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Item 1.01
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Entry into a Material Definitive Agreement.
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On April 6, 2021, Mudrick Capital Acquisition
Corporation II (“MUDS”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) by
and among MUDS, Titan Merger Sub I, Inc., a Delaware corporation and direct, wholly owned subsidiary of MUDS (“First Merger
Sub”), Titan Merger Sub II, LLC, a Delaware limited liability company and direct, wholly owned subsidiary of MUDS (“Second
Merger Sub”), Topps Intermediate Holdco, Inc., a Delaware corporation (the “Company”), and Tornante-MDP
Joe Holding LLC, a Delaware limited liability company and the sole stockholder of the Company (“Holdings”).
Pursuant to the Merger Agreement, the parties thereto
will enter into a business combination transaction (the “Business Combination”), pursuant to which (i) First Merger
Sub will merge with and into the Company, with the Company being the surviving corporation in the merger (the “First Merger”)
and (ii) Second Merger Sub will merge with and into the surviving corporation in the First Merger, with Second Merger Sub being the
surviving entity in the merger (the “Second Merger” and, together with the First Merger, the “Mergers”
and, together with the other transactions contemplated by the Merger Agreement, the “Transactions”).
The proposed Business Combination is expected to
be consummated after the required approval by the stockholders of MUDS and the satisfaction of certain other conditions summarized below.
Merger Agreement
Merger Consideration
The aggregate consideration to be paid to stockholders
of the Company will consist of:
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a combination of stock and cash consideration in an aggregate amount equal to (a) $1.227 billion, minus (b) the net indebtedness
of the Company as of immediately prior to the Closing, minus (c) MUDS’ and the Company’s transaction expenses, in each
case, incurred in connection with the Transactions, up to a maximum aggregate amount of $50 million (and with respect to MUDS, up to a
maximum amount of $25 million), minus (d) any remaining amounts payable by the Company under any affiliated contract being terminated
as part of the transaction (the “Closing Merger Consideration”);
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7,684,730 shares of Class B common stock of the combined company (the “Earnout Shares”), subject to forfeiture
if certain share price targets are not achieved in accordance with the applicable terms set forth in the Merger Agreement (and which will
convert into shares of the combined company’s Class A common stock or Class E common stock, as applicable, upon the achievement
of such share price targets);
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rights to receive payments under the Tax Receivable Agreement (as defined below); and
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rights to certain tax refunds received by the Company in respect of pre-Closing tax periods.
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The cash portion of the Closing Merger Consideration will be an amount
equal to (a) the amount of cash permitted to be distributed by the Company to its stockholders prior to the Closing but not so distributed,
plus (b) all amounts in MUDS’ trust account (after reduction for the aggregate amount required to be paid in connection with
any valid stockholder redemptions), plus (c) the aggregate amount of the PIPE Investment (as defined below) funded as of immediately
prior to the Closing (clauses (b) and (c), together, the “Available Closing Buyer Cash”), minus (d) MUDS’
and the Company’s transaction expenses, in each case, incurred in connection with the Transactions, up to an aggregate amount of
$50 million (and with respect to MUDS expenses, up to a maximum amount of $25 million), minus (e) the greater of (i) the amount
by which the cash and cash equivalents of the Company is less than $50 million and (ii) the amount by which the net indebtedness
of the Company exceeds $144 million, minus (f) any remaining amounts payable by the Company under any affiliated contract being terminated
as part of the transaction; provided, that the amount of cash consideration may be reduced if necessary to ensure (x) that total
cash consideration is no more than sixty percent of the total consideration payable to Company stockholders at the Closing or (y) that
certain equityholders of the Company (other than Tornante Topps, LLC and Topps Management, LLC) receive no less than 5,001,125 shares
of the combined company’s Class A common stock in the aggregate in connection with the Transactions.
The remainder of the Closing Merger Consideration will be paid in shares
of MUDS’ Class A common stock and MUDS’ Class E common stock at a per share price of $10.15 per share. The portion
of the Closing Merger Consideration to be paid to stockholders of the Company that are affiliated with Michael Eisner (namely, Tornante
Topps LLC) will consist entirely of MUDS’ Class E common stock (which will entitle the holder thereof to 10 votes per share)
and will not include any cash. The portion of the Closing Merger Consideration to be paid to all other stockholders of the Company will
consist of cash and MUDS’ Class A common stock (which will entitle the holder thereof to 1 vote per share).
MUDS’ Class E common stock held by Tornante
Topps LLC will convert into MUDS’ Class A common stock on a one-for-one basis at any time at the election of the holder and
automatically upon a transfer to a third party (specifically excepting certain affiliated, charitable and other permitted transfers).
All MUDS’ Class E common stock will convert into MUDS’ Class A Common Stock upon the death or permanent mental incapacity
of Michael Eisner, Michael Eisner ceasing to have majority voting control over Tornante Topps LLC and Tornante Topps LLC, its affiliates
and its permitted transferees ceasing to own at least 33.3% of the shares owned by them at the Closing.
MUDS’
Class B common stock will be issued in two equal series consisting of 3,842,365 shares of Series B-1 common stock and 3,842,365
shares of Series B-2 common stock. The Series B-1 common stock have a “triggering event” if the volume-weighted
average share price of MUDS’ Class A common stock is $14.00 or above for 20 trading days within a 30 consecutive trading day
period within 18 months after the Closing. If such triggering event (or another triggering event) has not previously occurred, both the
Series B-1 common stock and Series B-2 common stock will have a triggering event if the volume-weighted average share price
of MUDS’ Class A common stock is $16.00 or above for 20 trading days within a 30 consecutive trading day period within 3 years
after the Closing. A triggering event also occurs if there is a merger, consolidation, tender offer, exchange offer, business combination
or sale at or above the relevant share price. MUDS’ Class B common stock will convert automatically into shares of MUDS’
Class E common stock (in the case of Tornante Topps LLC) and shares of MUDS’ Class A common stock (in all other cases)
upon a triggering event. Any shares of MUDS’ Class B common stock that have not vested by the third anniversary of the Closing
shall be cancelled.
At the effective time of the First Merger, each
outstanding share of common stock of the Company (other than treasury shares or shares owned by MUDS, First Merger Sub, Second Merger
Sub or the Company) will be cancelled and converted into the right to receive a portion of the consideration described above, as determined
in accordance with the Company’s organizational documents. Following the consummation of the Mergers, MUDS will own, directly or
indirectly, all of the outstanding equity interests of the surviving company, and the former stockholders of the Company will become stockholders
of MUDS.
Company Recapitalization and Holdings Liquidation
Prior to the Closing, the Company will undergo
a recapitalization transaction, and Holdings will subsequently liquidate and distribute the equity interests of the Company to Holdings’
members. Taken together, these pre-Closing transactions will result in Holdings’ members becoming stockholders of the Company.
Representations and Warranties
The Merger Agreement contains representations and
warranties of the parties thereto with respect to, among other things, (i) entity organization, formation, corporate power and authority,
(ii) subsidiaries (iii) authorization to enter into the Merger Agreement, (iv) capital structure, (v) consents and
approvals, (vi) financial statements, (vii) liabilities, (viii) real estate, (ix) litigation, (x) material contracts,
(xi) taxes, (xii) absence of certain changes, (xiii) environmental matters, (xiv) employee matters, (xvii) licenses
and permits, (xviii) compliance with laws and (xix) regulatory matters. The representations and warranties of the parties contained
in the Merger Agreement will terminate and be of no further force and effect as of the Closing.
Covenants
The Merger Agreement contains customary covenants
of the parties, including, among others, covenants providing for (i) the operation of the parties’ respective businesses prior
to consummation of the Transactions, (ii) MUDS and the Company’s efforts to satisfy conditions to consummation of the Transactions,
(iii) MUDS and the Company to cease discussions for alternative transactions, (iv) MUDS to prepare and file a proxy statement
for the purpose of soliciting proxies from MUDS’ stockholders to vote in favor of certain matters (the “Buyer Stockholder
Matters”), including the adoption of the Merger Agreement, approval of the Transactions, amendment and restatement of MUDS’
certificate of incorporation and certain other matters at a special meeting called therefor (the “Special Meeting”),
(v) the protection of, and access to, confidential information of the parties and (vi) the parties’ efforts to obtain
necessary approvals from governmental agencies. Covenants of the parties contained in the Merger Agreement requiring performance prior
to Closing will terminate and be of no further force and effect as of the Closing.
Conditions to Closing
The consummation of the Transactions is subject
to customary closing conditions for special purpose acquisition companies, including, among others: (i) approval by MUDS’ stockholders,
(ii) the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
(iii) no order, statute, rule or regulation enjoining or prohibiting the consummation of the Transactions being in force, (iv) MUDS
having at least $5,000,001 of net tangible assets as of the closing of the Transactions and (v) customary bringdown conditions. Additionally,
(a) the obligations of the Company to consummate the Transactions are conditioned upon, among others, the amount of Available Closing
Buyer Cash being no less than $350 million as of the closing of the Transactions and (b) the obligations of MUDS to consummate the
Transactions are conditioned upon, among others, the amount of Available Closing Buyer Cash being no less than $350 million minus the
Backstop Amount (as defined below).
Termination
The Merger Agreement may be terminated at any time,
but not later than the closing of the Transactions, as follows:
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(i)
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by mutual written consent of MUDS and the Company;
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(ii)
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by either MUDS or the Company if a governmental entity shall have issued an order, decree or ruling or taken any other action, in any case having the effect of permanently enjoining or prohibiting the merger, which order, decree, judgment, ruling or other action is final and nonappealable;
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(iii)
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by either MUDS or the Company if the other party has breached any of its covenants, agreements, representations or warranties which would result in the failure of certain conditions to be satisfied at the closing and has not cured its breach within twenty business days of the notice of an intent to terminate, provided that the terminating party’s failure to fulfill any of its obligations under the Merger Agreement is not the primary cause of the failure of the closing to occur;
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(iv)
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by either MUDS or the Company if the transactions are not consummated on or before January 6, 2022 (the “Termination Date”), provided that the Termination Date with respect to MUDS’ right to terminate will be automatically extended if any bona fide action for specific performance or other equitable relief is filed by Holdings or the Company with respect to the Merger Agreement, the other transaction agreements specified in the Merger Agreement or otherwise regarding the Transactions is commenced or pending on or prior to the Termination Date, provided that the terminating party’s failure to fulfill any of its obligations under the Merger Agreement is not the primary cause of the failure of the closing to occur by such date;
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(v)
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by either MUDS or the Company if, at the Special Meeting, the Transactions and certain of the Buyer Stockholder Matters shall fail to be approved by holders of MUDS’ outstanding shares, provided that MUDS’ right to terminate for failure to obtain such approval shall not be available if, at the time of such termination, MUDS is in breach of certain of its obligations under the Merger Agreement, including with respect to the preparation, filing and mailing of the proxy statement and convening the Special Meeting; or
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(vi)
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by MUDS if there has been a Material Adverse Effect on the Company.
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The foregoing description of the Merger Agreement
and the Transactions does not purport to be complete and is qualified in its entirety by the terms and conditions of the Merger Agreement
and any related agreements. The Merger Agreement contains representations, warranties and covenants that the respective parties made to
each other as of the date of such agreement or other specific dates. The assertions embodied in those representations, warranties and
covenants were made for purposes of the contract among the respective parties and are subject to important qualifications and limitations
agreed to by the parties in connection with negotiating such agreement. The Merger Agreement has been included as an exhibit to this Current
Report on Form 8-K (this “Current Report”) to provide investors with information regarding its terms. It is not
intended to provide any other factual information about MUDS, the Company, Holdings or any other party to the Merger Agreement or any
related agreement. In particular, the representations, warranties, covenants and agreements contained in the Merger Agreement, which were
made only for purposes of such agreement and as of specific dates, were solely for the benefit of the parties to the Merger Agreement,
are subject to limitations agreed upon by the contracting parties (including being qualified by confidential disclosures made for the
purposes of allocating contractual risk between the parties to the Merger Agreement instead of establishing these matters as facts) and
are subject to standards of materiality applicable to the contracting parties that may differ from those applicable to investors and security
holders. Investors and security holders are not third-party beneficiaries under the Merger Agreement and should not rely on the representations,
warranties, covenants and agreements, or any descriptions thereof, as characterizations of the actual state of facts or condition of any
party to the Merger Agreement. Moreover, information concerning the subject matter of the representations and warranties may change after
the date of the Merger Agreement, which subsequent information may or may not be fully reflected in MUDS’ public disclosures.
A copy of the Merger Agreement is filed with this
Current Report as Exhibit 2.1 and is incorporated herein by reference, and the foregoing description of the Merger Agreement is qualified
in its entirety by reference thereto.
Related Agreements
Subscription Agreements
In connection with the execution of the Merger
Agreement, MUDS entered into subscription agreements with certain investors (“Subscription Agreement”), pursuant to
which such investors have agreed to purchase an aggregate of 24,630,542 shares of MUDS’ Class A common stock, for a purchase
price of $10.15 per share and for an aggregate commitment of $250 million, inclusive of the full Backstop Amount (the “PIPE Investment”).
The closing of the PIPE Investment is conditioned on all conditions set forth in the Merger Agreement having been satisfied or waived
and other customary closing conditions. The form of Subscription Agreement (other than with respect to the Backstop Amount) is attached
as Exhibit 10.1 hereto and is incorporated herein by reference, and the foregoing description of the Subscription Agreement is qualified
in its entirety by reference thereto.
As part of such PIPE Investment, and concurrently
with the execution of the Merger Agreement, MUDS entered into a subscription agreement with funds and accounts managed by Mudrick Capital
Management, L.P. (the “Mudrick Backstop Parties” and, such subscription agreement, the “Backstop Agreement”),
pursuant to which the Mudrick Backstop Parties have agreed to purchase an aggregate of up to 9,852,216 shares of MUDS’ Class A
common stock, for a purchase price of $10.15 per share and for an aggregate commitment of up to approximately $100 million (the “Backstop
Amount”); provided, that the Mudrick Backstop Parties may elect in connection with the Closing to reduce the Backstop Amount
by the excess above $350 million (if any) of the amount of the Available Buyer Closing Cash (including the maximum Backstop Amount). The
form of Backstop Agreement is attached as Exhibit 10.2 hereto and is incorporated herein by reference, and the foregoing description
of the Backstop Agreement is qualified in its entirety by reference thereto.
Sponsor Support Agreement
In connection with the execution of the Merger
Agreement, on April 6, 2021, MUDS and the Sponsor entered into the Sponsor Support Agreement (the “Sponsor Support Agreement”),
pursuant to which the Sponsor agreed (i) to vote all of its shares of MUDS common stock (a) in favor of (x) adoption of
the Merger Agreement and (y) approval of the Transactions and the other MUDS stockholder proposals and (b) against any proposal
that would materially impede the Transactions, (ii) not to redeem any shares of MUDS’ Class A common stock in connection
with the Transactions, (iii) for a period of three (3) years following the Closing, not to form a “group” for the
purpose of voting against persons nominated by the equityholders of Holdings for election as directors of MUDS, (iv) waive anti-dilution
rights that would result in MUDS’ Class B common stock converting on anything other than a 1-to-1 basis and (v) if more
than 20% of MUDS’ Class A common stock is redeemed by MUDS’ stockholders in connection with the Transactions, to surrender
for cancellation up to 2,635,416 shares of MUDS’ Class B common stock in proportion to the incremental percentage of shares
redeemed above such 20% threshold. The Sponsor Support Agreement is attached as Exhibit 10.3 hereto and is incorporated herein by
reference, and the foregoing description of the Sponsor Support Agreement is qualified in its entirety by reference thereto.
Investor Rights Agreement
At the consummation of the Transactions, MUDS,
Tornante Topps, LLC, investment funds affiliated with Madison Dearborn Partners, LLC, and certain parties listed therein will enter into
an investor rights agreement, which will provide, among other things, certain director nomination rights with respect to the post-Closing
board of directors of the combined company on a go-forward basis, including that Tornante Topps, LLC will be entitled to nominate a number
as is proportional to its voting ownership percentage, and investment funds affiliated with Madison Dearborn Partners, LLC will be entitled
to certain rights to have its director designee appointed to committees of the post-Closing board of directors of the combined company.
The combined company will also agree not to remove directors designated by the aforementioned parties. MUDS
expects to be a controlled company within the meaning of the NASDAQ rules at the Closing and has agreed to certain covenants in accordance
therewith.
Tax Receivable Agreement
At the consummation of the Transactions, MUDS will
enter into a tax receivable agreement (the “Tax Receivable Agreement”) with certain equityholders of the combined company.
Pursuant to the Tax Receivable Agreement, the combined company will be required, among other things, to pay the equityholders party thereto
85% of the amount of the actual tax savings, if any, in U.S. federal, state, local and non-U.S. income tax that the combined company actually
realizes as a result of certain preexisting tax attributes; provided, that the total payments under the Tax Receivable Agreement
shall not exceed $16 million.
In the case of a change of control of the combined
company, certain divestitures that do not constitute a change of control of the combined company, or a material breach of the combined
company’s obligations under the Tax Receivable Agreement, the combined company will be required to make a payment to certain equityholders
of the combined company in an amount equal to the present value of future payments under the Tax Receivable Agreement, which payment would
be based on certain assumptions, including those relating to the combined company’s future taxable income.
Registration Rights Agreement
At the consummation of the Transactions, MUDS,
the Sponsor, and certain parties listed therein will enter into a registration rights agreement in respect of the shares of MUDS’
Class A common stock (including shares of MUDS’ Class A common stock underlying other securities held by such persons)
issued to such persons in connection with the transactions set forth above. Pursuant to such agreement, the parties will be entitled to
certain customary registration rights, including demand, shelf and piggy-back rights, subject to cut-back provisions.
The parties
to the Registration Rights Agreement will be subject (subject to customary exceptions, including for permitted transfers) to a contractual lock-up on
the sale of MUDS common stock as follows: (a) in the case of the Sponsor, (i) with respect to the shares it receives upon conversion
of its Class B common stock (but not shares received in respect of its Backstop Amount), 12 months from Closing (subject to earlier
termination if MUDS’ common stock trades above $12.00 for 20 trading days in any 30 consecutive trading days beginning 150 days
after the Closing), and (ii) with respect to its warrants, 30 days after the Closing and (b) in the case of all other parties
thereto (including Tornante Topps LLC and investment funds affiliated with Madison Dearborn Partners, LLC), 6 months from the Closing.
The Class B common stock received by the Company’s equityholders is also subject to lock-up until such later date
as there has been a triggering event with respect to such shares.