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Item 1.01
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Entry into a Material Definitive Agreement.
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Merger Agreement
On July 19, 2020, GlobalSCAPE, Inc., a Delaware
corporation (the “Company”), entered into an Agreement and Plan of Merger (the “Merger Agreement”)
by and among Help/Systems, LLC, a Delaware limited liability company (“Parent”), Grail Merger Sub, Inc., a Delaware
corporation and a wholly owned subsidiary of Parent (“Merger Sub”), and solely with respect to certain sections
therein, HS Purchaser, LLC, a Delaware limited liability company (“HS Purchaser”), and Help/Systems Holdings,
Inc., a Delaware corporation (“HS Holdings” and, together with HS Purchaser, each a “Borrower”
and collectively, the “Borrowers”). Pursuant to the Merger Agreement and upon the terms and subject to the conditions
thereof, Merger Sub will commence a tender offer (as it may be extended or amended from time to time as permitted by this Agreement,
the “Offer”) to purchase any and all of the outstanding shares (the “Shares”) of common stock
of the Company, par value $0.001 per share (“Company Common Stock”), at a price of $9.50 per Share (the “Offer
Price”), subject to any required withholding of taxes, net to the seller in cash without interest, on the terms and subject
to the conditions set forth in the Merger Agreement.
Upon the terms and subject to the conditions
of the Merger Agreement, Merger Sub will commence the Offer no later than July 31, 2020. Subject to the terms and conditions set
forth in the Merger Agreement, Merger Sub shall, promptly after the expiration of the Offer, accept for payment all Shares validly
tendered and not withdrawn pursuant to the Offer (the time at which Shares are first accepted for payment under the Offer, the
“Acceptance Time”), and after the Acceptance Time, Merger Sub shall pay the Offer Price for such Shares.
Pursuant to the Merger Agreement, following
the consummation of the Offer, and subject to the conditions set forth in the Merger Agreement, Merger Sub will be merged with
and into the Company (the “Merger”), whereupon the separate existence of Merger Sub shall cease, and the Company
shall be the surviving corporation of the Merger and a wholly owned subsidiary of Parent. The Merger shall be governed by and effected
under Section 251(h) of the Delaware General Corporation Law (the “DGCL”), without a vote of the stockholders
of the Company.
At the effective time of the Merger (the
“Effective Time”), all remaining outstanding Shares not tendered in the Offer (other than Shares held by Parent
or any of its Subsidiaries, including Merger Sub, or in the treasury of the Company, or Shares held by stockholders who are entitled
to exercise, and properly exercise, appraisal rights with respect to such Shares pursuant to, and who comply in all respects with,
the provisions of Section 262 of the DGCL) will be cancelled and converted into the right to receive cash in an amount equal
to the Offer Price, without interest (the “Merger Consideration”), subject to any required withholding of taxes.
Merger Sub’s obligation to accept
for payment and pay for all Shares validly tendered and not withdrawn pursuant to the Offer is subject to certain conditions including:
(i) there being validly tendered and not validly withdrawn prior to the expiration of the Offer a number of Shares which,
considered together with all other Shares, if any, beneficially owned by Parent, and its affiliates, but excluding any Shares tendered
to guaranteed delivery procedures that have not yet been received, represents at least a majority of the Shares outstanding on
a fully diluted basis, (ii) the expiration or termination of any waiting period (and extensions thereof) under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, relating to the purchase of Shares pursuant to the Offer or the consummation of
the Merger, (iii) the absence of any law, judgment, injunction, order or decree by any governmental authority that would make
illegal or otherwise prevent or prohibit the consummation of the Offer or the Merger, (iv) that any change, event, effect
or development that, individually or in the aggregate, has had or would reasonably be expected to have, a Company Material Adverse
Effect (as defined in the Merger Agreement) shall not have occurred, (v) the accuracy of the representations and warranties of
the Company contained in the Merger Agreement, subject to customary exceptions, (vi) the Company’s material compliance
with its covenants contained in the Merger Agreement, (vii) the Merger Agreement shall not have been terminated, and (viii) other
customary conditions.
The Merger Agreement contains representations,
warranties and covenants of the parties as customary for transactions of this type. The Company has also agreed to customary covenants
governing the conduct of its business, including an obligation to conduct its business in the ordinary course consistent with past
practices through the Effective Time. The Merger Agreement contains a “go-shop” provision pursuant to which the Company
retains the right to initiate, solicit, propose, induce, receive, evaluate, encourage and engage in discussions and negotiations
with respect to alternative acquisition proposals from third parties through August 24, 2020 (the “No-Shop Period Start
Date”). The Merger Agreement also contains customary termination provisions for the Company and Parent and provides that,
in the event of the termination of the Merger Agreement in connection with a competing acquisition proposal that the Company’s
Board of Directors determines is a Superior Proposal (as defined in the Merger Agreement) and in other certain specified circumstances,
the Company may be required to pay Parent a termination fee of $5,527,500 or, under certain circumstances prior to the No-Shop
Period Start Date, $3,685,000. The Merger Agreement also provides for Parent to pay the Company a reverse termination fee of $11,055,000
under certain circumstances. The Merger Agreement provides that at the Effective Time, each outstanding Company option to
purchase Shares under the Company’s equity plans (a “Company Option”), whether vested or unvested, will,
without any action on the part of Parent, Merger Sub, the Company or the holder thereof, be cancelled and converted into and will
become a right to receive an amount in cash, without interest, equal to the product obtained by multiplying (i) the Merger
Consideration (less the exercise price per share attributable to such Company Option) by (ii) the total number of shares of
Company Common Stock issuable upon exercise in full of such Company Option (the “Option Consideration”). Notwithstanding
the foregoing, with respect to any Company Options for which the exercise price per share attributable to such Company Options
is equal to or greater than the Merger Consideration, such Company Options will be cancelled without any cash payment being made
in respect thereof. The payment of the Option Consideration will be subject to withholding for all required taxes.
The Merger Agreement also provides that
at the Effective Time, each outstanding Share of restricted stock granted under the Company’s equity plans (a “Company
Restricted Stock”) that, as of immediately prior to the Effective Time, remains subject to any performance-vest, time-vest
or other condition(s) that constitutes a “substantial risk of forfeiture” within the meaning of Section 83 of the Internal
Revenue Code, which is outstanding immediately prior thereto shall become fully vested as of the Effective Time. Each award of
Company Restricted Stock will, without any action on the part of Parent, Merger Sub, the Company or the holder thereof, be cancelled
and converted into and will become a right to receive an amount in cash, without interest, equal to the product obtained by multiplying
(i) the amount of the Merger Consideration by (ii) the total number of shares of Company Restricted Stock.
The Merger Agreement has been approved by
the member manager of Parent and the board of directors of Merger Sub and the Company, and the Company’s Board of Directors
has determined that the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger, are in
the best interests of the Company and its stockholders, and recommended that stockholders of the Company accept the Offer and tender
their Shares to Merger Sub pursuant to the Offer.
The Borrowers have obtained debt financing
commitments from Jefferies Finance LLC and credit funds affiliated with Charlesbank Capital Partners LLC, and Parent has obtained
equity financing commitments from the Borrowers, in each case to fund the transactions contemplated by the Merger Agreement. The
Merger Agreement requires the Borrowers, Parent and Merger Sub to use their reasonable best efforts to obtain the financing on
the terms and conditions described in the financing commitments.
The foregoing description of the Offer,
the Merger and the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the full text
of the Merger Agreement, a copy of which is attached hereto as Exhibit 2.1 and is incorporated into this report
by reference.
Limited Guarantee
On July 19, 2020, HS Midco, Inc., a Delaware
corporation and an affiliate of Parent (“Guarantor”), entered into a Limited Guarantee (the “Guarantee”)
with the Company pursuant to which, among other things, Guarantor has agreed to guarantee, subject to the terms and conditions
set forth in the Guarantee, the full and prompt payment of the obligations of Parent and Merger Sub to make certain payments required
to be made by Parent and Merger Sub under the Merger Agreement, plus certain reimbursement and indemnification obligations under
the terms of the Merger Agreement.
The foregoing description of the Guarantee
does not purport to be complete and is qualified in its entirety by reference to the Guarantee, which is filed as Exhibit 99.1
hereto and is incorporated herein by reference.
Support Agreements
Concurrently with the execution of the Merger
Agreement, certain beneficial owners of Company Common Stock, including the Company’s Chief Executive Officer and each member
of the Company’s Board of Directors, entered into Support Agreements (the “Support Agreements”) with Parent
and Merger Sub pursuant to which such parties agreed, among other things, to tender the Shares held by them and certain of their
affiliates in the Offer, upon the terms and subject to the conditions of such agreements. The Shares subject to the Support Agreements
comprise approximately 33% of the outstanding shares of Company Common Stock. The Support Agreements will terminate upon certain
circumstances, including upon termination of the Merger Agreement or the occurrence of a Company Board Recommendation Change (as
defined in the Merger Agreement).
The foregoing description of the Support
Agreements does not purport to be complete and is qualified in its entirety by reference to the form of Support Agreement, which
is filed as Exhibits 99.2 hereto and is incorporated herein by reference.