| Item 1.01. | Entry into a Material Definitive Agreement. |
On March 17, 2019, Coty Inc. (the “Company”), JAB Holdings B.V., a private limited liability company (besloten vennootschap met beperkte aansprakelijkheid) organized under the laws of the Netherlands (“JAB Holdings”), JAB Cosmetics B.V., a private limited liability company (besloten vennootschap met beperkte aansprakelijkheid) organized under the laws of the Netherlands (“Parent”), and Cottage Holdco B.V., a private limited liability company (besloten vennootschap met beperkte aansprakelijkheid) organized under the laws of the Netherlands (“Offeror” and, together with JAB Holdings and Parent, the “JAB Stockholder Parties”), entered into a Stockholders Agreement (the “Stockholders Agreement”). The Stockholders Agreement was negotiated at the direction of a special committee (the “Special Committee”) of disinterested, independent directors of the Board of Directors of the Company (the “Board”) in connection with its evaluation of the tender offer initiated by Offeror to acquire up to 150,000,000 outstanding shares of Class A Common Stock, par value $0.01 per share (the “Shares”), of the Company and was entered into at the recommendation of the Special Committee, as described in more detail in the Company’s Solicitation/Recommendation Statement on Schedule14D-9 filed with the Securities and Exchange Commission on March 18, 2019 (the “Statement”), and with the approval of the Board. The Stockholders Agreement was agreed to by the JAB Stockholder Parties as a condition to the Special Committee’s willingness to render its recommendation with respect to the Offer.
Pursuant to the Stockholders Agreement, among other things, (i) during the three-year period following the consummation of the Offer, the JAB Stockholder Parties shall not, subject to certain exceptions, effect or enter into any agreement to effect any acquisition of additional Shares; provided that, in the event the Minimum Tender Condition (as defined in the Statement) is satisfied, the JAB Stockholder Parties may acquire shares of capital stock of the Company (including Shares, “Company Securities”) on an established securities exchange or through privately negotiated transactions that, after giving effect to such acquisition, does not result in an increase in the JAB Stockholder Parties’ and their affiliates’ collective beneficial ownership percentage of the voting power of the then issued and outstanding Company Securities to an amount greater than the percentage of the voting power of the issued and outstanding Company Securities beneficially owned by the JAB Stockholder Parties, collectively, as of the consummation of the Offer, plus 9% (meaning, if the Offer is fully subscribed, a cap of approximately 69% for three years after the consummation of the Offer), (ii) during the three-year period following the consummation of the Offer, the JAB Stockholder Parties shall not, subject to certain exceptions, transfer any Shares to any other person or group (other than an affiliate of any of the JAB Stockholder Parties) that, after giving effect to such transfer, would beneficially own in excess of 20% of the voting power of the Company, (iii) for so long as the Stockholders Agreement is in effect, the JAB Stockholder Parties shall not effect or seek to effect, or announce any intention to effect, any “Rule13e-3 transaction” as defined in Rule13e-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) unless such transaction is conditioned on both (A) the affirmative approval of a special committee of the Board comprised solely of individuals who are each (1) “independent” under the requirements of Rule10A-3 under the Exchange Act, and under the rules of the applicable securities exchange and (2) disinterested as it relates to the JAB Stockholder Parties and their respective affiliates (any such individual, an “Independent Director”) and who are disinterested and independent under Delaware law as to the matter under consideration, duly obtained in accordance with the applicable provisions of the Company’s organizational documents, applicable law and the rules, regulations and listing standards promulgated by any securities exchange on which the Shares are traded (“Disinterested Director Approval”) and (B) the affirmative vote of the stockholders of the Company representing at least a majority of the voting power of the Company beneficially owned by stockholders that are not the JAB Stockholder Parties or their affiliates, (iv) for so long as the Stockholders Agreement is in effect, material related transactions involving the JAB Stockholder Parties or any of their affiliates and the Company will require Disinterested Director Approval, (v) the JAB Stockholder Parties and the Company have agreed, for so long as the Stockholders Agreement is in effect, to take all necessary actions within their control to maintain no fewer than four Independent Directors on the Board and to cause, no later than September 30, 2019, to be elected to the Board two new Independent Directors and (vi) the JAB Stockholder Parties shall have certain customary registration rights with respect to their Shares. The Stockholders Agreement shall become effective immediately following the consummation of the Offer. The Stockholders Agreement shall terminate upon the earlier of the mutual consent of the parties to the Stockholders Agreement (including, with respect to the Company, approval of the Special Committee before the consummation of the Offer and Disinterested Director Approval following the consummation of the Offer) or such time as the JAB Stockholder Parties and their affiliates cease to beneficially own 40% of the voting power of the Company on a fully diluted basis.
The description of the Stockholders Agreement set forth in this Item 1.01 is not complete and is qualified in its entirety by reference to the Stockholders Agreement, which is filed as Exhibit 4.1 to this Current Report on Form8-K and is incorporated herein by reference.
