the merger agreement, the Company has agreed to provide Parent and Merger Sub with a marketing period to market its debt financing for the merger before being obligated to close the merger. For the purposes of the merger agreement, “marketing period” means the first period of 15 consecutive business days (subject to certain customary blackout dates) after the date of the merger agreement throughout and on the last day of which (i) Parent has received certain specified information about the Company, as more fully described in the merger agreement (we refer to such information as the “required information”) that is and remains compliant (as defined in the merger agreement), (ii) certain conditions to the closing of the merger (or, for any 15 consecutive business day period that commences on or after November 15, 2021, solely the closing condition relating to the Company stockholder approval) have been satisfied (except for any conditions that by their nature can only be satisfied on the closing date of the merger) and (iii) nothing has occurred and no condition exists that would cause any of such closing conditions to fail to be satisfied assuming the closing of the merger were scheduled for any day during such 15 consecutive business day period; provided that the marketing period will not be deemed to have commenced if, after the date of the merger agreement and prior to the completion of such 15 consecutive

 

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business day period, (a) Ernst & Young withdraws its audit opinion with respect to any of the Company’s audited financial statements included in the required information, in which case the marketing period will not commence unless and until a new unqualified audit opinion is issued with respect to the audited financial statements of the Company for the applicable periods by such firm or another independent public accounting firm of recognized national standing or (b) the Company publicly announces any intention to restate any financial statements included in the required information, in which case the marketing period will not commence unless and until such restatement has been completed and the applicable required information has been amended or the Company announces that it has concluded that no restatement will be required in accordance with GAAP. If at any time the Company reasonably believes in good faith that it has provided the required information to Parent, that such required information is compliant and that the marketing period has commenced, it may deliver to Parent written notice to that effect, in which case the marketing period will commence on the date of such notice unless Parent, in good faith, reasonably believes the marketing period has not commenced and within two business days after the receipt of such notice from the Company delivers a written notice to the Company to that effect (provided that the delivery of such written notice will not prejudice the Company’s right to assert that the required information which is compliant has in fact been delivered and the marketing period has commenced).

Effects of the Merger

The merger agreement provides that, at the effective time of the merger, each issued and outstanding share of Company common stock (other than the excluded shares) will automatically be canceled and cease to exist and each holder of such shares will cease to have any rights with respect to such shares, except the right to receive $20.25 per share, in cash, without interest, less any required withholding taxes.

Exchange of Certificates

At or immediately prior to the effective time of the merger, Parent will provide or cause to be provided to a nationally recognized bank or trust company designated by Parent and reasonably acceptable to the Company (the “exchange agent”) an amount of cash necessary to pay the aggregate merger consideration payable to the holders of Company common stock.

If you hold your shares of Company common stock in certificated form, as soon as reasonably practicable after the effective time of the merger, and in any event not later than the fifth business day following the closing of the merger, Parent will instruct the exchange agent to mail to you, as the holder of record, a letter of transmittal and instructions setting forth the procedures by which you may surrender your Company common stock certificates in exchange for the merger consideration to which you are entitled. Upon surrender of Company common stock certificates, together with the duly completed and validly executed letter of transmittal and such other documents as may reasonably be required by the exchange agent, to the exchange agent for cancelation in accordance with the instructions provided to you by the exchange agent, you will be entitled to receive from the exchange agent an amount of cash equal to the number of shares of Company common stock previously represented by the Company common stock certificates so-surrendered by you multiplied by the merger consideration, and the Company common stock certificates so-surrendered by you will be canceled. Until surrendered as contemplated by this paragraph, each Company common stock certificate will be deemed after the effective time of the merger to represent only the right to receive merger consideration. No interest will be paid or accrue on any cash payable upon surrender of any Company common stock certificate. If you hold your shares of Company common stock in book-entry form, you will not be required to deliver an executed letter of transmittal and, upon the effective time of the merger, you will automatically be entitled to receive, and Parent will cause the exchange agent to pay and deliver as promptly as practicable after the effective time of the merger, an amount of cash equal to the merger consideration multiplied by the number of shares of Company common stock previously represented by such book-entry shares, and such book-entry shares will be canceled. No interest will be paid or accrue on any cash payable upon conversion of any book-entry shares.

 

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If you hold your shares of Company common stock in certificated form, you should not forward your stock certificates to the exchange agent without a duly executed letter of transmittal, and you should not return your certificates with the enclosed proxy card.

Each of the exchange agent, Parent, the Company, Merger Sub, surviving corporation and any other applicable withholding agent (as applicable) will be entitled to deduct and withhold from the merger consideration any amount required to be deducted or withheld from the merger consideration by law with respect of taxes.

Lost, Stolen or Destroyed Certificates

If any of your Company common stock certificates have been lost, stolen or destroyed, you will have to provide an affidavit (in form and substance reasonably acceptable to Parent) of that fact and, if required by Parent or the exchange agent, post a bond in reasonable and customary amount as indemnity against any claim that may be made against Parent, the exchange agent or the surviving corporation with respect to such Company common stock certificates. Upon the provision of such affidavit and the posting of such bond, the exchange agent will pay you the applicable merger consideration in exchange for your lost, stolen or destroyed Company common stock certificates.

Treatment of Company Equity Awards

Company Stock Options

The merger agreement provides that, unless otherwise agreed between Parent and the relevant holder of Company stock options, effective as of immediately prior to the effective time of the merger:

 

•

each outstanding and unexercised Company stock option (whether vested or unvested) will automatically be canceled; and

 

•

each holder of any such canceled Company stock option will be entitled to receive, in consideration of and in full settlement for the cancellation of each such Company stock option, a lump-sum cash payment of an amount equal to the product of (i) the total number of shares of Company common stock underlying each such canceled Company stock option and (ii) the excess, if any, of the merger consideration over the exercise price per share of each such Company stock option, without interest and subject to all applicable tax withholding.

If any such Company stock option has an exercise price per share that is greater than or equal to the merger consideration, then such Company stock option will be canceled in exchange for no consideration and will have no further force and effect.

Restricted Stock Units

The merger agreement provides that, unless otherwise agreed between Parent and the relevant holder of the Company RSU, as of immediately prior to the effective time of the merger:

 

•

each outstanding Company RSU (whether vested or unvested) will automatically be canceled; and

 

•

each holder of any such canceled Company RSU will be entitled to receive, in consideration of and in full settlement for the cancellation of each such Company RSU, a lump-sum cash payment of an amount equal to (a) the product of (i) the total number of shares of Company common stock underlying each such canceled Company RSU and (ii) the merger consideration, without interest and subject to all applicable tax withholding, plus (b) all accrued but unpaid dividend equivalents.

 

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Performance Stock Units

The merger agreement provides that, unless otherwise agreed between Parent and the relevant holder of the Company PSU, effective as of immediately prior to the effective time of the merger, each outstanding and unvested Company PSU will be:

 

•

deemed to be earned and vest based on actual performance through the latest practicable date prior to the closing of the merger, which level of actual performance will be determined in good faith by the Company at or before the closing of the merger, and be canceled; and

 

•

each holder of any such vested Company PSU will be entitled to receive, in consideration of and in full settlement for the cancellation of each such vested Company PSU, a lump-sum cash payment, without interest and subject to all applicable tax withholding, of an amount equal to (a) the product of (i) the total number of shares of Company common stock underlying each such canceled vested Company PSU and (ii) the merger consideration, plus (b) all accrued but unpaid dividend equivalents.

Company Restricted Stock

The merger agreement provides that, unless otherwise agreed between Parent and the holder of Company Restricted Stock, effective as of immediately prior to the effective time of the merger, each share of Company Restricted Stock that is outstanding immediately prior to the effective time of the merger shall automatically vest in full and all restrictions (including forfeiture restrictions) otherwise applicable to such vested Company Restricted Stock shall lapse, and each such share of Company Restricted Stock will be treated such that (i) all Company Restricted Stock will be automatically canceled and (ii) be converted into the right to receive the merger consideration; provided that any payment in respect of Company Restricted Stock held by an employee (or other person subject to compensatory withholding) will be paid through the surviving corporation’s regular payroll process and subject to all applicable withholding.

2022 Awards

If the effective time does not occur by March 1, 2022 (or the date of the Company’s 2022 annual stockholder meeting, in the case of non-employee directors), then Parent and the Company have agreed that, solely with respect to annual awards of Company RSUs or Company PSUs (or only Company RSUs to non-employee directors) granted in 2022 prior to the effective time, such awards will vest pro rata upon the effective time, based on service of the relevant holder from January 1, 2022 through the effective date of the merger (with any Company PSUs vesting based on deemed achievement of applicable performance targets), and the remaining and unvested portion of such awards being forfeited effective as of the effective time.

Payment and Timing of Payment

Parent will cause the surviving corporation to make any payments required to be made in respect of the Company equity awards (subject to any tax withholding), promptly after the effective time of the merger through, to the extent applicable, the regular payroll process of the surviving corporation, but in no event later than thirty days following the effective time. However, to the extent any payment in respect of the Company equity awards would cause an impermissible acceleration event under Section 409A of the Code, such payment will be made at the earliest time permitted under the applicable Company equity plan that would neither cause an impermissible acceleration event nor trigger a tax or penalty under Section 409A of the Code.

Appraisal Rights

Shares of Company common stock that are issued and outstanding immediately before the effective time of the merger and that are held by any person who is entitled to demand and has properly exercised appraisal rights in respect of such shares in accordance with Section 262 of the DGCL will not be converted into the right to receive

 

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the merger consideration, but rather the holders of such shares, which we refer to as “appraisal shares”, will be entitled to payment by the surviving corporation of the fair value of such appraisal shares in accordance with Section 262 of the DGCL. If any holder of appraisal shares fails to perfect or otherwise waives, withdraws or loses the right to appraisal under Section 262 of the DGCL, then such holder’s right to be paid the fair value of such holder’s appraisal shares will cease and such holder’s appraisal shares will be deemed to have been canceled and converted, at the effective time of the merger, into the right to receive, and to have become exchangeable solely for, the merger consideration, without interest less applicable withholding taxes.

The Company will give prompt notice to Parent of any demands received by the Company for appraisal of any shares of Company common stock, withdrawals or attempted withdrawals of such demands and any other instruments, notices or demands received by the Company, in each case, that are served pursuant to Section 262 of DGCL. Prior to the effective time of the merger, the Company will not, without the prior written consent of Parent, make any payment with respect to, or settle or offer to settle, any such demands, waive any failure to timely deliver a written demand for appraisal under the DGCL, approve any withdrawal of any such demands or propose or agree to do any of the foregoing. Parent will have the right to participate in and direct all negotiations and proceedings with respect to appraisal demands.

Adjustments

If, between the date of the merger agreement and the effective time of the merger, the outstanding shares of Company common stock are changed into a different number or class of shares by reason of any reclassification, stock split (including a reverse stock split), recapitalization, split-up, combination, exchange of shares, readjustment or other similar transaction, or a stock dividend thereon is declared with a record date within such period, then the merger consideration and any other similarly dependent items will be appropriately and equitably adjusted, without duplication.

Representations and Warranties

The merger agreement contains certain customary representations and warranties, subject to certain exceptions in the merger agreement and confidential disclosures made by the Company to Parent and Merger Sub in connection with the merger agreement. Each of Parent, Merger Sub and the Company has made representations and warranties regarding, among other things:

 

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organization, standing and power;

 

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authority with respect to the execution, delivery and performance of the merger agreement, and the due and valid execution and delivery and enforceability of the merger agreement;

 

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board recommendation and approval;

 

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governmental consents, approvals and filings required in connection with the transactions contemplated by the merger agreement;

 

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absence of conflicts with, or violations of, organizational documents, contracts and applicable law;

 

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requisite stockholder approval;

 

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this proxy statement and the accuracy of information supplied for the purpose of being included herein;

 

•

absence of certain legal proceedings; and

 

•

brokers’ fees payable in connection with the transactions contemplated by the merger agreement.

The Company has made additional representations and warranties regarding, among other things:

 

•

capitalization of the Company;

 

•

ownership of the Company’s subsidiaries and certain other entities;

 

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SEC filings, financial statements, undisclosed liabilities and internal controls;

 

•

conduct of the Company’s business since March 31, 2021 through the date of the merger agreement;

 

•

absence of any event, change, development or occurrence that has had a Company material adverse effect (as defined below) since March 31, 2021;

 

•

compliance with applicable laws and governmental authorizations;

 

•

real property matters;

 

•

intellectual property, privacy and data security, and information technology matters;

 

•

tax matters;

 

•

employee benefits matters and ERISA compliance;

 

•

employee and labor matters;

 

•

environmental matters;

 

•

material contracts;

 

•

opinion of the Company’s financial advisor;

 

•

absence of any anti-takeover statutes applying to the merger;

 

•

anti-corruption and anti-bribery matters;

 

•

insurance matters;

 

•

regulatory status; and

 

•

related-party transactions.

Parent and Merger Sub have made additional representations and warranties regarding, among other things:

 

•

Merger Sub’s operations;

 

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the financing of the merger consideration, including the enforceability of the executed equity commitment and debt commitment letter and the sufficiency of the proceeds to be disbursed under the commitment letters, together with other sources of financing available to Parent, to pay the aggregate merger consideration and the other amounts payable under the merger agreement;

 

•

ownership of Company common stock;

 

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absence of certain agreements; and

 

•

the Company’s solvency following the effective time of the merger.

The representations and warranties do not survive the merger (and thus there are no post-closing remedies for breaches), are often qualified by a “materiality” qualification or a “Company material adverse effect” qualification (as discussed below) and are qualified by confidential disclosures made by the Company to Parent and Merger Sub in connection with the merger agreement.

For purposes of the merger agreement, a “Company material adverse effect” means any effect, change, condition, fact, development, occurrence or event that, individually or in the aggregate, has resulted in, or would reasonably be expected to result in, a material adverse effect on the financial condition, business, assets or results of operations of the Company and its subsidiaries, taken as a whole, excluding any effect, change, condition, fact, development, occurrence or event resulting from or arising out of:

 

•

general economic or political conditions in the United States or any foreign jurisdiction or in securities, credit or financial markets, including changes in interest rates and changes in exchange rates;

 

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changes or conditions generally affecting the industries, markets or geographical areas in which the Company or any of its subsidiaries operates;

 

•

outbreak or escalation of hostilities, acts of war (whether or not declared), terrorism or sabotage, or other changes in geopolitical conditions, including any material worsening of such conditions threatened or existing as of the date of the merger agreement;

 

•

any epidemics, pandemics or other disease outbreaks (including COVID-19), natural disasters (including hurricanes, tornadoes, floods or earthquakes) or other force majeure events, including any material worsening of such conditions threatened or existing as of the date of the merger agreement, and any governmental or industry responses thereto, including any actions taken in response to or as a result of COVID-19, whether in place currently or adopted or modified after the date of the merger agreement, including any quarantine, “shelter in place”, “stay at home”, furlough, workforce reduction, social distancing, closure, sequester, safety or other law, response, guideline, directive or recommendation (collectively, “COVID-19 measures”);

 

•

any failure by the Company or its subsidiaries to meet any internal or published (including analyst) projections, expectations, forecasts or predictions in respect of the Company’s revenue, earnings or other financial performance or results of operations, or any failure by the Company to meet its internal budgets, plans or forecasts of its revenue, earnings or other financial performance or results of operations;

 

•

the downgrade in rating of any debt or debt securities of the Company or any of its subsidiaries;

 

•

changes in GAAP or the interpretation thereof or the adoption, implementation, promulgation, repeal, modification, amendment, reinterpretation, change or proposal of any Law (including COVID-19 measures) applicable to the operation of the business of the Company or any of its subsidiaries;

 

•

the taking of any action required by, or the failure to take any action prohibited by the merger agreement, including any action expressly prohibited by the covenants regarding the conduct of the business by the Company in the merger agreement;

 

•

the taking of any action or refraining from taking any action at Parent or Merger Sub’s written request;

 

•

any change in the market price or trading volume of the Company’s securities;

 

•

the execution and delivery of the merger agreement or the consummation of the transactions contemplated thereby, or the public announcement or pendency of the merger agreement or the merger, including any resulting (i) loss or departure of officers or other employees of the Company or any of its subsidiaries or (ii) termination or reduction (or potential reduction) or any other resulting negative development in the Company’s or any of its subsidiaries’ relationships with any of its customers, suppliers, distributors, lenders, other business partners, employees or regulators, provided that this bullet of Company material adverse effect does not apply to representations or warranties in the merger agreement with respect to non-contravention of the Company regarding existing consents or approvals, among other things, and a limited number of employment-related matters relating to, among other things, severance pay, unemployment compensation (including compensation or benefits vesting) and forgiveness of indebtedness payable in connection with the merger, to the extent the purpose of such representation or warranty is to address the consequences resulting from the merger agreement or the consummation of the transactions contemplated thereby; and

 

•

any proceeding brought or threatened by stockholders of either Parent or the Company (whether on behalf of the Company, Parent or otherwise) asserting allegations of breach of fiduciary duty relating to the merger agreement or violations of securities laws solely in connection with the merger.

However, with respect to the matters described in the first four bullets and the seventh bullet above, such effect, change, condition, fact, development, occurrence or event may be taken into account in determining whether or not there has been a Company material adverse effect to the extent such effect, change, condition, fact,

 

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development, occurrence or event has a disproportionate impact on the Company and its subsidiaries, taken as a whole, as compared to other similarly situated participants in the industry in which the Company and its subsidiaries operate. In addition, with respect to the effects described in the fifth, sixth and tenth bullets above, any effect, change, condition, fact, development, occurrence or event giving rise to or contributing to any such event may be taken into account in determining whether there has been, or would reasonably be expected to be, a Company material adverse effect, to the extent not otherwise excluded in the definition of Company material adverse effect.

Covenants Regarding Conduct of Business by the Company Prior to the Merger

The Company has agreed to certain covenants in the merger agreement restricting the conduct of its business between the date of the merger agreement and the earlier to occur of the effective time of the merger and the termination of the merger agreement. In general, except as (i) expressly permitted or required by the merger agreement, (ii) previously disclosed in writing by the Company, (iii) the Company determines, in good faith, may be necessary or advisable in connection with any COVID-19 measure, (iv) consented to in writing by Parent (which consent may not be unreasonably withheld, conditioned or delayed) or (v) required by applicable law, the Company will, and will cause each of its subsidiaries to, use its reasonable best efforts to conduct its business in all material respects in the ordinary course of business and preserve in all material respects its present relationships with key customers, suppliers, employees and other persons with which it has material business relations.

In addition, without limiting the generality of the foregoing, from the date of the merger agreement until the earlier to occur of the effective time of the merger and the termination of the merger agreement, except as (i) expressly permitted or required by the merger agreement, (ii) previously disclosed in writing by the Company, (iii) consented to in writing by Parent (which consent may not be unreasonably withheld, conditioned or delayed) or (iv) required by applicable law, the Company will not, nor will it permit any of its subsidiaries to:

 

•

amend its certificate of incorporation, bylaws or other similar organizational documents (other than amendments to the organizational documents of any wholly owned subsidiary of the Company that would not prevent, materially delay or materially impair the consummation of the merger or the transactions contemplated by the merger agreement);

 

•

split, combine or reclassify any shares of capital stock of the Company or any of its subsidiaries, or redeem, repurchase or otherwise acquire or offer to redeem, repurchase or otherwise acquire any Company securities or any Company subsidiary securities, other than redemptions, repurchases or acquisitions in connection with the payment of the exercise price of Company stock options with Company stock and to satisfy tax withholding obligations in connection with the exercise of Company stock options or the vesting or settlement of Company Restricted Stock, Company RSUs or Company PSUs, that are outstanding on the date of the merger agreement in accordance with the applicable terms thereof on the date of the merger agreement or subsequently granted to the extent permitted by the terms of the merger agreement;

 

•

issue, pledge, deliver or sell, or authorize the issuance, pledge, delivery or sale of, any shares of any Company securities or Company subsidiary securities, other than (i) with respect to the grant of Company Equity Awards to employees and directors of the Company and its subsidiaries as set forth in the disclosure letter given by the Company to Parent under the merger agreement, (ii) the issuance of any shares of Company stock upon the exercise of Company stock options or the settlement of Company RSUs and Company PSUs that are outstanding on the date of the merger agreement in accordance with the applicable terms thereof on the date of the merger agreement and (iii) issuances of securities of the Company’s subsidiaries to the Company or to wholly owned subsidiaries of the Company;

 

•

amend any term of any Company security or security of a subsidiary of the Company (in each case, whether by merger, consolidation or otherwise);

 

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establish a record date for, authorize, declare, pay or make any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to any Company securities or securities of a subsidiary of the Company, other than dividends (i) paid by any wholly owned subsidiary of the Company to the Company or any wholly owned subsidiary of the Company or (ii) set forth in the disclosure letter given by the Company to Parent under the merger agreement (which permits the Company to pay up to four quarterly dividends in an amount not to exceed $0.08 per share for each such dividend, to be declared consistent with the Company’s past practice (including with respect to declaration and payment dates));

 

•

make or commit to any capital expenditures in excess of $10,000,000 individually or $50,000,000 in the aggregate, except in the ordinary course of business or pursuant to the Company’s annual capital expenditures budget made available to Parent;

 

•

make any acquisition (whether by merger, consolidation or acquisition of stock or assets) of any interest in any person or any division or assets with a value or purchase price in excess of $10,000,000 individually or $25,000,000 in the aggregate, other than (i) acquisitions pursuant to contracts in effect as of the date of the merger agreement and (ii) purchases of assets that do not constitute a business in the ordinary course of business;

 

•

sell, assign, license, lease or otherwise transfer or create any lien (other than those permitted under the merger agreement) on any material asset of the Company or its subsidiary, other than in the ordinary course of business;

 

•

incur, issue or amend in any material respect the terms of, any indebtedness for borrowed money or guarantees (including, for clarity, issuing or selling any debt securities or rights to acquire debt securities), other than incurring or issuing any (i) intercompany indebtedness, (ii) indebtedness under the Company’s existing credit facility (provided that, as of any time, the aggregate amount of indebtedness under such credit facility does not exceed the amount set forth in the disclosure letter given by the Company to Parent under the merger agreement) and (iii) trade payables, letters of credit, parent guarantees and similar arrangements entered into in the ordinary course of business;

 

•

optionally prepay, or reduce the commitments of, any indebtedness set forth in the disclosure letter given by the Company to Parent under the merger agreement, including the exercising of any consent rights in connection with any proposed optional prepayment or commitment reduction;

 

•

other than in the ordinary course of business (including renewals or extensions consistent with the terms thereof or on improved terms), (i) amend or modify in any material respect or terminate (excluding terminations or renewals upon expiration of the term thereof in accordance with the terms thereof) any material contract or real property lease, (ii) enter into any contract that would be a material contract or a real property lease if in existence on the date of the merger agreement or (iii) waive, release or assign any material rights, claim or benefits under any material contract or real property lease; provided that in no event will the Company or any of its subsidiaries be permitted to (a) modify or amend certain material contracts (“specified contracts”) to the extent such modification or amendment would be adverse in any material respect to the Company and its subsidiaries, taken as a whole, (b) terminate any specified contract (excluding terminations upon expiration of the term thereof in accordance with the terms thereof), (c) enter into any contract that would be a specified contract if in existence on the date of the merger agreement, or (d) waive, release or assign any material rights, claims or benefits under any specified contract;

 

•

other than as required by applicable law or the existing terms of any Company employee benefit plan or a collective bargaining agreement in effect on the date of the merger agreement, (i) grant or commit to grant or increase any severance or termination pay to (or amend any existing severance pay or termination arrangement) or enter into any employment, deferred compensation or other similar agreement (or amend any such existing agreement) with respect to any current or former director, officer, employee, independent contractor or individual service provider of the Company or any of its

 

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subsidiaries (other than in connection with a promotion, increase in duties or new hire on terms provided to similarly-situated employees, in each case, in the ordinary course of business consistent with past practice), (ii) increase benefits payable under any existing severance or termination pay policies, (iii) establish, adopt, terminate, materially modify or materially amend any Company plan or any collective bargaining, bonus, profit-sharing, thrift, pension, retirement, deferred compensation, stock option, restricted stock or other benefit plan or arrangement (that would be a Company plan if in effect on the date of the merger agreement), (iv) except as otherwise permitted by the merger agreement, grant or commit to grant or amend any equity or equity-based awards, (v) increase compensation, bonus or other benefits payable to any current or former director, officer, employee, independent contractor or individual service provider of the Company or any of its subsidiaries other than increases in the ordinary course of business consistent with past practice for individuals with an annual base salary or base compensation of less than $200,000, (vi) hire or terminate (other than for “cause”) any officer, employee, independent contractor or individual service provider with an annual base salary or base compensation of more than $200,000 or (vii) take any action to accelerate the vesting, funding or payment date of any material compensation or benefits (including any Company equity awards);

 

•

negotiate, modify, extend or enter into any collective bargaining agreement, other than renewals, replacements, extensions or amendments of collective bargaining agreements in the ordinary course of business or as required by applicable law or pursuant to the existing terms thereof or recognize or certify any labor union, labor organization, works council, or group of employees as the bargaining representative for any employees of the Company or its subsidiaries, except as required by applicable law;

 

•

change the Company’s methods of financial accounting, except as required by GAAP or in Regulation S-X of the Exchange Act (or any interpretation thereof), any governmental authority or applicable law;

 

•

(i) materially change any method of tax accounting, except as required by applicable law, (ii) make or change any material election with respect to taxes, (iii) amend any federal income or other tax return in a manner that would materially increase the taxes of the Company and its subsidiaries, (iv) agree or settle any claim or assessment in respect of a material amount of taxes, excluding for these purposes any agreement or settlement relating to a tax item to the extent that such agreement or settlement does not materially exceed the reserves for such tax item on the Company balance sheet, (v) enter into any closing agreement within the meaning of Section 7121 of the Code (or any similar provision of state, local or non-U.S. law) with respect to a material amount of taxes, (vi) surrender any right to a material refund of taxes or (vii) extend or waive the statute of limitations period applicable to any material tax or tax return;

 

•

adopt or publicly propose a plan of complete or partial liquidation or resolutions providing for or authorizing such a liquidation or a dissolution, in each case, of the Company or any material subsidiary of the Company;

 

•

settle, release, waive compromise or offer or propose to settle, release, waive or compromise any pending or threatened proceeding involving or against the Company or any of its subsidiaries in excess of $2,500,000 (excluding, for the avoidance of doubt, amounts paid by insurance and other amounts not paid out-of-pocket by the Company);

 

•

knowingly take or fail to take any action that would reasonably be expected to result in the cancellation or revocation of certain regulatory authorizations of the Company’s subsidiaries and that would be reasonably expected to be material to the Company and its subsidiaries, taken as a whole; or

 

•

agree, resolve or commit to do any of the foregoing actions.

 

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Restrictions on Solicitation of Company Acquisition Proposals

From and after July 14, 2021 until the earlier to occur of the effective time of the merger and the termination of the merger agreement in accordance with its terms:

 

•

the Company is required to, and to cause each of its subsidiaries and their respective directors, officers and employees to, and to cause its and their respective other representatives to, immediately cease and cause to be terminated any existing discussions or negotiations with any third party with respect to a Company acquisition proposal or any inquiry, proposal or offer which constitutes, or could reasonably be expected to lead to, a Company acquisition proposal; and

 

•

the Company is required to promptly (and in any event within three business days of the date of the merger agreement) request in writing that each third party that has previously executed a confidentiality or similar agreement promptly return to the Company or destroy, in accordance with the terms of such confidentiality agreement, all non-public information previously furnished or made available to such third party or any of its representatives by or on behalf of the Company or its representatives.

In addition, the Company has agreed, subject to the terms of the merger agreement, that from and after July 14, 2021 until the earlier to occur of the effective time of the merger and the termination of the merger agreement in accordance with its terms it will not, and will cause each of its subsidiaries and its and their respective directors, officers and employees not to, and will not permit its and their respective other representatives to, directly or indirectly:

 

•

solicit, initiate or knowingly encourage any Company acquisition proposal, inquiry, proposal or offer which constitutes, or could reasonably be expected to lead to, a Company acquisition proposal;

 

•

participate in any negotiations or discussions regarding, or furnish to any third party (other than Parent, its affiliates and their respective representatives) any nonpublic information relating to the Company and its subsidiaries, or provide access to the properties or personnel of the Company and its subsidiaries, in each case, in connection with any Company acquisition proposal or any inquiry, proposal or offer which constitutes, or could reasonably be expected to lead to, a Company acquisition proposal;

 

•

approve or recommend, or make any public statement approving or recommending, a Company acquisition proposal or any proposal or offer which constitutes, or could reasonably be expected to lead to, a Company acquisition proposal;

 

•

grant any waiver, amendment or release under any “standstill” or confidentiality agreement (unless the Board has determined in good faith, after consultation with its outside legal counsel, that failure to take such action would reasonably be expected to be inconsistent with the directors’ fiduciary duties under applicable law);

 

•

approve or execute or enter into any letter of intent, memorandum of understanding, agreement in principle, merger agreement, acquisition agreement or other similar agreement that constitutes a Company acquisition proposal or any proposal or offer which could reasonably be expected to lead to a Company acquisition proposal (each, an “alternative acquisition agreement”), subject to certain exceptions set forth in the merger agreement;

 

•

submit any Company acquisition proposal to a vote of the stockholders of the Company; or

 

•

resolve or agree to do any of the foregoing.

Notwithstanding the foregoing limitations, but subject to compliance with the other terms of the merger agreement, if, after the date of the merger agreement and prior to the time the Company stockholder approval is obtained, the Company receives a bona fide Company acquisition proposal that did not result from a material breach of the Company’s non-solicitation obligations under the merger agreement and that the Board determines

 

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