424B3 1 d868352d424b3.htm FORM 424(B)(3) Form 424(b)(3)
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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-236122

 

Offer by

FORE ACQUISITION CORPORATION,

an indirect wholly-owned subsidiary of

COTT CORPORATION,

to exchange each outstanding share of common stock of

PRIMO WATER CORPORATION

for

$5.04 in Cash and

0.6549 Cott Corporation Common Shares

or

$14.00 in Cash

or

1.0229 Cott Corporation Common Shares

(subject in each case to the election procedures and, in the case of a cash election or a stock election,

to the proration procedures described in this document and related letter of election and transmittal)

 

 

THE OFFER AND THE WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, AT THE END OF THE DAY ON TUESDAY, FEBRUARY 25, 2020, UNLESS THE OFFER IS EXTENDED, WITHDRAWN OR VARIED.

Cott Corporation (“Cott”), through its indirect wholly-owned subsidiary Fore Acquisition Corporation (the “Purchaser”), is offering, upon the terms and subject to the conditions set forth in this prospectus/offer and in the accompanying letter of election and transmittal, to exchange for each outstanding share of common stock of Primo Water Corporation (“Primo”), par value $0.001 per share, that is validly tendered in the offer and not properly withdrawn:

 

   

$5.04 in cash, without interest and less any applicable taxes required to be deducted or withheld in respect thereof; and

 

   

0.6549 Cott common shares.

We refer to the above as the “mixed consideration.” In lieu of receiving the mixed consideration, holders of Primo shares may elect to receive, for each Primo share that they hold, (1) $14.00 in cash (we refer to this election as the “cash election”) or (2) 1.0229 Cott common shares (we refer to this election as the “stock election”).

Primo stockholders who tender (and do not properly withdraw) their Primo shares into the offer and do not make a valid election will receive the mixed consideration for their Primo shares. Primo stockholders who make the cash election or the stock election will be subject to proration to ensure that approximately 64.02% of the aggregate consideration in the offer will be paid in Cott common shares and approximately 35.98% of the aggregate consideration in the offer will be paid in cash. See “Exchange Offer Procedures – Elections and Proration” for a description of the proration procedure.

The Purchaser’s obligation to accept for exchange, and to exchange, shares of Primo common stock for cash and Cott common shares in the offer is subject to a number of conditions, including there having been a number of shares of Primo common stock validly tendered and not properly withdrawn that, together with any shares of Primo common stock directly or indirectly owned by Cott and the Purchaser, represents at least a majority of the outstanding shares of Primo common stock. See “Merger Agreement – Conditions to the Transactions – Conditions to the Offer” for a description of all such conditions.

The offer is being made pursuant to an Agreement and Plan of Merger, dated January 13, 2020, and amended January 28, 2020 (as such agreement may be further amended, supplemented or otherwise modified from time to time in accordance therewith, the “merger agreement”), among Cott, Cott Holdings Inc., a wholly-owned subsidiary of Cott (“Holdings”), Fore Merger LLC, a Delaware limited liability company and a wholly-owned subsidiary of Holdings (“Merger Sub 2”), Purchaser, and Primo. A copy of the merger agreement and the amendment thereto are attached to this document as Annex A-1 and Annex A-2, respectively.

The offer is the first step in Cott’s plan to acquire control of, and ultimately all of the outstanding equity in, Primo. Pursuant to the terms and subject to the conditions of the merger agreement, as soon as practicable following the consummation of the


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offer, Cott intends to consummate a merger of the Purchaser with and into Primo, with Primo surviving the merger (the “first merger”). The purpose of the first merger is for Cott to acquire all shares of Primo common stock that it did not acquire in the offer. In the first merger, each outstanding Primo share that was not acquired by Cott or the Purchaser (other than certain dissenting, converted and cancelled shares, as described further in this document) will be converted into the mixed consideration or, at the election of the holder of such shares, the cash consideration or stock consideration, subject to proration to ensure that approximately 64.02% of the aggregate consideration in the first merger will be paid in Cott common shares and approximately 35.98% of the aggregate consideration in the first merger (as reduced by the Primo shares held by stockholders who have properly exercised and perfected appraisal rights under the DGCL) will be paid in cash. As a result of the first merger, the Primo business will be an indirect wholly-owned subsidiary of Cott Corporation, and the former stockholders of Primo will no longer have any direct ownership interest in the surviving entity (the “first surviving company”). The first merger will be governed by Section 251(h) of the General Corporation Law of the state of Delaware (the “DGCL”), and, accordingly, no stockholder vote will be required to complete the first merger.

Immediately following the first merger, the first surviving company will merge with and into Merger Sub 2 (which we refer to as the “second merger” and together with the first merger, the “mergers”), with Merger Sub 2 surviving the second merger. The entity surviving the second merger (the “surviving company”) will be a limited liability company. Cott and Primo intend and anticipate that the acquisition of the Primo common stock pursuant to the offer and the mergers together constitute a single integrated transaction that will qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”) and that the relevant requirements under Section 367(a) of the Code will be met. However, the completion of the offer and the mergers is not conditioned upon the receipt of an opinion of counsel to that effect. In addition, no ruling from the IRS regarding these matters will be obtained, and no assurance can be given that the IRS will not challenge the anticipated U.S. tax treatment or that a court would not sustain such a challenge. Please read the discussion under the caption “Material U.S. Federal Income Tax Consequences” in this prospectus/offer. Immediately before the second merger, Cott will be the sole indirect owner of Primo, and none of the former Primo stockholders will have any direct economic interest in, or approval or other rights with respect to, the second merger.

The Primo board of directors unanimously determined that the terms of the merger agreement and the transactions contemplated by the merger agreement (the “transactions”), including the offer and the first merger, are fair to, and in the best interests of, Primo and its stockholders. The Primo board of directors has also resolved to recommend that the stockholders of Primo accept the offer and tender their shares of Primo common stock to the Purchaser pursuant to the offer.

The Cott board of directors also unanimously determined that the terms of the merger agreement and the transactions, including the offer and the first merger, are fair to, and in the best interests of, Cott and its shareowners.

Cott common shares are listed on the New York Stock Exchange (“NYSE”) under the symbol “COT” and on the Toronto Stock Exchange (“TSX”) under the symbol “BCB.” Primo common stock is listed on the Nasdaq Stock Market LLC (“Nasdaq”) under the symbol “PRMW.” You are encouraged to obtain current market quotations for Cott common shares and Primo common stock in connection with your decision regarding whether to tender your shares.

The first merger will entitle Primo stockholders who did not tender their shares in the offer and who otherwise satisfy the other requirements prescribed by Delaware law to exercise appraisal rights under the DGCL. To exercise appraisal rights, a Primo stockholder must strictly comply with all of the procedures under the DGCL. These procedures are described more fully in the section entitled “The Transactions – Primo’s Reasons for the Transactions; Recommendation of Primo’s Board of Directors – Appraisal Rights.”

For a discussion of certain factors that Primo stockholders should consider in connection with the offer, please read the section of this document entitled “Risk Factors” beginning on page 28.

You are encouraged to read this entire document and the related letter of election and transmittal carefully, including the annexes and information referred to or incorporated by reference in this document.

Neither Cott nor the Purchaser has authorized any person to provide any information or to make any representation in connection with the offer other than the information contained or incorporated by reference in this document, and if any person provides any information or makes any representation of this kind, that information or representation must not be relied upon as having been authorized by Cott or the Purchaser.

Neither the U.S. Securities and Exchange Commission (the “SEC”) nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this document. Any representation to the contrary is a criminal offense.

The date of this prospectus/offer is February 18, 2020


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     Page  

ADDITIONAL INFORMATION

     vi  

QUESTIONS AND ANSWERS ABOUT THE OFFER

     1  

Who is offering to buy my Primo common stock?

     1  

What is Cott proposing?

     1  

Why is Cott proposing the offer and the mergers?

     2  

Does the Primo board of directors support the transactions?

     2  

Have any of Primo’s significant stockholders already agreed to tender their shares in the offer?

     2  

What are the classes and amounts of Primo securities that the Purchaser is offering to acquire?

     2  

What will I receive for my shares of Primo common stock?

     2  

What is the market value of my shares of Primo common stock as of a recent date?

     3  

What is the market value of a common share of cott as of a recent date?

     3  

Will I have to pay any fee or commission to exchange my shares of Primo common stock?

     3  

What are the most significant conditions of the offer?

     3  

How long will it take to complete the proposed transactions?

     4  

Until what time can I tender my shares of Primo common stock in the offer?

     4  

How do I tender my shares of Primo common stock?

     5  

Until what time can I withdraw tendered shares of Primo common stock?

     5  

How do I withdraw previously tendered shares of Primo common stock?

     5  

When and how will I receive the transaction consideration in exchange for my tendered shares of Primo common stock?

     6  

Do I have to vote to approve the offer or the first merger?

     6  

What happens if I do not tender my shares of Primo common stock?

     6  

If the offer is completed, will Primo continue as a public company?

     6  

Will I have the right to have my shares of Primo common stock appraised?

     7  

What are the anticipated U.S. federal income tax consequences to me of receiving Cott shares and cash in exchange for my shares pursuant to the offer or the first merger?

     7  

Are there any unique Canadian tax considerations that I should be aware of in obtaining shares of a Canadian company?

     8  

Who should I contact if I have questions about the offer?

     8  

Where can I find more information about Cott and Primo?

     8  

SUMMARY

     9  

The Transactions

     9  

Transaction Consideration

     9  

The Offer

     10  

The Mergers

     10  

The Companies

     10  

Cott

     10  

Holdings

     11  

Merger Sub 2

     11  

The Purchaser

     11  

Primo

     12  

Tender and Support Agreements

     13  

Conditions to the Transactions

     14  

Exchange of Shares; Delivery of Cash and Cott Common Shares

     14  

Elections and Proration

     14  

Treatment of Primo Equity-Based Awards; Warrants

     15  

Primo 2010 Employee Stock Purchase Plan

     16  

Other Equity-Based Incentive Plans

     16  

Regulatory Approvals

     16  

Source and Amount of Funds

     16  

 

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(continued)

 

     Page  

Listing of Cott common shares

     17  

Appraisal Rights

     17  

Market Information and Dividend Matters

     17  

Ownership of Cott After the Transactions

     18  

Comparison of Stockholders’ Rights

     18  

Material U.S. Federal Income Tax Consequences

     18  

Material Canadian Federal Income Tax Consequences

     18  

Accounting Treatment

     19  

Questions About the Offer and the Mergers

     19  

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF COTT

     20  

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF PRIMO

     22  

SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA

     24  

COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE DATA

     26  

RISK FACTORS

     28  

Risks Relating to the Offer and Mergers and Combined Company

     28  

Risks Related to Cott’s Business

     32  

Risks Related to Primo’s Business

     32  

FORWARD-LOOKING STATEMENTS

     35  

THE COMPANIES

     37  

Cott

     37  

Holdings

     37  

Merger Sub 2

     37  

The Purchaser

     37  

Primo

     38  

THE TRANSACTIONS

     39  

General

     39  

Background of the Transactions

     39  

Cott’s Reasons for the Transactions

     50  

Primo’s Reasons for the Transactions; Recommendation of Primo’s Board of Directors

     53  

Opinion of Goldman, Sachs & Co. LLC

     58  

Ownership of Cott After the Transactions

     65  

Appraisal Rights

     65  

Plans for Primo

     66  

Delisting and Termination of Registration

     66  

Board of Directors, Management and Organizational Documents

     66  

Regulatory Approvals

     67  

Interests of Certain Persons in the Transactions

     68  

Treatment of Equity and Equity-Based Awards

     68  

Primo Shares

     68  

Primo Options

     69  

Primo RSUs

     69  

Primo LTPP Units

     70  

Primo DSUs

     70  

Primo Warrants

     71  

Estimated Value of Consideration for Primo Common Stock and Equity Awards.

     72  

2010 Employee Stock Purchase Plan

     72  

Other Equity-Based Incentive Plans

     72  

Arrangements with Executive Officers

     72  

 

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(continued)

 

     Page  

Director Compensation

     73  

Indemnification of Executive Officers and Directors

     73  

Executive Officer and Director Arrangements Following the Mergers

     74  

Effect of the Mergers on Employee Benefits

     74  

Certain Relationships With Primo

     75  

Source and Amount of Funds

     75  

Fees and Expenses

     76  

Accounting Treatment

     76  

Stock Exchange Listing

     76  

Resale of Cott Common Shares

     76  

EXCHANGE OFFER PROCEDURES

     77  

Distribution of Offering Materials

     77  

Elections and Proration

     77  

Over Election of Cash

     78  

Over Election of Stock

     78  

Maximum Cott Common Share Issuance

     78  

Consequences of Tendering with No Election

     78  

Expiration of the Offer

     79  

Extension, Termination and Amendment of Offer

     79  

Exchange of Shares

     80  

Withdrawal Rights

     80  

Procedures for Tendering

     81  

No Guaranteed Delivery

     82  

Grant of Proxy

     83  

Fees and Commissions

     83  

Matters Concerning Validity and Eligibility

     83  

Announcement of Results of the Offer

     83  

No Stockholder Approval

     84  

Non-Applicability of Rules Regarding “Going Private” Transactions

     84  

Effect of the Offer on the Market for Primo Common Stock

     84  

Nasdaq Listing

     84  

Registration Under the Exchange Act

     85  

Margin Regulations

     85  

Exchange Agent Contact Information

     85  

MERGER AGREEMENT

     86  

The Offer

     86  

The Mergers

     87  

Effect of the Mergers

     87  

Transaction Consideration

     88  

Fractional Shares

     89  

Exchange of Primo Stock Certificates for the Transaction Consideration

     89  

Treatment of Primo Equity-Based Awards; Employee Stock Purchase Plan

     90  

Vested in-the-Money Primo Options

     90  

Unvested Primo Options

     90  

Vested Primo RSUs

     91  

Unvested Primo RSUs

     91  

Primo LTPP Units

     91  

Primo DSUs

     91  

 

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(continued)

 

     Page  

Primo Warrants

     91  

2010 Employee Stock Purchase Plan

     92  

Other Equity-Based Incentive Plans

     92  

Conditions to the Transactions

     92  

Conditions to the Offer

     92  

Conditions to the Mergers Following Completion of the Offer

     94  

Material Adverse Effect

     94  

Representations and Warranties

     96  

No Solicitation of Other Offers by Primo

     98  

Change of Recommendation

     99  

Conduct of Business During Pendency of the Transactions

     100  

Restrictions on Primo’s Operations

     100  

Restrictions on Cott’s Operations

     103  

Regulatory Efforts

     103  

Access

     104  

Employee Matters

     104  

Resignations and Appointments of Primo Officers and Directors

     105  

Name Change

     106  

Third Party Consents

     106  

Financing Covenants

     106  

Certain Tax Matters

     108  

Charter Documents and Management of Surviving Company

     108  

Directors’ and Officers’ Indemnification and Insurance

     108  

Securityholder Litigation

     109  

Takeover Statutes

     109  

Public Announcements

     109  

Termination of the Merger Agreement

     110  

Termination by Cott or Primo

     110  

Termination by Cott

     110  

Termination by Primo

     110  

Termination Fee

     111  

Expenses

     111  

Effect of Termination

     111  

Enforcements and Remedies

     111  

Amendments and Waivers of Merger Agreement

     112  

TENDER AND SUPPORT AGREEMENTS

     113  

MARKET INFORMATION AND DIVIDEND MATTERS

     115  

Market Information

     115  

Dividends

     115  

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

     116  

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

     119  

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

     120  

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

     121  

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

     122  

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

     123  

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

     124  

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES

     131  

U.S. Federal Income Tax Consequences of the Offer and the Mergers to U.S. Holders

     132  

 

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(continued)

 

     Page  

U.S. Federal Income Tax Consequences of the Offer and the Mergers to Non-U.S. Holders

     134  

Information Reporting and Backup Withholding

     135  

U.S. Federal Income Tax Consequences to U.S. Holders of Owning and Disposing of Cott Common Shares

     135  

MATERIAL CANADIAN FEDERAL INCOME TAX CONSEQUENCES

     138  

Disposition of Primo Common Stock

     138  

Dividends on Cott Common Shares

     138  

Disposition of Cott Common Shares

     138  

Taxable Canadian Property

     139  

DESCRIPTION OF COTT CAPITAL STOCK

     140  

Common Shares

     140  

Preferred Shares

     140  

Pre-emptive Rights

     140  

Anti-Takeover Effects of Certain Provisions of Cott’s Articles and Cott’s By-laws

     141  

Unlimited Authorized but Unissued Common Shares and Preferred Shares

     141  

Shareowner Action; Special Meetings of Shareowners

     141  

Shareholder Rights Plan

     141  

Advance Notice Requirements for Shareowner Proposals and Director Nominations

     142  

Amendment to Cott’s Articles and Cott’s By-laws

     142  

Canadian Law

     142  

Transfer Agent and Registrar

     142  

COMPARISON OF STOCKHOLDERS’ RIGHTS

     143  

LEGAL MATTERS

     155  

EXPERTS

     155  

WHERE TO OBTAIN ADDITIONAL INFORMATION

     155  

Annex A-1 MERGER AGREEMENT

     A-1-1  

Annex A-2 AMENDMENT NO.1 TO AGREEMENT AND PLAN OF MERGER

     A-2-1  

Annex B FORM OF TENDER AND SUPPORT AGREEMENT

     B-1  

Annex C OPINION OF GOLDMAN, SACHS & CO. LLC

     C-1  

Annex D DIRECTORS AND EXECUTIVE OFFICERS OF COTT AND THE PURCHASER

     D-1  

 

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ADDITIONAL INFORMATION

As permitted by the SEC, this document incorporates by reference important business and financial information about Cott, Primo and their respective subsidiaries from documents filed with the SEC that have not been included in or delivered with this document.

This information is available without charge at the SEC’s website at www.sec.gov, as well as from other sources.

You can obtain the documents incorporated by reference in this document, without charge, by requesting them in writing or by telephone at the following address and telephone number.

Jarrod Langhans

Vice President of Investor Relations and Corporate FP&A

Cott Corporation

4221 West Boy Scout Blvd., Suite 400

Tampa, Florida, United States 33607

(813) 313-1732

investorrelations@cott.com

If you would like to request documents, in order to receive timely delivery prior to the expiration of the offer, please make your request at least five business days prior to the expiration of the offer. Unless the offer is extended, this means that the latest you should request documents is February 18, 2020.

See also “Where To Obtain Additional Information.”

Primo has supplied all information contained or incorporated by reference in this document relating to Primo, and Cott has supplied all information contained or incorporated by reference in this document relating to Cott. Both Primo and Cott have contributed information relating to the transactions.

Certain information relating to Primo appears in the Solicitation/Recommendation Statement on Schedule 14D-9 dated as of the date of this document and filed by Primo with the SEC (the “Schedule 14D-9”). The Schedule 14D-9 was mailed to Primo stockholders on January 29, 2020 and a supplement is being mailed to Primo stockholders on February 18, 2020.

 

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QUESTIONS AND ANSWERS ABOUT THE OFFER

Below are some of the questions that you as a holder of shares of Primo common stock may have regarding the offer, along with answers to those questions. You are urged to read carefully the remainder of this document, the related letter of election and transmittal, the annexes to this document and the other information referred to or incorporated by reference in this document because the information contained in this section and in the “Summary” section is not complete. See “Where To Obtain Additional Information.”

As used in this document, unless otherwise indicated or the context requires: “Cott” (or “we,” “us” and “our”) refers to Cott Corporation, a Canadian corporation, and its consolidated subsidiaries; “Holdings” refers to Cott Holdings Inc., a Delaware corporation and wholly-owned subsidiary of Cott; “Merger Sub 2” refers to Fore Merger LLC, a Delaware limited liability company and wholly-owned subsidiary of Holdings; the “Purchaser” refers to Fore Acquisition Corporation, a Delaware corporation and wholly-owned subsidiary of Merger Sub 2; and “Primo” refers to Primo Water Corporation, a Delaware corporation, and its consolidated subsidiaries.

Who is offering to buy my Primo common stock?

Cott, through its indirect wholly-owned subsidiary Fore Acquisition Corporation, as Purchaser, is making this offer to exchange cash and Cott common shares for Primo common stock.

Cott Corporation is a leading North American and European water, coffee and coffee extracts, tea and filtration solutions service company with the largest volume-based national presence in the North American and European home and office bottled water delivery industry and a leader in custom coffee roasting and blending of iced tea for the U.S. foodservice industry. Cott’s platform reaches over 2.5 million customers or delivery points with over 3,600 direct-to-consumer routes across North America and Europe supported by strategically located sales and distribution facilities and fleets, as well as wholesalers and distributors. This enables Cott to efficiently service residences, businesses, restaurant chains, hotels and motels, small and large retailers, and healthcare facilities.

Cott was incorporated in Canada in 1955. Its shares are traded on the NYSE under the ticker symbol “COT” and on the TSX under the ticker symbol “BCB.”

What is Cott proposing?

Pursuant to the terms and subject to the conditions set forth in the merger agreement, Cott proposes to acquire control of, and ultimately all of the outstanding equity of, Primo.

The offer is the first step in Cott’s plan to acquire all of the outstanding shares of Primo, and the first merger is the second step in such plan.

If a sufficient number of shares of Primo common stock are tendered into the offer such that Cott will own at least a majority of the outstanding shares of Primo common stock, subject to the satisfaction or waiver of the other conditions to the offer, Cott will accept for exchange the shares tendered in the offer. Then, as soon as practicable thereafter, Cott will consummate a merger of the Purchaser with and into Primo, with Primo surviving the merger. The purpose of the first merger is for Cott to acquire all remaining shares of Primo common stock that it did not acquire in the offer. As a result of the first merger, the Primo business will be an indirect wholly-owned subsidiary of Cott, and the former stockholders of Primo will no longer have any direct ownership interest in the first surviving company. The first merger will be governed by Section 251(h) of the DGCL, and, accordingly, no stockholder vote will be required to consummate the first merger.

Immediately following the first merger, the first surviving company will merge with and into Merger Sub 2, with Merger Sub 2 surviving the second merger.

 

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Why is Cott proposing the offer and the mergers?

The board of directors of Cott unanimously determined that the terms of the merger agreement and the transactions contemplated by the merger agreement (the “transactions”), including the offer and the first merger, are fair to, and in the best interests of, Cott and its shareowners. See “The Transactions – Cott’s Reasons for the Transactions” for more information.

Does the Primo board of directors support the transactions?

Yes. The Primo board of directors unanimously resolved to recommend that Primo stockholders accept the offer and tender their Primo shares to the Purchaser pursuant to the offer. The Primo board of directors also unanimously determined that the terms of the merger agreement and the transactions, including the offer and the first merger, are advisable, fair to, and in the best interests of Primo’s stockholders.

See “The Transactions – Primo’s Reasons for the Transactions; Recommendation of Primo’s Board of Directors” for more information. A description of the reasons for this recommendation is also set forth in Primo’s Schedule 14D-9, which was mailed to you on January 29, 2020, with a supplement mailed to you on February 18, 2020.

Have any of Primo’s significant stockholders already agreed to tender their shares in the offer?

Yes. Concurrently with the execution of the merger agreement on January 13, 2020, Cott and the Purchaser entered into separate tender and support agreements (each, a “support agreement” and collectively, the “support agreements”) with each of Primo’s directors and executive officers (collectively, the “supporting stockholders”), who beneficially owned, in the aggregate, approximately 10.4% of Primo common stock as of January 10, 2020, to commit to tender their shares of Primo common stock in the offer. See “Tender and Support Agreements.”

What are the classes and amounts of Primo securities that the Purchaser is offering to acquire?

Cott, through the Purchaser, is seeking to acquire all issued and outstanding shares of Primo common stock, par value $0.001 per share.

What will I receive for my shares of Primo common stock?

Cott, through the Purchaser, is offering, upon the terms and subject to the conditions set forth in this document and in the accompanying letter of election and transmittal, to exchange for each outstanding share of Primo common stock that is validly tendered in the offer and not properly withdrawn:

 

   

$5.04 in cash; and

 

   

0.6549 Cott common shares.

We refer to the above as the “mixed consideration.”

In lieu of receiving the mixed consideration, holders of Primo shares may elect to receive, for each Primo share that they hold, (1) $14.00 in cash (we refer to this election as the “cash election” and this amount as the “cash consideration”) or (2) 1.0229 Cott common shares (we refer to this election as the “stock election” and this amount as the “stock consideration”).

Primo stockholders who tender their Primo shares into the offer and do not make a valid election will receive the mixed consideration for their Primo shares. Primo stockholders who make the cash election or the stock election will be subject to proration to ensure that approximately 64.02% of the aggregate consideration in the offer will be paid in Cott common shares and approximately 35.98% of the aggregate consideration in the offer will be paid in cash. See “Exchange Offer Procedures – Elections and Proration” for a detailed description of the proration procedures applicable to the offer.

 

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Primo stockholders should consider the potential effects of proration and should obtain current market quotations for Primo shares and Cott common shares before deciding whether to tender pursuant to the offer and before electing the form of consideration they wish to receive. Please see “Risk Factors – Risk Factors Relating to the Offer and Mergers and Combined Company.”

If you do not tender your shares into the offer, but the first merger is completed, you will also receive the transaction consideration in exchange for your shares of Primo common stock (other than for certain dissenting, converted and cancelled shares, as described further in this document).

What is the market value of my shares of Primo common stock as of a recent date?

The January 24, 2020 closing price of a share of Primo common stock on Nasdaq was $14.75.

What is the market value of a common share of Cott as of a recent date?

The January 24, 2020 closing price of a Cott common share on the NYSE was $14.89 and on the TSX was CAD 19.57.

Will I have to pay any fee or commission to exchange my shares of Primo common stock?

If you are the record owner of your shares of Primo common stock and you tender those shares in the offer, you will not have to pay any brokerage fees, commissions or similar expenses. If you own your shares of Primo common stock through a broker, dealer, commercial bank, trust company or other nominee and your broker, dealer, commercial bank, trust company or other nominee tenders your shares on your behalf, your broker or such other nominee may charge a fee for doing so. You should consult your broker, dealer, commercial bank, trust company or other nominee to determine whether any charges will apply.

What are the most significant conditions of the offer?

The offer is conditioned upon, among other things, the following:

 

   

Regulatory Approval – any waiting period (and extensions thereof) applicable to the offer under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), having expired or been terminated;

 

   

Minimum Condition – the Purchaser receiving at least a majority of the outstanding shares of Primo common stock, having been validly tendered into (and not properly withdrawn from) the offer prior to the expiration date of the offer (giving effect to any shares issued in respect of equity awards as described under the heading “Merger Agreement – Treatment of Primo Equity-Based Awards; Employee Stock Purchase Plan”) (the “minimum condition”);

 

   

Effectiveness of Form S-4 – the registration statement on Form S-4 of which this document is a part having been declared effective by the SEC under the U.S. Securities Act of 1933, as amended (the “Securities Act”), which occurred on February 11, 2020, and no stop order suspending the effectiveness of such Form S-4 having been issued by the SEC or proceedings for that purpose having been initiated or threatened by the SEC;

 

   

No Material Adverse Effect – since January 13, 2020, there not having occurred any Company Material Adverse Effect (as defined herein) that is continuing as of the expiration date;

 

   

Listing of Cott Common Shares – the Cott common shares to be issued in connection with the offer and the first merger having been approved for listing on the NYSE and the TSX, subject to official notice of issuance;

 

   

Accuracy of Primo’s Representations – the representations and warranties of Primo contained in the merger agreement being true and correct as of January 13, 2020 and the expiration date of the offer, subject to specified de minimis and materiality standards, as applicable;

 

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Primo’s Compliance with Covenants – Primo having complied with or performed in all material respects all of the covenants and agreements that Primo is required to comply with or perform at or prior to the date of Cott’s acceptance of the tendered shares;

 

   

No Legal Prohibition – no governmental entity of competent jurisdiction having issued any judgment, temporary restraining order, preliminary or permanent injunction or other order that remains in effect preventing the consummation of the offer or the mergers, nor any pending or threatened (in writing) action by any governmental entity, or any law or order having been promulgated, entered, enforced, enacted, issued or deemed applicable to the offer or the mergers by any governmental entity which prohibits, or makes illegal the consummation of the offer or the mergers; and

 

   

Primo Closing Certificate – Cott and Purchaser having received a certificate executed on behalf of Primo by Primo’s Chief Executive Officer and Chief Financial Officer confirming that certain conditions set forth in the merger agreement have been duly satisfied.

The offer is subject to certain other conditions set forth in the section entitled “Merger Agreement – Conditions to the Transactions – Conditions to the Offer.” Cott’s obligation to consummate the offer is not conditioned upon any financing arrangements or contingencies or the receipt of any tax opinion regarding the tax consequences associated with the offer and the mergers.

How long will it take to complete the proposed transactions?

The transactions are currently expected to be completed during the first calendar quarter of 2020, subject to the satisfaction or waiver of the conditions described in “Merger Agreement – Conditions to the Transactions.”

Until what time can I tender my shares of Primo common stock in the offer?

The offer is scheduled to expire at 12:00 midnight, New York City Time, at the end of the day on Tuesday, February 25, 2020, unless the offer is extended, terminated or varied. Any extension, delay, termination, waiver or amendment of the offer will be followed as promptly as practicable by public announcement thereof. During any such extension, all shares previously tendered and not properly withdrawn will remain subject to the offer, subject to the rights of a tendering stockholder to withdraw such stockholder’s shares. “Expiration date” means February 25, 2020, unless and until the Purchaser has extended the period during which the offer is open, subject to the terms and conditions of the merger agreement, in which event the term “expiration date” means the latest time and date at which the offer, as so extended by the Purchaser, will expire.

Subject to the provisions of the merger agreement, and unless the merger agreement is terminated in accordance with its terms, (1) the Purchaser must extend the offer for (A) any minimum period required by the U.S. federal securities laws, rules, regulations interpretations or positions of the SEC and its staff or applicable stock exchange, in each case, applicable to the offer, and (B) periods of up to 20 business days per extension, until any waiting period (and any extension thereof) applicable to the consummation of the offer under the HSR Act or any applicable foreign antitrust laws shall have expired or been terminated; (2) if the offer conditions are not satisfied or earlier waived at any scheduled expiration date, the Purchaser may (and must, if requested by Primo) extend the offer for not more than 10 business days from the previously scheduled expiration date; provided, that Purchaser is not required to extend the offer at the request of Primo pursuant to this clause (2) on more than two occasions if all offer conditions other than the minimum condition are satisfied on the date on which the offer is scheduled to expire. Notwithstanding the foregoing, (1) in no event shall the Purchaser be required to extend the offer beyond July 13, 2020 (the “outside date”) or the termination of the merger agreement in accordance with its terms and (2) in no event shall Purchaser be permitted to extend the offer beyond the outside date without the consent of Primo.

If the merger agreement is terminated, the Purchaser must promptly terminate the offer.

 

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Other than as described above, the Purchaser may not extend, terminate or withdraw the offer without the prior written consent of Primo.

Any decision to extend, terminate or withdraw the offer will be made public by an announcement.

See “Exchange Offer Procedures – Extension, Termination and Amendment of Offer.”

How do I tender my shares of Primo common stock?

To validly tender shares of Primo common stock held of record, Primo stockholders must:

 

   

if such shares are in certificated form or Direct Registration Form, deliver a properly completed and duly executed letter of election and transmittal, along with any required signature guarantees and any other required documents, and certificates, if applicable, for tendered Primo shares to Computershare Trust Company of Canada, the depositary and exchange agent (the “exchange agent”) for the offer, at its address set forth elsewhere in this document, all of which must be received by the exchange agent prior to the expiration date; or

 

   

if such shares are in electronic book-entry form, deliver an agent’s message in connection with a book-entry transfer, and any other required documents, to the exchange agent at its address set forth elsewhere in this document and follow the other procedures for book-entry tender set forth herein, all of which must be received by the exchange agent prior to the expiration date.

If your shares of Primo common stock are held in “street name” (i.e., through a broker, dealer, commercial bank, trust company or other nominee), those shares may be tendered by your nominee by book-entry transfer through The Depository Trust Company (“DTC”). To validly tender such shares held in street name, you should instruct such nominee to do so prior to the expiration date.

We are not providing for guaranteed delivery procedures. Accordingly you must allow sufficient time for the necessary tender procedures to be completed during normal business hours prior to the expiration date.

Tenders received by the exchange agent after the expiration date will be disregarded and of no effect. In all cases, you will receive your consideration for your tendered shares only after timely receipt by the exchange agent of certificates for such shares, if any, or of a confirmation of a book-entry transfer of such shares, and a properly completed and duly executed letter of election and transmittal and any other required documents.

For a more complete discussion of the procedures for tendering your shares of Primo common stock, see “Exchange Offer Procedures – Procedures for Tendering.”

Until what time can I withdraw tendered shares of Primo common stock?

You may withdraw your previously tendered shares of Primo common stock at any time until the offer has expired. Once the offer has expired, however, you will no longer be able to withdraw them. For a more complete discussion of the procedures for withdrawing your Primo shares, see “Exchange Offer Procedures – Withdrawal Rights.”

How do I withdraw previously tendered shares of Primo common stock?

To withdraw previously tendered shares of Primo common stock that are held of record, you must deliver a written notice of withdrawal with the required information to the exchange agent at any time at which you have the right to withdraw shares.

 

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To withdraw previously tendered shares of Primo common stock that are held in “street name,” you must instruct your broker, dealer, commercial bank, trust company or other nominee to arrange for the withdrawal of your shares and such broker, dealer, commercial bank, trust company or other nominee must effectively withdraw such shares at any time at which you have the right to withdraw shares.

For a more complete discussion of the procedures for withdrawing your Primo shares, including the applicable deadlines for effecting withdrawals, see “Exchange Offer Procedures – Withdrawal Rights.”

When and how will I receive the transaction consideration in exchange for my tendered shares of Primo common stock?

Upon the terms and subject to the satisfaction or waiver of the conditions of the offer (including, if the offer is extended or amended, the terms and conditions of any extension or amendment), promptly following the expiration date, the Purchaser will accept for exchange, and will thereafter promptly exchange, all shares of Primo common stock validly tendered and not properly withdrawn prior to the expiration date.

The Purchaser will deliver the transaction consideration for your validly tendered and not properly withdrawn shares through the exchange agent, which will act as your agent for the purpose of receiving the transaction consideration from the Purchaser and transmitting such transaction consideration to you. In all cases, you will receive your consideration for your tendered shares only after timely receipt by the exchange agent of certificates for such Primo shares, if any, or a confirmation of a book-entry transfer of such shares, and a properly completed and duly executed letter of election and transmittal and any other required documents for such shares.

Do I have to vote to approve the offer or the first merger?

Because Cott is extending the offer directly to Primo stockholders, Primo stockholders are not being asked to vote to approve the offer. If Purchaser owns a majority of the outstanding common stock of Primo following consummation of the offer, pursuant to DGCL Section 251(h), the first merger can be accomplished without any vote or action by written consent of Primo stockholders under applicable Delaware law.

What happens if I do not tender my shares of Primo common stock?

If Cott completes the offer, it intends to complete the first merger as soon as practicable following such completion of the offer. Upon consummation of the first merger, each share of Primo common stock that has not been tendered and accepted for exchange in the offer, unless appraisal rights under Delaware law for such shares are properly exercised and other than shares held in treasury by Primo or shares held by Cott, any subsidiary of Cott or any subsidiary of Primo, will be converted in the first merger into the right to receive the transaction consideration.

If the offer is completed, will Primo continue as a public company?

No. Cott is required, on the terms and subject to the satisfaction or waiver of the conditions set forth in the merger agreement, to consummate the mergers as soon as practicable following its acceptance for purchase of shares of Primo common stock in the offer. If the offer is consummated, the first merger will be consummated pursuant to DGCL Section 251(h) without a stockholder vote and shares that were not tendered into the offer will be converted into the right to receive the transaction consideration (other than dissenting, converted and cancelled shares, but including shares paid to a holder of a vested Primo equity-based award or Primo warrant immediately prior to the first effective time, as described further in this document), and the common stock of Primo will be delisted from trading. As such, Cott does not expect a significant period of time between the consummation of the offer and the consummation of the mergers, and Cott and Merger Sub 2 will take the actions, including filing required forms with the SEC, to deregister Primo as a public company.

 

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If the first merger takes place, Primo will no longer be publicly traded, and the Primo business will be an indirect wholly-owned subsidiary of Cott.

Will I have the right to have my shares of Primo common stock appraised?

Appraisal rights are not available in connection with the offer, and Primo stockholders who tender their shares in the offer will not have appraisal rights in connection with the first merger. However, if the Purchaser accepts shares in the offer and the first merger is completed, holders of shares of Primo common stock who did not tender their shares in the offer and who otherwise satisfy the other requirements prescribed by Delaware law will be entitled to exercise appraisal rights in connection with the first merger.

Primo stockholders entitled to appraisal rights who comply with the applicable statutory procedures under the DGCL will be entitled to receive a judicial determination of the fair value of their shares of Primo common stock (exclusive of any element of value arising from the accomplishment or expectation of the first merger) and to receive payment of such fair value in cash. Any such judicial determination of the fair value of shares of Primo common stock could be based upon considerations other than, or in addition to, the price paid in the offer and the first merger and the market value of shares of Primo common stock. The value so determined could be higher or lower than the price per Primo share paid by Cott or the Purchaser pursuant to the offer and the first merger. You should be aware that opinions of investment banking firms as to the fairness from a financial point of view of the consideration payable in a sale transaction, such as the offer and the first merger, are not opinions as to fair value under applicable Delaware law.

Under Section 262 of the DGCL, where a merger is approved under Section 251(h), either a constituent corporation before the effective date of the merger, or the first surviving company within 10 days thereafter, will notify each of the holders of any class or series of stock of such constituent corporation who are entitled to appraisal rights of the approval of the merger or consolidation and that appraisal rights are available for any or all shares of such class or series of stock of such constituent corporation, and shall include in such notice a copy of Section 262 of the DGCL.

Notwithstanding the foregoing, under the “de minimis carve-out,” the Delaware Court of Chancery will dismiss appraisal proceedings as to all shares of Primo common stock unless (i) the total number of shares entitled to appraisal exceeds 1% of the outstanding shares of Primo common stock eligible for appraisal or (ii) the value of the consideration provided in the first merger for such total number of shares entitled to appraisal exceeds $1 million. The Schedule 14D-9 constitutes the formal notice of appraisal rights under Section 262 of the DGCL.

The foregoing summary of the rights of dissenting stockholders under the DGCL does not purport to be a complete statement of the procedures to be followed by Primo stockholders desiring to exercise any available appraisal rights under Section 262 of the DGCL, and is qualified in its entirety by the full text of Section 262 of the DGCL. See “The Transactions – Primo’s Reasons for the Transactions; Recommendation of Primo’s Board of Directors – Appraisal Rights.”

What are the anticipated U.S. federal income tax consequences to me of receiving Cott shares and cash in exchange for my shares pursuant to the offer or the first merger?

It is anticipated that the acquisition of Primo shares pursuant to the offer to purchase and the mergers will constitute a “reorganization” under Section 368(a) of the Code, and that each Primo stockholder who receives Cott shares and/or cash in exchange for Primo shares will generally recognize gain (but not loss) on the exchange in an amount equal to the lesser of (1) the cash received or (2) the excess, if any, of (x) the sum of (a) the cash received and (b) the fair market value of Cott shares received over (y) the tax basis in the Primo shares exchanged. Assuming that the transactions qualify for such tax treatment, the gain will generally be capital gain for Primo stockholders who hold their shares for investment (although it is possible that the amount may instead be taxable as dividend income for some Primo stockholders who already actually or constructively own Cott shares).

 

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As described more fully in the section entitled “Material U.S. Federal Income Tax Consequences,” no ruling from the IRS will be sought regarding the qualification of the transactions as a reorganization under Section 368(a) of the Code or the determination of whether Section 367(a) of the Code will apply. You should carefully read the discussion in the section entitled “Material U.S. Federal Income Tax Consequences,” beginning on page 129 of this prospectus/offer. Tax matters are very complicated and the tax consequences to you of the offer and the mergers will depend on the facts of your own situation. You are urged to consult your own tax advisor for a full understanding of the tax consequences of participating in the offer or of the first merger.

Are there any unique Canadian tax considerations that I should be aware of in obtaining shares of a Canadian company?

Yes. A Primo stockholder who is a non-resident of Canada will not be subject to Canadian tax on the disposition of its shares of Primo common stock under the offer or the first merger, nor on a subsequent disposition of any Cott common shares received under the offer or the first merger, unless such shares of Primo common stock or Cott common shares are “taxable Canadian property” for such holder for Canadian tax purposes. Any dividends paid in respect of the Cott common shares to persons who are non-residents of Canada will be subject to Canadian withholding tax at a rate of 25% unless the rate is reduced under the provisions of an applicable tax treaty. See “Material Canadian Federal Income Tax Consequences.”

Who should I contact if I have questions about the offer?

You may contact MacKenzie Partners, Inc., the information agent, by phone toll-free at (800) 322-2885 or by email at tenderoffer@mackenziepartners.com.

Where can I find more information about Cott and Primo?

You can find more information about Cott and Primo from various sources described in the section of this document entitled “Where To Obtain Additional Information.”

 

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SUMMARY

This section summarizes material information presented in greater detail elsewhere in this document. However, this summary does not contain all of the information that may be important to Primo stockholders. You are urged to read carefully the remainder of this document, the related letter of election and transmittal, the annexes to this document and the other information referred to or incorporated by reference in this document because the information contained in this section and in the “Questions and Answers About the Offer” section is not complete. See “Where To Obtain Additional Information.”

The Transactions (Page 38)

The purpose of the transactions that have been agreed to between Cott and Primo is for Cott to acquire control of, and ultimately the entire equity interest in, Primo. The offer is the first step in Cott’s plan to acquire all of the outstanding shares of Primo common stock, and the first merger is the second step in such plan. If the offer is completed, tendered shares of Primo common stock will be exchanged for the transaction consideration, and upon completion of the first merger, any remaining shares of Primo common stock that were not tendered into the offer (other than certain dissenting, converted or cancelled shares, as described further in this document, but including shares paid to a holder of a vested Primo equity-based award or Primo warrant immediately prior to the first effective time, as described further in this document) will be converted into the right to receive the transaction consideration.

Immediately following the first merger, and as the final step in Cott’s plan to acquire all of the outstanding shares of Primo common stock, the first surviving company will merge with and into Merger Sub 2 in the second merger.

Transaction Consideration (Page 38)

The transaction consideration consists of:

 

   

$5.04 in cash; and

 

   

0.6549 Cott common shares.

We refer to the above as the “mixed consideration.”

In lieu of receiving the mixed consideration, holders of Primo shares may elect to receive, for each Primo share that they hold, (1) $14.00 in cash (we refer to this election as the “cash election” and this amount as the “cash consideration”) or (2) 1.0229 Cott common shares (we refer to this election as the “stock election” and this amount as the “stock consideration”).

Primo stockholders who tender their Primo shares into the offer and do not make a valid election will receive the mixed consideration for their Primo shares. Primo stockholders who make the cash election or the stock election will be subject to proration to ensure that approximately 64.02% of the aggregate consideration in the offer will be paid in Cott common shares and approximately 35.98% of the aggregate consideration in the offer will be paid in cash. See “Exchange Offer Procedures – Elections and Proration” for a detailed description of the proration procedures applicable to the offer.

No fractional Cott common shares will be issuable in the offer or the first merger and each Primo stockholder who otherwise would be entitled to receive a fraction of a Cott common share pursuant to the offer or the first merger will be paid an amount in cash (without interest) equal to such fractional part of a Cott common share multiplied by the volume weighted average sale price per common share of Cott as reported on the NYSE for the



 

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ten consecutive trading days ending on and including the trading day immediately preceding the final expiration date of the offer. See “Exchange Offer Procedures – Elections and Proration” and “Material U.S. Federal Income Tax Consequences.”

Primo stockholders should consider the potential effects of proration and should obtain current market quotations for Primo shares and Cott common shares before deciding whether to tender pursuant to the offer and before electing the form of consideration they wish to receive. Please see “Risk Factors – Risks Relating to the Offer and Mergers and Combined Company.”

Primo stockholders who do not tender Primo shares into the offer, if the offer is successful and the first merger is completed, will receive the transaction consideration in exchange for shares of Primo common stock (other than for certain dissenting, converted and cancelled shares, as described further in this document).

The Offer (Page 85)

Cott, through the Purchaser, is offering, upon the terms and subject to the conditions set forth in this document and in the accompanying letter of election and transmittal, to exchange the transaction consideration for each outstanding share of Primo common stock that is validly tendered in the offer and not properly withdrawn.

The Mergers (Page 86)

The first merger and the second merger will be completed as soon as practicable following the Purchaser’s acceptance of tendered shares, assuming the satisfaction or waiver of the other conditions of the offer at such time. The first merger will be subject to Section 251(h) of the DGCL, which means that no vote of Primo stockholders will be required to complete the first merger. Accordingly, Cott anticipates that the first merger will be completed within three business days of the completion of the offer.

In the first merger, the Purchaser will merge with and into Primo, with Primo surviving the merger (the “first effective time”). At the first effective time, each outstanding share of Primo common stock that was not acquired by the Purchaser in the offer (other than shares held by stockholders validly exercising appraisal rights under Delaware law, shares held in treasury by Primo or shares held by Cott, any subsidiary of Cott or any subsidiary of Primo, but including shares paid to a holder of a vested Primo equity-based award or Primo warrant immediately prior to the first effective time, as described further in this document) will be converted into the mixed consideration or, at the election of the holder of such shares, the cash consideration or stock consideration, subject to proration to ensure that approximately 64.02% of the aggregate consideration in the first merger will be paid in Cott common shares and approximately 35.98% of the aggregate consideration in the first merger (as reduced by the Primo shares held by stockholders who have properly exercised and perfected appraisal rights under the DGCL) will be paid in cash. As a result of the first merger, Primo will be an indirect wholly-owned subsidiary of Cott, and the former stockholders of Primo will no longer have any direct ownership interest in the first surviving company.

Immediately following the first merger, the first surviving company will merge with and into Merger Sub 2, with Merger Sub 2 surviving the second merger (the “second effective time”).

The Companies (Page 36)

Cott

Cott Corporation

4221 West Boy Scout Blvd., Suite 400

Tampa, Florida, United States 33607

Phone: (813) 313-1732

Cott Corporation is a leading North American and European water, coffee and coffee extracts, tea and filtration solutions service company with the largest volume-based national presence in the North American and European



 

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home and office bottled water delivery industry and a leader in custom coffee roasting and blending of iced tea for the U.S. foodservice industry. Cott’s platform reaches over 2.5 million customers or delivery points with over 3,600 direct-to-consumer routes across North America and Europe supported by strategically located sales and distribution facilities and fleets, as well as wholesalers and distributors. This enables Cott to efficiently service residences, businesses, restaurant chains, hotels and motels, small and large retailers, and healthcare facilities.

Cott was incorporated in Canada in 1955. Its shares are traded on the NYSE under the ticker symbol “COT” and on the TSX under the ticker symbol “BCB.”

Holdings

Cott Holdings Inc.

c/o Cott Corporation

4221 West Boy Scout Blvd., Suite 400

Tampa, Florida, United States 33607

Phone: (813) 313-1732

Holdings is a Delaware corporation and a wholly-owned subsidiary of Cott. Holdings was incorporated on August 10, 2010 and will serve as an intermediary between Cott and the Purchaser in connection with the offer and the mergers. Holdings is the principal U.S. holding company within Cott’s corporate structure and holds the equity of Cott’s DS Services of America, Inc. and S. & D. Coffee, Inc. subsidiaries.

Merger Sub 2

Fore Merger LLC

c/o Cott Corporation

4221 West Boy Scout Blvd., Suite 400

Tampa, Florida, United States 33607

Phone: (813) 313-1732

Merger Sub 2 is a Delaware limited liability company and an indirect wholly-owned subsidiary of Cott. Merger Sub 2 was formed on January 10, 2020 for the purpose of consummating the second merger. Merger Sub 2 has engaged in no business activities to date and it has no material assets or liabilities of any kind, other than those incident to its formation and those incurred in connection with the merger agreement and the mergers.

The Purchaser

Fore Acquisition Corporation

c/o Cott Corporation

4221 West Boy Scout Blvd., Suite 400

Tampa, Florida, United States 33607

Phone: (813) 313-1732

The Purchaser is a Delaware corporation and an indirect wholly-owned subsidiary of Cott. The Purchaser was incorporated on January 10, 2020 for the purpose of making the offer and consummating the first merger. The Purchaser has engaged in no business activities to date and has no material assets or liabilities of any kind, other than those incident to its formation and those incurred in connection with the merger agreement, the offer and the mergers.



 

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Primo

Primo Water Corporation

101 North Cherry Street, Suite 501

Winston-Salem, North Carolina, United States 27101

Phone: (336) 331-4000

Primo Water Corporation is an environmentally and ethically responsible company with a purpose of inspiring healthier lives through better water. Primo is North America’s leading single source provider of water dispensers, multi-gallon purified bottled water, and self-service refill drinking water. Primo’s Dispensers, Exchange and Refill products are available in over 45,000 retail locations and online throughout the United States and Canada.

Primo was incorporated in Delaware in 2017 in connection with the creation of a holding company structure. The business predecessor was founded in Delaware in 2004. Primo’s shares trade on Nasdaq under the ticker symbol “PRMW.”

Recent Developments

On February 3, 2020, John Thompson filed a putative class action lawsuit in the United States District Court of Delaware in an action styled, Thompson v. Primo Water Corporation et al., 1:20-cv-00172-UNA. Mr. Thompson alleges that he is a stockholder of Primo and purports to bring the lawsuit on behalf of himself and a putative class defined as all similarly-situated Primo stockholders. The complaint names as defendants Primo, all of the members of Primo’s board of directors, Cott, Purchaser, and the other parties to the merger agreement. The complaint purports to state claims for violations of Sections 14(e), 14(d) and 20(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 14a-9 promulgated thereunder. The plaintiff in this action generally alleges that the Solicitation/Recommendation Statement on Schedule 14D-9 filed by Primo on January 29, 2020 (the “Schedule 14D-9”) omits material information with respect to the proposed transaction which renders the Schedule 14D-9 false and misleading. More specifically, the complaint alleges that the Schedule 14D-9 contains materially incomplete and misleading information concerning the financial projections prepared by Primo and Cott, and the financial analyses conducted by Primo’s financial advisor. Plaintiff seeks, among other things, an injunction preventing the consummation of the proposed transaction, a declaration that the defendants violated Sections 14(e), 14(d) and 20(a) of the Exchange Act and Rule 14a-9 promulgated thereunder, rescission of the proposed transaction or rescissory damages in the event it is consummated, and the award of attorneys’ fees and expenses. Cott believes that the allegations in the complaint are without merit.

On February 4, 2020, Brandon Flink filed a putative class action lawsuit in the General Court of Justice, Superior Court Division, North Carolina, in an action styled Flink v. Primo Water Corporation, et al., 20-cvs-724. Mr. Flink alleges that he is a stockholder of Primo and purports to bring the lawsuit on behalf of himself and a putative class of all similarly-situated Primo stockholders. The complaint names as defendants Primo, all of the members of Primo’s board of directors, Cott, Purchaser, and the other parties to the merger agreement. The complaint alleges that the defendants have violated applicable law by directly breaching and/or aiding breaches of fiduciary duties of loyalty and due care owed to plaintiff and the purported class. Among other things, the complaint alleges that Primo’s board of directors agreed to preclusive deal protection devices and engaged in an insufficient sales process. The complaint further alleges that the proposed transaction may be tainted by potential conflicts of interest of the directors and Primo executives. The complaint also challenges the disclosures in the Schedule 14D-9 as materially deficient because of the purported failure to provide information concerning, among other things, (a) the sales process leading up to the proposed transaction, (b) certain of Primo’s and Cott’s financial projections, and (c) the data and inputs underlying the financial valuation analysis prepared by Primo’s financial advisor. Plaintiff seeks, among other things, an injunction preventing the consummation of the proposed transaction, damages, and attorneys’ and experts’ fees. Cott believes that the allegations in the complaint are without merit.



 

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On February 7, 2020, Cody Badder filed a putative class action lawsuit in the United States District Court of Delaware in an action styled Badder v. Primo Water Corporation et al., 1:20-cv-00191-UNA. Mr. Badder alleges that he is a stockholder of Primo and purports to bring the lawsuit on behalf of himself and a putative class defined as all similarly-situated Primo stockholders. The complaint names as defendants Primo, all of the members of the Primo board of directors, Cott, Purchaser, and the other parties to the merger agreement. The complaint purports to state claims for violations of Sections 14(e) and 20(a) of the Exchange Act, and Rule 14a-9 promulgated thereunder. The plaintiff generally alleges that the Schedule 14D-9 filed by Primo omits material information with respect to the proposed transaction which renders the Schedule 14D-9 false and misleading. More specifically, the complaint alleges that the Schedule 14D-9 contains materially incomplete and misleading information concerning, among other things, the sales process, financial projections prepared by Primo management, the financial analyses conducted by Primo’s financial advisor (Goldman Sachs), and the fees that Goldman Sachs’ affiliate earned as a lender and agent under Primo’s senior credit facility. Plaintiff seeks, among other things, an injunction preventing the consummation of the proposed transaction, rescission of the proposed transaction or rescissory damages in the event it is consummated, and the award of attorneys’ fees and expenses. Cott believes that the allegations in the complaint are without merit.

The Thompson, Flink and Badder actions are collectively referred to herein as the “Class Actions.”

On February 18, 2020, the parties to the Class Actions entered into a memorandum of understanding (the “MOU”) in which the plaintiffs in the Class Actions agreed to dismiss their individual claims with prejudice and to dismiss claims asserted on behalf of the putative class without prejudice, and the defendants agreed to make certain of the supplemental disclosures set forth herein. The MOU further provides that the parties shall attempt to resolve, as soon as practicable, the plaintiffs’ counsel’s anticipated claim for an award of attorneys’ fees and expenses based on the purported benefit they believe was conferred on Primo stockholders by causing the supplemental disclosures to be disseminated. If the parties cannot reach an agreement, the plaintiffs’ counsel have agreed that any claim for an award of attorneys’ fees and expenses will be made in a single, joint application, and the defendants have reserved the right to challenge the amount of such an award.

Tender and Support Agreements (Page 112)

Concurrently with the execution of the merger agreement on January 13, 2020, Cott and the Purchaser entered into the support agreements with Primo’s directors and executive officers, who beneficially owned, in the aggregate, approximately 10.4% of Primo common stock as of January 10, 2020. Those supporting stockholders agreed to tender their outstanding shares of Primo common stock in the offer. This same group also agreed to elect the stock consideration, subject to certain limited exceptions.

Pursuant to the support agreements, each of the supporting stockholders agreed during the term of his, her or its respective support agreement, among other things, (i) to tender or cause to be tendered all outstanding shares of Primo common stock owned by the supporting stockholder no later than 10 business days following commencement of the offer, (ii) with respect to any additional shares of Primo common stock acquired after commencement of the offer, but before the acceptance time, to tender or cause to be tendered such additional shares no later than two business days following the acquisition of such additional shares and (iii) not to withdraw such shares of Primo common stock from the offer unless the support agreement is terminated in accordance with its terms.

The support agreements may terminate early in certain circumstances. For more information regarding the support agreements, see “Tender and Support Agreements.”



 

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Conditions to the Transactions (Page 91)

Completion of the transactions is subject to certain conditions, including, among others:

 

   

Regulatory Approval – any waiting period (and extensions thereof) applicable to the offer under the HSR Act having expired or been terminated;

 

   

Minimum Condition – the Purchaser receiving at least a majority of the outstanding shares of Primo common stock having been validly tendered into (and not properly withdrawn from) the offer prior to the expiration date of the offer (giving effect to any shares issued in respect of equity awards as described under the heading “Merger Agreement – Treatment of Primo Equity-Based Awards; Employee Stock Purchase Plan”);

 

   

Effectiveness of Form S-4 – the registration statement on Form S-4 of which this document is a part having been declared effective by the SEC under the Securities Act, which occurred on February 11, 2020, and no stop order suspending the effectiveness of such Form S-4 having been issued by the SEC or proceedings for that purpose having been initiated or threatened by the SEC;

 

   

No Material Adverse Effectsince January 13, 2020, there not having occurred any Company Material Adverse Effect (as defined herein) that is continuing as of the expiration date;

 

   

Listing of Cott Common Shares – the Cott common shares to be issued in the offer and the first merger having been approved for listing on the NYSE and the TSX, subject to official notice of issuance;

 

   

Accuracy of Primo’s Representations – the representations and warranties of Primo contained in the merger agreement being true and correct as of January 13, 2020 and the expiration date of the offer, subject to specified de minimis and materiality standards, as applicable;

 

   

Primo’s Compliance with Covenants – Primo having complied with or performed in all material respects all of the covenants and agreements that Primo is required to comply with or perform at or prior to the date of Cott’s acceptance of the tendered shares;

 

   

No Legal Prohibition – no governmental entity of competent jurisdiction having issued any judgment, temporary restraining order, preliminary or permanent injunction or other order that remains in effect preventing the consummation of the offer or the mergers, nor any pending or threatened (in writing) action by any governmental entity, or any law or order promulgated, entered, enforced, enacted, issued or deemed applicable to the offer or the mergers by any governmental entity which prohibits, or makes illegal the consummation of the offer or the mergers; and

 

   

Primo Closing Certificate – Cott and Purchaser having received a certificate executed on behalf of Primo by Primo’s Chief Executive Officer and Chief Financial Officer confirming that certain conditions set forth in the merger agreement have been duly satisfied.

Exchange of Shares; Delivery of Cash and Cott Common Shares (Page 79)

Upon the terms and subject to the satisfaction or waiver of the conditions of the offer (including, if the offer is extended or amended, the terms and conditions of any extension or amendment), as soon as practicable following the expiration date, the Purchaser will accept for exchange, and will exchange, all Primo shares validly tendered and not properly withdrawn prior to the expiration date.

Elections and Proration (Page 76)

Primo stockholders may elect to receive the mixed consideration, the cash consideration or the stock consideration in exchange for each Primo share validly tendered and not properly withdrawn pursuant to the offer, subject in each case to the election procedures and, in the case of elections of the cash consideration or the



 

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stock consideration, to the proration procedures described in this document and the related letter of election and transmittal, by indicating their elections in the applicable section of the letter of election and transmittal. If a Primo stockholder decides to change its election after tendering its Primo shares, it must first properly withdraw the tendered Primo shares and then re-tender the shares prior to the expiration date, with a new letter of election and transmittal that indicates the revised election.

Treatment of Primo Equity-Based Awards; Warrants (Page 89)

Under the terms of the merger agreement,

 

   

Vested in-the-Money Primo Stock Options. Immediately prior to the first effective time, the portion of each Primo option that is then outstanding and unexercised and that has a per-share exercise price less than the amount of the cash consideration, to the extent vested in accordance with its terms as of the first effective time (whether by virtue of prior vesting or upon acceleration of such vesting in connection with the transactions, in accordance with the terms of such option), will be settled and paid to such holder in Primo shares (net of any Primo shares equal in value to the aggregate exercise price thereof and any applicable tax to be deducted or withheld in respect thereof) at a per-share price equal to the cash consideration, and such holder will have the right to submit an election to receive transaction consideration with respect to such settled and paid Primo shares. Any vested Primo options with a per-share exercise price that is equal to or greater than the transaction consideration will be cancelled for no consideration.

 

   

Unvested Primo Stock Options. At the first effective time, the portion of each Primo option that is outstanding and unexercised as of immediately prior to the first effective time, and has not vested in accordance with its terms, will be cancelled in exchange for an option issued, immediately following the first effective time, under a Cott equity incentive plan, subject to the same vesting schedule in effect immediately prior to the first effective time, in each case, to purchase a number of Cott common shares equal to (a) the number of Primo shares subject to such unvested portion of such Primo option as of immediately prior to the first effective time, multiplied by (b) the equity award adjustment ratio, with an exercise price per share equal to (y) the exercise price per Primo share for which such Primo option was exercisable as of immediately prior to the first effective time, divided by (z) the equity award adjustment ratio. The “equity award adjustment ratio” is equal to 1.0229.

 

   

Vested Primo Restricted Stock Units. Immediately prior to the first effective time, the portion of each Primo restricted stock unit award (“RSU”) that is then outstanding, to the extent vested in accordance with its terms as of the first effective time, will be settled and paid to such holder in Primo shares (net of any Primo shares equal in value to any applicable tax to be deducted or withheld in respect thereof) at a per-share price equal to the cash consideration, and such holder will have the right to submit an election to receive transaction consideration with respect to such settled and paid Primo shares.

 

   

Unvested Primo Restricted Stock Units. At the first effective time, the portion of each Primo RSU that is outstanding as of immediately prior to the first effective time that is not vested will be cancelled in exchange for a restricted stock unit award issued, immediately following the first effective time, under a Cott equity incentive plan, subject to the same vesting schedule in effect immediately prior to the first effective time, in each case, covering a number of Cott common shares that is equal to (i) the number of shares of Primo common stock subject to such unvested Primo RSU as of immediately prior to the first effective time, multiplied by (ii) the equity award adjustment ratio.

 

   

Other Primo Equity-Based Awards. Immediately prior to the first effective time, each vested long-term performance plan unit award then outstanding will be settled and paid to such holder in Primo shares (net of any Primo shares equal in value to any applicable tax to be deducted or withheld in respect thereof) at a per-share price equal to the cash consideration, and such holder will have the right to



 

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submit an election to receive transaction consideration with respect to such settled and paid Primo shares. At the first effective time, each unvested long-term performance plan unit award will be cancelled for no consideration. Immediately prior to the first effective time, each deferred stock unit award will be cancelled in exchange for the right to receive cash (without interest and net of any applicable tax to be deducted or withheld in respect thereof) at a per-share price equal to the cash consideration.

 

   

Primo Warrants. Immediately prior to the first effective time, each warrant then outstanding and unexercised and that has a per-share exercise price less than the amount of the cash consideration will be settled and paid to such holder in Primo shares (net of any Primo shares equal in value to the aggregate exercise price thereof and any applicable tax to be deducted or withheld in respect thereof) at a per-share price equal to the cash consideration, and such holder will have the right to submit an election to receive transaction consideration with respect to such settled and paid Primo shares. Any warrant with an exercise price greater than the cash consideration will be cancelled for no consideration.

Cott’s board of directors has unanimously approved and declared advisable the merger agreement and the transactions contemplated by the merger agreement as required under applicable law. The mergers are not subject to the approval of Cott’s shareowners.

Primo 2010 Employee Stock Purchase Plan (Page 91)

Primo intends to take all actions with respect to the Primo 2010 Employee Stock Purchase Plan (the “Primo ESPP”) such that the offering in progress thereunder as of January 13, 2020 will be the final offering under the Primo ESPP.

Other Equity-Based Incentive Plans (Page 91)

Primo intends to take all actions to terminate all of Primo’s equity-based incentive plans, long-term performance plan, amended and restated executive deferred compensation plan and non-employee director compensation policy.

Regulatory Approvals (Page 65)

Completion of the transactions is subject to the expiration or termination of the waiting period applicable to the transactions under the HSR Act. The parties to the merger agreement are required to use their respective reasonable best efforts to consummate the transactions, including by taking all reasonable actions necessary to obtain any antitrust or other regulatory approvals, as described in the merger agreement.

Source and Amount of Funds (Page 73)

Cott estimates that the aggregate amount of cash consideration required to purchase the maximum amount of shares of Primo common stock sought in the offer is approximately $216 million, consisting of (i) $203.6 million calculated by multiplying $14.00 by 14,541,939 shares of Primo common stock (see Note 3 to the “Unaudited Pro Forma Condensed Combined Financial Statements” for the calculation of the estimated shares of Primo common stock entitled to the cash consideration), plus (ii) $12.3 million to settle deferred share units in cash.

Cott is exploring a divestiture of its S&D Coffee and Tea business (the “Coffee business”) and has entered into exclusivity with a prospective buyer. If agreement is reached with a buyer and the divestiture closes before the acceptance time, Cott anticipates using the proceeds of the divestiture, along with cash on hand, to pay the cash consideration in the offer and first merger, repay Primo’s existing credit facility, and settle certain fees and expenses of Cott, Holdings, the Purchaser and Merger Sub 2.



 

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If the Coffee business divestiture does not occur prior to the acceptance time, Cott has arranged for committed financing to close the offer and the mergers. On January 13, 2020, in connection with the execution of the merger agreement, Cott also entered into a financing commitment letter (the “commitment letter”) with Deutsche Bank AG, New York Branch (the “commitment party”), pursuant to which the commitment party has committed, subject to the terms and conditions set forth therein, to lend Cott up to $400,000,000 for the purpose of financing the offer and the mergers, including but not limited to the transaction consideration, repayment of Primo’s existing credit facility, and certain fees and expenses of Cott, Holdings, the Purchaser and Merger Sub 2. In addition to the commitment letter financing, Cott intends to use cash on hand and available borrowings to finance the cash portion of the transactions and the related costs and expenses. If the Coffee business divestiture occurs as contemplated by the previous paragraph, the financing commitment will cease to be available.

Listing of Cott common shares (Page 91)

Cott will submit the necessary notification to the NYSE and the TSX with respect to the listing of the Cott common shares to be issued in connection with the transactions. Approval of these listings is a condition to completion of the offer and the first merger.

Appraisal Rights (Page 63)

Appraisal rights are not available in connection with the offer, and Primo stockholders who tender their shares in the offer will not have appraisal rights in connection with the first merger. However, if the Purchaser accepts shares in the offer and the first merger is completed, holders of shares of Primo common stock who did not tender their shares in the offer and satisfy the other requirements prescribed by Section 262 of the DGCL will be entitled to exercise appraisal rights in connection with the first merger. The “fair value” of Primo common stock may be greater than, less than or the same as the transaction consideration. For more information, see “The Transactions – Primo’s Reasons for the Transactions; Recommendation of Primo’s Board of Directors – Appraisal Rights.”

You will find a detailed discussion of appraisal rights in the Schedule 14D-9, which has been filed with the SEC and was mailed to you and other Primo stockholders on January 29, 2020, with a supplement mailed to you on February 18, 2020. The Schedule 14D-9 constitutes the formal notice of appraisal rights under Section 262 of the DGCL.

Market Information and Dividend Matters (Page 114)

Cott common shares are listed on the NYSE under the symbol “COT” and the TSX under the symbol “BCB,” and Primo common stock is listed on Nasdaq under the symbol “PRMW.” The following table sets forth the closing prices of Cott common shares on the NYSE and Primo common stock on Nasdaq as reported on January 10, 2020, the trading day prior to public announcement of execution of the merger agreement, and on January 24, 2020, the most recent practicable trading date prior to the filing of this document. The table also shows the implied value of one share of Primo common stock on such dates, which was calculated by adding (1) the cash portion of the per-share mixed consideration of $5.04 and (2) the product of the exchange ratio of 0.6549 multiplied by the closing price of a Cott common share on such date.

 

     Per-Share
Primo Closing
Price
     Per-Share
Cott Closing Price
     Implied Transaction
Value of Primo
Share
 

January 10, 2020

   $ 11.09      $ 14.12      $ 14.29  

January 24, 2020

   $ 14.75      $ 14.89      $ 14.79  

The market value of the stock portion of the transaction consideration will change as the market value of Cott common shares fluctuates during the offer period and thereafter. Primo stockholders should obtain current



 

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market quotations for shares of Primo common stock and Cott common shares before deciding whether to tender their Primo shares in the offer.

Ownership of Cott After the Transactions (Page 63)

Cott estimates that former stockholders of Primo will own, in the aggregate, approximately 16.6% of the Cott common shares outstanding immediately following completion of the transactions.

Comparison of Stockholders’ Rights (Page 141)

The rights of Cott shareowners are different in some respects from the rights of Primo stockholders. Therefore, Primo stockholders will have different rights as stockholders once they become Cott shareowners. See “Comparison of Stockholders’ Rights.”

Material U.S. Federal Income Tax Consequences (Page 129)

It is intended and anticipated that the acquisition of the Primo common stock pursuant to the offer and the mergers together constitute a single integrated transaction that will qualify as a “reorganization” within the meaning of Section 368(a) of the Code and that the relevant requirements under Section 367(a) of the Code will be met. However, the completion of the offer and the mergers is not conditioned upon the receipt of an opinion of counsel to that effect. In addition, no ruling from the IRS regarding these matters will be obtained, and no assurance can be given that the IRS will not challenge the anticipated U.S. tax treatment or that a court would not sustain such a challenge. If such anticipated tax treatment does apply, U.S. holders (as defined under “Material U.S. Federal Income Tax Consequences”) of shares of Primo common stock that receive (1) solely cash in exchange for shares of Primo common stock pursuant to the offer and first merger generally will recognize taxable gain or loss in an amount equal to the difference between the cash received and the U.S. holder’s adjusted tax basis in the Primo common stock surrendered, (2) a combination of Cott common shares and cash (other than cash received in lieu of fractional Cott common shares) in exchange for shares of Primo common stock pursuant to the offer and/or the first merger generally will recognize gain (but not loss) in an amount equal to the lesser of (i) the amount by which the sum of the fair market value of Cott common shares and cash received by the U.S. holder exceeds such U.S. holder’s adjusted tax basis in the shares of Primo common stock surrendered and (ii) the amount of cash received by such U.S. holder; and (3) solely stock in exchange for shares of Primo common stock will not recognize gain or loss, except with respect to cash, if any, received in lieu of a fractional Cott common share. In certain cases, non-U.S. holders (as defined under “Material U.S. Federal Income Tax Consequences”) of shares of Primo common stock that receive the transaction consideration pursuant to the offer or the first merger may be subject to U.S. withholding tax with respect to cash received.

Holders of Primo common stock should read carefully the section entitled “Material U.S. Federal Income Tax Consequences” for a more complete discussion of the U.S. federal income tax consequences of the transactions. Tax matters are complicated, and the tax consequences of the transactions to a particular holder will depend on such holder’s particular facts and circumstances. Primo stockholders should consult their own tax advisors to determine the specific consequences to them of exchanging their shares of Primo common stock for the transaction consideration pursuant to the offer or the first merger. See “Material U.S. Federal Income Tax Consequences” for a more complete discussion of the U.S. federal income tax consequences of the transactions.

Material Canadian Federal Income Tax Consequences (Page 136)

A Primo stockholder who is a non-resident of Canada will not be subject to Canadian tax on the disposition of its shares of Primo common stock under the mergers, nor on a subsequent disposition of any Cott common shares received under the mergers, unless such shares of Primo common stock or Cott common shares are “taxable



 

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Canadian property” for such holder for Canadian tax purposes. Any dividends paid in respect of the Cott common shares to persons who are non-residents of Canada will be subject to Canadian withholding tax at a rate of 25% unless the rate is reduced under the provisions of an applicable tax treaty. See “Material Canadian Federal Income Tax Consequences.”

Holders of Primo common stock should read the section entitled “Material Canadian Federal Income Tax Consequences” for a more complete discussion of the Canadian federal income tax consequences of the transactions. This summary is of a general nature only and is not intended to be, nor should it be construed to be, legal or tax advice to any particular stockholder and no representations with respect to the income tax consequences to any particular stockholder are made. This summary is not exhaustive of all Canadian federal income tax considerations. Accordingly, shareholders should consult their own tax advisors with respect to their own particular circumstances.

Accounting Treatment (Page 74)

In accordance with United States generally accepted accounting principles (“GAAP”), Cott will account for the acquisition of shares in the transactions under the acquisition method of accounting for business combinations.

Questions About the Offer and the Mergers

Questions or requests for assistance or additional copies of this document may be directed to the information agent at the telephone number and address set forth below. Stockholders may also contact their broker, dealer, commercial bank, trust company or other nominee for assistance concerning the offer and the mergers.

The information agent for the offer is:

MacKenzie Partners, Inc.

1407 Broadway

New York, New York 10018

Bankers and Brokers Call: (212) 929-5500

Others Call Toll Free: (800) 322-2885

Email: tenderoffer@mackenziepartners.com



 

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF COTT

The following table sets forth certain selected historical consolidated financial data for Cott as of and for the periods indicated. The selected consolidated statements of operations data for fiscal years 2018, 2017 and 2016 and the selected consolidated balance sheet data as of December 29, 2018 and December 30, 2017 are derived from the audited consolidated financial statements of Cott included in Cott’s Annual Report on Form 10-K for the fiscal year ended December 29, 2018, which is incorporated by reference into this document. The selected consolidated statements of operations data for the nine months ended September 28, 2019 and September 29, 2018, and the selected consolidated balance sheet data as of September 28, 2019 are derived from, and qualified by reference to, the unaudited consolidated financial statements included in Cott’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 28, 2019, which is incorporated by reference into this document. The selected consolidated statements of operations data for fiscal years 2015 and 2014 and the selected consolidated balance sheet data as of December 31, 2016, January 2, 2016 and January 3, 2015 are derived from Cott’s audited consolidated financial statements, adjusted for discontinued operations, which are not incorporated by reference into this document. The selected consolidated balance sheet data as of September 29, 2018 is derived from Cott’s unaudited interim historical consolidated financial statements which are not incorporated by reference into this document. You should read this summary selected financial data together with Cott’s “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Cott’s historical consolidated financial statements and the notes thereto included in Cott’s Annual Report on Form 10-K for the fiscal year ended December 29, 2018 and in Cott’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 28, 2019, which are incorporated by reference into this document. See “Where To Obtain Additional Information.” The historical results are not necessarily indicative of results to be expected in the future.

Cott Corporation

Consolidated Statements of Operations Data

 

    Nine Months Ended     Fiscal Years Ended  
(in millions, except share and per
share amounts)
  September 28,
2019
    September 29,
2018
    December 29,
2018
    December 30,
2017
    December 31,
2016
    January 2,
2016
    January 3,
2015
 
    (unaudited)     (unaudited)                                

Revenue, net

  $ 1,794.3     $ 1,773.7     $ 2,372.9     $ 2,269.7     $ 1,623.2     $ 1,187.3     $ 160.8  

Cost of sales

    872.1       888.3       1,197.3       1,142.0       773.1       536.8       125.3  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

    922.2       885.4       1,175.6       1,127.7       850.1       650.5       35.5  

Selling, general and administrative expenses

    837.1       816.2       1,092.1       1,043.2       806.2       608.4       54.2  

Loss on disposal of property, plant and equipment, net

    4.6       3.8       9.4       10.2       6.6       4.2       0.2  

Acquisition and integration expenses

    10.2       10.8       15.3       30.4       27.8       20       38.2  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

    70.3       54.6       58.8       43.9       9.5       17.9       (57.1

Other expense (income), net

    6.9       (33.0     (42.9     (8.0     5.6       (12.8     (0.2

Interest expense, net

    58.6       58.3       77.6       85.5       43.0       30.1       1.0  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations before income taxes

    4.8       29.3       24.1       (33.6     (39.1     0.6       (57.9

Income tax expense (benefit)

    11.5       4.0       (4.8     (30.0     21.2       (15.1     (65.0
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income from continuing operations

  $ (6.7   $ 25.3     $ 28.9     $ (3.6   $ (60.3   $ 15.7     $ 7.1  

Net income (loss) from discontinued operations, net of income taxes

    1.5       357.5       354.6       10.7       (11.2     4.9       9.3  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 


 

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    Nine Months Ended     Fiscal Years Ended  
(in millions, except share and per
share amounts)
  September 28,
2019
    September 29,
2018
    December 29,
2018
    December 30,
2017
    December 31,
2016
    January 2,
2016
    January 3,
2015
 
    (unaudited)     (unaudited)                                

Net (loss) income

  $ (5.2   $ 382.8     $ 383.5     $ 7.1     $ (71.5   $ 20.6     $ 16.4  

Less: Net income attributable to non-controlling interests – discontinued operations

    —         0.6       0.6       8.5       6.3       6.1       5.6  

Less: Accumulated dividends on convertible preferred shares – continued operations

    —         —         —         —         —         4.5       0.6  

Less: Accumulated dividends on non-convertible preferred shares – continued operations

    —         —         —         —         —         1.4       0.2  

Less: Foreign exchange impact on redemption of preferred shares – continued operations

    —         —         —         —         —         12.0       —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income attributable to Cott Corporation

  $ (5.2   $ 382.2     $ 382.9     $ (1.4   $ (77.8   $ (3.4   $ 10.0  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income per common share attributable to Cott Corporation

             

Basic:

             

Continuing operations

  $ (0.05   $ 0.18     $ 0.21     $ (0.03   $ (0.47   $ (0.02   $ 0.07  

Discontinued operations

  $ 0.01     $ 2.56     $ 2.54     $ 0.02     $ (0.14   $ (0.01   $ 0.04  

Net (loss) income

  $ (0.04   $ 2.74     $ 2.75     $ (0.01   $ (0.61   $ (0.03   $ 0.11  

Diluted:

             

Continuing operations

  $ (0.05   $ 0.18     $ 0.21     $ (0.03   $ (0.47   $ (0.02   $ 0.07  

Discontinued operations

  $ 0.01     $ 2.51     $ 2.50     $ 0.02     $ (0.14   $ (0.01   $ 0.03  

Net (loss) income

  $ (0.04   $ 2.69     $ 2.71     $ (0.01   $ (0.61   $ (0.03   $ 0.10  

Weighted average common shares outstanding (in thousands)

             

Basic

    135,395       139,503       139,097       139,078       128,290       103,037       93,777  

Diluted

    135,395       141,963       141,436       139,078       128,290       103,037       95,900  

Cott Corporation

Consolidated Balance Sheet Data

 

          Fiscal Years Ended  
(in millions)   September 28,
2019
    September 29,
2018
    December 29,
2018
    December 30,
2017
    December 31,
2016
    January 2,
2016
    January 3,
2015
 

Total assets

  $ 3,320.8     $ 3,160.1     $ 3,175.5     $ 4,093.1     $ 3,939.7     $ 2,887.3     $ 3,073.2  

Short-term borrowings required to be repaid or extinguished from divestiture

    —         —         —         220.3       207.0       122.0       229.0  

Debt required to be repaid or extinguished from divestiture

    —         —         —         519.0       1,135.4       1,133.6       1,132.5  

Long-term debt, net of current maturities

    1,243.0       1,262.9       1,250.2       1,542.6       851.4       390.1       405.6  


 

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF PRIMO

The following table sets forth certain selected historical consolidated financial data for Primo as of the end of and for the periods indicated. The selected consolidated statements of operations data for the fiscal years ended December 31, 2018, 2017 and 2016 and the selected consolidated balance sheet data as of December 31, 2018 and 2017 are derived from, and qualified by reference to, the audited consolidated financial statements included in Primo’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, which is incorporated by reference into this document. The selected consolidated statements of operations data for the nine months ended September 30, 2019 and September 30, 2018, and the selected consolidated balance sheet data as of September 30, 2019 are derived from, and qualified by reference to, the unaudited consolidated financial statements included in Primo’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2019, which is incorporated by reference into this document. The selected consolidated statements of operations data for the fiscal years ended December 31, 2015 and 2014 and the selected consolidated balance sheet data as of December 31, 2016, 2015 and 2014 are derived from Primo’s audited consolidated financial statements which are not incorporated by reference into this document. The selected consolidated balance sheet data as of September 30, 2018 is derived from Primo’s unaudited interim historical consolidated financial statements, which are not incorporated by reference into this document. You should read this summary selected consolidated financial data together with Primo’s “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Primo’s historical consolidated financial statements and the notes thereto included in Primo’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 and in Primo’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2019, which are incorporated by reference into this document. See “Where To Obtain Additional Information.” The historical results are not necessarily indicative of results to be expected in the future.

Primo Water Corporation

Consolidated Statements of Operations Data

 

    Nine Months Ended     Fiscal Years Ended December 31,  
(in millions)   September 30
2019
    September 30,
2018
    2018     2017     2016     2015     2014  
   

(unaudited)

   

(unaudited)

                               

Net sales

  $ 236.3     $ 231.2     $ 302.1     $ 286.1     $ 142.5     $ 127.0     $ 106.3  

Operating costs and expenses:

             

Cost of sales

    174.5       164.5       215.5       202.9       100.2       92.5       78.4  

Selling, general and administrative expenses

    27.1       26.2       35.2       34.7       26.4       19.1       19.0  

Special items

    2.2       0.6       0.7       7.9       4.8       0.3       2.9  

Depreciation and amortization

    21.5       18.4       24.6       26.7       10.5       10.4       10.7  

Impairment charges and other

    0.1       68.2       68.4       (0.1     0.7       0.5       2.1  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating costs and expenses

    225.4       277.9       344.4       272.1       142.6       122.8       113.1  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from operations

    10.9       (46.7     (42.3     14.0       (0.1     4.2       (6.8

Interest expense, net

    8.7       18.9       21.4       20.3       6.0       2.0       6.3  

Change in fair value of warrant liability

    —         —         —         3.1       (0.2     —         —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations before income taxes

    2.2       (65.6     (63.7     (9.4     (5.9     2.2       (13.1

Income tax benefit

    —         (8.9     (8.9     (3.1     —         —         —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations

    2.2       (56.7     (54.8     (6.3     (5.9     2.2       (13.1

Income (loss) from discontinued operations

    —         —         —         —         —         (0.3     (0.4
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

  $ 2.2     $ (56.7   $ (54.8   $ (6.3   $ (5.9   $ 1.9     $ (13.5

 



 

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Primo Water Corporation

Consolidated Balance Sheet Data

 

          Fiscal Years Ended December 31,  

(in millions)

  September 30
2019
    September 30,
2018
    2018     2017     2016     2015     2014  

Cash and cash equivalents

  $ 2.0     $ 5.6     $ 7.3     $ 5.6     $ 15.6     $ 1.8     $ 0.5  

Total Assets

  $ 340.2     $ 318.5     $ 320.1     $ 383.8     $ 391.4     $ 64.5     $ 65.7  

Current portion of long-term debt and finance leases

  $ 11.6     $ 11.1     $ 11.2     $ 3.5     $ 2.2     $ 0.2     $ 0.1  

Long-Term Debt and finance leases, net of current portion and debt issuance costs

  $ 186.6     $ 178.2     $ 179.0     $ 269.8     $ 270.3     $ 19.9     $ 24.2  

Other long-term liabilities

  $ 1.2     $ 0.8     $ 0.6     $ 2.0     $ 2.1     $ 2.5     $ 2.3  


 

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SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA

The following selected unaudited pro forma condensed combined financial data of Cott consists of the unaudited pro forma condensed combined statements of operations for the nine months ended September 28, 2019, as well as for the twelve months ended December 29, 2018 and an unaudited pro forma condensed combined balance sheet as of September 28, 2019. The following selected unaudited pro forma condensed combined financial data represents the pro forma impacts of the probable disposition of the Coffee business and the acquisition of Primo.

The unaudited pro forma condensed combined balance sheet data as of September 28, 2019 gives effect to the probable disposition of the Coffee business and the Primo acquisition, as if each occurred on September 28, 2019. The unaudited pro forma condensed combined statements of operations data for the nine months ended September 28, 2019 and for the year ended December 29, 2018 assume that the Primo acquisition was consummated on December 31, 2017 and the proposed disposition of the Coffee business was consummated on January 3, 2016.

The selected unaudited pro forma condensed combined financial data has been prepared in accordance with Article 11 of Regulation S-X and using the acquisition method of accounting in accordance with the business combination accounting guidance as provided in Accounting Standards Codification 805, Business Combinations, with Cott treated as the accounting acquirer, and Accounting Standards Codification 205, Presentation of Financial Statements, Discontinued Operations, Other Presentation Matters.

The selected unaudited pro forma condensed combined financial data will differ from the final acquisition accounting for a number of reasons, including the fact that the estimates of fair values of assets and liabilities acquired are preliminary and subject to change when the formal valuation and other studies are finalized, the assumed proceeds from the probable disposition of the Coffee business and related pro forma adjustments described in the accompanying notes are estimates based upon information and assumptions available at the time of the filing of this prospectus/offer. Furthermore, accounting for income taxes in accordance with Accounting Standards Codification 740, Income Taxes, is preliminary and deferred tax assets and liabilities may change when final fair value adjustments and additional information is considered. Also, the definitive determination of the fair value of assets acquired and liabilities assumed will occur on the date of acquisition, which will also have an impact on the final acquisition accounting, and ultimately on goodwill. The differences that will occur between the preliminary estimates and the final acquisition accounting could have a material impact on the accompanying selected unaudited pro forma condensed combined financial data.

The selected unaudited pro forma condensed combined financial data is provided for informational purposes only and is not necessarily indicative of the operating results that would have occurred if the Primo acquisition and probable disposition of the Coffee business had been completed as of the dates set forth above, nor is it indicative of the future results of the combined entities. The selected unaudited pro forma condensed combined financial data does not purport to project the future operating results or financial position of the combined entities following the Primo acquisition and the transactions related thereto. The unaudited pro forma condensed combined statements of operations do not reflect any revenue or cost savings from synergies that may be achieved with respect to the transactions, or the impact of non-recurring items, including synergies, directly related to the Primo acquisition.

The following information has been derived from, and should be read in conjunction with, the unaudited pro forma combined financial statements and the related notes included in this document. See “Unaudited Pro Forma Condensed Combined Financial Statements.”



 

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Unaudited Pro Forma Combined Condensed Statement of Operation Data

 

(in millions, except for share and per share amounts)

   Nine Months Ended
September 28, 2019
    Year ended
December 29, 2018
 

Revenue, net

   $ 1,556.3     $ 2,051.2  

Cost of sales

     706.9       956.3  
  

 

 

   

 

 

 

Gross profit

     849.4       1,094.9  

Selling, general and administrative expenses

     763.7       1,002.5  

Loss on disposal of property, plant and equipment, net

     4.8       9.4  

Acquisition and integration expenses

     10.4       17.8  

Impairment charges and other

     —         67.7  
  

 

 

   

 

 

 

Operating income (loss)

     70.5       (2.5

Other expense (income), net

     7.1       (42.0

Interest expense, net

     58.3       77.6  
  

 

 

   

 

 

 

Income (loss) from continuing operations before income taxes

     5.1       (38.1

Income tax expense (benefit)

     10.4       (22.2
  

 

 

   

 

 

 

Net loss from continuing operations

     (5.3     (15.9
  

 

 

   

 

 

 

Net loss from continuing operations per common share

    

Basic

   $ (0.03   $ (0.10

Diluted

   $ (0.03   $ (0.10

Weighted average common shares outstanding (in thousands)

    

Basic

     162,221       165,923  

Diluted

     162,221       165,923  

Unaudited Pro Forma Combined Condensed Balance Sheet Data

 

(in millions)

   As of September 28, 2019  

Total assets

   $ 3,670.6  

Short-term borrowings

     82.3  

Long-term debt, net of current maturities

     1,246.8  

Total equity

     1,554.6  


 

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COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE DATA

The table below summarizes selected per share data about Cott and Primo. Cott share data is presented on a pro forma basis to reflect the proposed acquisition of Primo as if the transaction had become effective at the end of the period presented, in the case of balance sheet information, and at the beginning of the period presented, in the case of income statement information. Cott expects to issue up to 26,825,842 shares of its common stock in the transaction.

The Primo pro forma equivalent per share amounts are calculated by multiplying the Cott pro forma combined book value per share and earnings per share by the exchange ratio of 0.6549 so that the per share amounts equate to the respective values for one share of Primo common stock.

The pro forma per share data or combined results of operations per share data is presented as an illustration only. The data does not necessarily indicate the combined financial position per share or combined results of operations per share that would have been reported if the transaction had occurred when indicated, nor is the data a forecast of the combined financial position or combined results of operations for any future period. The information set forth below, while helpful in illustrating the financial characteristics of the combined company under one set of assumptions, may not reflect potential effects of merger integration expenses, cost savings or operational synergies which may be obtained by combining the operations of Cott and Primo, or the costs of combining the companies and their operations.

In addition, the information set forth below has been prepared based on preliminary estimates of transaction consideration and fair values attributable to the transaction, the actual amounts recorded for the transaction may differ from the information presented. The estimation and allocations of transaction consideration are subject to change pending further review of the fair value of the assets acquired and liabilities assumed and actual transaction costs. A final determination of fair value will be based on the actual net tangible and intangible assets and liabilities of Primo that will exist on the date of completion of the first merger.

The information in the table is based on, and should be read together with, the unaudited pro forma condensed combined financial statements that appear elsewhere in this document, including the notes thereto, and the historical financial statements of Cott and Primo that are incorporated by reference into this document. See “Where To Obtain Additional Information” and “Unaudited Pro Forma Condensed Combined Financial Statements.”

 

     Unaudited Comparative Per Common Share Data  
     Cott     Primo     Cott Pro Forma
Combined(1)
    Primo Pro Forma
Equivalent Per
Share(2)
 

Basic Earnings Per Common Share

        

Year ended December 29, 2018

   $ 0.21     $ (1.47   $ (0.10   $ (0.07

Nine months ended September 28, 2019

   $ (0.05   $ 0.06     $ (0.03   $ (0.02

Diluted Earnings Per Common Share

        

Year ended December 29, 2018

   $ 0.21     $ (1.47   $ (0.10   $ (0.07

Nine months ended September 28, 2019

   $ (0.05   $ 0.05     $ (0.03   $ (0.02

Cash Dividends Per Common Share

        

Year ended December 29, 2018

   $ 0.24     $ —       $ 0.24     $ 0.16  

Nine months ended September 28, 2019

   $ 0.18     $ —       $ 0.18     $ 0.12  

Book Value Per Common Share

        

Year ended December 29, 2018

   $ 8.59     $ 2.45     $ N/A     $ N/A  

Nine months ended September 28, 2019

   $ 8.48     $ 2.47     $ 9.56     $ 6.26  


 

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(1)

Pro forma combined dividend per share represent Cott’s historical dividends per share. Cott has declared a cash dividend of $0.06 per share for each quarter during the periods presented. Primo has not declared or paid any dividends during the periods presented.

(2)

The pro forma equivalent per share is based upon the pro forma combined amounts multiplied by the exchange ratio of 0.6549.



 

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RISK FACTORS

Primo stockholders should carefully read this document and the other documents referred to or incorporated by reference into this document, including in particular the following risk factors, in deciding whether to tender Primo shares pursuant to the offer.

Risks Relating to the Offer and Mergers and Combined Company

The market price of Cott common shares may decline after the consummation of the offer and the mergers.

The market price of Cott common shares may decline after the offer and the mergers are completed because, among other things, Cott may not achieve the expected benefits of the acquisition of Primo as rapidly or to the extent anticipated, or at all; Primo’s business may not perform as anticipated following the acquisition; the effect of Cott’s acquisition of Primo on Cott’s financial results may not meet the expectations of Cott, financial analysts or investors; the addition of Primo’s business may be unsuccessful, take longer or be more disruptive than anticipated; or Cott’s credit rating may be downgraded as a result of increased indebtedness incurred to finance the offer and the mergers.

As of January 24, 2020, there were 134,828,109 Cott common shares outstanding, and held of record by approximately 893 shareowners, and no preferred shares were outstanding. On such date, 6,501,422 Cott common shares were subject to outstanding options, 397,416 Cott common shares were subject to outstanding restricted stock units, 1,599,715 Cott common shares were subject to outstanding restricted stock awards, and 2,529,502 Cott common shares were unassigned and available for grant. In connection with the offer and the first merger, Cott estimates that Cott will issue approximately 26.8 million additional Cott common shares. An increase in the number of outstanding Cott common shares may lead to sales of such shares or the perception that such sales may occur, either of which may adversely affect the market price of Cott common shares.

Primo stockholders may not receive all consideration in the form elected.

Primo stockholders electing to receive either the cash consideration or the stock consideration in the offer will be subject to proration to ensure that approximately 64.02% of the aggregate consideration in the offer will be paid in Cott common shares and approximately 35.98% of the aggregate consideration in the offer will be paid in cash. Similarly, following the effective time of the first merger, Primo stockholders electing to receive either the cash consideration or the stock consideration in the first merger will be subject to proration to ensure that approximately 64.02% of the aggregate consideration in the first merger will be paid in Cott common shares and approximately 35.98% of the aggregate consideration in the first merger (as reduced by the Primo shares held by stockholders who have properly exercised and perfected appraisal rights under the DGCL) will be paid in cash. Accordingly, some of the consideration a Primo stockholder receives in the offer or the first merger may differ from the type of consideration elected and such difference may be significant. This may result in, among other things, tax consequences that differ from those that would have resulted if the Primo stockholder had received solely the form of consideration that such stockholder elected. A discussion of the proration mechanism can be found under the heading “Exchange Offer Procedures – Elections and Proration” and a discussion of the material U.S. federal income tax consequences of the offer and the first merger can be found under “The Offer – Material U.S. Federal Income Tax Consequences.”

The offer remains subject to conditions that Cott cannot control.

The offer is subject to a number of conditions, including the minimum condition, lack of legal prohibitions, the listing on the NYSE and the TSX of the Cott common shares to be issued in the transactions, the effectiveness of the registration statement on Form S-4 of which this document is a part, the truth and accuracy of Primo’s representations and warranties made in the merger agreement, subject to specified materiality standards, Primo’s material compliance with its covenants under the merger agreement and there shall not have occurred any

 

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change, state of facts, condition, event, circumstance, effect, occurrence or development after the date of the merger agreement that would reasonably be expected to have, individually or in the aggregate, a material adverse effect on Primo. There are no assurances that all of the conditions to the offer will be satisfied or that the conditions will be satisfied in the time frame expected. If the conditions to the offer are not met, then Cott may, subject to the terms and conditions of the merger agreement, allow the offer to expire, or amend or extend the offer. See “Merger Agreement – Conditions to the Transactions.”

If the transactions are completed, Primo stockholders who receive Cott common shares in the offer will become Cott shareowners. Cott common shares may be affected by different factors and Cott shareowners will have different rights than Primo stockholders.

Upon consummation of the offer, Primo stockholders receiving Cott common shares will become shareowners of Cott. Cott’s business differs from that of Primo, and Cott’s results of operations and the trading price of Cott common shares may be adversely affected by factors different from those that would affect Primo’s results of operations and stock price.

In addition, holders of Cott common shares will have rights as Cott shareowners that differ from the rights they had as Primo stockholders before the offer or the first merger. For a detailed comparison of the rights of Cott shareowners to the rights of Primo stockholders, see “Comparison of Stockholders’ Rights.”

Primo stockholders will have a reduced ownership and voting interest in the combined company.

Immediately following consummation of the offer and the first merger, Primo stockholders will collectively own approximately 16.6% of the outstanding Cott common shares. Consequently, Primo stockholders will not be able to exercise as much influence over the management and policies of the combined company as they currently exercise over Primo.

Cott may fail to realize all of the anticipated benefits of the transactions or those benefits may take longer to realize than expected.

The full benefits of the transactions may not be realized as expected or may not be achieved within the anticipated time frame, or at all. Failure to achieve the anticipated benefits of the transactions could adversely affect Cott’s results of operations or cash flows, cause dilution to the earnings per share of Cott, decrease or delay the expected benefits of the transactions and negatively affect the price of Cott common shares.

In addition, Cott and Primo will be required to devote significant attention and resources prior to closing to prepare for the post-closing operation of the combined company, and post-closing Cott will be required to devote significant attention and resources to successfully align the business practices and integrate the operations of Cott and Primo. This process may disrupt the businesses and, if ineffective, would limit the anticipated benefits of the transactions.

Cott and Primo will incur direct and indirect costs as a result of the transactions.

Cott and Primo will incur substantial expenses in connection with and as a result of completing the transactions. Following the completion of the mergers, Cott expects to incur additional expenses in connection with combining the businesses, operations, policies and procedures of Cott and Primo. Factors beyond Cott’s control could affect the total amount or timing of those expenses, many of which, by their nature, are difficult to estimate accurately. Moreover, diversion of management focus and resources from the day-to-day operation of the business to matters relating to the transactions could adversely affect each company’s business, regardless of whether the offer and the mergers are completed.

 

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The stock prices of Cott and Primo common stock may be adversely affected if the offer and mergers are not completed.

If the offer and the mergers are not completed, the prices of Cott common shares and Primo common stock may decline to the extent that the current market prices of such common stock reflect a market assumption that the offer and the mergers will be completed and have value.

The receipt of Cott common shares in the offer and/or the first merger might be taxable to Primo stockholders.

Primo stockholders would be taxed on the receipt of Cott common shares if the transactions were to fail to qualify as a reorganization under Section 368(a) of the Code or if other relevant requirements under Section 367(a) of the Code that apply to reorganizations involving non-U.S. corporations were not met. Cott and Primo intend and anticipate that the transactions will qualify as a reorganization under Section 368(a) of the Code and that the other relevant requirements under Section 367(a) of the Code will be met. However, no ruling is being obtained from the Internal Revenue Service (the “IRS”) on these matters, and there can be no assurance that the IRS (or a court, in the event of an IRS challenge) will reach the same conclusions. See “Material U.S. Federal Income Tax Consequences.”

Cott’s and Primo’s actual financial positions and results of operations may differ materially from the unaudited pro forma combined financial data included in this document.

The unaudited pro forma combined financial information contained in this document is presented for illustrative purposes only and may differ materially from what Cott’s actual financial position or results of operations would have been had the transactions been completed on the dates indicated. The unaudited pro forma combined financial information has been derived from the audited and unaudited historical financial statements of Cott and certain adjustments and assumptions have been made regarding the combined company after giving effect to the offer and mergers. The assets and liabilities of Primo have been measured at fair value based on various preliminary estimates using assumptions that Cott’s management believes are reasonable utilizing information currently available. The process for estimating the fair value of acquired assets and assumed liabilities requires the use of judgment in determining the appropriate assumptions and estimates. These estimates may vary significantly as additional information becomes available and as additional analyses are performed. Differences between preliminary estimates in the unaudited pro forma combined financial information and the final acquisition accounting may occur and are not necessarily indicative of Cott’s financial position or results of operations in future periods or that would have been realized in historical periods presented.

In addition, the assumptions used in preparing the unaudited pro forma combined financial information may not prove to be accurate, and other factors may affect Cott’s financial condition or results of operations following the closing. Any potential decline in Cott’s financial condition or results of operations may cause significant variations in Cott’s share price. See “Unaudited Pro Forma Condensed Combined Financial Statements.”

Cott may incur significant additional debt in connection with the offer and the mergers.

Cott is exploring a divestiture of its Coffee business and has entered into exclusivity with a prospective buyer. Cott has received a financing commitment for up to $400 million that it can access to pay the cash portion of the consideration for the offer and the first merger if that divestiture is not consummated prior to the effective time. Accessing such financing commitment would subject Cott to significant additional debt. Refer to “The Offer – Source and Amount of Funds” below. Cott has outstanding debt and other financial obligations and significant unused borrowing capacity that subjects Cott to certain risks. The incurrence of additional debt in connection with the consummation of the offer and the mergers could cause these risks to increase. These risks include, among other things, requiring a portion of Cott’s cash flow from operations to make interest payments on debt and reducing the cash flow available to fund capital expenditures and other corporate purposes and to grow Cott’s business. In addition, Cott’s cash flow from operations may not be sufficient to repay all of the

 

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outstanding debt as it becomes due, and Cott may not be able to borrow money, sell assets, or otherwise raise funds on acceptable terms, or at all, to refinance its debt. The incurrence of this additional debt could also lead Cott’s credit rating to be downgraded. In addition, there can be no assurance that Cott’s plans to divest the Coffee business will be consummated on favorable terms or at all.

The merger agreement limits Primo’s ability to pursue alternative transactions, and in certain instances requires payment of a termination fee, which could deter a third party from proposing an alternative transaction.

The merger agreement contains provisions that, subject to certain exceptions, limit Primo’s ability to solicit, initiate or knowingly encourage or knowingly facilitate any inquiries regarding or the making or submission of any proposal or offer that constitutes or could reasonably be expected to lead to a Primo acquisition proposal (as defined below). See “Merger Agreement – No Solicitation of Other Offers by Primo.” In addition, under specified circumstances, Primo is required to pay a termination fee of $18.9 million if the merger agreement is terminated. See “Merger Agreement – Termination of the Merger Agreement – Effect of Termination.” It is possible that these or other provisions might discourage a potential competing acquiror that might have an interest in acquiring all or a significant part of Primo from considering or proposing an acquisition, or might result in a potential competing acquiror proposing to pay a lower per share price to acquire Primo than it might otherwise have proposed to pay.

If the value of Cott’s business, together with any synergies to be achieved from Cott’s acquisition of Primo, is less than the value of the transaction consideration, the trading price of Cott common shares could decrease.

If investors believe that the value of the transaction consideration to be exchanged for Primo shares in connection with the offer and the first merger, together with transaction costs, is greater than the value of Primo’s business, together with any synergies expected to be achieved from Cott’s acquisition of Primo, the trading price of Cott common shares could decrease and the transactions could have a dilutive effect on the value of common shares held by Cott shareowners (including former Primo stockholders).

Uncertainty during pendency of the transactions may cause suppliers, customers or other business partners to delay or defer decisions concerning Cott and/or Primo or re-negotiate agreements with Cott and/or Primo, and completion of the transactions could cause suppliers, customers and other business partners to terminate or re-negotiate their relationships with the combined company.

The offer and mergers will be completed only if specified conditions are met, many of which are outside the control of Cott and Primo. In addition, both parties have rights to terminate the merger agreement under specified circumstances. Accordingly, there may be uncertainty regarding the consummation of the offer and mergers, both as to whether they will be consummated and when. This uncertainty may cause suppliers, customers or other business partners of Cott and/or Primo to delay or defer decisions concerning such company’s products or businesses, or to seek to change existing agreements with Cott and/or Primo, which could negatively affect their respective businesses, results of operations and financial conditions.

Additionally, if the offer and mergers are completed, certain suppliers, customers or other business partners may attempt to terminate or change their relationships with the combined company, for example if such counterparties had prior experiences with either Cott or Primo that caused them to be dissatisfied with Cott or Primo. These decisions could have an adverse effect on the business of the combined company.

Failure to effectively retain, attract and motivate key employees could diminish the anticipated benefits of the transactions.

The success of the acquisition of Primo will depend in part on the attraction, retention and motivation of personnel critical to the business and operations of the combined company due to, for example, their technical

 

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skills or industry and management expertise. Employees and consultants may experience uncertainty about their future roles with Cott and Primo during the pendency of the offer and mergers or after their completion. Cott and Primo, while similar and sharing a number of core values, do not have identical corporate cultures, and some employees or consultants may not want to work for the combined company. In addition, competitors may recruit employees during Cott’s integration of Primo. If the companies are unable to attract, retain and motivate personnel that are critical to the successful integration and future operation of the companies, the combined company could face disruptions in its operations, loss of existing customers, key information, expertise or know-how and unanticipated additional recruiting and training costs. In addition, the loss of key personnel could diminish the anticipated benefits of the acquisition of Primo to Cott.

The financial analyses and forecasts considered by Primo and its financial advisors may not be realized.

While the financial analyses utilized by Primo and its advisors in connection with the offer and the mergers and summarized in this registration statement were prepared in good faith based on information available at the time of preparation, no assurances can be made regarding future events or that the assumptions made in preparing such analyses will prove to be accurate.

Risks Related to Cott’s Business

You should read and consider the risk factors specific to Cott’s business that will also affect the combined company after the merger. These risks are described in (i) Part I, Item 1A of Cott’s Annual Report on Form 10-K for the fiscal year ended December 29, 2018, as filed with the SEC on February 27, 2019 and (ii) in other documents that are incorporated by reference into this document. See “Where To Obtain Additional Information” for the location of information incorporated by reference in this document.

Risks Related to Primo’s Business

The announcement and pendency of Primo’s agreement to be acquired by Cott may have an adverse effect on Primo’s business, operating results and stock price.

Primo’s announcement of having entered into the merger agreement and Cott’s and the Purchaser’s commencement of the offer could cause a material disruption to Primo’s business.

Primo is subject to additional risks in connection with the announcement and pendency of the offer and the mergers, including, but not limited to, the following:

 

   

market reaction to the announcement of the offer and the mergers;

 

   

changes in the respective business, operations, financial position and prospects of either company or the combined company following consummation of the mergers;

 

   

market assessments of the likelihood that the offer and the mergers will be consummated;

 

   

the amount of cash and the number of Cott common shares comprising the transaction consideration will not be adjusted for changes in Primo’s business, assets, liabilities, prospects, outlook, financial condition or results of operations during the pendency of the merger agreement, including any successful execution of Primo’s current strategy as an independent company or in the event of any change in the market price of, analyst estimates of, or projections relating to, Primo common stock;

 

   

potential adverse effects on Primo’s relationships with Primo’s current customers, suppliers and other business partners, or those with which Primo is seeking to establish business relationships, due to uncertainties about the offer and the mergers;

 

   

pursuant to the merger agreement, Primo is subject to certain restrictions on the conduct of Primo’s business prior to consummation of the mergers, which restrictions could adversely affect Primo’s ability to realize certain of Primo’s business strategies or take advantage of certain business opportunities;

 

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potential adverse effects on Primo’s ability to attract, recruit, retain and motivate current and prospective employees who may be uncertain about their future roles and relationships with us following the completion of the mergers, and the possibility that Primo’s employees could lose productivity as a result of uncertainty regarding their employment following the mergers;

 

   

Primo has incurred, and will continue to incur, significant costs, expenses and fees for professional services and other transaction costs in connection with the offer and the mergers, and many of these fees and costs are payable by Primo regardless of whether the mergers are consummated;

 

   

the possibility of disruption to Primo’s business, including increased costs and diversion of management time and resources that could otherwise have been devoted to other opportunities that may have been beneficial to us; and

 

   

interest rates, general market and economic conditions and other factors generally affecting the market prices of Cott common shares and Primo common stock.

Since a portion of the offer consideration consists of Cott common shares, Primo’s stock price will be adversely affected by a decline in Cott’s stock price and any adverse developments in Cott’s business. Changes in Cott’s stock price and business may result from a variety of factors, including changes in its business operations and changes in general market and economic conditions. These factors are beyond Primo’s control.

The failure of the offer and the mergers to be completed may adversely affect Primo’s business and Primo’s stock price.

Cott’s and the Purchaser’s obligation to accept for exchange, and to exchange, shares of Primo common stock for the transaction consideration in the offer is subject to a number of conditions, including (i) at least a majority of the outstanding shares of Primo common stock, when added to shares of Primo common stock already owned by the Purchaser, having been validly tendered into (and not properly withdrawn from) the offer prior to the expiration date of the offer, (ii) the exchange of Cott common shares pursuant to the offer and the mergers having been registered pursuant to a registration statement filed by Cott with the SEC and declared effective by the SEC, which occurred on February 11, 2020, (iii) Cott common shares issuable pursuant to the offer and the mergers having been authorized for listing on the NYSE and the TSX, (iv) the absence of any order or ruling prohibiting the consummation of the mergers and (v) subject to certain exceptions, the accuracy of Primo’s representations and warranties and compliance with covenants.

There can be no assurance that these conditions to the completion of the offer will be satisfied, or that the mergers will be completed on the proposed terms, within the expected timeframe or at all. If the offer and the mergers are not completed, Primo’s stock price could fall. Furthermore, if the offer and the mergers are not completed, Primo may suffer other consequences that could adversely affect Primo’s business, results of operations and stock price, including the following:

 

   

Primo could be required to pay a termination fee of $18.9 million to Cott under certain circumstances as described in the merger agreement;

 

   

Primo would have incurred significant costs in connection with the offer and the mergers that Primo would be unable to recover;

 

   

Primo may be subject to negative publicity or be negatively perceived by the investment or business communities;

 

   

Primo may be subject to legal proceedings related to the transactions contemplated by the merger agreement;

 

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any disruptions to Primo’s business resulting from the announcement and pendency of the offer and the mergers, including any adverse changes in its relationships with customers, suppliers, other business partners and employees, may continue or intensify in the event the mergers are not consummated; and

 

   

Primo may not be able to take advantage of alternative business opportunities or effectively respond to competitive pressures.

Other Risks Related to Primo’s Business

You should also read and consider the risk factors specific to Primo’s business that will also affect the combined company after the mergers. These risks are described in (i) Part I, Item 1A of Primo’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, as filed with the SEC on March 6, 2019, (ii) Part II Item 1A of Primo’s Quarterly Reports for the quarterly periods ended March 31, 2019, filed on May 9, 2019; ended June 30, 2019, filed on August 7, 2019; and ended September 30, 2019, filed on November 6, 2019; and (iii) in other documents that are incorporated by reference into this document. See “Where To Obtain Additional Information” for the location of information incorporated by reference in this document.

 

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FORWARD-LOOKING STATEMENTS

Information both included and incorporated by reference in this document may contain forward-looking statements, which may be identified by their use of terms such as “intend,” “plan,” “may,” “should,” “will,” “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “continue,” “potential,” “opportunity,” “project” and similar terms and their negative expressions. These statements convey management’s expectations as to the future based on plans, estimates and projections at the time Cott makes the statements. Forward-looking statements involve inherent risks and uncertainties and Cott cautions investors that a number of significant factors could cause actual results to differ materially from those expressed or implied by any such forward-looking statement. The forward-looking statements contained in this document include, but are not limited to, statements related to the benefits and completion of the transactions on the terms proposed, the anticipated financing of the transactions on the terms proposed, the anticipated timing of the transactions, expected synergies and contribution to Cott’s performance, and the potential impact the acquisition will have on Cott and related matters.

All subsequent forward-looking statements attributable to Cott, Primo or any person acting on Cott’s or Primo’s behalf are qualified by the cautionary statements in this section.

Factors that could have a material adverse effect on Cott’s or Primo’s operations and future prospects or the consummation of the offer and the mergers, many of which are difficult to predict and beyond the control of Cott or Primo, include, but are not limited to:

 

   

failure to satisfy the conditions to consummate the offer and the mergers;

 

   

uncertainties as to how many Primo stockholders will tender their shares in the offer;

 

   

the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement;

 

   

the failure of the offer and the mergers to close in a timely manner or at all;

 

   

difficulties encountered in integrating or inability of Cott to integrate Primo following completion of the acquisition;

 

   

failure to realize the expected benefits, costs savings, revenues, profits, synergies or growth from the acquisition of Primo, in a timely manner or at all;

 

   

failure to meet expectations concerning future business combinations or dispositions, at all or within a specific time period, including Cott’s planned disposition of the Coffee business;

 

   

significant transaction costs related to the offer and the mergers;

 

   

effects of the pendency of the acquisition on relationships with employees, suppliers, customers and other business partners;

 

   

Cott acquiring, managing and integrating new operations, businesses or assets, and the associated diversion of management attention or other related costs or difficulties;

 

   

the loss of the services of any key employees, the inability to attract or retain qualified employees in the future, or delays in hiring required employees;

 

   

the inherent uncertainty associated with financial or other projections;

 

   

changes in tax laws or other rules or regulations, including laws relating to net operating loss carry-forwards and credits;

 

   

potential non-realization of expected orders or non-realization of backlog;

 

   

variations in product development costs, especially related to advanced technologies;

 

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risks related to litigation and/or regulatory actions related to the offer and the mergers;

 

   

fluctuations in the market price of Primo’s or Cott’s common stock, for any reason; and

 

   

negative effects of this registration statement or the consummation of the offer and mergers on the market price of Cott’s common stock and on Cott’s operating results.

The foregoing list of factors is not exhaustive. These risks and uncertainties, along with the risk factors discussed under “Risk Factors” in this document, should be considered in evaluating any forward-looking statements contained in this document.

Investors are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date hereof. Investors are urged to carefully review and consider the various disclosures, including but not limited to risk factors relating to Cott and Primo contained in their respective Annual Reports on Form 10-K for the fiscal years ended December 29, 2018 and December 31, 2018, respectively, and in their subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. The statements made in this document are made as of the date hereof. Cott does not undertake to update or revise any of these statements in light of new information or future events, except as expressly required by applicable law.

 

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THE COMPANIES

Cott

Cott Corporation is a leading North American and European water, coffee and coffee extracts, tea and filtration solutions service company with the largest volume-based national presence in the North American and European home and office bottled water delivery industry and a leader in custom coffee roasting and blending of iced tea for the U.S. foodservice industry. Cott’s platform reaches over 2.5 million customers or delivery points with over 3,600 direct-to-consumer routes across North America and Europe supported by strategically located sales and distribution facilities and fleets, as well as wholesalers and distributors. This enables Cott to efficiently service residences, businesses, restaurant chains, hotels and motels, small and large retailers, and healthcare facilities.

Cott was incorporated in Canada in 1955. Its shares are traded on the NYSE under the ticker symbol “COT” and on the TSX under the ticker symbol “BCB.”

The address and telephone number of Cott’s principal executive offices is 4221 West Boy Scout Blvd., Suite 400, Tampa, Florida, United States 33607; phone: (813) 313-1732.

Cott also maintains a website at https://www.cott.com/. Cott’s website and the information contained therein or connected thereto shall not be deemed to be incorporated herein, and you should not rely on any such information in making an investment decision.

Holdings

Holdings is a Delaware corporation and a wholly-owned subsidiary of Cott. Holdings was incorporated on August 10, 2010 and will serve as an intermediary between Cott and the Purchaser in connection with the offer and the mergers. Holdings is the principal U.S. holding company within Cott’s corporate structure and holds the equity of Cott’s DS Services of America, Inc. and S&D Coffee, Inc. subsidiaries.

The address and telephone number of the Purchaser’s principal executive offices is c/o Cott Corporation, 4221 West Boy Scout Blvd., Suite 400, Tampa, Florida, United States 33607; phone: (813) 313-1732.

Merger Sub 2

Merger Sub 2 is a Delaware limited liability company and an indirect wholly-owned subsidiary of Cott. Merger Sub 2 was formed on January 10, 2020 for the purpose of consummating the second merger. Merger Sub 2 has engaged in no business activities to date and it has no material assets or liabilities of any kind, other than those incident to its formation and those incurred in connection with the merger agreement and the mergers.

The address and telephone number of Merger Sub 2’s principal executive offices is c/o Cott Corporation, 4221 West Boy Scout Blvd., Suite 400, Tampa, Florida, United States 33607; phone: (813) 313-1732.

The Purchaser

The Purchaser is a Delaware corporation and an indirect wholly-owned subsidiary of Cott. The Purchaser was incorporated on January 10, 2020 for the purpose of making the offer and consummating the first merger. The Purchaser has engaged in no business activities to date and it has no material assets or liabilities of any kind, other than those incident to its formation and those incurred in connection with the merger agreement, the offer and the mergers.

The address and telephone number of the Purchaser’s principal executive offices is c/o Cott Corporation, 4221 West Boy Scout Blvd., Suite 400, Tampa, Florida, United States 33607; phone: (813) 313-1732.

 

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Primo

Primo Water Corporation is an environmentally and ethically responsible company with a purpose of inspiring healthier lives through better water. Primo is North America’s leading single source provider of water dispensers, multi-gallon purified bottled water, and self-service refill drinking water. Primo’s Dispensers, Exchange and Refill products are available in over 45,000 retail locations and online throughout the United States and Canada.

Primo was incorporated in Delaware in 2017 in connection with the creation of a holding company structure. The business predecessor was founded in Delaware in 2004. Primo’s shares trade on Nasdaq under the ticker symbol “PRMW.”

The address and telephone number of Primo’s principal executive offices is 101 North Cherry Street, Suite 501

Winston-Salem, North Carolina, United States 27101; phone: (336) 331-4000.

Primo also maintains a website at https://www.primo.com/. Primo’s website and the information contained therein or connected thereto shall not be deemed to be incorporated herein, and you should not rely on any such information in making an investment decision.

 

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THE TRANSACTIONS

General

Cott, through its indirect wholly-owned subsidiary the Purchaser, is offering to exchange for each outstanding share of Primo common stock validly tendered in the offer and not properly withdrawn:

 

   

$5.04 in cash; and

 

   

0.6549 Cott common shares.

We refer to the above as the “mixed consideration.” In lieu of receiving the mixed consideration, holders of Primo shares may elect to receive, for each Primo share that they hold, (1) $14.00 in cash (we refer to this election as the “cash election” and this amount as the “cash consideration”) or (2) 1.0229 Cott common shares (we refer to this election as the “stock election” and this amount as the “stock consideration”).

Primo stockholders who tender their Primo shares into the offer and do not make a valid election will receive the mixed consideration for their Primo shares. Primo stockholders who make the cash election or the stock election will be subject to proration to ensure that approximately 64.02% of the aggregate consideration in the offer will be paid in Cott common shares and approximately 35.98% of the aggregate consideration in the offer will be paid in cash. See “Exchange Offer Procedures – Elections and Proration” for a detailed description of the proration procedures applicable to the offer.

The purpose of the transactions is for Cott to acquire control of, and ultimately the entire equity interest in, Primo. The offer is the first step in Cott’s plan to acquire all of the outstanding shares of Primo common stock, and the first merger is the second step in such plan. Tendered shares of Primo common stock will be exchanged for the transaction consideration, and if the first merger is completed, any remaining shares of Primo common stock that were not tendered into the offer (other than certain dissenting, converted or cancelled shares, but including shares paid to a holder of a vested Primo equity-based award or Primo warrant immediately prior to the first effective time, as described further in this document) will be converted into the right to receive the transaction consideration. At the election of the holder of such shares, Primo stockholders will receive the mixed consideration, the cash consideration or the stock consideration, subject to proration to ensure that approximately 64.02% of the aggregate consideration in the first merger will be paid in Cott common shares and approximately 35.98% of the aggregate consideration in the first merger (as reduced by the Primo shares held by stockholders who have properly exercised and perfected appraisal rights under the DGCL) will be paid in cash.

Immediately following the first merger and as the final step in Cott’s plan to acquire all of the outstanding shares of Primo common stock, the first surviving company will merge with and into Merger Sub 2 in the second merger.

Background of the Transactions

As part of its ongoing evaluation of Primo’s business, Primo’s board of directors and senior management periodically review and assess Primo’s operations and financial performance as well as industry conditions that may affect Primo’s long-term strategic goals and plans. These reviews include consideration of potential opportunities to maximize stockholder value, such as business combinations, acquisitions, and other financial and strategic alternatives.

On November 12, 2013, Primo entered into a strategic alliance agreement with DS Waters of America, Inc, a (“DS Waters”), pursuant to which DS Waters agreed to act as Primo’s primary bottler and distributor of three and five gallon purified bottled drinking water and as its primary provider of exchange and supply services in the United States. The strategic alliance agreement resulted in DS Waters becoming Primo’s primary bottler and distributor in the United States. In connection with the entry into the strategic alliance agreement, Primo issued a warrant to purchase 475,000 shares of common stock to DS Waters. The warrant was exercisable at an exercise price of $3.04 per share and was exercised in full on August 23, 2018.

 

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On December 12, 2014, Cott acquired DS Waters and it became a wholly-owned subsidiary of Cott. DS Waters subsequently changed its corporate name to “DS Services of America, Inc.” (“DS Services”).

On March 13, 2017, Primo entered into an amendment to the strategic alliance agreement that extended the initial term from December 31, 2020 to December 31, 2025, and provided that the initial term would automatically renew for additional seven-year terms unless otherwise terminated in accordance with the terms of the strategic alliance agreement.

On December 31, 2017, Primo and DS Services entered into a second amendment to the strategic alliance agreement that, among other things, modified the service incentive payable to DS Services.

On May 4, 2018, Legion Partners Asset Management, LLC and certain affiliated entities and persons (collectively, “Legion Partners”) filed a Schedule 13D with the SEC in which they reported ownership of an aggregate of 1,604,366 shares of Primo’s common stock, or 5.2% of Primo’s outstanding shares.

On June 8, 2018, Legion Partners filed Amendment No. 1 to its Schedule 13D in which it reported that its ownership of Primo’s common stock had increased to an aggregate of 2,121,366 shares, or 5.8% of Primo’s outstanding common stock.

On November 23, 2018, Legion Partners filed Amendment No. 2 to its Schedule 13D in which it reported that its ownership of Primo’s common stock had increased to an aggregate of 2,635,571 shares, or 6.8% of Primo’s outstanding common stock.

Prior to January 2019, none of the discussions between representatives of Primo, DS Services or Cott involved the possibility of an acquisition of Primo by Cott.

In January 2019, Thomas J. Harrington, Cott’s Chief Executive Officer, contacted Billy D. Prim, then Primo’s Executive Chairman and Director, and proposed a potential combination of Primo and Cott under the “Primo Water” brand as part of Cott’s transformation into a “pure-play” water company. No specific transaction terms were discussed at this time. Mr. Prim subsequently had discussions with all of the members of the Primo board and they were interested in understanding the proposal in greater detail.

In February 2019, Mr. Harrington and Mr. Prim had a conversation in which they discussed further the positioning and strategy of the combined companies. Mr. Harrington indicated he would be having further discussions with the Cott board regarding a possible Primo transaction in the context of a potential overall repositioning of Cott’s business. Mr. Harrington and Mr. Prim did not discuss a per share transaction price or other similar valuation matters.

After the market close on March 5, 2019, Primo issued a press release in which it reported net sales of $302.1 million, a net loss of $1.7 million (or $.04 per diluted share), and Adjusted EBITDA of $55.4 million for 2018. Primo announced full year 2019 revenue guidance of $315 – $325 million and full year 2019 Adjusted EBITDA guidance of $60 – $63 million.

In early April 2019, Mr. Harrington again contacted Mr. Prim regarding a potential transaction and suggested the parties continue discussing strategic matters and conduct high level due diligence. No specific transaction terms were discussed at this time.

On April 9, 2019, Mr. Harrington sent Mr. Prim a proposed confidentiality letter. The letter contained mutual non-disclosure and confidentiality obligations, a customary mutual standstill provision, a related “fall away” provision providing that the standstill obligations would terminate in certain circumstances, including upon a party entering into a binding agreement related to a change of control of such party, but no prohibition on either party requesting a waiver or amendment to the standstill provision. Mr. Prim reviewed the letter with

 

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representatives of Primo’s regular outside corporate and securities counsel K&L Gates LLP (“K&L Gates”). Mr. Prim and K&L Gates negotiated revisions to the confidentiality letter, including extending the standstill provision from one year to 18 months, and Primo and Cott executed the confidentiality letter on April 10, 2019.

On April 25, 2019, Mr. Prim, Matthew T. Sheehan, then Primo’s President and Chief Executive Officer and a director, and Charles A. Norris, a Primo director with extensive experience in the water industry, met with Mr. Harrington and Jay Wells, Cott’s Chief Financial Officer. Mr. Harrington and Mr. Wells outlined Cott’s business and operating strategy and provided the Primo representatives with financial and operational information regarding Cott. The parties did not discuss a per share transaction price or other similar valuation matters.

On May 1, 2019, Primo held a special in person board meeting in advance of its regularly scheduled meeting to be held the following day. At the invitation of the Primo board, representatives of K&L Gates and of Goldman Sachs & Co. LLC (“Goldman Sachs”) were in attendance. The Primo board invited the representatives of Goldman Sachs based on Goldman Sachs’ qualifications, expertise and reputation as a financial advisor, as well as its familiarity with Primo’s business as a result of periodic meetings between members of Primo’s senior management and representatives of Goldman Sachs to discuss Primo’s business, strategy and prospects. In addition, an affiliate of Goldman Sachs has been a lender and served as administrative agent, collateral agent and lead arranger under Primo’s prior $196.0 million senior credit facility, which was entered into in December 2016, that was refinanced and terminated in June 2018. Primo paid this affiliate approximately $6.0 million in interest during 2018 and $3.9 million in early payment penalties in connection with the termination of the facility.

At the May 1, 2019 Primo board meeting, Mr. Prim reviewed his discussions with Cott’s representatives and noted that representatives of Cott had made a presentation to Mr. Prim, Mr. Sheehan and Mr. Norris the prior week, and discussed business, operating and strategic matters as well as a possible combination of Cott and Primo. He reviewed financial and operational information with respect to Cott and its various lines of business and discussed strategic positioning, market perception and potential valuation considerations with respect to Cott on a stand-alone basis and on a combined basis with Primo. Mr. Prim discussed Cott’s interest in performing high-level due diligence and considering a potential strategic transaction. The representatives of Goldman Sachs reviewed a variety of financial matters, including industry factors affecting, trading multiples for, and M&A activities of U.S. food and beverage companies. They discussed a number of preliminary financial and valuation metrics for Primo and Cott and reviewed at a high level how a potential merger transaction could be structured. The Primo directors and the representatives of Goldman Sachs discussed the possibility of considering a transaction with Cott and reviewed other potential acquirers as well as both the advisability of conducting a market check and simply staying independent. The Primo directors considered the possibility of structuring a transaction with Cott such that Primo stockholders would be able to receive a portion of their consideration in Cott common shares and participate in the synergies potentially realizable by the combined company that would be repositioned as a “pure-play” water company should Cott proceed with a potential disposition of its coffee, tea and extract solutions business. The Primo directors determined to proceed in preliminarily considering a potential transaction. The Primo directors also reviewed and discussed with K&L Gates their fiduciary duties in evaluating a potential transaction.

After the market close on May 7, 2019, Primo issued a press release in which it reported net sales of $70.0 million, a net loss of $1.3 million (or $.03 per diluted share), and Adjusted EBITDA of $9.8 million for the first quarter. Primo increased its full year revenue guidance to $317 – $325 million and decreased its full year Adjusted EBITDA guidance to $59 – $62 million. The trading price of Primo’s common stock dropped from $15.61 at the close of the market on May 7, 2019 to $13.10 at the close of the market on May 8, 2019.

On May 10, 2019, Legion Partners filed Amendment No. 3 to its Schedule 13D in which it reported that its ownership of Primo’s common stock had increased to an aggregate of 3,088,769 shares, or 7.9% of Primo’s outstanding common stock.

During the week of May 13, 2019, representatives of Goldman Sachs reviewed with Mr. Prim and Mr. Sheehan the timing and structure of a potential market check, including matters such as the identity of potential acquirers,

 

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specific messaging targeted to each such potential acquirer, an outline of materials that could be presented to each such potential acquirer, and potential next steps for structuring and conducting such a market check.

During May 2019, Mr. Prim and Mr. Harrington had a conversation in which Mr. Harrington indicated that Cott was continuing to review its overall strategy (particularly with respect to its coffee, tea and extract solutions business) and continuing to consider a transaction involving Primo.

On May 28, 2019, the Primo board held a special telephonic meeting to discuss recent developments in Primo’s business. A representative of K&L Gates was also in attendance. The Primo directors and senior management discussed operational challenges facing Primo’s business (particularly the refill business) and the potential negative impact such challenges could have on Primo’s financial results as well as on its financial covenants under its senior credit facility. The Primo directors and senior management reviewed a broad range of strategic and operational matters involving Primo, including challenges continuing to face the outdoor refill business, the pros and cons of reduced spending, and the potential negative impact such reduced spending would have on Primo’s business. The Primo directors also reviewed the status of recent conversations with Cott and the possibility of conducting a market check and contacting other third parties regarding a potential strategic transaction involving Primo. The Primo directors discussed and concluded that in light of the continuing need to address certain operational issues facing Primo’s refill business in particular, discussions with Cott should be discontinued, and Goldman Sachs should be instructed to take no further action at this time.

On May 29, 2019, Mr. Sheehan contacted Goldman Sachs and informed them of the Primo board’s decision. Goldman Sachs had not yet reached out to any third parties regarding interest in pursuing a potential transaction with Primo.

After the market close on August 5, 2019, Primo issued a press release in which it reported net sales of $79.3 million, net income of $0.9 million (or $.02 per diluted share), and Adjusted EBITDA of $13.4 million for the second quarter. Primo decreased its full year revenue guidance to $312 – $320 million and decreased its full year Adjusted EBITDA guidance to $56 – $58 million. The trading price of Primo’s common stock dropped from $13.43 at the close of the market on August 5, 2019 to $11.15 at the close of the market on August 6, 2019.

On August 9, 2019, Legion Partners filed Amendment No. 4 to its Schedule 13D in which it reported that its ownership of Primo’s common stock had increased to an aggregate of 3,567,746 shares, or 9.1% of Primo’s outstanding common stock.

On September 6, 2019, Mr. Harrington informed Mr. Prim that the Cott board had completed its strategic review and was aligned on Cott potentially divesting its coffee, tea and extract solutions business. Mr. Harrington indicated that Cott would be interested in pursuing a potential strategic transaction at a $14.50 per share price for Primo common stock (with the consideration consisting of a mix of cash and Cott common shares equal to 19.9% of Cott’s outstanding shares of common stock). Mr. Harrington noted that the offer was subject to Cott’s financial due diligence, particularly with respect to Primo’s refill business and with respect to Primo’s anticipated results for the balance of 2019 and 2020. Mr. Harrington’s offer did not contemplate any Primo executive officers entering into employment agreements with Cott, and Mr. Prim had previously informed Mr. Harrington that he had no interest in serving as an executive officer of Cott after the closing of the transaction. The Primo board had previously authorized management to negotiate an engagement letter with Goldman Sachs pursuant to which Goldman Sachs would provide customary advisory and investment banking services to Primo in connection with the possible sale of Primo. On September 12, following negotiations, Primo executed an engagement letter with Goldman Sachs.

On September 17, 2019, Legion Partners filed Amendment No. 5 to its Schedule 13D in which it reported having issued a press release and a public letter to Primo stockholders in which it expressed its view of a need for change at Primo with respect to a variety of matters relating to operational and financial performance, the composition of its board of directors, executive compensation and governance (including de-staggering the board

 

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of directors). Legion Partners did not report any change in its ownership position in Amendment No. 5 to its Schedule 13D, and continued to beneficially own 9.1% of Primo’s outstanding common stock.

On September 18, 2019, Primo held a special telephonic board meeting with Primo senior management and representatives of Goldman Sachs and K&L Gates in attendance. Mr. Prim reviewed his discussion with Mr. Harrington regarding a potential strategic transaction, including Cott’s preliminary valuation of $14.50 per share for Primo’s common stock (with the consideration consisting of a mix of cash and a number of Cott common shares equal to 19.9% of Cott’s outstanding number of shares of common stock). Mr. Prim discussed strategic positioning, market perception and potential valuation considerations with respect to Cott and Primo on a stand-alone basis and on a combined basis. The representatives of Goldman Sachs discussed the Cott proposal at a high level (including Cott’s requirement to keep the stock portion of the consideration at or below the 19.9% cap), the amounts of cash consideration to be included in the offer based upon hypothetical prices for Cott and Primo’s common stock, and potential next steps. The representatives of Goldman Sachs reviewed an illustrative process timeline and the structure of a potential market check, and the directors and the representative of K&L Gates discussed the directors’ fiduciary duties in evaluating a potential transaction. The Primo board of directors unanimously agreed that Primo should continue exploring a potential strategic transaction with Cott, including authorizing Goldman Sachs to coordinate discussions with Cott’s investment bank, Deutsche Bank, and to conduct a market check and contact other potential strategic acquirers that had been previously reviewed with the Primo board of directors.

During late September and October 2019, Goldman Sachs reached out to nine potential acquirers with respect to a possible transaction involving Primo. The potential acquirers were among those previously identified by Goldman Sachs in May and were those Goldman Sachs viewed as most likely to be interested in and best able to engage in a possible strategic transaction with Primo as a result of their ability to realize significant cost savings and synergies following a transaction. Primo entered into a confidentiality agreement with one such potential acquirer (“Company A”) on October 15, 2019 to facilitate further discussions on the basis of confidential information. The confidentiality agreement included an 18-month, customary standstill provision, a related “fall away” provision providing that the standstill obligations would terminate in certain circumstances, including upon Primo entering into a binding agreement related to a change of control of Primo, and a prohibition on Company A requesting a waiver or amendment to the standstill provision.

On October 29, 2019, Legion Partners filed Amendment No. 6 to its Schedule 13D in which it reported having submitted to Primo on October 28, 2019 a non-binding stockholder proposal to declassify Primo’s board of directors for inclusion in Primo’s proxy statement in connection with its 2020 annual meeting of stockholders. Legion Partners also issued a press release on October 29, 2019 in which it expressed its “frustrations” with the Primo board of directors. Legion Partners did not report any change in its ownership position in Amendment No. 6 to its Schedule 13D, and continued to beneficially own 9.1% of Primo’s outstanding common stock.

On October 29 and 30, 2019, Primo held its regularly scheduled in person quarterly board meeting with Primo senior management and representatives of K&L Gates and Goldman Sachs in attendance for portions of the meeting. During the afternoon of October 29, 2019, the representatives of Goldman Sachs and Mr. Prim reviewed his discussions with Mr. Harrington in which they discussed valuation and the fact that the Cott board of directors would be meeting on November 5 and 6, 2019. The representatives of Goldman Sachs reviewed the results of the market check, noting that they had reached out to nine potential acquirers, that one had signed a confidentiality agreement and was reviewing information, that six had passed on a potential transaction due to a variety of reasons (including a potential Primo transaction being outside of core competencies and not aligned with current strategic initiatives), and that two were still considering entering into a confidentiality agreement and considering a potential transaction. The representatives of Goldman Sachs and the directors discussed perspectives of various parties on Primo’s business and prospects, the reasons certain potential acquirers had passed, and a variety of other considerations potentially impacting a transaction. The representatives of Goldman Sachs and the directors discussed a number of other matters, including premium levels with respect to recent acquisition transactions, preliminary valuation considerations related to Primo’s consideration of a transaction

 

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with a cash/stock election structure, and potential strategies with respect to reaching back out to Cott and other potentially interested parties. Following the departure of Goldman Sachs’ representatives from the meeting, Primo’s senior management and directors discussed a variety of business, operational and strategic matters facing Primo’s business in light of continuing operational challenges with the refill business in particular and in light of Primo’s disappointing financial results. Primo’s senior management discussed their preliminary view on financial performance for 2020 in light of the continuing operational challenges.

On October 30, 2019, the Primo board reconvened with a representative of K&L Gates present. The K&L Gates representative led a discussion of the director’s fiduciary duties in evaluating a potential transaction. The directors discussed possible next steps with both Cott and the parties that Goldman Sachs had contacted and that continued to be potentially interested in a transaction with Primo. They discussed the financial aspects of a possible transaction with Cott and non-financial matters such as the addition of legacy Primo directors to the Cott board of directors and the potential rebranding of the combined company as “Primo Water” consistent with Cott’s proposed repositioning as a “pure-play” water company, both of which they believed would benefit the combined company and create value for holders of Primo common stock who acquired Cott common shares in a transaction. The directors discussed the benefits and risks of both staying independent and of undertaking a sale of Primo, and reviewed a number of matters, including short-term and long-term challenges facing Primo’s business, Primo’s growth prospects, and Primo’s perception in the investor community and with Wall Street analysts. They discussed potential transactions with a variety of other potential bidders and noted that it was unlikely that a pure financial buyer would be able to make an attractive offer given the synergies potentially realizable by a strategic buyer. The directors reviewed both the financial and non-financial terms of a possible transaction with Cott, including the advisability of accepting a $14.50 per share price to Cott. After further discussion, the directors instructed Mr. Prim to engage in further discussions with Goldman Sachs regarding negotiating strategies and then reach back out to Mr. Harrington to continue discussing valuation and other issues associated with a potential transaction.

On November 1, 2019, Primo entered into a confidentiality agreement with another potential acquirer (“Company B”) previously contacted by Goldman Sachs to facilitate further discussions on the basis of confidential information. The confidentiality agreement included a 12-month customary standstill provision, a related “fall away” provision providing that the standstill obligations would terminate in certain circumstances, including upon Primo entering into a binding agreement related to a change of control of Primo, but no prohibition on Company B requesting a waiver or amendment to the standstill provision.

On November 1, 2019, the Primo board met and reviewed prior discussions over the past few months regarding Mr. Sheehan’s performance as the Primo’s Chief Executive Officer and President in which they had expressed significant concern regarding his ability to drive operational and financial improvements in Primo’s business and results of operations. The directors determined that a leadership change was in the best interests of Primo in light of Mr. Sheehan’s inability to meet the Primo board’s expectations with respect to improved execution and results. As a result, the Primo board of directors determined that Mr. Sheehan’s employment as Chief Executive Officer and President should be terminated and that Mr. Prim should assume the role of Interim Chief Executive Officer and President, both effective immediately. The Primo board also undertook to continue working with the leading global executive search firm it had retained several months earlier to assist it in identifying a chief executive officer with capabilities and experiences aligned with Primo’s strategic priorities.

On November 2, 2019, Mr. Prim and Mr. Harrington had a telephone conversation in which Mr. Prim indicated the Primo board’s willingness to consider a transaction at $15.00 per share for Primo common stock (with the consideration consisting of a mix of cash and Cott common shares subject to a 19.9% cap). The proposal also included the addition of three legacy Primo directors to the Cott board of directors, a change in the name of the combined company to “Primo Water” consistent with Cott’s proposed repositioning as a “pure-play” water company, and an exchange offer structure followed by a back-end merger. There was no discussion of the identity of the legacy Primo directors to be added to the Cott board of directors.

 

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Before the opening of the market on November 5, Primo issued two press release. One press release announced the termination of Mr. Sheehan’s employment and Mr. Prim’s assumption of the role of Interim Chief Executive Officer and President. In the second press release, Primo reported net sales of $87.0 million, net income of $2.6 million (or $.06 per diluted share), and Adjusted EBITDA of $15.4 million for the third quarter. Primo decreased its full year revenue guidance to $312 – $316 million and decreased its full year Adjusted EBITDA guidance to $50 – $52 million.

On November 9 2019, Mr. Prim and Mr. Harrington had a telephone conversation in which Mr. Harrington indicated that Cott would be willing to consider a transaction at $15.00 per share (with the consideration consisting of a mix of cash and Cott common shares subject to the 19.9% cap). He also indicated that Cott would be willing to agree to change the name of the combined company to “Primo Water Corporation” consistent with Cott’s proposed repositioning as a “pure-play” water company and to an exchange offer structure. Finally, he indicated that Cott would be willing to add two legacy Primo directors to the Cott board of directors. He noted that Cott needed to continue its financial due diligence in light of Primo’s recent earnings announcement and evaluate the relative trading prices of Primo and Cott’s common stock.

On November 11, 2019, Mr. Prim and Mr. Harrington had a telephone conversation in which Mr. Harrington indicated that Cott had continued to review the proposed transaction and that in light of Primo’s third quarter financial results (in particular the disappointing results of the refill business), reduced guidance and stock price performance, Cott would only be interested in pursuing at a transaction at a lower price, possibly at a $14.00 per share price for Primo’s common stock (with the consideration consisting of a mix of cash and Cott common shares subject to a 19.9% cap).

On November 15, 2019, Primo held a special telephonic board meeting with Primo senior management and representatives of Goldman Sachs and K&L Gates in attendance. Mr. Prim provided an update on recent discussions with Mr. Harrington and the potential price per share of Primo common stock at which Cott would be willing to consider a transaction. The directors and the representatives of Goldman Sachs discussed negotiating strategies and other matters with respect to a potential transaction with Cott. The Goldman Sachs representatives discussed the status of Company B’s evaluation of potential interest in considering a transaction involving Primo and noted that Company A had indicated earlier that day that it was not in a position to consider a transaction with Primo in light of certain internal strategic discussions at Company A. The Goldman Sachs representatives and the directors reviewed other potential strategic and financial buyers that could be contacted and engaged in a discussion with the directors regarding the relatively low likelihood that any such potential buyer would be in a position to pursue a transaction involving Primo in a timely manner or on attractive financial terms. The directors discussed potential next steps with Cott and a variety of other matters, including staying independent.

After November 15, 2019, Company B discontinued its communications with Goldman Sachs with respect to pursuing a potential transaction with Primo.

On November 18, 2019, Mr. Harrington sent Mr. Prim a letter indicating Cott’s non-binding interest in acquiring Primo at $14.00 per share (payable in cash and Cott common shares with the Cott common shares issuable being capped at 19.9% of Cott’s issued and outstanding shares). The letter noted Cott’s strategic review of its coffee, tea and extract solutions business as part of its transformation from a mature soft drink manufacturing business into a “pure-play” water company. The letter noted the proposed combination would present an opportunity for Primo stockholders to participate in the expected benefits of synergies and potential multiple expansion of the merged entity, and the highly liquid Cott common shares would provide Primo stockholders with flexibility should they need to monetize their investment in Cott shares. Cott indicated that it anticipated the cash portion of the consideration would be financed with cash on hand, borrowings under its asset-based lending facility and/or term debt, and that the closing of the transaction would not be contingent on obtaining financing.

In the November 18, 2019 letter, Cott stated that it anticipated adding two members of Primo’s board to Cott’s board (but did not name such members), that it anticipated changing Cott’s corporate name to “Primo Water Corporation,” and that it would expect certain Primo stockholders to execute tender and support agreements. Cott

 

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further indicated it expected to structure the transaction as an exchange offer followed by a short-form merger pursuant to Section 251(h) of the DGCL and that the transaction would qualify as a tax-free reorganization for Primo stockholders (to the extent they received Cott common shares in the transaction). Finally, in order to induce Cott to commit the substantial resources necessary to complete the work to consummate a transaction, Cott would require that Primo enter into a 60-day exclusivity letter.

On November 19, 2019, Primo held a special telephonic board meeting with Primo senior management and representatives of Goldman Sachs and K&L Gates attendance. Mr. Prim and the representatives of Goldman Sachs reviewed the terms of the indication of interest received from Cott the prior day. They indicated that Cott anticipated a four to six week due diligence period with a particular focus on Primo’s refill business. The representatives of Goldman Sachs also reported on recent discussions with Deutsche Bank and reviewed a variety of matters related to the proposal. The directors engaged in a discussion regarding the risks and opportunities of pursuing a transaction with Cott, the reactions received from the nine other potential acquirers approached by Goldman Sachs (including the fact that Primo was not currently engaged in meaningful discussions with any such potential acquirers), and the risks and opportunities of staying independent given the continuing financial and operational challenges facing Primo. They considered the compelling strategic fit of Primo and Cott in light of the current operating relationship and the complementary nature of their respective businesses in assessing whether a third party would in a position to complete a transaction on more attractive financial terms than Cott. They noted that a significant portion of the consideration payable in connection with a transaction involving Cott would be payable in stock, that Primo stockholders would have the ability to participate in the growth of the combined company, and that such Primo stockholders would benefit from the rebranding and transition of the combined company to a “pure-play” water company with the opportunity to be valued in line with its water peers. Following further discussion of strategy and potential next steps, the directors unanimously approved and authorized continued discussions with Cott regarding a potential transaction at $14.00 per share of Primo common stock, working with Cott on an expedited due diligence process, and entering into an exclusivity agreement with Cott.

On November 19, 2019, at the direction of the primo board, the representatives of Goldman Sachs called Mr. Wells to inform Cott that $14.00 per share was an acceptable price but that it was important that the due diligence process be expedited and conducted in less than the four to six weeks previously indicated given the parties’ familiarity with each other in light of their current operational relationship and the due diligence done to date. Mr. Wells indicated that Cott would work as quickly as reasonably practicable to complete it due diligence investigation.

On November 25, 2019, representatives Primo, Cott, Goldman Sachs, Deutsche Bank and K&L Gates met in Winston-Salem, North Carolina at a third party site for management presentations to facilitate Cott’s due diligence on Primo’s business and operations and Primo’s reverse due diligence on Cott’s business and operations.

After the November 25, 2019 meeting and during the week of November 25, 2019, Primo and Cott exchanged due diligence request lists and virtual data rooms were created. Both Cott and its representatives and Primo and its representatives conducted business, financial and legal due diligence through the rest of November and during December and early January 2020.

On December 3, 2019, representatives of Drinker Biddle & Reath LLP (“Drinker Biddle”), Cott’s regular outside corporate and securities counsel, were given access to Primo’s online data room for the purpose of conducting legal due diligence.

On December 5, 2019, representatives of Drinker Biddle and K&L Gates had a telephone conversation in which they discussed high level legal due diligence issues and the continuation of the legal due diligence process.

On December 6, 2019, K&L Gates sent a draft definitive merger agreement to Drinker Biddle.

 

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On December 12, 2019, representatives of Deutsche Bank sent a draft letter of intent to Goldman Sachs regarding a proposed transaction between Cott and Primo at $14.00 per share. The draft letter of intent was consistent in all material respects with the non-binding indication of interest sent on November 18, 2019, and included a 30-day exclusivity period.

On December 13, 2019, at the direction of the Primo board, representatives of Goldman Sachs informed representatives of Deutsche Bank that Primo was working diligently to address due diligence questions, particularly those related to Primo’s refill business, and that it was premature to consider exclusivity at that time.

On December 17, 2019, representatives of Primo and Cott met in Tampa, Florida to discuss due diligence matters, with a focus on Primo’s refill business.

On December 20, 2019, representatives of Drinker Biddle, K&L Gates and Primo’s management team discussed legal due diligence matters and Primo’s initial responses to Drinker Biddle’s due diligence request list.

On December 20, 2019, representatives of Goldman and Deutsche Bank discussed Cott’s request for exclusivity pursuant to the draft letter of intent that had been transmitted on December 12, 2019. Representatives of K&L Gates and Drinker Biddle also discussed the draft letter of intent and Cott’s request for exclusivity.

On December 21, 2019, Mr. Harrington and Mr. Prim had a telephone conversation in which they discussed Primo granting Cott exclusivity through January 15, the status of Cott’s exploration of strategic options for its coffee, tea and extract solutions business, and the possibility of completing due diligence and executing a definitive merger agreement by January 13, 2020. The Primo board had previously authorized Primo’s entry into an exclusivity arrangement.

On December 22, 2019, K&L Gates sent a proposed exclusivity letter to Drinker Biddle that provided Cott with exclusivity through January 15, 2020. Representatives of Drinker Biddle and K&L Gates negotiated and finalized the form of the exclusivity letter, and Primo and Cott signed the exclusivity letter on December 23, 2019.

On December 23, 2019, Drinker Biddle sent a revised version of the merger agreement to K&L Gates which, as proposed, contained no fiduciary out to the non-solicitation covenant, did not allow the Primo board to change its recommendation in favor of a Cott transaction under any circumstance, and contained no superior proposal termination right.

On December 27, 2019, representatives of Drinker Biddle, K&L Gates and Primo’s management team discussed additional legal due diligence matters and Primo’s responses to Drinker Biddle’s supplemental due diligence request list. The same day, representatives of K&L Gates and Drinker Biddle had a telephone conversation in which they discussed certain proposed Cott revisions to the merger agreement related to the fiduciary out, change of board recommendation and termination fee provisions that Primo viewed as unacceptable.

On December 31, 2019, K&L Gates sent a revised version of the merger agreement which contained a fiduciary out to the non-solicitation covenant, allowed the Primo board to change its recommendation in response to a superior proposal or a material change in circumstances, and permitted Primo to terminate the merger agreement to pursue a superior proposal. Primo also circulated an initial draft of a tender and support agreement to Drinker Biddle.

Throughout December 2019, Mr. Prim solicited input from and provided the members of the Primo board with periodic updates regarding the progress of the proposed transaction.

On January 2, 2020, representatives of Goldman Sachs and Deutsche Bank had a telephone conversation in which they discussed possible methods of calculating the exchange ratio with respect to Cott common shares issuable to Primo stockholders.

 

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On January 3, 2020, representatives of Drinker Biddle, K&L Gates and Primo’s management team discussed additional legal due diligence matters and Primo’s responses to Drinker Biddle’s second supplemental due diligence request list.

On January 3, 2020, Drinker Biddle sent a revised version of the tender and support agreement to K&L Gates. K&L Gates and Drinker Biddle worked to finalize the form of the tender and support agreement on January 4, 2020 that consistent with Mr. Harrington and Mr. Prim’s discussion would be signed by each of Primo’s directors and executive officers.

On January 5, 2020, Drinker Biddle sent a revised version of the merger agreement to K&L Gates. The revised version reflected Cott’s substantial acceptance of Primo’s position with respect to the fiduciary out, change of board recommendation and the structure of the termination fee provisions but noted ongoing discussions with respect to the amount of the termination fee.

During the week of January 6, 2020, Mr. Harrington had conversations with Mr. Prim and Susan E. Cates, Primo’s lead independent director, regarding their willingness, subject to approval by the Primo board, to serve as Primo’s two nominees for the Cott board of directors.

On January 6, 2020, K&L Gates sent a revised version of the merger agreement to Drinker Biddle that reflected ongoing discussions and revisions to, among other things, the representations and warranties, interim operating covenants, and covenants related to Primo’s assistance with Cott’s efforts to arrange financing.

On January 7, 2020, the compensation committee of the Primo board met to review a proposed severance program for employees of Primo not otherwise party to an employment agreement with Primo that formally memorialized a number of Primo’s current informal practices. The proposed severance program was to be applicable to David Hass, Primo’s Chief Strategy Officer, and Michael Cauthen, Primo’s Vice President of Finance, as well as all of Primo’s other management and non-management employees not otherwise party to an employment agreement. The proposed severance program provided for severance benefits for Mr. Hass and Mr. Cauthen and all other management level employees payable upon termination of employment without cause or an employee’s resignation for good reason and provided for severance benefits for all non-management employees payable upon termination of employment without cause, all in a manner generally consistent with Primo’s past practices. The proposed severance program did not apply to Mr. Prim, David Mills, Primo’s Chief Financial Officer, or any of Primo’s directors. The compensation committee instructed management to review the proposed program with Cott and thereafter finalize the program in a manner substantially consistent with that reviewed with the compensation committee. The compensation committee also reviewed Primo’s existing employment agreements with Mr. Prim and Mr. Mills, the provisions thereof related to the accelerated vesting of all equity awards upon a change of control transaction, and the benefits payable if either were terminated in connection with a change of control transaction. The compensation committee considered outstanding awards for Mr. Prim and Mr. Mills under Primo’s long-term performance plan with performance periods ending December 31, 2020 and December 31, 2021 and determined that no such accelerated vesting would be applicable to such awards. Later that day K&L Gates sent the proposed severance program to Drinker Biddle.

On January 8, 2020, before the opening of the market, Cott issued a press release announcing that, as part of its strategic planning process, it was evaluating certain strategic alternatives for its Coffee business, including a sale of such business, to transition Cott into a “pure-play” water solutions provider. Cott noted that it had engaged a financial advisor as part of its strategic planning process to assist it in evaluating whether there are alternatives available to Cott’s Coffee, Tea and Extract Solutions operating segment that would either complement its strategy of organic growth or otherwise enhance shareowner value.

On January 8, 2020, Mr. Prim and Mr. Harrington had a telephone conversation in which they agreed that the value of Cott common shares to be issued to Primo stockholders would be determined based on the period ending January 7, 2020, prior to the announcement earlier that morning regarding the Coffee, Tea and Extract Solution

 

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business and the subsequent increase in the trading price for Cott common shares. They also discussed Primo’s proposed severance program and the importance to Cott of all Primo directors and executive officers entering into tender and support agreements and making an election to receive all Cott common shares in connection with the exchange offer to indicate their confidence in the business strategy and prospects of the combined company. The election to receive all Cott common shares in the exchange offer would be subject to the proration mechanics and all other provisions of the merger agreement applicable to Primo stockholders generally.

On January 8, 2020, representatives of K&L Gates and Drinker Biddle had a telephone conversation in which they reviewed and discussed open issues with respect to the merger agreement. Significant open issues included the amount of the termination fee (with Primo proposing 2.5% of Primo’s equity value and Cott proposing 3.75% of such equity value, in each case as implied by the transaction consideration payable pursuant to the merger agreement) and whether the closing of the exchange offer would be subject to a condition relating to holders of no more than 20% of Primo’s outstanding common stock having exercised appraisal rights under the DGCL (the “appraisal rights condition”). Representatives of K&L Gates and Drinker Biddle had further discussions that evening regarding the open issues, including Primo’s counter-proposal regarding a termination fee equal to 3.0% of its equity value as implied by the transaction consideration payable pursuant to the merger agreement.

Early in the morning of January 9, 2020, Drinker Biddle sent K&L Gates a draft letter agreement, consistent with Mr. Harrington and Mr. Prim’s January 8, 2020 conversation, to be signed by all of Primo’s directors and executive officers in which they would elect to receive all Cott common shares in connection with the exchange offer (subject to the proration mechanics and all other provisions of the merger agreement applicable to Primo stockholders generally). K&L Gates and Drinker Biddle finalized the form of such letter agreement later that day, and all directors and executive officers confirmed their willingness to make a stock election in the exchange offer.

On January 9, 2020, representatives of Deutsche Bank and Goldman Sachs discussed calculating the exchange ratio for Cott common shares to be issued to Primo stockholders based on the volume weighted average price per Cott common share ending on January 7, 2020 (or an implied price per Cott common share of $13.69), including whether such volume weighted average price calculation should be based on five or 15 trading days. They also engaged in further discussions regarding the amount of the termination fee and the proposed appraisal rights condition.

During the course of the day on January 9, 2020, Drinker Biddle and K&L Gates exchanged revised versions of the merger agreement. All parties worked to finalize the calculation of the exchange ratio with respect to Cott common shares issuable to holders of Primo common stock (taking into account the 19.9% cap on the number of Cott common shares issuable in the transaction). Representatives of Goldman Sachs and Deutsche Bank had further conversations that evening regarding the amount of the termination fee, the proposed appraisal rights condition and the calculation of the exchange ratio for Cott common shares to be issued to Primo stockholders. Cott and Primo agreed to a termination fee based on 3.25% of Primo’s equity value, as implied by the transaction consideration payable pursuant to the merger agreement, and that the proposed appraisal rights condition should be eliminated.

During the course of the day on Friday, January 10, 2020, all parties worked to finalize open issues on the merger agreement. Primo and Cott engaged in further discussions regarding the severance program and benefits available to Primo management and non-management employees who do not have an employment agreement and whose employment is terminated for specified reasons following the transaction. Primo and Cott and their respective representatives also participated in a due diligence/reverse due diligence bring-down call.

On Saturday, January 11, 2020, Primo held a special board meeting. At the invitation of the Primo board of directors, members of Primo’s management, representatives of Goldman Sachs and representatives of K&L Gates attended the meeting. Mr. Prim began the meeting by reviewing recent developments and discussions with Cott. Representatives of K&L Gates presented the terms of the form of the definitive merger agreement and also

 

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reviewed the form of the tender and support agreement (including the letter agreement pursuant to which all of Primo’s directors and executive officers would elect to receive all Cott common shares in connection with the exchange offer (subject to the proration mechanics and all other provisions of the merger agreement applicable to Primo stockholders generally)). The directors approved of Mr. Prim and Ms. Cates being the two nominees to the Cott board of directors. Representatives of Goldman Sachs presented updated financial analyses of the consideration to be received by Primo’s stockholders pursuant to the form of the definitive merger agreement, and the final financial terms of Cott’s offer. Among other things, the Primo board discussed that, using the five-day volume weighted average trading price for Cott common shares on January 7, 2019 of $13.69 to calculate the exchange ratio (rather than the $14.12 per share closing price of Cott common shares on the prior trading day), Cott’s offer represented an implied value of approximately $14.28 per share of Primo common stock (assuming the aggregate mix of consideration payable of approximately 35% cash and 65% Cott common shares). The Primo board also noted that a significant portion of the consideration would be payable in Cott common shares, that Primo stockholders would have the ability to participate in the growth of the combined company, and that such Primo stockholders would benefit from the transition of the combined company to a “pure-play” water company with the opportunity to be valued in line with its water peers. Representatives of Goldman Sachs then rendered Goldman Sachs’ oral opinion to the Primo board of directors, subsequently confirmed by delivery of a written opinion, that, subject to the factors and assumptions set forth therein, the transaction consideration per share of Primo common stock to be paid to the holders (other than Cott and its affiliates) of shares of Primo common stock taken in the aggregate, pursuant to the merger agreement was fair from a financial point of view to such holders. For more information about Goldman Sachs’ opinion, see below under the caption “ – Opinion of Primo’s Financial Advisor.”

Following discussion, the Primo board of directors unanimously (i) determined that the merger agreement and the transactions contemplated thereby, including the offer and the mergers, are advisable, fair to and in the best interests of Primo’s stockholders, (ii) approved and declared advisable the merger agreement and the transactions contemplated thereby, including the offer and the mergers, in accordance with the requirements of the DGCL, and (iii) recommended that stockholders of Primo accept the offer and tender their shares of Primo common stock pursuant to the offer.

Over the balance of Saturday, January 11, 2020 and Sunday, January 12, 2020, the parties and their respective advisors finalized communication and other matters.

Early in the morning of Monday, January 13, 2020, Primo and Cott signed the definitive agreement and issued a joint press release announcing the transaction. In connection with Primo’s entry into the definitive agreement, the standstill provisions in the confidentiality agreements with Company A and Company B terminated immediately” at the end of the penultimate paragraph.

On January 15, 2020, Legion Partners filed Amendment No. 7 to its Schedule 13D in which it reported that it had sold substantially all shares of Primo common stock owned by it on January 13 and 14, 2020.

Cott’s Reasons for the Transactions

Cott’s board of directors unanimously approved, adopted and declared advisable the transactions contemplated by the merger agreement, including the offer, the mergers and that the mergers are fair to, and in the best interests of, Cott and its shareowners.

In reaching its determination, Cott’s board of directors consulted with Cott’s management, as well as with Cott’s legal and financial advisors, and considered a variety of factors weighing favorably towards the transactions, including the factors described below.

 

   

Expected Benefits of the Transaction. Cott’s board of directors believes that the transactions will allow Cott to realize a number of significant benefits, including the following:

 

   

Create a pure play water company and market leader in home and office delivery, self-service refill, retail returnable water or exchange, dispenser sales and point of use or water filtration;

 

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Improve overall growth profile and margin as a result of the pure play water focus, underlying water category dynamics, combined distribution footprint and anticipated exit of the Coffee business;

 

   

Strengthen sustainability platform focused on refillable, reusable and recyclable containers;

 

   

Expect cost synergies of approximately $35 million over a three-year period, driven by the existing Primo partnership, geographic overlap and elimination of duplicative expenses; and

 

   

Create a singular water-focused combined company positioned as a rebranded entity, with the opportunity to be valued in line with water peers.

 

   

Market Conditions and Diligence. Cott’s board also took into account current financial market conditions and the current and historical market prices and volatility of, and trading information with respect to, shares of Primo common stock and Cott common shares. Cott’s board of directors further considered its familiarity with the business operations, strategy, earnings and prospects of each of Cott and Primo and the scope and results of the due diligence investigation conducted by Cott’s management and advisors with respect to Primo.

 

   

Financial Terms of the Transaction. Cott’s board of directors reviewed the amount and form of consideration to be paid in the transactions, the fact that the exchange ratio is fixed, the expected pro forma ownership of the combined company and other financial terms of the transactions.

 

   

Recommendation of Management. Cott’s board of directors took into account the recommendation of Cott’s management in favor of the transactions.

 

   

Provisions of the Merger Agreement. Cott’s board of directors considered the structure of the transactions and terms and conditions of the merger agreement, including the financial terms, the anticipated short time period from announcement to completion achievable through the exchange offer structure, the restrictions placed on Primo’s ability to seek a Primo acquisition proposal (as defined below) from any person other than Cott and its subsidiaries, the conditions to completion, the termination rights of the parties and the obligation of Primo to pay an $18.9 million termination fee to Cott in certain circumstances.

 

   

Likelihood of Completion. Cott’s board of directors took into account the expectation that the conditions to consummation of the offer and the mergers will be satisfied on a timely basis.

 

   

Tender and Support Agreements. Cott’s board of directors viewed favorably the willingness of Primo’s directors and executive officers, who together beneficially own approximately 10.4% of Primo’s outstanding common stock, to commit to tender their outstanding Primo shares in the offer (see “Tender and Support Agreements”).

Cott’s board of directors also identified and considered certain potentially negative factors in its deliberations to be balanced against the positive factors, including:

 

   

the risk that the anticipated benefits of the transactions will not be realized in full or in part, including the risks that expected revenue and/or cost synergies will not be achieved or not achieved on the expected timeframe;

 

   

the risk that the transaction may not be consummated despite the parties’ efforts or that the closing of the transaction may be unduly delayed;

 

   

costs associated with the transactions, and with any disruption to Cott’s or Primo’s business resulting from the transactions;

 

   

the risk that the trading price of Cott common shares could decrease and the offer and the merger could have a dilutive effect on the value of common shares held by Cott shareowners for any number of reasons, some of which are outside Cott’s control, including for example if investors in Cott believe

 

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that the value of the cash and stock consideration to be exchanged for Primo shares in connection with the offer and the merger, together with transaction costs, is greater than the value of Primo’s business, together with any synergies expected to be achieved or actually realized from Cott’s acquisition of Primo;

 

   

potential challenges in integrating the two companies and realizing expected synergies;

 

   

the provisions of the merger agreement that place restrictions on the interim operations of Cott and its subsidiaries pending the closing (see “Merger Agreement – Conduct of Business During Pendency of the Transactions”);

 

   

the risks associated with the occurrence of events which may materially adversely affect the operations or financial condition of Primo and its subsidiaries, which may not entitle Cott to terminate the merger agreement;

 

   

the risk of diverting Cott management’s focus and resources from other strategic opportunities and from operational matters while working to implement the transaction with Primo, and other potential disruption associated with combining the companies, and the potential effects of such diversion and disruption on the businesses and customer relationships of Cott and Primo; and

 

   

the risks associated with the transactions, the combined company following the transactions, Cott’s business and Primo’s business described under the sections entitled “Forward-Looking Statements” and “Risk Factors.”

After consideration of these factors, Cott’s board of directors determined that, overall, the potential benefits of the transactions outweighed the potential risks.

This discussion of the information and factors considered by Cott’s board of directors includes the material positive and negative factors considered by Cott’s board of directors, but it is not intended to be exhaustive and may not include all the factors considered by Cott’s board of directors. Cott’s board of directors did not quantify or assign any relative or specific weights to the various factors that it considered in reaching its determination to approve the merger agreement and the transactions. Rather, Cott’s board of directors viewed its position and recommendation as being based on the totality of the information presented to and factors considered by it. In addition, individual members of Cott’s board of directors may have given differing weights to different factors. It should be noted that this explanation of the reasoning of Cott’s board of directors and certain information presented in this section is forward-looking in nature and, therefore, should be read in light of the factors discussed in the section entitled “Forward-Looking Statements.”

 

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Primo’s Reasons for the Transactions; Recommendation of Primo’s Board of Directors

On January 11, 2020, Primo’s board of directors unanimously (i) determined that the merger agreement and the transactions contemplated thereby, including the offer and the mergers, are advisable, fair to and in the best interests of Primo’s stockholders, (ii) approved and declared advisable the merger agreement and the transactions contemplated thereby, including the offer and the mergers, in accordance with the requirements of the DGCL, and (iii) recommended that stockholders of Primo accept the offer and tender their shares of Primo common stock pursuant to the offer.

In evaluating the merger agreement, the offer, the mergers and the other transactions contemplated by the merger agreement, Primo’s board of directors consulted with Primo’s executive management, outside legal counsel and an outside financial advisor. In recommending that Primo’s stockholders accept the offer and tender their shares of Primo common stock pursuant to the offer, Primo’s board of directors also considered a number of factors potentially weighing in favor of the offer and the first merger, including the following factors (which are not necessarily presented in order of relative importance):

 

   

Offer Price and Right to Participate in Cott’s Future Growth. Primo’s board of directors considered:

 

   

The fact that, as of the close of business on the last trading day prior to the announcement of the offer and the first merger, the value of the consideration represented a premium of approximately 32.2% to the 30-day volume-weighted average price of Primo shares ending on January 10, 2020 ($10.80);

 

   

The historic volatility in the trading price of Primo shares demonstrated by the broad range of 52-week high ($16.22 on May 3, 2019) and low ($9.59 on November 19, 2019) trading prices of Primo shares;

 

   

The fact that, for each outstanding Primo share accepted for payment in the offer or converted and exchanged in the first merger, the holder thereof will be entitled to receive approximately 64.02% of the consideration in Cott common shares and, therefore, participate in the upside potential of the combined company;

 

   

The fact that in lieu of receiving the mixed consideration, holders of Primo shares may elect to receive, for each share that they hold, the cash consideration or the stock consideration, in each case, subject to proration;

 

   

The ability for stockholders to elect the stock consideration which may allow them to defer a portion of their taxable gain;

 

   

The belief of Primo’s board of directors that as a result of extensive negotiations between the parties it had obtained Cott’s best and final offer for the Primo shares; and

 

   

The fact that the offer and the mergers are expected to be immediately accretive to Cott’s earnings per share.

 

   

Implied Valuation. Primo’s board of directors considered the fact that the valuation of Primo implied by the offer price was at a premium to almost all of the comparable food and beverage company transaction multiples identified by Primo and its advisors, in each case based on trailing twelve month EBITDA multiples.

 

   

Combined Resources, Complementary Products, Strong Partnership, Execution Risks in Remaining Independent and Future Success. Primo’s board of directors carefully considered the current and historical financial condition, results of operations, business, competitive position and prospects of Primo. Additionally, Primo’s board of directors also considered a number of other factors, including:

 

   

Combined Resources. Primo’s board of directors’ belief that the transaction would provide Primo with the substantial resources necessary to expand its geographic footprint to deliver its product offerings across North American and European markets. In particular, Primo has historically faced challenges expanding its operations outside the United States and Canada. Cott currently has an established presence in 21 countries across North America and Europe. Primo’s board of directors also considered

 

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that the combination of Primo and Cott would (i) enable Primo to increase retail penetration by targeting retail customers with which Cott has an established relationship, (ii) increase purchasing power, creating opportunities to reduce procurement costs and (iii) enable Primo and Cott to benefit from the marketing of Cott products in the packaging and sale of Primo water dispensers.

 

   

Complementary Products. Primo’s board of directors considered the complementary nature of the products of Primo and Cott to enable the combined company to offer end users a full range of water solutions across a broader array of price points, including home and office delivery, exchange and refill. Additionally, Primo’s board of directors believes the combined company can benefit from leveraging Cott’s Pureflo intellectual property with respect to the refill business.

 

   

Strong Partnership. Primo’s board of directors considered the fact that Cott has been an important partner of Primo since 2013, and that Cott’s management’s deep understanding of Primo’s exchange business would reduce integration risks and increase the likelihood of achieving expected synergies. Primo’s board of directors also considered the fact that Cott has agreed to appoint two current members of Primo’s board of directors to its board of directors, evidencing Cott’s desire to take advantage of the experience and industry knowledge of Primo’s board of directors to drive growth of the combined company.

 

   

Execution Risks in Remaining Independent. Primo’s board of directors considered a number of the business challenges that Primo was facing, including the operational and business risks of operating as an independent company, the challenges Primo has recently faced with its Refill business, the current competitive environment in Primo’s industry as well as general uncertainty surrounding forecasted economic conditions, both in the near-term and long-term.

 

   

Future Success. Given the stock component of the consideration payable to Primo stockholders, Primo’s board of directors considered that Primo stockholders will continue to be able to meaningfully participate in the future growth of Cott and, indirectly, Primo.

 

   

Rebranding and Transition to Pure Play Water Company Improves Growth Profile. Primo’s board of directors considered the fact that Cott has announced a desired intention to transition into a pure play water company and that it is exploring strategic alternatives for its Coffee business. Primo’s board of directors considered that Cott’s transformation to a pure play water company, including the divesture of its lower margin Coffee business, would create opportunities for the combined company to benefit from higher revenue growth and margins, more consistent with its water and route-based peers. Primo’s board of directors also believes the combined company, rebranded under the “Primo Water Corporation” name, will benefit from the fact that Primo’s brand is associated with the current trends of healthy hydration and environmental sustainability.

 

   

Certainty of Value and Liquidity; Potential Participation in Growth. Primo’s board of directors considered the form of the consideration payable to Primo stockholders. The cash consideration will offer Primo stockholders certainty as to value and liquidity, while the stock consideration will offer the ability to participate in the future growth of Cott and, indirectly, Primo and to benefit from any potential appreciation that may be reflected in the value of Cott common shares (which future earnings growth rate may represent a different growth rate than Primo’s business on a standalone basis), as well as the ability to attain liquidity should any of the Primo stockholders choose not to retain their Cott common shares.

 

   

No Financing Condition and Transaction Certainty. Primo’s board of directors considered its belief that the offer and the first merger will likely be consummated, based on, among other factors:

 

   

The representations and covenants of Cott and the Purchaser in the merger agreement regarding their obligations to obtain financing sufficient to pay the aggregate consideration and the debt commitment letter and the fact that Cott’s obligation to accept Primo shares for payment in the offer and close the first merger is not subject to any financing contingency;

 

   

The reputation and financial condition of Cott;

 

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The fact that directors and executive officers who are beneficial owners of 10.4% of Primo’s equity have entered into the support agreements with Cott pursuant to which they have agreed to tender their Primo common stock in the offer; and

 

   

The fact that Primo’s board of directors believes, after consultation with senior management, that there are unlikely to be any significant delays or obstacles to Cott obtaining the necessary regulatory clearances and approvals to complete the offer and the first merger.

 

   

Market Check. Primo’s board of directors considered results of a market check conducted by Primo’s board of directors and senior management with the assistance of Primo’s financial advisor, Goldman Sachs, involving a group of nine potential acquirers determined to be the most likely to have interest in an acquisition. Primo’s board of directors believes that the transaction consideration to be paid by Cott in the offer and the first merger reflected the best price reasonably attainable for Primo stockholders (based on a number of criteria including value and certainty of closing).

 

   

Fairness Opinion. Primo’s board of directors considered the oral opinion of its financial advisor, Goldman, Sachs, subsequently confirmed in writing, that, as of the date of that written opinion, based on and subject to the assumptions made, procedures followed, matters considered, and limitations upon the review undertaken by Goldman Sachs in preparing its written opinion, as set forth in such written opinion, the aggregate consideration (as defined in the written opinion) to be offered to the holders of the shares of Primo common stock (other than Cott and its affiliates) pursuant to the merger agreement was fair from a financial point of view to such holders, as more fully described below in “Primo’s Reasons for the Transactions; Recommendations of Primo’s Board of Directors – Opinion of Goldman, Sachs & Co. LLC.” Primo’s board of directors was aware that Goldman Sachs will become entitled to certain fees upon consummation of the offer and mergers, as more fully described below in “Primo’s Reasons for the Transactions; Recommendations of Primo’s board of directors – Opinion of Goldman, Sachs & Co. LLC.” The full text of the written opinion of Goldman Sachs is attached to this document as Annex C.

 

   

Certain Management Projections. Primo’s board of directors considered certain financial projections for Primo prepared by Primo management, which reflected certain assumptions of Primo’s senior management. For further discussion, see “Selected Historical Consolidated Financial Data of Primo.

 

   

The Terms of the Merger Agreement. Primo’s board of directors considered all of the terms and conditions of the merger agreement, including the representations, warranties, covenants and agreements of the parties, the conditions to closing, the form of the consideration and the structure of the termination rights, including:

 

   

That the terms of the merger agreement were the product of arms-length negotiations between two sophisticated parties and their respective advisors;

 

   

The merger agreement provides for the prompt commencement of the offer, which may enable holders of Primo common stock who tender their shares into the offer to receive their consideration more quickly than in a transaction structured as a one-step merger;

 

   

The ability to respond to unsolicited acquisition proposals by Primo’s board of directors upon the determination that the failure to take such action would reasonably be expected to constitute a breach of the directors’ fiduciary duties under applicable law and to engage in negotiations or discussions with third parties regarding alternative transactions under certain circumstances (see “Merger Agreement – No Solicitation of Other Offers by Primo” for more information);

 

   

The right of Primo’s board of directors to change or withdraw its recommendation to holders of Primo common stock following receipt of an unsolicited superior proposal or upon the occurrence of certain other intervening events and determination that the failure to take such action would reasonably be expected to constitute a breach of the directors’ fiduciary duties under applicable law (see “Merger Agreement – Change of Recommendation” for more information);

 

   

The right of Primo’s board of directors to terminate the merger agreement and to accept a superior proposal if certain conditions are met, subject to the payment of the $18.9 million termination fee

 

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(approximately 3.25% of the aggregate equity value represented by the transaction and approximately 2.44% of the aggregate transaction value) to Cott (see “Merger Agreement – Termination of the Merger Agreement – Termination by Primo” for more information);

 

   

Primo’s board of directors’ belief that the $18.9 million termination fee payable by Primo upon its termination of the merger agreement to accept a superior proposal (i) is reasonable in light of the overall terms of the merger agreement and the benefits of the offer and the first merger and (ii) would not preclude another party from making a competing proposal;

 

   

The obligations of Cott and Purchaser to accept Primo shares for payment pursuant to the offer and to close the first merger are subject to a limited number of conditions, and Primo’s board of directors’ belief, in consultation with senior management and legal advisors, that the transactions contemplated by the merger agreement are reasonably likely to be consummated;

 

   

The fact that in the event that the conditions of the offer, with the exception of certain conditions, have not been satisfied or waived at the scheduled expiration of the offer, the Purchaser must extend the offer for one or more periods of up to 10 business days until such conditions have been satisfied or waived, subject to the outside date provided in the merger agreement and the other terms and conditions of the merger agreement; and

 

   

Primo’s ability to enforce any provision of the merger agreement by a decree of specific performance if Cott or Purchaser fails, or threatens to fail, to satisfy their obligations under the merger agreement.

 

   

Appraisal Rights. Primo’s board of directors considered the availability of statutory rights of appraisal to holders of Primo shares who do not tender their shares pursuant to the offer and comply with specified procedures under Delaware law.

In its deliberations concerning the offer, the first merger and the other transactions contemplated by the merger agreement, Primo’s board of directors also considered and balanced against the factors potentially weighing in favor of the offer and the first merger a number of uncertainties, risks, restrictions and other factors potentially weighing against the offer and the first merger, including the following (which are not necessarily presented in order of relative importance):

 

   

Fluctuations in the Price of Cott Common Shares. Primo’s board of directors considered the fact that holders of shares of Primo common stock who receive Cott common shares in the offer or the first merger will receive a fixed number of Cott common shares, and such number of shares will not be adjusted for any decrease in the trading price of Cott common shares between the date of the merger agreement and the completion of the offer or the first merger, and the fact that Primo is not permitted to terminate the merger agreement solely because of changes in the market price of Cott common shares.

 

   

Value of Consideration Below 52-Week High of Company Stock Price. Primo’s board of directors considered the fact that, while the value of the consideration represented a premium of approximately 32.2% to the 30-day volume-weighted average price of the shares ending on January 10, 2020, such value is below the $16.35 52-week high trading price of Primo’s common stock on May 3, 2019.

 

   

Non-Solicitation Covenant. Primo’s board of directors considered the fact that the merger agreement imposes restrictions on soliciting and responding to competing acquisition proposals from third parties.

 

   

Termination Fee. Primo’s board of directors considered the fact that, under specified circumstances, Primo may be required to pay fees and expenses in the event the merger agreement is terminated and the effect this could have on Primo, including:

 

   

The possibility that the $18.9 million termination fee payable by Primo upon the termination of the merger agreement under certain circumstances could discourage other potential acquirers from making a competing proposal, although Primo’s board of directors believed that the termination fee was reasonable in amount and would not unduly deter any other party that might have a genuine interest in acquiring Primo; and

 

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If the offer and the first merger are not consummated, Primo will generally be required to pay its own expenses associated with the merger agreement and the transactions contemplated thereby.

 

   

Monetary and Opportunity Costs / Interim Restrictions. Primo’s board of directors considered the significant costs involved in connection with entering into and completing the offer and the first merger and the substantial time and effort of management required to consummate the offer and the first merger, which could disrupt Primo’s business operations. Primo’s board of directors also considered the restrictions on Primo’s conduct of business prior to completion of the offer and the first merger, which could delay or prevent Primo from undertaking business opportunities that may arise or taking other actions with respect to Primo’s operations during the pendency of the offer, whether or not the offer and the first merger are completed.

 

   

Effects of Transaction Announcement. Primo’s board of directors considered the fact that the announcement and pendency of the offer and the first merger, or the failure to complete the first merger, may cause substantial harm to Primo’s relationships with its employees (including making it more difficult to attract and retain key personnel and the possible loss of key management and other personnel), vendors and customers.

 

   

Effect on Market Price. Primo’s board of directors considered the fact that the market price of shares could be affected by many factors, including: (i) if the merger agreement is terminated, the reason or reasons for such termination and whether such termination resulted from factors adversely affecting Primo; (ii) the possibility that, as a result of the termination of the merger agreement, possible acquirers may consider Primo to be an unattractive acquisition candidate; and (iii) the possible sale of Primo common stock by short-term investors following an announcement that the merger agreement was terminated.

 

   

Closing Conditions. Primo’s board of directors considered the fact that completion of the offer and first merger is subject to the satisfaction of certain closing conditions that are not within Primo’s control, including receipt of the necessary regulatory clearances and approvals and that no Company Material Adverse Effect (as defined and described in “Merger Agreement – Company Material Adverse Effect” ) on Primo has occurred.

 

   

Cash Component of Consideration. Primo’s board of directors considered that the holders of Primo common stock who receive cash consideration, either because of an affirmative election or because of subsequent proration, will not be able to participate in the future benefits of the combined company and the fact that the receipt of cash will be a taxable transaction for U.S. federal income tax purposes; and

 

   

Potential Conflicts of Interest. Primo’s board of directors considered the fact that certain of Primo’s directors and executive officers may have interests in the offer and the first merger that may be deemed to be different from, or in addition to, those of Primo stockholders. Primo’s board of directors was made aware of and considered these interests; for more information about such interests, see “Merger Agreement – Interests of Certain Persons in the Transactions.”

After taking into account all of the factors set forth above, as well as others, Primo’s board of directors concluded that the risks, uncertainties, restrictions and potentially negative factors associated with the offer and the first merger were outweighed by the potential benefits of the offer and the first merger to Primo’s stockholders.

The foregoing discussion of factors considered by Primo’s board of directors is not intended to be exhaustive, but summarizes the material factors considered by Primo’s board of directors. In light of the variety of factors considered in connection with its evaluation of the offer and the first merger, Primo’s board of directors did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its determination and recommendation. Moreover, each member of Primo’s board of directors applied his or her own personal business judgment to the process and may have given different weight to different factors. Primo’s board of directors did not undertake to make any specific determination as to whether any factor, or any particular aspect of any factor, supported or did not support its ultimate determination. Primo’s board of directors based its recommendation on the totality of the information presented, including thorough discussions

 

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with, and questioning of, Primo’s executive management, financial advisor and legal counsel. It should be noted that this explanation of the reasoning of Primo’s board of directors and certain information presented in this section is forward-looking in nature and should be read in light of the factors set forth in “Forward-Looking Statements.”

Opinion of Goldman, Sachs & Co. LLC

At a meeting of the Primo board of directors, Goldman Sachs rendered its oral opinion to Primo’s board of directors, subsequently confirmed in writing, that, as of the date of its written opinion and based upon and subject to the factors and assumptions set forth in Goldman Sachs’ written opinion, the aggregate consideration to be paid to the holders (other than Cott and its affiliates) of shares of Primo common stock pursuant to the merger agreement was fair from a financial point of view to such holders.

The full text of the written opinion of Goldman Sachs, dated January 13, 2020, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached hereto as Annex C. The summary of Goldman Sachs’ opinion set forth in this prospectus/offer is qualified in its entirety by reference to the full text of Goldman Sachs’ written opinion. Goldman Sachs’ advisory services and opinion were provided for the information and assistance of Primo’s board of directors in connection with its consideration of the transactions. Goldman Sachs’ opinion is not a recommendation as to whether or not any holder of Primo common stock should tender such shares in connection with the exchange offer, how any holder of such shares should make any election with respect to the transaction or any other matter.

In connection with rendering the opinion described above and performing its related financial analyses, Goldman Sachs reviewed, among other things:

 

   

the merger agreement;

 

   

annual reports to stockholders or shareowners, as applicable, and Annual Reports on Form 10-K of Primo and Cott for the five fiscal years ended December 31, 2018 and December 29, 2018, respectively;

 

   

certain interim reports to stockholders or shareowners, as applicable, and Quarterly Reports on Form 10-Q of Primo and Cott;

 

   

certain other communications from Primo and Cott to their respective stockholders or shareowners, as applicable;

 

   

certain publicly available research analyst reports for Primo and Cott;

 

   

certain internal financial analyses and forecasts for Primo prepared by its management and for Cott standalone prepared by Cott’s management, and certain financial analyses and forecasts for Cott pro forma for the transactions prepared by the managements of Primo and Cott, in each case, as approved for Goldman Sachs’ use by Primo (the “Forecasts”), including certain operating synergies projected by the managements of Primo and Cott to result from the transactions, as approved for Goldman Sachs’ use by Primo (the “Synergies”); and

 

   

certain internal analyses and estimates of Primo’s expected utilization of net operating loss carryforwards prepared by its management, as approved for Goldman Sachs’ use by Primo (the “NOL Forecasts”).

Goldman Sachs also held discussions with members of the senior managements of Primo and Cott regarding their assessment of the strategic rationale for, and the potential benefits of, the transactions and the past and current business operations, financial condition and future prospects of Primo and Cott; reviewed the reported price and trading activity for the shares of Primo common stock and Cott common shares; compared certain financial and

 

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stock market information for Primo and Cott with similar information for certain other companies the securities of which are publicly traded; reviewed the financial terms of certain recent business combinations in the food and beverage industry and in other industries; and performed such other studies and analyses, and considered such other factors, as it deemed appropriate.

For purposes of rendering its opinion, Goldman Sachs, with Primo’s consent, relied upon and assumed the accuracy and completeness of all of the financial, legal, regulatory, tax, accounting and other information provided to, discussed with or reviewed by, Goldman Sachs, without assuming any responsibility for independent verification thereof. In that regard, Goldman Sachs assumed with Primo’s consent that the Forecasts, including the Synergies, and the NOL Forecasts were reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of Primo. Goldman Sachs did not make an independent evaluation or appraisal of the assets and liabilities (including any contingent, derivative or other off-balance-sheet assets and liabilities) of Primo or Cott or any of their respective subsidiaries and Goldman Sachs was not furnished with any such evaluation or appraisal. Goldman Sachs assumed that all governmental, regulatory or other consents and approvals necessary for the consummation of the transactions will be obtained without any adverse effect on Primo or Cott or on the expected benefits of the transactions in any way meaningful to its analysis. Goldman Sachs has also assumed that the transactions will be consummated on the terms set forth in the merger agreement, without the waiver or modification of any term or condition the effect of which would be in any way meaningful to its analysis.

Goldman Sachs’ opinion does not address the underlying business decision of Primo to engage in the transactions or the relative merits of the transactions as compared to any strategic alternatives that may be available to Primo; nor does it address any legal, regulatory, tax or accounting matters or the fairness of proration and certain other procedures and limitations set forth in the merger agreement. Goldman Sachs’ opinion addresses only the fairness from a financial point of view, as of the date of the opinion, to the holders (other than Cott and its affiliates) of Primo common stock of the Aggregate transaction consideration to be paid to such holders pursuant to the merger agreement. Goldman Sachs’ opinion does not express any view on, and does not address, any other term or aspect of the merger agreement or the transactions or any term or aspect of any other agreement or instrument contemplated by the merger agreement or entered into or amended in connection with the transactions, including the fairness of the transactions to, or any consideration received in connection therewith by, the holders of any other class of securities, creditors, or other constituencies of Primo; nor as to the fairness of the amount or nature of any compensation to be paid or payable to any of the officers, directors or employees of Primo, or class of such persons in connection with the transactions, whether relative to the Aggregate transaction consideration to be paid to the holders (other than Cott and its affiliates) of shares of Primo common stock pursuant to the merger agreement or otherwise. Goldman Sachs’ opinion was necessarily based on economic, monetary, market and other conditions, as in effect on, and the information made available to it as of the date of the opinion and Goldman Sachs assumed no responsibility for updating, revising or reaffirming its opinion based on circumstances, developments or events occurring after the date of its opinion. In addition, Goldman Sachs does not express any opinion as to the prices at which shares of Cott’s common stock will trade at any time or as to the impact of the transactions on the solvency or viability of Primo or Cott or the ability of Primo or Cott to pay their respective obligations when they come due. Goldman Sachs’ opinion was approved by a fairness committee of Goldman Sachs.

The following is a summary of the material financial analyses delivered by Goldman Sachs to the board of directors of Primo in connection with rendering the opinion described above. The following summary, however, does not purport to be a complete description of the financial analyses performed by Goldman Sachs, nor does the order of analyses described represent relative importance or weight given to those analyses by Goldman Sachs. Some of the summaries of the financial analyses include information presented in tabular format. The tables must be read together with the full text of each summary and are alone not a complete description of Goldman Sachs’ financial analyses. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before January 10, 2020, the last

 

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completed trading day prior to announcement of the transactions, and is not necessarily indicative of current market conditions.

Implied Premia and Multiples

Goldman Sachs calculated and compared certain implied premia and multiples using the implied value of the aggregate transaction consideration to be paid for each share of Primo common stock upon an election to receive the mixed consideration, which was derived by Goldman Sachs by multiplying of $14.12, Cott’s closing stock price on January 10, 2020, by 0.6549, representing the number of Cott common shares to be received upon a mixed consideration election, and adding $5.04, the cash consideration to be received per share of Primo common stock upon a mixed consideration election.

Goldman Sachs compared the implied value of the aggregate transaction consideration to be received upon a mixed consideration election to (i) the closing price of shares of Primo common stock on January 10, 2020 and (ii) the volume weighted average trading price of the shares of Primo common stock for the 10 trading-day, 30 trading-day and 60 trading-day periods ended January 10, 2020. This analysis indicated that the aggregate transaction consideration to be received upon a mixed consideration election represented:

 

   

a premium of 28.8% to the closing price of shares of Primo common stock on January 10, 2020, of $11.09;

 

   

a premium of 26.9% to the volume weighted average trading price of $11.26 per share of Primo common stock for the 10-trading day period ended January 10, 2020;

 

   

a premium of 32.3% to the volume weighted average trading price of $10.80 per share of Primo common stock for the 30-trading day period ended January 10, 2020; and

 

   

a premium of 32.1% to the volume weighted average trading price of $10.81 per share of Primo common stock for the 60-trading day period ended January 10, 2020.

Goldman Sachs also calculated an implied offer equity value for Primo by multiplying the implied value of the aggregate transaction consideration to be received upon a mixed consideration election by the total number of fully diluted shares of Primo common stock outstanding, as provided by the management of Primo. Goldman Sachs then calculated an implied enterprise value for Primo by adding to the implied equity value Primo’s net debt as of December 31, 2019, as provided by the management of Primo. Using the foregoing implied enterprise value, Goldman Sachs calculated the following multiples:

 

   

the implied enterprise value as a multiple of Adjusted EBITDA for the 12-month period ended September 30, 2019, or Q3 LTM Adj. EBITDA, as provided in company filings;

 

   

the implied enterprise value as a multiple of Estimated Adjusted EBITDA for calendar year 2019, as reflected in (i) the Forecasts and (ii) median estimates published by the Institutional Brokers’ Estimate System (which we refer to in this section as the “IBES Estimates”) for Primo; and

 

   

the implied enterprise value as a multiple of Estimated Adjusted EBITDA for calendar year 2020, as reflected in (i) the Forecasts and (ii) IBES Estimates for Primo.

Goldman Sachs also calculated the implied value of the aggregate transaction consideration to be received upon a mixed consideration election as a multiple of earnings per share for calendar year 2020 (“P/E”), as reflected in (i) the Forecasts and (ii) IBES Estimates for Primo.

 

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The results of these calculations are as follows:

 

     Aggregate Transaction
Consideration
 

EV / Q3 LTM Adjusted EBITDA

     15.7 x  

Based on Primo Management Forecasts

  

EV / 19E Adjusted EBITDA

     15.2 x  

EV / 20E Adjusted EBITDA

     12.6 x  

2020 P/E

     32.6 x  

Based on IBES Forecasts

  

EV / 19E Adjusted EBITDA

     15.6 x  

EV / 20E Adjusted EBITDA

     14.2 x  

2020 P/E

     57.1 x  

Illustrative Discounted Cash Flow Analysis. Using the Forecasts and the NOL Forecasts, Goldman Sachs performed an illustrative discounted cash flow analysis on Primo. Using mid-year convention and discount rates ranging from 5.50% to 6.50%, reflecting estimates of Primo’s weighted average cost of capital, Goldman Sachs discounted to present value as of December 31, 2019, (i) estimates of unlevered free cash flow for Primo for the years 2019 through 2024 as reflected in the Forecasts and (ii) a range of illustrative terminal values for Primo, which were calculated by applying perpetuity growth rates ranging from 1.00% to 1.50%, to a normalized terminal year estimate of the free cash flow to be generated by Primo of $39 million, per the management of Primo (which analysis implied exit terminal year LTM Adjusted EBITDA multiples ranging from 9.2x to 12.8x). In addition, using the same range of discount rates, Goldman Sachs discounted to present value as of December 31, 2019, the estimated benefits of Primo’s net operating losses and other tax attributes for the years 2020 through 2031, per the management of Primo and as reflected in the NOL Forecasts. Goldman Sachs derived such discount rates by application of the Capital Asset Pricing Model, which requires certain company-specific inputs, including Primo’s target capital structure weightings, the cost of long-term debt, after-tax yield on permanent excess cash, if any, future applicable marginal cash tax rate and a beta for Primo, as well as certain financial metrics for the United States financial markets generally. The range of perpetuity growth rates was estimated by Goldman Sachs utilizing its professional judgment and experience, taking into account the Forecasts and market expectations regarding long-term real growth of gross domestic product and inflation. Goldman Sachs derived a range of illustrative implied enterprise values for Primo by adding the ranges of present values it derived above. Goldman Sachs then subtracted from the range of illustrative implied enterprise values it derived for Primo using Primo’s net debt outstanding as of December 31, 2019, of $192 million, as provided by the management of Primo, to derive a range of illustrative implied equity values for Primo. Goldman Sachs then divided the range of illustrative implied equity values it derived by the number of fully diluted shares outstanding of Primo (41.7–42.0 million shares), as provided by the management of Primo, to derive a range of illustrative implied present values per share ranging from $13.87 to $19.73.

Illustrative Present Value of Future Share Price Analysis. Using the Forecasts, Goldman Sachs performed an illustrative analysis of the implied present value of an illustrative future value per share of Primo common stock, which is designed to provide an indication of the present value of a theoretical future value of Primo’s equity as a function of Primo’s financial multiples. Goldman Sachs first calculated the implied enterprise value per share of Primo common stock as of December 31 for each of the fiscal years 2020 and 2021 by applying a range of enterprise value to next twelve months (NTM) Adjusted EBITDA multiples, or NTM Adj. EBITDA multiples, of 10.5x to 12.5x to estimates of the Adjusted EBITDA for Primo for the following fiscal year, as reflected in the Forecasts. These illustrative multiple estimates were derived by Goldman Sachs utilizing its professional judgment and experience, taking into account current and historical average NTM Adj. EBITDA multiples for Primo during the 1-year and 2-year periods ended January 10, 2020. To derive a range of illustrative implied equity value for Primo, Goldman Sachs subtracted the estimated amount of Primo’s net debt outstanding as of December 31 for each of the fiscal years 2020 and 2021 of $166 million and $136 million respectively, as reflected in the Forecasts, from the range of illustrative implied enterprise values it derived for Primo. Goldman

 

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Sachs then divided the range of illustrative implied equity values it derived by the number of fully diluted shares outstanding of Primo as of December 31 for each of the fiscal years 2020 and 2021 (42.7–42.8 million shares and 42.8–42.9 million shares respectively), as reflected in the Forecasts, and discounted the resulting implied future share prices to present value as of January 10, 2020, using an illustrative discount rate of 6.3%, reflecting an estimate by Goldman Sachs of Primo’s cost of equity, to derive a range of illustrative implied present values per share of Primo common stock. Goldman Sachs derived such illustrative discount rate by application of the Capital Asset Pricing Model, which requires certain company-specific inputs, including an estimated beta for Primo, as well as certain financial metrics for the United States financial markets generally. This analysis resulted in an illustrative range of implied present equity values of $11.94 to $16.23 per share of Primo common stock.

Selected Transactions Analysis. Goldman Sachs analyzed certain information relating to the following selected transactions in the beverage sector between July 2010 and January 2020 (which we refer to as the “selected transactions”). The following table presents the result of this analysis:

 

Date    Target    Acquirer    EV ($bn)    EV /EBITDA
Jan-2018    Keurig Green Mountain    Dr. Pepper Snapple    $27.5    17.0x
Jul-2017    Cott (Bottling)    Refresco    $1.3    9.2x
Oct-2016    Glacier Water    Primo Water    $0.3    10.8x
Aug-2016    S&D Coffee    Cott    $0.4    9.9x
Dec-2015    Keurig Green Mountain    JAB Group    $14.3    13.9x
Dec-2014    DS Services    Cott    $1.3    7.4x
Jul-2014    Apple & Eve    Lassonde    $0.2    9.9x
Jun-2011    Clement Pappas    Lassonde    $0.4    6.7x
Jul-2010    Cliffstar    Cott    $0.5    6.3x
Low             6.3x
High             17.0x

While none of the companies that participated in the selected transactions are directly comparable to Primo, the companies that participated in the selected transactions are companies with operations that, for the purposes of analysis, may be considered similar to certain of Primo’s results, market size and product profile.

For each of the selected transactions, Goldman Sachs calculated and compared the estimated transaction enterprise value, which is (x) the announced per share consideration paid or payable in the applicable transaction multiplied by the number of diluted outstanding shares of the target company plus (y) the net debt of the target company, based on data obtained from public filings, Mergermarket and Capital IQ, as a multiple of the EBITDA as of the announcement date for the applicable target company’s most recently completed four fiscal quarters (which we refer to as the “EV / EBITDA multiple”). Goldman Sachs calculated the implied value per share of Primo common stock by applying an illustrative range of EV / EBITDA multiples of 6.3x to 17.0x to Primo’s LTM Adjusted EBITDA for the period ended September 30, 2019, as provided in company filings, to derive a range of implied enterprise values, from which Goldman Sachs subtracted Primo’s net debt outstanding as of December 31, 2019 of $192 million, as provided by the management of Primo, to derive a range of implied equity values. Goldman Sachs then divided the range of implied equity values by the number of diluted shares of Primo (41.4–41.8 million shares), as provided by the management of Primo, to derive a range of implied values of $2.98 to $15.86 per share of Primo common stock. The illustrative range was selected by Goldman Sachs based on its professional judgment and experience, taking into consideration, among other things, the observed multiples for the selected transactions.

Premia Analysis. Using publicly available information and Thomson Financial Securities data, Goldman Sachs reviewed and analyzed the acquisition premia for 199 transactions announced during the time period from January 10, 2015 through January 10, 2020 involving a public company target based in the United States where stock accounted for more than 50% of the total consideration and where the disclosed enterprise value for the

 

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target in the transaction was between $500 million and $5 billion. For the entire period, Goldman Sachs calculated the median, 25th percentile and 75th percentile premiums of the price paid in such transactions relative to the target’s last closing price per share one day prior to the date of the announcement of the transaction. This analysis indicated a median premium of 11.6% across the period. This analysis also indicated a 25th percentile premium of 1.7% and 75th percentile premium of 24.2% across the period. Using this analysis, Goldman Sachs applied a reference range of illustrative premiums of 1.7% to 24.2% to the closing price per share of Primo common stock of $11.09 as of January 10, 2020, and calculated a range of implied equity value per share of Primo common stock of $11.28 to $13.77. The illustrative range was selected by Goldman Sachs based on its professional judgment and experience, taking into consideration, among other things, the observed premia for the transactions.

Illustrative Present Value of Future Stock Price Analysis for Shares of Primo Common Stock on a Pro Forma Basis. Goldman Sachs performed an illustrative analysis to derive a range of illustrative implied present values of the future value of the aggregate transaction consideration to be received for each share of Primo common stock upon a mixed consideration election.

Goldman Sachs first derived a range of theoretical enterprise values of Cott (after giving effect to the transactions), separately deriving such theoretical enterprise values to account for Cott’s retention of S. & D. Coffee, Inc. (“S&D”) and Cott’s sale of S&D, as of December 31 for each of the fiscal years 2019, 2020 and 2021, by applying a range of enterprise value to next twelve months (NTM) Adjusted EBITDA multiples, or NTM Adj. EBITDA multiples, of 9.0x to 10.0x to estimates of the Adjusted EBITDA for Cott for the following fiscal year (after giving effect to the transactions), based on the Forecasts, taking into account the Synergies. These illustrative multiple estimates were derived by Goldman Sachs utilizing its professional judgment and experience, taking into account current and historical average NTM Adj. EBITDA multiples for Cott and Primo during the 1-year and 2-year periods ended January 10, 2020. To derive a range of illustrative implied equity values for Cott on a pro forma basis, Goldman Sachs first calculated the estimated amount of Cott’s pro forma net debt outstanding as of December 31, 2019, 2020 and 2021, based on the Forecasts and separately deriving such net debt to account for scenarios where Cott retained S&D, deriving $1.6 billion, $1.5 billion and $1.4 billion for 2019, 2020 and 2021 respectively, and where Cott sold S&D, deriving $1.2 billion, $1.1 billion and $1.0 billion for 2019, 2020 and 2021 respectively. Goldman Sachs then subtracted such estimates of Cott’s pro forma net debt from the range of illustrative implied enterprise values it derived for Cott on a pro forma basis, calculating such equity values to account for Cott’s retention of S&D and Cott’s sale of S&D. By applying a discount rate of 5.7%, reflecting an estimate of Cott’s cost of equity on a pro forma basis (based on the estimated cost of equity for each of Cott and Primo on a stand-alone basis weighted by the market capitalization of Cott and Primo, as of January 10, 2020), Goldman Sachs discounted to present value as of January 10, 2020 both the theoretical future equity values it derived for Cott on a pro forma basis and the cumulative estimated dividends to be paid per Cott common share on a pro forma basis assuming an annual dividend of $0.24, as reflected in the Forecasts, to yield illustrative present values of the pro forma equity values. Goldman Sachs derived such illustrative discount rate by application of the Capital Asset Pricing Model, which requires certain company-specific inputs, including a beta for the company, as well as certain financial metrics for the United States financial markets generally. Goldman Sachs then divided the illustrative present values of the pro forma equity values it derived by the number of fully diluted Cott shares estimated to be outstanding on a pro forma basis (164.6 million), based on the Forecasts, to derive a range of present values per Cott common share on a pro forma basis. Goldman Sachs then multiplied these estimated per share present values by 0.6549, representing the number of Cott common shares to be received upon a mixed consideration election, and added $5.04, the cash portion of the consideration to be received per share of Primo common stock upon a mixed consideration election. This analysis yielded a range of illustrative present values for the 0.6549 Cott common shares, together with the cash portion of the mixed consideration of $5.04, ranging from $14.06 to $17.72, reflecting Cott’s retention of S&D, and $14.10 to $17.34, reflecting Cott’s sale of S&D, for the aggregate transaction consideration received for each share of Primo common stock in the transactions on a pro forma basis.

 

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General

The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or of the summary set forth above, without considering the analyses as a whole, could create an incomplete view of the processes underlying Goldman Sachs’ opinion. In arriving at its fairness determination, Goldman Sachs considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis considered by it. Rather, Goldman Sachs made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all of its analyses. No company or transaction used in the above analyses as a comparison is directly comparable to Primo or Cott or the contemplated transactions.

Goldman Sachs prepared these analyses for purposes of Goldman Sachs’ providing its opinion to Primo’s board of directors as to the fairness from a financial point of view, as of the date of the opinion, to the holders (other than Cott and its affiliates) of Primo common stock of the aggregate transaction consideration to be paid to such holders pursuant to the merger agreement. These analyses do not purport to be appraisals nor do they necessarily reflect the prices at which businesses or securities actually may be sold. Analyses based upon forecasts of future results are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by these analyses. Because these analyses are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of the parties or their respective advisors, none of Primo, Cott, Goldman Sachs or any other person assumes responsibility if future results are materially different from those forecast.

The aggregate transaction consideration was determined through arm’s-length negotiations between Primo and Cott and was approved by Primo’s board of directors. Goldman Sachs provided advice to Primo during these negotiations. Goldman Sachs did not, however, recommend any specific amount or form of consideration to Primo or its board of directors or that any specific amount or form of consideration constituted the only appropriate consideration for the transaction.

As described above, Goldman Sachs’ opinion to Primo’s board of directors was one of many factors taken into consideration by Primo’s board of directors in making its determination to approve the merger agreement. The foregoing summary does not purport to be a complete description of the analyses performed by Goldman Sachs in connection with the fairness opinion and is qualified in its entirety by reference to the written opinion of Goldman Sachs attached hereto as Annex C.

Goldman Sachs and its affiliates are engaged in advisory, underwriting and financing, principal investing, sales and trading, research, investment management and other financial and non-financial activities and services for various persons and entities. Goldman Sachs and its affiliates and employees, and funds or other entities they manage or in which they invest or have other economic interests or with which they co-invest, may at any time purchase, sell, hold or vote long or short positions and investments in securities, derivatives, loans, commodities, currencies, credit default swaps and other financial instruments of Primo, Cott, any of their respective affiliates and third parties or any currency or commodity that may be involved in the transactions contemplated by the merger agreement. Goldman Sachs acted as financial advisor to Primo in connection with, and participated in certain of the negotiations leading to, the transactions contemplated by the merger agreement. During the two year period ended January 13, 2020, the Investment Banking Division of Goldman Sachs has not been engaged by Primo or Cott or any of their respective affiliates to provide financial advisory or underwriting services for which Goldman Sachs has recognized compensation. Goldman Sachs may also in the future provide financial advisory and/or underwriting services to Primo, Cott and their respective affiliates for which the Investment Banking Division of Goldman Sachs may receive compensation.

The board of directors of Primo selected Goldman Sachs as its financial advisor because it is an internationally recognized investment banking firm that has substantial experience in transactions similar to the transactions. Pursuant to a letter agreement dated September 12, 2019, Primo engaged Goldman Sachs to act as its financial

 

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advisor in connection with the transactions. The engagement letter between Primo and Goldman Sachs provides for a transaction fee, the calculation of which will be based in part on the value of Cott common shares to be issued in the transactions. The amount of such transaction fee is estimated, based on the information available as of the date of announcement, at approximately $12 million, all of which is contingent upon consummation of the transactions. In addition, Primo has agreed to reimburse Goldman Sachs for certain of its expenses, including attorneys’ fees and disbursements, and to indemnify Goldman Sachs and related persons against various liabilities, including certain liabilities under the federal securities laws.

Ownership of Cott After the Transactions

It is estimated that former stockholders of Primo will own in the aggregate approximately 16.6% of the outstanding Cott common shares immediately following consummation of the transaction, assuming that:

 

   

Cott acquires through the offer and the first merger one hundred percent (100%) of the outstanding shares of common stock of Primo;

 

   

in the offer and the first merger, Cott issues 26,825,842 Cott common shares as part of the transaction consideration (see Note 3 to the “Unaudited Pro Forma Condensed Combined Financial Statements” for the calculation of the estimated shares to be issued); and

 

   

immediately following completion of the transactions, there are 161,653,951 Cott common shares outstanding (calculated by adding 134,828,109, the number of Cott common shares outstanding as of January 24, 2020, plus 26,825,842, the number of Cott common shares estimated to be issued as part of the transaction consideration).

Appraisal Rights

No appraisal rights are available to Primo stockholders in connection with the offer. However, if the first merger is consummated, the holders of shares of Primo common stock immediately prior to the first effective time who (1) did not tender their shares of Primo common stock in the offer; (2) follow the procedures set forth in Section 262 of the DGCL; and (3) do not thereafter withdraw their demand for appraisal of such shares or otherwise lose their appraisal rights, in each case in accordance with the DGCL, will be entitled to have their shares appraised by the Delaware Court of Chancery and receive payment of the “fair value” of such shares, exclusive of any element of value arising from the accomplishment or expectation of the transactions, together with a fair rate of interest, as determined by such court.

The “fair value” of any shares of Primo common stock could be based upon considerations other than, or in addition to, the price paid in the offer and the first merger and the market value of such shares. Primo stockholders should recognize that the value so determined could be higher or lower than, or the same as, the consideration payable in the offer and the first merger. Moreover, Cott and Primo may argue in an appraisal proceeding that, for purposes of such proceeding, the fair value of such shares of Primo common stock is less than such amount.

Under Section 262 of the DGCL, if a merger is approved under Section 251(h) of the DGCL, either a constituent corporation before the effective date of the merger, or the first surviving company within 10 days thereafter, will notify each of the holders of any class or series of stock of such constituent corporation who is entitled to appraisal rights of the approval of the merger or consolidation and that appraisal rights are available for any or all shares of such class or series of stock of such constituent corporation, and will include in such notice a copy of Section 262 of the DGCL. The Schedule 14D-9 constitutes the formal notice of appraisal rights under Section 262 of the DGCL.

 

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As described more fully in the Schedule 14D-9, if a Primo stockholder elects to exercise appraisal rights under Section 262 of the DGCL, such stockholder must do all of the following:

 

   

within 20 days after the mailing of the Schedule 14D-9, which occurred on January 29, 2020, deliver to Primo a written demand for appraisal of shares of Primo common stock held, which demand must reasonably inform Primo of the identity of the stockholder and that the stockholder is demanding appraisal;

 

   

not tender Primo shares in the offer;

 

   

continuously hold of record the shares from the date on which the written demand for appraisal is made through the first effective time; and

 

   

you, another Primo stockholder, a beneficial owner of Primo common stock or the surviving company must file a petition in the Delaware Court of Chancery requesting a determination of the fair value of the shares of Primo common stock within 120 days after the first effective time. The surviving company is under no obligation to file any such petition in the Delaware Court of Chancery and has no intention of doing so. Accordingly, it is the obligation of Primo stockholders to initiate all necessary action to perfect their appraisal rights in respect of shares of Primo common stock within the time prescribed in Section 262 of the DGCL.

This does not purport to be a complete statement of the procedures to be followed by Primo stockholders desiring to exercise any appraisal rights and is qualified in its entirety by reference to Section 262 of the DGCL. The proper exercise of appraisal rights requires strict and timely adherence to the applicable provisions of Delaware law. A copy of Section  262 of the DGCL is included as Annex II to the Schedule 14D-9.

Plans for Primo

In connection with the offer, Cott has reviewed and will continue to review various possible business strategies that it might consider in the event that Cott acquires control of Primo pursuant to the offer and the first merger. Cott intends to review additional information regarding Primo before deciding on a strategy. Changes could include, among other things, changes in Primo’s business, operations, personnel, employee benefit plans, corporate structure, capitalization and management. See also “The Transactions – Cott’s Reasons for the Transactions.”

Delisting and Termination of Registration

Following consummation of the transactions, shares of Primo common stock will no longer be eligible for inclusion on Nasdaq and will be withdrawn from listing. Assuming that Primo qualifies for termination of registration under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) after the transactions are consummated, Cott also intends to seek to terminate the registration of shares of Primo common stock under the Exchange Act.

Board of Directors, Management and Organizational Documents

Upon consummation of the first merger, subject to applicable law, the directors of the Purchaser immediately prior to the first effective time will become the initial directors of the first surviving company, and the officers of the Purchaser immediately prior to the first effective time will continue as the officers of the first surviving company. At the first effective time, the certificate of incorporation and bylaws of Primo will be amended and restated, and as so amended will be the certificate of incorporation and bylaws of the first surviving company.

Upon consummation of the second merger, subject to applicable law, the manager of Merger Sub 2 immediately prior to the second effective time will become the manager of the surviving company, and, except as otherwise determined by Cott prior to the second effective time, the officers of the corporation surviving the first merger

 

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immediately prior to the second effective time will be the officers of the company surviving the second merger. At the second effective time, the certificate of formation and limited liability company agreement of Merger Sub 2 will be the certificate of formation and limited liability company agreement of the surviving company. From and after the first effective time until the sixth anniversary thereof, Cott must preserve the rights to indemnification of individuals who were, prior to the first effective time, directors or officers of Primo, that are presently set forth in the organizational documents of Primo and certain indemnification agreements between Primo and its directors and officers.

In connection with these transactions, Cott intends to (i) cause its articles of amalgamation to be amended to reflect a change in Cott’s corporate name to “Primo Water Corporation” and (ii) change its ticker symbol on the NYSE and the TSX to “PRMW.”

After Cott’s review of Primo and its corporate structure, management and personnel, Cott will determine what additional changes, if any, are desirable.

Regulatory Approvals

Cott is not aware of any governmental license or regulatory permit that is material to Primo’s business and might be adversely affected by the Purchaser’s acquisition of Primo shares pursuant to the transactions or, except as described below, of any approval or other action by any government or governmental administrative or regulatory authority or agency, domestic or foreign, that would be required for the Purchaser’s acquisition or ownership of Primo shares pursuant to the transactions. Should any of these approvals or other actions be required, Cott and the Purchaser currently contemplate that these approvals or other actions will be sought. There can be no assurance that (a) any of these approvals or other actions, if needed, will be obtained (with or without substantial conditions), (b) if these approvals were not obtained or these other actions were not taken adverse consequences would not result to Primo’s business or (c) certain parts of Primo’s or Cott’s businesses, or those of any of their respective subsidiaries’ businesses, would not have to be disposed of or held separate.

Cott and Primo agreed to use their respective reasonable best efforts to obtain any required governmental or third party consents and approvals required in connection with the transactions (including in connection with the HSR Act) and, including with respect to antitrust laws, use their reasonable efforts to obtain any consent, authorization or approval of any governmental entity required as described in the merger agreement as promptly as reasonably practicable.

It is a condition to completion of the transactions the waiting period under the HSR Act has expired or been terminated. Accordingly, and in accordance with their obligations under the merger agreement, Cott filed a Notification and Report Form with respect to the transactions with the Antitrust Division and the FTC on January 28, 2020, and Primo also filed a Notification and Report Form with respect to the transactions with the Antitrust Division and the FTC on January 28, 2020.

At any time before or after consummation of the transactions, notwithstanding any termination or expiration of the waiting period under the HSR Act, the FTC or the Antitrust Division could take such action under the antitrust laws as it deems necessary under the applicable statutes, including seeking to enjoin the completion of the transactions, seeking divestiture of substantial assets of the parties or requiring the parties to license, or hold separate, assets or terminate existing relationships and contractual rights. At any time before or after the completion of the transactions, and notwithstanding any termination or expiration of the waiting period under the HSR Act, any state or other governmental entity could take such action under the antitrust laws as it deems necessary. Such action could include seeking to enjoin the completion of the transactions or seeking divestiture of substantial assets of the parties, or requiring the parties to license, or hold separate, assets or terminate existing relationships and contractual rights. Private parties may also seek to take legal action under the antitrust laws under certain circumstances. There can be no assurance that a challenge to the transactions on antitrust grounds will not be made, or if such a challenge is made, what the result will be.

 

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Interests of Certain Persons in the Transactions

Primo’s directors and executive officers may have interests in the offer, the mergers and the other transactions contemplated by the merger agreement that are different from, or in addition to, the interests of the Primo stockholders generally. These interests may create potential conflicts of interest. The Primo board of directors was aware of these interests and considered them, among other matters, in approving the merger agreement and the transactions described therein.

Treatment of Equity and Equity-Based Awards

Certain Primo directors and executive officers hold equity and/or one or more of the following equity-based awards: options to acquire shares of Primo common stock (“Primo options”), Primo restricted stock units (“Primo RSUs”), Primo long-term performance plan units (“Primo LTPP units”), Primo deferred stock units (“Primo DSUs”) and Primo warrants for the purchase of common stock (“Primo warrants”) which equity and equity-based awards and warrants will be treated as follows in connection with the transactions.

Primo Shares

Pursuant to the support agreements and the side letters, each of Primo’s directors and executive officers (and their affiliated entities) who own shares of Primo common stock have agreed to tender their Primo shares for purchase pursuant to the offer and to elect to receive stock consideration in exchange for their tendered shares. As of January 24, 2020, the directors and executive officers of Primo beneficially owned, in the aggregate, 3,157,545 shares of outstanding Primo common stock. If the directors and executive officers were to tender all of such Primo shares pursuant to the offer and those shares were accepted for purchase and purchased by Purchaser, the directors and officers (and their affiliated entities) would receive an aggregate of 3,229,853 Cott common shares.

The following table sets forth, as of January 24, 2020, the stock consideration payable in Cott common shares that each executive officer and director would be entitled to receive in respect of his or her outstanding shares of Primo common stock described above if such individual were to tender all of his or her outstanding Primo shares pursuant to the offer and those shares were accepted for purchase and purchased by Purchaser.

 

Name

  

Position

   Shares of
Outstanding Primo
Common Stock
    Cott Common
Shares Payable in
Respect of Primo
Shares  (1)
 

Billy D. Prim

   Executive Chairman, Interim President and Chief Executive Officer      1,907,454       1,951,134  

Emma S. Battle

   Director      1,796       1,837  

Richard A. Brenner

   Director      152,095       155,577  

Susan E. Cates

   Director      28,968       29,631  

Jack C. Kilgore

   Director      132,255       135,283  

Malcolm McQuilkin

   Director      443,449       453,603  

Charles A. Norris

   Director      171,387       175,311  

David L. Warnock

   Director      12,341       12,623  

David J. Mills

   Chief Financial Officer      104,207       106,593  

David W. Hass

   Chief Strategy Officer      203,588 2)      208,250  
     

 

 

   

 

 

 

Total

     3,157,540       3,229,842  

 

(1)

Reflects the number of Cott common shares payable before deducting any applicable tax withholdings.

(2)

Includes 8,000 shares of Primo common stock held in custodial accounts maintained for certain family members of Mr. Hass. Mr. Hass serves as custodian of each custodian account and exercises voting control over such shares.

 

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Primo Options

Immediately prior to the first effective time, the portion of each Primo option that is then outstanding and unexercised and that has a per-share exercise price less than the amount of the cash consideration, to the extent vested in accordance with its terms as of the first effective time (whether by virtue of prior vesting or upon acceleration of such vesting in connection with the transactions, in accordance with the terms of such option), will be settled and paid to such holder in Primo shares (net of any Primo shares equal in value to the aggregate exercise price thereof and any applicable tax to be deducted or withheld in respect thereof) at a per-share price equal to the cash consideration, and such holder will have the right to submit an election to receive transaction consideration with respect to such settled and paid Primo shares. Any vested Primo options with a per-share exercise price that is equal to or greater than the cash consideration will be cancelled for no consideration.

At the first effective time, the portion of each Primo option that is outstanding and unexercised as of immediately prior to the first effective time, and has not vested in accordance with its terms, will be cancelled in exchange for an option issued, immediately following the first effective time, under a Cott equity incentive plan, subject to the same vesting schedule in effect immediately prior to the first effective time, in each case, to purchase a number of Cott common shares equal to (a) the number of Primo shares subject to such unvested portion of such Primo option as of immediately prior to the first effective time, multiplied by (b) the equity award adjustment ratio (after such conversion, “rollover options”), with an exercise price per share equal to (y) the exercise price per Primo share for which such Primo option was exercisable as of immediately prior to the first effective time, divided by (z) the equity award adjustment ratio. The “equity award adjustment ratio” is equal to 1.0229. The exercise price and the number of Cott common shares purchasable pursuant to the rollover options will be determined in a manner consistent with the requirements of Section 409A of the Code and, in the case of any such rollover option to which Section 422 of the Code applies, the exercise price and the number of Cott common shares purchasable pursuant to such rollover option will be determined subject to such adjustments as are necessary in order to satisfy the requirements of Section 424(a) of the Code.

The following table sets forth the consideration that certain of Primo’s executive officers and directors would be entitled to receive in respect of his outstanding Primo options pursuant to the merger agreement assuming that the first effective time occurs on March 31, 2020. None of Primo’s executive officers or directors will receive rollover options in respect of unvested Primo options.

 

Name

   Primo Common Stock
Payable in Respect  of

In-the-Money
Vested Primo Options (1)
 

Billy D. Prim

     64,013  

Richard A. Brenner

     18,288  

Jack C. Kilgore

     18,288  

David J. Mills

     94,845  

David W. Hass

     58,099  
  

 

 

 

Total

     253,533  

 

(1)

Reflects the number of shares of Primo common stock payable net of the aggregate exercise price of the subject Primo options, but before deducting any applicable tax withholdings.

Primo RSUs

Immediately prior to the first effective time, the portion of each Primo restricted stock unit award (“RSU”) that is then outstanding, to the extent vested in accordance with its terms as of the first effective time, will be settled and paid to such holder in Primo shares (net of any Primo shares equal in value to any applicable tax to be deducted or withheld in respect thereof) at a per-share price equal to the cash consideration, and such holder will have the right to submit an election to receive transaction consideration with respect to such settled and paid Primo shares.

 

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At the first effective time, the portion of each Primo RSU that is outstanding as of immediately prior to the first effective time that is not vested will be cancelled in exchange for a restricted stock unit award issued, immediately following the first effective time, under a Cott equity incentive plan, subject to the same vesting schedule in effect immediately prior to the first effective time, in each case, covering a number of Cott common shares that is equal to (i) the number of shares of Primo common stock subject to such unvested portion of such Primo RSU as of immediately prior to the first effective time, multiplied by (ii) the equity award adjustment ratio (after such conversion, “rollover RSUs”). Any rollover RSU issued will be subject to the same terms and conditions as set forth in the cancelled unvested Primo RSU to the extent such terms and conditions are required for compliance with Section 409A of the Code.

The following table sets forth the consideration that certain of Primo’s executive officers and director would be entitled to receive in respect of his or her outstanding RSUs pursuant to the merger agreement assuming that the first effective time occurs on March 31, 2020.

 

Name

   Primo Common Stock
Payable in Respect of

Vested Primo  RSUs (1)
     Rollover RSUs to be
Received in Respect of
Unvested Primo RSUs
 

Billy D. Prim

     18,000        —    

Emma S. Battle

     9,810        —    

David J. Mills

     15,333        —    

David W. Hass

     —          14,661  
  

 

 

    

 

 

 

Total

     43,143        14,661  

 

(1)

Reflects the number of shares of Primo common stock payable before deducting any applicable tax withholdings. Each of these awards represents an unvested RSU award for which vesting would be accelerated pursuant to the applicable employment agreement or director compensation policy.

Primo LTPP Units

Immediately prior to the first effective time, each Primo LTPP unit award that is then outstanding, to the extent vested in accordance with its terms as of the first effective time based on achievement of performance goals through the first effective time, will be settled and paid to such holder in Primo shares (net of any Primo shares equal in value to any applicable tax to be deducted or withheld in respect thereof) at a per-share price equal to the cash consideration and such holder will have the right to submit an election to receive transaction consideration with respect to such settled and paid Primo shares in accordance with the terms and procedures described under the heading “Exchange Offer Procedures – Elections and Proration”. Any Primo LTPP unit that is not vested immediately prior to the first effective time will be cancelled for no consideration.

All LTPP units outstanding at the first effective time are expected to be unvested, and will therefore be cancelled for no consideration.

Primo DSUs

Immediately prior to the first effective time, each Primo DSU will be cancelled in exchange for the right to receive from Purchaser (without interest and less amounts to be withheld or deducted by Primo for taxes) an amount in cash equal to the product obtained by multiplying (i) the total number of Primo shares then subject to such Primo DSU by (ii) the cash consideration.

 

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The following table sets forth the consideration that each executive officer of Primo would be entitled to receive in respect of his outstanding DSUs pursuant to the merger agreement assuming that the first effective time occurs on March 31, 2020.

 

Name

   Cash Payable in Respect
of Primo DSUs (1)
 

Billy D. Prim

   $ 7,113,358  

David J. Mills

     405,748  

David W. Hass

     640,024  
  

 

 

 

Total

   $ 8,159,130  

 

(1)

Reflects the cash amount payable before deducting any applicable tax withholdings.

Primo Warrants

Immediately prior to the first effective time, each Primo warrant then outstanding and unexercised and that has a per-share exercise price less than the amount of the cash consideration will be settled and paid to such holder in Primo shares (net of any Primo shares equal in value to the aggregate exercise price thereof and any applicable tax to be deducted or withheld in respect thereof) at a per-share price equal to the cash consideration, and such holder will have the right to submit an election to receive transaction consideration with respect to such settled and paid Primo shares. Any warrant with an exercise price equal to or greater than the cash consideration will be cancelled for no consideration.

The following table sets forth the consideration that certain executive officers and directors of Primo would be entitled to receive in respect of his outstanding warrants pursuant to the merger agreement assuming that the first effective time occurs on March 31, 2020.

 

Name

   Primo common stock
Payable in Respect  of

In-the-Money
Primo Warrants (1)
 

Billy D. Prim

     24,434  

Richard A. Brenner

     88  

Jack C. Kilgore

     4,775  

Total

     29,297  

 

(1)

Reflects the number of shares of Primo common stock payable net of the aggregate exercise price of the warrants, but before deducting any applicable tax withholdings.

 

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Estimated Value of Consideration for Primo Common Stock and Equity Awards.

The table below sets forth, for each of Primo’s directors and executive officers, the estimated value of the transaction consideration to be received in respect of each such person’s outstanding Primo common stock and equity awards (excluding any shares issuable under the Primo ESPP (as defined below)) pursuant to the merger agreement assuming that the first effective time occurs on March 31, 2020. Each of Primo’s directors and executive officers have agreed to elect to receive the stock consideration.

 

Name

  Value to be
Received in
Respect of
Shares of
Primo

Common
Stock
    Value to be
Received in
Respect of
In-the-
Money
Vested
Primo
Options
    Value to
be
Received
in Respect
of Vested
Primo
RSUs
    Value to
be
Received
in Respect
of
Unvested
Primo
RSUs
    Value to be
Received in
Respect of
Primo DSUs
    Value to
be
Received
in Respect
of In-the-
Money
Primo
Warrants
    Total:  

Billy D. Prim

  $ 26,704,356     $ 896,200     $ 252,000     $ 0     $ 7,113,358     $ 342,076     $ 35,307,990  

Emma S. Battle

  $ 25,144     $ 0     $ 137,340     $ 0     $ 0     $ 0     $ 162,484  

Richard A. Brenner

  $ 2,129,330     $ 256,045     $ 0     $ 0     $ 0     $ 1,232     $ 2,386,607  

Susan E. Cates

  $ 405,552     $ 0     $ 0     $ 0     $ 0     $ 0     $ 405,552  

Jack C. Kilgore

  $ 1,851,570     $ 256,045     $ 0     $ 0     $ 0     $ 66,850     $ 2,174,465  

Malcolm McQuilkin

  $ 6,208,286     $ 0     $ 0     $ 0     $ 0     $ 0     $ 6,208,286  

Charles A. Norris

  $ 2,399,418     $ 0     $ 0     $ 0     $ 0     $ 0     $ 2,399,418  

David L. Warnock

  $ 172,774     $ 0     $ 0     $ 0     $ 0     $ 0     $ 172,774  

David J. Mills

  $ 1,459,318     $ 1,327,875     $ 214,662     $ 0     $ 405,748     $ 0     $ 3,407,603  

David W. Hass

  $ 2,850,232     $ 813,400     $ 0     $ 200,662     $ 640,024     $ 0     $ 4,504,318  

2010 Employee Stock Purchase Plan

Prior to the time of Cott’s acceptance of any tender of shares, Primo intends to take all actions with respect to the Primo 2010 Employee Stock Purchase Plan (as amended, the “Primo ESPP”) such that the offering in progress thereunder as of January 13, 2020 will be the final offering. Prior to the time of Cott’s acceptance of any tender of shares, such offering will terminate and all shares Primo is obligated to issue to each participant thereunder will be promptly issued.

Other Equity-Based Incentive Plans

Prior to the time of Cott’s acceptance of any tender of shares, Primo intends to take all actions to terminate all of Primo’s equity-based incentive plans, long-term performance plan, executive deferred compensation plan and non-employee director compensation policy.

Arrangements with Executive Officers

Pursuant to an amended and restated employment agreement dated June 10, 2013, as amended October 31, 2016, between Primo and Billy Prim, Executive Chairman & Interim Chief Executive Officer of Primo, subject to the conditions set forth therein, in the event that Mr. Prim (i) is terminated without Cause; (ii) resigns for Good Reason; (iii) dies or (iv) becomes Disabled, in each case, in connection with or within two years following a Change of Control (each as defined in Mr. Prim’s employment agreement), then he is entitled to the following benefits under his employment agreement: (A) severance payments in an amount equal to 6.0 times the sum of (1) his annual base salary in effect during the 12 months immediately prior to his termination date plus (2) the average annual bonus earned by him for the most recent two fiscal years ending prior to his termination date; and (B) coverage under health, dental, life, accident, disability and similar benefit plans offered to (and on the same terms as) the other senior executive officers for the 24 months following his termination date or payment of COBRA health insurance premiums. In addition, upon any such termination, Mr. Prim would receive payment for (i) any unpaid base salary and vacation pay earned through the date of termination, (ii) any unreimbursed

 

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reimbursable expenses properly reported by him, (iii) a prorated annual bonus (based on actual performance for the year of termination) and (iv) any accrued but unpaid annual bonus for the fiscal year immediately preceding the year of termination. Finally, Mr. Prim is entitled to a Section 4999 excise tax gross-up payment to cover certain taxes and penalties, and any restricted stock, stock option or other equity compensation awards held by Mr. Prim that are unvested immediately vest as of the date of the Change of Control.

Pursuant to an employment agreement dated March 6, 2018 between Primo and David Mills, Chief Financial Officer of Primo, subject to the conditions set forth therein, in the event that Mr. Mills (i) is terminated without Cause or (ii) resigns for Good Reason, in each case, in connection with or within two years of a Change of Control (each as defined in Mr. Mills’ employment agreement), then he is entitled to an amount equal to 1.5 times the sum of (A) his highest base salary in effect during the 12 months immediately prior to his termination date plus (B) the average annual bonus earned by Mr. Mills for the most recent two fiscal years ending prior to his termination date. In such case, Mr. Mills will also be entitled to coverage under health, dental, life, accident, disability and similar benefit plans offered to (and on the same terms as) the other senior executive officers for the 18 months following his termination date or payment of COBRA health insurance premiums. In addition, upon any such termination, Mr. Mills would receive payment for (i) any unpaid base salary and vacation pay earned through the date of termination, (ii) any unreimbursed reimbursable expenses properly reported by him, (iii) a prorated annual bonus (based on actual performance for the year of termination) and (iv) any accrued but unpaid annual bonus for the fiscal year immediately preceding the year of termination. Finally, any restricted stock, stock option or other equity compensation awards held by Mr. Mills that are unvested immediately vest as of the date of the Change of Control.

On January 10, 2020, Primo adopted, with the approval of the compensation committee of Primo’s board of directors, a severance program (the “program”) applicable to all Primo employees who are not a party to an employment agreement with Primo, including David Hass. Under the program, Mr. Hass’s severance would be triggered by the termination of his employment by Primo without “cause” or termination by Mr. Hass for “good reason” (each as defined in the program). The severance benefit to which Mr. Hass would be entitled (in addition to accrued compensation) is a lump-sum cash payment equal to the sum of (i) his annual base salary, plus (ii) his prorated annual bonus at target for the year of termination, plus (iii) his annual COBRA insurance premiums (at the current rate paid by Primo). Mr. Hass would also be entitled to the acceleration of vesting of all unvested equity awards that roll over in connection with the mergers and employer-paid full executive level outplacement services for a period of 12 months.

Director Compensation

Prior to the closing date of the mergers, Primo will issue to its non-employee members of the its board of directors the stock-based compensation each such board member would otherwise receive following Primo’s 2020 annual meeting of stockholders in respect of such board member’s service on the board of directors since Primo’s 2019 annual meeting of stockholders, but prorated for the period through the date of the closing date of the mergers, in each case otherwise subject to the terms of the Primo Water Corporation Amended and Restated Non-Employee Director Compensation Policy.

Indemnification of Executive Officers and Directors

The merger agreement provides that all rights to exculpation and indemnification (and all rights to advancement of expenses relating thereto) for acts or omissions occurring at or prior to the first effective time of the first merger in favor of each current and former director or officer of Primo, when acting in their capacity as such (each an “Primo indemnitee” and collectively, the “Primo indemnitees”), existing on the date of the merger agreement as provided in the Primo certificate of incorporation and the Primo bylaws will survive and continue in full force and effect for a period of six (6) years after the first effective time.

At or prior to the first effective time, Primo will, and if Primo does not, Cott will, purchase and maintain, a six year “tail” prepaid policy on terms and conditions no less advantageous to the Primo indemnitees than Primo’s

 

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directors’ and officers’ insurance policies and fiduciary liability insurance policies (“D&O insurance”) existing as of the date of the merger agreement with respect to any claim related to any period of time at or prior to the first effective time or, if substantially equivalent or greater insurance coverage is unavailable, the best available coverage. In no event, however, will the company surviving the second merger or Cott be required to pay for such “tail” prepaid policy more than 300% of the annual premium paid by Primo as of the date of the merger agreement for its D&O insurance.

The foregoing summary of the indemnification of executive officers and directors and directors’ and officers’ insurance does not purport to be complete and is qualified in its entirety by reference to the merger agreement and the amendment thereto, copies of which are attached to this document as Annex A-1 and Annex A-2, respectively, and incorporated into this document by reference.

Executive Officer and Director Arrangements Following the Mergers

Pursuant to the terms of the merger agreement, Primo has agreed to use reasonable best efforts to obtain and deliver to Cott at or prior to the first effective time the resignation of each director and officer (exclusively from such officer’s constitutional officer position and not from employment) of Primo.

In addition, two directors of Primo, Mr. Prim and Ms. Cates, will be appointed to the board of directors of Cott. Depending on the timing of the first effective time, these individuals may be included in the Cott proxy statement for the 2020 annual meeting of shareowners. Alternatively, these two directors will be appointed by the board of directors of Cott after such meeting. Pursuant to the merger agreement, these two directors, or their designated replacements, will serve at least one term as a director of Cott.

The directors and executive officers of Cott and the Purchaser immediately after the first effective time are set forth on Annex D hereto.

Effect of the Mergers on Employee Benefits

The merger agreement provides that, as soon as reasonably practicable after the consummation of the merger, Cott will permit, or will cause the surviving company to permit, employees of Primo or any of its subsidiaries who are employed as of immediately prior to the first effective time and who continue to be employed by Cott or the surviving company or any of their respective subsidiaries following the first effective time (the “continuing employees”), to participate in the benefit programs of Cott or its subsidiaries to the same extent as similarly situated employees of Cott or its subsidiaries or permit such continuing employees to continue participating in the Primo benefit programs to the extent Cott continues such programs after the first effective time.

Each continuing employee will, during the period commencing at the first effective time and ending six months after the closing date of the mergers, be provided with an annual rate of base salary or base wage and an annual target cash bonus opportunity or commission plan that is, in the aggregate, no less favorable than the annual rate of base salary or base wage and the annual target cash bonus opportunity or commission plan, as applicable, provided to similarly situated employees of Cott or its subsidiaries; provided that if a continuing employee is assigned to a different role within the Cott’s business, the continuing employee will be provided with an annual compensation package that is, in the aggregate, no less favorable than the annual compensation package of Cott employees similarly situated to the continuing employee’s new role.

Cott will recognize the service of each continuing employee and will credit (for all purposes, including eligibility to participate, vesting, benefit accrual, vacation and leave entitlement, and severance benefits) service with Primo or its subsidiaries (or predecessor employers to the extent Primo or any subsidiary provides such past service credit) to the extent recognized by Primo or any subsidiary under the comparable employee benefit plans, programs and policies of Cott, the surviving company or any of their respective subsidiaries, as applicable, in which continuing employees become participants; provided that such recognition of service will not operate to duplicate any benefits of a continuing employee with respect to the same period of service.

 

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Under each post-closing plan that provides medical, dental, pharmaceutical or vision insurance benefits, Cott will use its reasonable best efforts to (A) cause any pre-existing condition limitations or eligibility requirements under such plan to be waived with respect to each continuing employee, and (B) credit each continuing employee for an amount equal to any eligible expenses incurred by such continuing employee in the plan year that includes the first effective time for purposes of any applicable deductible, copayments and out-of-pocket expense requirements under any such post-closing plan to the extent such expenses would have been credited under the terms of the applicable Primo benefit plans.

If directed by Cott not later than 15 days prior to the closing date, Primo will take (or cause to be taken) all actions necessary or appropriate to terminate, effective no later than the day prior to the closing date, its 401(k) plan (the “Primo 401(k) plan”). If Cott so directs Primo to terminate the Primo 401(k) plan, then, prior to and conditioned upon termination of the Primo 401(k) plan, Primo will take any action necessary to fully vest any unvested amounts of the accounts of all participants in the Primo 401(k) plan that are impacted by such termination. If Cott directs Primo to terminate its 401(k) plan, then Cott will permit each participant in the Primo 401(k) plan who is a continuing employee to make rollover contributions of “eligible rollover distributions” (within the meaning of Section 401(a)(31) of the Code, including any promissory notes evidencing outstanding loans) in an amount equal to the eligible rollover distribution portion of the account balance distributed to each such continuing employee from the Primo 401(k) plan to the Cott DS Retirement Savings Plan (the “Cott 401(k) plan”). If Cott does not direct Primo to terminate its 401(k) plan, then Cott will merge the Primo 401(k) plan with and into the Cott 401(k) plan as soon as practicable following the first effective time.

Certain Relationships With Primo

As of the date of this document, Cott does not own any shares of Primo common stock. Neither Cott nor the Purchaser has effected any transaction in the securities of Primo in the past 60 days. To the best of Cott and the Purchaser’s knowledge, after reasonable inquiry, none of the directors or executive officers of Cott or the Purchaser, nor any of their respective associates or majority-owned subsidiaries, beneficially owns or has the right to acquire any securities of Primo or has effected any transaction in the securities of Primo during the past 60 days.

Source and Amount of Funds

Cott estimates that the aggregate amount of cash consideration required to purchase the maximum amount of shares of Primo common stock sought in the offer is approximately $216 million, consisting of (i) $203.6 million calculated by multiplying $14.00 by 14,541,939 shares of Primo common stock (see Note 3 to the “Unaudited Pro Forma Condensed Combined Financial Statements” for the calculation of the estimated shares of Primo common stock entitled to the cash consideration), plus (ii) $12.3 million to settle deferred share units in cash.

Cott is exploring a divestiture of the Coffee business and has entered into exclusivity with a prospective buyer. If agreement is reached with a buyer and the divestiture closes before the acceptance time, Cott anticipates using the proceeds of the divestiture, along with cash on hand, to pay the cash consideration in the offer and first merger, repay Primo’s existing credit facility, and settle certain fees and expenses of Cott, Holdings, the Purchaser and Merger Sub 2.

If the Coffee business divestiture does not occur prior to the acceptance time, Cott has arranged for committed financing to close the offer and the mergers. On January 13, 2020, in connection with the execution of the merger agreement, Cott also entered into the commitment letter with the commitment party, pursuant to which the commitment party has committed, subject to the terms and conditions set forth therein, to lend Cott up to $400,000,000 for the purpose of financing the offer and the mergers, including but not limited to the transaction consideration, repayment of Primo’s existing credit facility, and certain fees and expenses of Cott, Holdings, the Purchaser and Merger Sub 2. In addition to the commitment letter financing, Cott intends to use cash on hand and available borrowings to finance the cash portion of the transactions and the related costs and expenses. If the

 

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Coffee business divestiture occurs as contemplated by the previous paragraph, the financing commitment will cease to be available.

Fees and Expenses

Cott has retained MacKenzie Partners, Inc. as the information agent (the “information agent”) in connection with the offer and the first merger. The information agent may contact holders of shares by mail, email, telephone, facsimile or personal interview and may request brokers, dealers, commercial banks and trust companies and other nominees to forward material relating to the offer and the merger to beneficial owners of shares. Cott will pay the information agent reasonable and customary compensation for its services in connection with the offer, will reimburse the information agent for its reasonable out-of-pocket expenses and will indemnify the information agent against certain liabilities and expenses, including certain liabilities under the U.S. federal securities laws.

In addition, Cott has retained Computershare Trust Company of Canada as the exchange agent in connection with the offer and the first merger. Cott will pay the exchange agent reasonable and customary compensation for its services in connection with the offer, will reimburse the exchange agent for its reasonable out-of-pocket expenses and will indemnify the exchange agent against certain liabilities and expenses, including certain liabilities under the U.S. federal securities laws.

Cott will reimburse brokers, dealers, commercial banks and trust companies and other nominees, upon request, for customary clerical and mailing expenses incurred by them in forwarding materials related to the offer and the merger to their customers. Except as set forth above, neither Cott nor the Purchaser will pay any fees or commissions to any broker, dealer or other person for soliciting tenders of shares pursuant to the offer.

Accounting Treatment

In accordance with GAAP, Cott will account for the acquisition of shares in the transactions under the acquisition method of accounting for business combinations.

Stock Exchange Listing

Cott common shares are listed on the NYSE under the symbol “COT” and the TSX under the symbol “BCB.” Cott intends to submit an application to list on the NYSE and the TSX the Cott common shares that Cott will issue in the transactions as part of the transaction consideration. Such listing is a condition to completion of the transactions.

Cott intends to change its corporate name to “Primo Water Corporation” in connection with the closing of the transactions and to use the “PRMW” ticker symbol on both the NYSE and TSX thereafter.

Resale of Cott Common Shares

All Cott common shares received by Primo stockholders as consideration in the offer and the first merger will be freely tradable for purposes of the Securities Act, except for Cott common shares received by any person who is deemed an “affiliate” of Cott at the time of the closing of the first merger. Cott common shares held by an affiliate of Cott may be resold or otherwise transferred without registration in compliance with the volume limitations, manner of sale requirements, notice requirements and other requirements under Rule 144 or as otherwise permitted under the Securities Act. This document does not cover resale of Cott common shares received upon completion of the offer or the first merger by any person, and no person is authorized to make any use of this document in connection with any resale.

 

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EXCHANGE OFFER PROCEDURES

Distribution of Offering Materials

This document, the related letter of election and transmittal and other relevant materials will be delivered to record holders of shares of Primo common stock and to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on Primo’s stockholder list or, if applicable, who are listed as participants in a clearing agency’s security position listing, so that they can in turn send these materials to beneficial owners of shares of Primo common stock.

Elections and Proration

Primo stockholders electing the mixed consideration will not be subject to proration; however, holders electing the cash consideration or the stock consideration may receive a different form of consideration than selected. Primo stockholders electing to receive either the cash consideration or the stock consideration in the offer will be subject to proration to ensure that approximately 64.02% of the aggregate consideration in the offer will be paid in Cott common shares and approximately 35.98% of the aggregate consideration in the offer will be paid in cash. Similarly, following the effective time of the first merger, Primo stockholders electing to receive either the cash consideration or the stock consideration in the first merger will be subject to proration to ensure that approximately 64.02% of the aggregate consideration in the first merger will be paid in Cott common shares and approximately 35.98% of the aggregate consideration in the first merger (as reduced by the Primo shares held by stockholders who have properly exercised and perfected appraisal rights under the DGCL) will be paid in cash. Therefore, the ability of Primo stockholders to receive their elected transaction consideration will depend on the elections of other Primo stockholders.

The greater the oversubscription to the stock election, if any, the fewer Cott common shares and more cash a Primo stockholder making the stock election will receive. Reciprocally, the greater the oversubscription to the cash election, if any, the less cash and more Cott common shares a Primo stockholder making the cash election will receive. The proration of the transaction consideration payable to Primo stockholders in the offer will not be known until the exchange agent tallies the results of the elections made by Primo stockholders in the offer, which will not occur until near or after completion of the offer. Similarly, the proration of the transaction consideration payable to Primo stockholders in the first merger will not be known until the exchange agent tallies the results of the elections made by Primo stockholders in the first merger, which will not occur until after the effective time of the first merger.

Fractional Cott common shares will not be issued in the offer or the first merger. Primo stockholders who otherwise would be entitled to receive a fractional common share of Cott will instead receive an amount in cash (without interest) equal to the amount of such fraction multiplied by the volume weighted average sale price per common share of Cott as reported on the NYSE for the ten consecutive trading days ending on and including the trading day immediately preceding the final acceptance time of the offer.

The aggregate number of Primo shares that will receive the cash consideration in the offer will be calculated as follows:

 

   

35.98% of the aggregate number of Primo shares validly tendered in the offer (and not properly withdrawn) (excluding shares electing to receive mixed consideration and shares for which no election is made).

The aggregate number of Primo shares that will receive the stock consideration in the offer will be calculated as follows:

 

   

64.02% of the aggregate number of Primo shares validly tendered in the offer (and not properly withdrawn) (excluding shares electing to receive mixed consideration and shares for which no election is made).

 

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Over Election of Cash

If the number of Primo shares validly tendered and not properly withdrawn in the offer making a cash election is greater than the number of Primo shares to receive the cash consideration in the offer as calculated above, such shares will be subject to proration. If proration applies to the Primo shares making a cash election in the offer, the percentage of Primo shares making a cash election that will receive the cash consideration in the offer will be equal to the following:

 

   

the number of Primo shares that will receive the cash consideration in the offer, as calculated above;

divided by

 

   

the aggregate number of Primo shares validly tendered and not properly withdrawn in the offer that have made a cash election.

All such prorations will be applied on a pro rata basis, such that each Primo stockholder who tenders shares subject to a cash election bears its proportionate share of the proration. If proration applies to the Primo shares with respect to which a cash election has been made, the shares that do not receive the cash consideration due to proration will receive the stock consideration.

Over Election of Stock

If the number of Primo shares validly tendered and not properly withdrawn in the offer making a stock election is greater than the number of Primo shares to receive the stock consideration in the offer as calculated above, such shares will be subject to proration. If proration applies to the Primo shares making a stock election in the offer, the percentage of Primo shares making a stock election that will receive the stock consideration will be equal to the following:

 

   

the number of Primo shares that will receive the stock consideration in the offer, as calculated above;

divided by

 

   

the aggregate number of Primo shares validly tendered and not properly withdrawn in the offer that have made a stock election.

All such prorations will be applied on a pro rata basis, such that each Primo stockholder who tenders shares subject to a stock election bears its proportionate share of the proration. If proration applies to the Primo shares with respect to which a stock election has been made, the shares that do not receive the stock consideration due to proration will receive the cash consideration.

See “Risk Factors—Risks Relating to the Offer and Mergers and Combined Company.”

Maximum Cott Common Share Issuance

In no event will the total number of Cott common shares (i) issued pursuant to the offer, (ii) issuable pursuant to the first merger, (iii) issuable pursuant to the Primo warrants, (iv) covered by Primo equity-based awards converted into Cott equity-based awards as of the first effective time and (v) issuable upon exercise or conversion of all convertible securities assumed by Cott in the mergers, constitute such a percentage of the total number of outstanding Cott common shares the issuance of which would require any shareowner action under the rules of the NYSE or the TSX.

Consequences of Tendering with No Election

Primo stockholders who validly tender (and do not properly withdraw) their Primo shares in the offer and do not make an election will be deemed to have elected to receive the mixed consideration.

 

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Expiration of the Offer

The offer is scheduled to expire at 12:00 midnight, New York City Time, at the end of the day on Tuesday, February 25, 2020, unless the offer is extended, terminated or varied. “Expiration date” means February 25, 2020, unless and until the Purchaser has extended the period during which the offer is open, subject to the terms and conditions of the merger agreement, in which event the term “expiration date” means the latest time and date at which the offer, as so extended by the Purchaser, will expire.

Extension, Termination and Amendment of Offer

Unless the merger agreement has been terminated in accordance with its terms, (1) the Purchaser will extend the expiration date for any period required by applicable U.S. federal securities laws and the rules and regulations of the SEC and its staff or the rules and regulations of the NYSE or the TSX applicable to the offer (but in no event will the Purchaser be required to extend the offer past the outside date) and (2) if at any scheduled expiration date any of the offer conditions have not been satisfied or earlier waived, the Purchaser may elect to, and if requested by Primo, will, extend the offer and the expiration date to a date that is not more than 10 business days after such previously scheduled expiration date; provided, that Purchaser will not be required to extend the offer pursuant to this clause (2) on more than two occasions if all offer conditions other than the minimum condition are satisfied on the date on which the offer is scheduled to expire (and in no event will the Purchaser be required to extend the offer beyond the outside date and in no event will the Purchaser be permitted to extend the offer past the outside date unless Primo has consented to such extension).

If the merger agreement is terminated in accordance with its terms, the Purchaser will promptly (and in any event within 24 hours) irrevocably and unconditionally terminate the offer.

If the Purchaser does not accept any tendered Primo shares for exchange pursuant to the terms and conditions of the offer for any reason, including as a result of termination of the offer, the Purchaser will cause to be returned certificates for such unexchanged shares without expense to the tendering stockholder or, in the case of shares tendered by book-entry transfer into the exchange agent’s account at DTC, the shares to be returned will be credited to an account maintained with DTC following any such termination of the offer.

Other than as described above, the Purchaser may not extend, terminate or withdraw the offer without the prior written consent of Primo.

Any decision to extend, terminate or withdraw the offer will be made public by an announcement.

The Purchaser expressly reserves the right to waive any offer condition or modify the terms of the offer, except that the Purchaser may not take the following actions without Primo’s prior written consent: (1) decrease the offer consideration, (2) change the form of consideration payable in the offer, (3) decrease the maximum number of shares sought to be purchased in the offer, (4) impose conditions to the offer in addition to the offer conditions set forth in Annex I to the merger agreement, (5) change the minimum condition, (6) amend, modify, or supplement any of the offer conditions in a manner adverse to Primo stockholders, (7) extend or otherwise change the expiration date of the offer (except to the extent permitted or required pursuant to the terms of the merger agreement), (8) provide any “subsequent offering period” or (9) take any action (or fail to take any action) that would result in the first merger not qualifying for consummation pursuant to Section 251(h) of the DGCL.

In the case of any extension, the Purchaser will make a public announcement of such extension as promptly as practicable following the previously scheduled expiration date. Subject to applicable law (including Rules 14d-4(c) and 14d-6(d) under the Exchange Act, which require that any material change in the information published, sent or given to stockholders in connection with the offer be promptly disseminated to stockholders in a manner reasonably designed to inform them of such change) and without limiting the manner in which the

 

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Purchaser may choose to make any public announcement, the Purchaser assumes no obligation to publish, advertise or otherwise communicate any such public announcement of this type other than by issuing a press release or making a public announcement.

If the Purchaser materially changes the terms of the offer or the information concerning the offer, or if the Purchaser waives a material condition of the offer, the Purchaser will extend the offer to the extent legally required under the Exchange Act.

For purposes of the offer, a “business day” means any day other than a Saturday, Sunday or any other day on which commercial banks in New York, New York are closed and consists of the time period from 12:01 a.m. through 12:00 midnight, Eastern Time.

The parties do not anticipate making any subsequent offering period available after the offer.

Exchange of Shares

Cott has retained Computershare Trust Company of Canada as the exchange agent to handle the exchange of shares for the transaction consideration in both the offer and the first merger.

Upon the terms and subject to the satisfaction or waiver of the conditions of the offer (including, if the offer is extended or amended, the terms and conditions of any such extension or amendment), the Purchaser will accept for exchange promptly after the expiration date, and will thereafter promptly exchange the transaction consideration for, shares of Primo common stock validly tendered and not properly withdrawn. In all cases, a Primo stockholder will receive consideration for tendered Primo shares only after timely receipt by the exchange agent of certificates for those shares, or a confirmation of a book-entry transfer of those shares into the exchange agent’s account at DTC, a properly completed and duly executed letter of election and transmittal, or an agent’s message in connection with a book-entry transfer, and any other required documents.

For purposes of the offer, the Purchaser will be deemed to have accepted for exchange shares validly tendered and not properly withdrawn if and when it notifies the exchange agent of its acceptance of those shares pursuant to the offer. The exchange agent will deliver to the applicable Primo stockholders any cash and Cott common shares issuable in exchange for shares validly tendered and accepted pursuant to the offer promptly after receipt of such notice informing it of the Purchaser’s acceptance. The exchange agent will act as the agent for tendering Primo stockholders for the purpose of receiving cash and Cott common shares from the Purchaser and transmitting such cash and stock to the tendering Primo stockholders. Primo stockholders will not receive any interest on any cash that the Purchaser pays in the offer, even if there is a delay in making the exchange.

Without the prior written consent of Primo, the Purchaser shall not accept for payment or pay for any Primo shares if, as a result, the Purchaser would acquire less than the number of shares of Primo common stock necessary to satisfy the minimum condition to the offer. If the Purchaser does not accept any tendered Primo shares for exchange pursuant to the terms and conditions of the offer for any reason, or if certificates are submitted representing more shares than are tendered for, the Purchaser will cause to be returned certificates for such unexchanged shares without expense to the tendering stockholder or, in the case of shares tendered by book-entry transfer into the exchange agent’s account at DTC, the shares to be returned will be credited to an account maintained with DTC following expiration or termination of the offer.

Withdrawal Rights

Primo stockholders may withdraw tendered shares of Primo common stock at any time until the expiration date (as the same may be extended).

For the withdrawal of shares to be effective, the exchange agent must receive a written notice of withdrawal from the Primo stockholder at one of the addresses set forth elsewhere in this document, prior to the expiration time on

 

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the expiration date. The notice must include the Primo stockholder’s name, address, social security number, the certificate number(s), if any, the number of shares to be withdrawn and the name of the registered holder, if it is different from that of the person who tendered those shares, and any other information required pursuant to the offer or the procedures of DTC, if applicable.

A financial institution must guarantee all signatures on the notice of withdrawal, unless the shares to be withdrawn were tendered for the account of an eligible institution (as defined below). Most banks, savings and loan associations and brokerage houses are able to provide signature guarantees. An “eligible institution” is a financial institution that is a participant in the Securities Transfer Agents Medallion Program.

If shares have been tendered pursuant to the procedures for book-entry transfer, any notice of withdrawal must specify the name and number of the account at DTC to be credited with the withdrawn shares and must otherwise comply with DTC’s procedures. If certificates have been delivered or otherwise identified to the exchange agent, the name of the registered holder and the serial numbers of the particular certificates evidencing the shares withdrawn must also be furnished to the exchange agent, as stated above, prior to the physical release of such certificates.

The Purchaser will decide all questions as to the form and validity (including time of receipt) of any notice of withdrawal in its sole discretion, and its decision will be final and binding. None of the Purchaser, Cott, Primo, the exchange agent, the information agent or any other person is under any duty to give notification of any defects or irregularities in any tender or notice of withdrawal or will incur any liability for failure to give any such notification. Any shares properly withdrawn will be deemed not to have been validly tendered for purposes of the offer. However, a Primo stockholder may re-tender withdrawn shares by following the applicable procedures discussed under the section “Exchange Offer Procedures-Procedures for Tendering” at any time prior to the expiration date.

Procedures for Tendering

To validly tender shares of Primo common stock held of record, Primo stockholders must:

 

   

if such shares are in certificated form or Direct Registration Form, deliver a properly completed and duly executed letter of election and transmittal, along with any required signature guarantees and any other required documents, and certificates, if applicable, for tendered Primo shares to the exchange agent for the offer, at its address set forth elsewhere in this document, all of which must be received by the exchange agent prior to the expiration date; or

 

   

if such shares are in electronic book-entry form, deliver an agent’s message in connection with a book-entry transfer, and any other required documents, to the exchange agent at its address set forth elsewhere in this document and follow the other procedures for book-entry tender set forth herein, all of which must be received by the exchange agent prior to the expiration date.

If shares of Primo common stock are held in “street name” (i.e., through a broker, dealer, commercial bank, trust company or other nominee), those shares may be tendered by the nominee holding such shares by book-entry transfer through DTC. To validly tender such shares held in street name, Primo stockholders should instruct such nominee to do so prior to the expiration date.

The term “agent’s message” means a message transmitted by DTC to, and received by, the exchange agent and forming a part of a book-entry confirmation, which states that DTC has received an express acknowledgment from the DTC participant tendering the shares that are the subject of such book-entry confirmation, that such participant has received and agrees to be bound by the terms of the letter of election and transmittal and that the Purchaser may enforce that agreement against such participant.

The exchange agent has established an account with respect to the shares at DTC in connection with the offer, and any financial institution that is a participant in DTC may make book-entry delivery of shares by causing

 

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DTC to transfer such shares prior to the expiration date into the exchange agent’s account in accordance with DTC’s procedure for such transfer. However, although delivery of shares may be effected through book-entry transfer at DTC, the letter of election and transmittal with any required signature guarantees, or an agent’s message, along with any other required documents, must, in any case, be received by the exchange agent at one of its addresses set forth elsewhere in this document prior to the expiration date. The Purchaser cannot assure Primo stockholders that book-entry delivery of shares will be available. If book-entry delivery is not available, Primo stockholders must tender shares by means of delivery of Primo share certificates. The Purchaser is not providing for guaranteed delivery procedures and therefore Primo stockholders must allow sufficient time for the necessary tender procedures to be completed during normal business hours of DTC prior to the expiration date. Tendered shares received by the exchange agent after the expiration date will be disregarded and of no effect.

Signatures on all letter of election and transmittal must be guaranteed by an eligible institution, except in cases in which shares are tendered either by a registered holder of shares who has not completed the box entitled “Special Issuance Instructions” or the box entitled “Special Delivery Instructions” on the letter of election and transmittal or for the account of an eligible institution.

If the certificates for shares are registered in the name of a person other than the person who signs the letter of election and transmittal, or if certificates for unexchanged shares are to be issued to a person other than the registered holder(s), the certificates must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name or names of the registered owner or owners appear on the certificates, with the signature or signatures on the certificates or stock powers guaranteed by an eligible institution.

The method of delivery of Primo share certificates and all other required documents, including delivery through DTC, is at the option and risk of the tendering Primo stockholder, and delivery will be deemed made only when actually received by the exchange agent. If delivery is by mail, the Purchaser recommends registered mail with return receipt requested and properly insured. In all cases, Primo stockholders should allow sufficient time to ensure timely delivery.

To prevent U.S. federal backup withholding, each Primo stockholder that is a U.S. person, other than a stockholder exempt from backup withholding as described elsewhere in this document, must provide the exchange agent with its correct taxpayer identification number and certify that it is not subject to backup withholding by completing the Internal Revenue Service (“IRS”) Form W-9 included with the letter of election and transmittal. Certain stockholders (including, among others, certain non-U.S. persons) are not subject to these backup withholding requirements. In order for a non-U.S. person to qualify as an exempt recipient for purposes of U.S. backup withholding, the stockholder must submit an IRS Form W-8BEN, or other applicable IRS Form W-8, signed under penalties of perjury, attesting to such person’s exempt status. See “Material U.S. Federal Income Tax Consequences.”

The tender of shares pursuant to any of the procedures described above will constitute a binding agreement between the Purchaser and the tendering Primo stockholder upon the terms and subject to the satisfaction or waiver of the conditions of the offer (including, if the offer is extended or amended, the terms and conditions of any such extension or amendment).

No Guaranteed Delivery

The Purchaser is not providing for guaranteed delivery procedures, and therefore Primo stockholders must allow sufficient time for the necessary tender procedures to be completed during normal business hours of DTC prior to the expiration date. Primo stockholders must tender their Primo shares in accordance with the procedures set forth in this document. In all cases, the Purchaser will exchange shares tendered and accepted for exchange pursuant to the offer only after timely receipt by the exchange agent of certificates for shares (or timely confirmation of a book-entry transfer of such shares into the exchange agent’s account at DTC as described elsewhere in this document), a properly completed and duly executed letter of election and transmittal (or an agent’s message in connection with a book-entry transfer) and any other required documents.

 

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Grant of Proxy

By executing a letter of election and transmittal as set forth above, a Primo stockholder irrevocably appoints the Purchaser’s designees as such Primo stockholder’s attorneys-in-fact and proxies, each with full power of substitution, to the full extent of such stockholder’s rights with respect to its shares tendered and accepted for exchange by the Purchaser and with respect to any and all other shares and other securities issued or issuable in respect of those shares on or after the expiration date. That appointment is effective, and voting rights will be affected, when and only to the extent that the Purchaser accepts tendered Primo shares for exchange pursuant to the offer and deposits with the exchange agent the transaction consideration for such shares. All such proxies will be considered coupled with an interest in the tendered Primo shares and therefore will not be revocable. Upon the effectiveness of such appointment, all prior proxies that the Primo stockholder has given will be revoked, and such stockholder may not give any subsequent proxies (and, if given, they will not be deemed effective). The Purchaser’s designees will, with respect to the shares for which the appointment is effective, be empowered, among other things, to exercise all of such stockholder’s voting and other rights as they, in their sole discretion, deem proper at any annual, special or adjourned meeting of Primo stockholders or otherwise. The Purchaser reserves the right to require that, in order for shares to be deemed validly tendered, immediately upon the exchange of such shares, the Purchaser must be able to exercise full voting rights with respect to such shares. However, prior to acceptance for exchange by the Purchaser in accordance with terms of the offer, the appointment will not be effective, and the Purchaser will have no voting rights as a result of the tender of shares.

Fees and Commissions

Tendering registered Primo stockholders who tender shares directly to the exchange agent will not be obligated to pay any charges or expenses of the exchange agent or any brokerage commissions. Tendering Primo stockholders who hold Primo shares through a broker, dealer, commercial bank, trust company or other nominee should consult that institution as to whether or not such institution will charge the stockholder any service fees in connection with tendering shares pursuant to the offer. Except as set forth in the instructions to the letter of election and transmittal, transfer taxes on the exchange of shares pursuant to the offer will be paid by the Purchaser.

Matters Concerning Validity and Eligibility

The Purchaser will determine questions as to the validity, form, eligibility (including time of receipt) and acceptance for exchange of any tender of shares, in its sole discretion, and its determination will be final and binding. The Purchaser reserves the absolute right to reject any and all tenders of shares that it determines are not in the proper form or the acceptance of or exchange for which may be unlawful. The Purchaser also reserves the absolute right, subject to applicable laws, to waive any defect or irregularity in the tender of any shares. No tender of shares will be deemed to have been validly made until all defects and irregularities in tenders of such shares have been cured or waived. None of the Purchaser, Cott, Primo, the exchange agent, the information agent or any other person will be under any duty to give notification of any defects or irregularities in the tender of any shares or will incur any liability for failure to give any such notification. The Purchaser’s interpretation of the terms and conditions of the offer (including the letter of election and transmittal and instructions thereto) will be final and binding.

Primo stockholders who have any questions about the procedure for tendering shares in the offer should contact the information agent at the address and telephone number set forth elsewhere in this document.

Announcement of Results of the Offer

Cott will announce the final results of the offer, including whether all of the conditions to the offer have been satisfied or waived and whether the Purchaser will accept the tendered shares of Primo common stock for exchange, as promptly as practicable following the expiration date. The announcement will be made by a press release in accordance with applicable securities laws and stock exchange requirements.

 

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No Stockholder Approval

Section 251(h) of the DGCL provides that following consummation of a successful tender offer or exchange offer for a public corporation, and subject to certain statutory provisions, if the acquiring corporation owns at least the amount of shares of each class of stock of the target corporation that would otherwise be required to approve a merger involving the target corporation, and the other stockholders receive the same consideration for their stock in the merger as was payable in the tender offer or exchange offer, the acquiring corporation can effect a merger without the action of the other stockholders of the target corporation. Accordingly, if the offer is completed, it will mean that the minimum condition has been satisfied, and if the minimum condition has been satisfied, it will mean that the first merger will be subject to Section 251(h) of the DGCL. Accordingly, if the offer is completed, Cott intends to affect the closing of the first merger without a vote of the Primo stockholders in accordance with Section 251(h) of the DGCL.

Non-Applicability of Rules Regarding “Going Private” Transactions

The SEC has adopted Rule 13e-3 under the Exchange Act, which is applicable to certain “going private” transactions, and which may under certain circumstances be applicable to the first merger or another business combination following the purchase of shares pursuant to the offer in which the Purchaser seeks to acquire the remaining shares not held by it. The Purchaser believes that Rule 13e-3 will not be applicable to the first merger because it is anticipated that the first merger will be effected within one year following the consummation of the offer and, in the first merger, stockholders will receive the same consideration as that paid in the offer.

Effect of the Offer on the Market for Primo Common Stock

The purchase of shares of Primo common stock by the Purchaser pursuant to the offer will reduce the number of holders of shares of Primo common stock, and the number of shares of Primo common stock that might otherwise trade publicly and could adversely affect the liquidity and market value of the remaining shares held by the public. It is anticipated that, because the first merger will be subject to Section 251(h) of the DGCL if the offer is consummated, the first merger will be consummated on the same day that the offer is consummated. As a result of the first merger, shares of Primo common stock will no longer qualify for inclusion on Nasdaq and will be withdrawn from listing.

Nasdaq Listing

The shares of Primo common stock are currently listed on Nasdaq. However, the rules of Nasdaq establish certain criteria that, if not met, could lead to the discontinuance of listing of the shares of Primo common stock from Nasdaq. Among such criteria are the number of stockholders, the number of shares publicly held and the aggregate market value of the shares publicly held. If, as a result of the purchase of shares of Primo common stock pursuant to the offer, shares of Primo common stock no longer meet the requirements of Nasdaq for continued listing and the listing of shares of Primo common stock is discontinued, the market for such shares would be adversely affected.

Following the consummation of the offer, if the first merger is for some reason not consummated, it is possible that shares of Primo common stock would be traded on other securities exchanges (with trades published by such exchanges), the OTC Bulletin Board or in a local or regional over-the-counter market. The extent of the public market for such shares would, however, depend upon the number of Primo stockholders and the aggregate market value of shares of Primo common stock remaining at such time, the interest in maintaining a market in such shares on the part of securities firms, the possible termination of registration of shares of Primo common stock under the Exchange Act and other factors. As a result of the first merger, shares of Primo common stock will no longer qualify for inclusion on Nasdaq and will be withdrawn from listing.

 

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Registration Under the Exchange Act

The shares of Primo common stock are currently registered under the Exchange Act. Such registration may be terminated upon application by Primo to the SEC if Primo shares are neither listed on a national securities exchange nor held by 300 or more holders of record. Termination of registration of Primo shares under the Exchange Act would substantially reduce the information required to be furnished by Primo to its stockholders and to the SEC and would make certain provisions of the Exchange Act no longer applicable to Primo, such as the short-swing profit recovery provisions of Section 16(b) of the Exchange Act, the requirement of furnishing a proxy statement pursuant to Section 14(a) of the Exchange Act in connection with meetings of stockholders and the related requirement of furnishing an annual report to stockholders and the requirements of Rule 13e-3 under the Exchange Act with respect to “going private” transactions. Furthermore, the ability of “affiliates” of Primo and persons holding “restricted securities” of Primo to dispose of such securities pursuant to Rule 144 promulgated under the Securities Act may be impaired. If registration of shares of Primo common stock under the Exchange Act were terminated, such shares would no longer be “margin securities” or be eligible for listing on Nasdaq. After consummation of the offer, Cott and the Purchaser currently intend to cause Primo to terminate the registration of Primo shares under the Exchange Act as soon as the requirements for termination of registration are met.

Margin Regulations

The shares of Primo common stock are currently “margin securities” under the Regulations of the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”), which designation has the effect, among other effects, of allowing brokers to extend credit on the collateral of such shares of Primo common stock. Depending upon factors similar to those described above regarding the market for Primo shares and stock quotations, it is possible that, following the offer, shares of Primo common stock would no longer constitute “margin securities” for the purposes of the margin regulations of the Federal Reserve Board and, therefore, could no longer be used as collateral for loans made by brokers. As a result of the first merger, shares of Primo common stock will no longer constitute “margin securities.”

Exchange Agent Contact Information

The contact information for the exchange agent for the offer and the first merger is:

Computershare Trust Company of Canada

If delivering by mail:

P.O. Box 7021

31 Adelaide St. E

Toronto, ON M5C 3H2

Attn: Corporate Actions

If delivering by hand or courier:

100 University Avenue

8th Floor

Toronto, ON M5J 2Y1

Attn: Corporate Actions

 

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MERGER AGREEMENT

The following summary describes certain material provisions of the merger agreement and the amendment thereto entered into by Cott, Holdings, the Purchaser, Merger Sub 2 and Primo, copies of which are attached to this document as Annex A-1 and Annex A-2, respectively, and incorporated into this document by reference. This summary may not contain all of the information about the merger agreement that is important to Primo stockholders, and Primo stockholders are encouraged to read the merger agreement carefully in its entirety. The legal rights and obligations of the parties are governed by the specific language of the merger agreement and not this summary.

The summary of the merger agreement is intended to provide information regarding the terms of the merger agreement and is not intended to modify or supplement any factual disclosures about Cott or Primo in either of their public reports filed with the SEC. In particular, the merger agreement and the related summary are not intended to be, and should not be relied upon as, disclosures regarding any facts and circumstances relating to any party to the merger agreement. The merger agreement includes representations, warranties and covenants of the parties thereto made solely for the benefit of such parties. The assertions embodied in those representations and warranties were made solely for purposes of the contract among the parties to the merger agreement and may be subject to important qualifications and limitations agreed to by the parties thereto in connection with the negotiated terms. Moreover, some of those representations and warranties may not be accurate or complete as of any specified date, may be subject to a contractual standard of materiality different from those generally applicable to Cott’s or Primo’s SEC filings or may have been used for purposes of allocating risk among the parties rather than establishing matters as facts. Primo stockholders should not rely on the representations, warranties and covenants or any description thereof as characterizations of the actual state of facts of the parties to the merger agreement.

The Offer

The Purchaser is offering to exchange the transaction consideration for each outstanding share of Primo common stock that is validly tendered in the offer and not properly withdrawn.

The Purchaser’s obligation to accept for exchange and to exchange shares of Primo common stock validly tendered in the offer and not properly withdrawn is subject to the satisfaction or waiver of certain conditions, including there having been a number of shares of Primo common stock validly tendered and not properly withdrawn prior to the expiration of the offer that, together with the shares of Primo common stock then owned by Cott, the Purchaser and Cott’s other subsidiaries, represents at least a majority of all then-outstanding shares of Primo common stock. This condition is referred to as the “minimum condition.” See “Merger Agreement – Conditions to the Transactions – Conditions to the Offer” for a description of the other offer conditions. As used herein, “offer conditions” means those conditions set forth on Annex I to the merger agreement and summarized in “Merger Agreement – Conditions to the Transactions – Conditions to the Offer.”

The offer is scheduled to expire at 12:00 midnight, New York City Time, at the end of the day on Tuesday, February 25, 2020, unless the offer is extended, terminated or varied by Cott and Primo. Any extension, delay, termination, waiver or amendment of the offer will be followed by public announcement thereof. During any such extension, all shares previously validly tendered and not properly withdrawn will remain subject to the offer, subject to the rights of a tendering stockholder to withdraw such stockholder’s shares. As used herein “expiration date” means February 25, 2020, unless and until the Purchaser has extended the period during which the offer is open, subject to the terms and conditions of the merger agreement, in which event the term “expiration date” means the latest time and date at which the offer, as so extended by the Purchaser pursuant to the terms of the merger agreement, will expire.

Unless the merger agreement has been terminated in accordance with its terms, (1) the Purchaser will extend the expiration date for any period required by applicable U.S. federal securities laws and the rules and regulations of

 

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the SEC and its staff or the rules and regulations of the NYSE or the TSX applicable to the offer (but in no event will the Purchaser be required to extend the offer past the outside date) and (2) if at any scheduled expiration date any of the offer conditions have not been satisfied or earlier waived, the Purchaser may elect to, and if requested by Primo, will, extend the offer and the expiration date to a date that is not more than 10 business days after such previously scheduled expiration date; provided, that Purchaser is not required to extend the offer pursuant to this clause (2) on more than two occasions if all offer conditions other than the minimum condition are satisfied on the date on which the offer is scheduled to expire (and in no event will the Purchaser be required to extend the offer beyond the outside date if the Purchaser is entitled to terminate the merger agreement pursuant to Section 8.1(e) of the merger agreement and in no event will the Purchaser be permitted to extend the offer past the outside date unless Primo has consented to such extension).

See “Exchange Offer Procedures – Extension, Termination and Amendment of Offer.”

The Mergers

The first merger and the second merger will be completed as soon as practicable after the satisfaction or waiver of the closing conditions and following the consummation of the offer. The first merger refers to the merger of Purchaser with and into Primo, with Primo surviving the first merger, which will occur at the first effective time. The first merger will be governed by Section 251(h) of the DGCL, and, accordingly, no stockholder vote will be required to consummate the first merger. As such, Cott anticipates that, the first merger will be completed on or about the same day as completion of the offer. The second merger refers to the merger of Primo, as the company surviving the first merger, with and into Merger Sub 2, with Merger Sub 2 surviving the second merger, which will occur at the second effective time. As a result of the first merger, Primo will be an indirect wholly-owned subsidiary of Cott, and the former stockholders of Primo will no longer have any direct ownership interest in the first surviving company.

Each merger will become effective upon the issuance of a certificate of merger by the Secretary of State of the State of Delaware unless a later date is specified therein. The first merger (the merger of the Purchaser with and into Primo whereby Primo will become an indirect wholly-owned subsidiary of Cott) must precede the second merger (the merger of the corporation surviving the first merger with and into Merger Sub 2). The second merger is anticipated to occur immediately following the first merger.

Effect of the Mergers

At the first effective time, by virtue of the first merger and without any action on the part of the parties to the merger agreement or the holders of any shares of Primo common stock or on the part of the sole stockholder of the Purchaser:

 

   

Each share of Primo common stock issued and outstanding immediately prior to the first effective time that is (i) owned or held in treasury by Primo or (ii) owned by Cott, the Purchaser or any other direct or indirect wholly-owned subsidiary of Cott will, in each case of the foregoing clauses (i) and (ii), no longer be outstanding and will automatically be cancelled and retired and will cease to exist, and no consideration will be delivered in exchange therefor (the “cancelled shares”).

 

   

Each share of Primo common stock issued and outstanding immediately prior to the first effective time (other than any cancelled shares and any dissenting shares, but including shares paid to a holder of a vested Primo equity-based award or Primo warrant immediately prior to the first effective time, as described further in “Merger Agreement – Treatment of Primo Equity-Based Awards: Employee Stock Purchase Plan”) will be automatically converted into the right to receive the transaction consideration. From and after the first effective time, each applicable holder of such shares of Primo common stock will cease to have any rights with respect thereto, all such shares of Primo common stock will no longer be outstanding and will automatically be cancelled and retired and will cease to exist, and uncertificated shares of Primo common stock represented by book-entry form (“book-entry shares”)

 

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and each certificate that, immediately prior to the first effective time, represented any such shares of Primo common stock will thereafter represent only the right to receive the transaction consideration upon the surrender of such shares of Primo common stock.

 

   

Any shares of Primo common stock issued and outstanding immediately prior to the first effective time and held by a person (a “dissenting stockholder”) who has not tendered into the offer and has complied with all the provisions of the DGCL concerning the right of holders of shares of Primo common stock to require appraisal of their shares (the “appraisal provisions”) of Primo common stock (“dissenting shares”), to the extent the appraisal provisions are applicable, will not be converted into the right to receive the transaction consideration, but will become the right to receive such consideration as may be determined to be due to such dissenting stockholder pursuant to the procedures set forth in the DGCL. If such dissenting stockholder, after the first effective time, withdraws its demand for appraisal or fails to perfect or otherwise loses its right of appraisal, in any case pursuant to the DGCL, each of such dissenting stockholder’s shares of Primo common stock will thereupon be treated as though such shares of Primo common stock had been converted as of the first effective time into the right to receive the transaction consideration.

 

   

Each issued and outstanding share of common stock of the Purchaser will be automatically converted into and become one fully paid and nonassessable share of common stock of the corporation surviving the first merger and will constitute the only outstanding shares of capital stock of the corporation surviving the first merger, which will be an indirect wholly-owned subsidiary of Cott.

At the second effective time, by virtue of the second merger and without any action on the part of any of the parties or holders of any securities of the corporation surviving the first merger or Merger Sub 2:

 

   

Each membership interest of Merger Sub 2 issued and outstanding immediately prior to the second effective time will remain outstanding as a membership interest of the company surviving the second merger.

 

   

All shares of common stock of the company surviving the first merger will no longer be outstanding and will automatically be cancelled and will cease to exist without any consideration being payable therefor.

The effects of the mergers will be as provided in the merger agreement and in the applicable provisions of the DGCL and the Delaware Limited Liability Company Act (the “DLLCA”). Without limiting the generality of the foregoing, and subject thereto, (a) at the first effective time, all of the property, rights, privileges, powers and franchises of Primo and the Purchaser will vest in the company surviving the first merger, and all debts, liabilities and duties of Primo and the Purchaser will become the debts, liabilities and duties of the company surviving the first merger, all as provided under the DGCL and (b) at the second effective time, all of the property, rights, privileges, powers and franchises of the company surviving the first merger and Merger Sub 2 will vest in the company surviving the second merger, and all debts, liabilities and duties of the company surviving the first merger and Merger Sub 2 will become the debts, liabilities and duties of the company surviving the second merger, all as provided under the DGCL and the DLLCA.

Transaction Consideration

The transaction consideration consists of, for each share of Primo common stock:

 

   

$5.04 in cash, without interest and less any applicable taxes required to be deducted or withheld in respect thereof; and

 

   

0.6549 Cott common shares.

We refer to the above as the “mixed consideration.” In lieu of receiving the mixed consideration, holders of Primo shares may elect to receive, for each share of Primo common stock that they hold, (1) $14.00 in cash (we

 

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refer to this election as the “cash election”) or (2) 1.0229 Cott common shares (we refer to this election as the “stock election”), subject, in each case, to the proration mechanism summarized in the immediately following paragraph.

Primo stockholders with shares to be converted into the transaction consideration who do not make a valid election will receive the mixed consideration for their Primo shares. Primo stockholders who make the cash election or the stock election will be subject to proration to ensure that approximately 64.02% of the aggregate consideration in the first merger will be paid in Cott common shares and approximately 35.98% of the aggregate consideration in the first merger will be paid in cash (in each case, as reduced by the Primo shares held by stockholders who have properly exercised and perfected appraisal rights under the DGCL). If Primo stockholders tender shares of Primo common stock in excess of the 64.02% limit on stock consideration, all such stockholders who tendered for Cott common shares will be prorated down, on a pro rata basis, to ensure that approximately 64.02% of shares of Primo common stock receive Cott common shares as consideration, and shares in excess of that limit will receive the cash consideration. If Primo stockholders tender shares of Primo common stock in excess of the 35.98% limit on cash consideration, all such stockholders who tendered for cash will be prorated down, on a pro rata basis, to ensure that approximately 35.98% of shares of Primo common stock receive cash as consideration, and shares in excess of that limit will receive the stock consideration.

In no event will the total number of Cott common shares (i) issued pursuant to the offer, (ii) issuable pursuant to the first merger, (iii) issuable pursuant to the Primo warrants, (iv) covered by Primo equity-based awards converted into Cott equity awards as of the first effective time and (v) issuable upon exercise or conversion of all convertible securities assumed by Cott in the mergers, constitute such a percentage of the total number of outstanding Cott common shares the issuance of which would require any shareowner action under the rules of the NYSE the TSX.

See “Exchange Offer Procedures – Elections and Proration” for a description of the proration procedure.

Fractional Shares

Cott will not issue fractional Cott common shares in the offer or the first merger. Each holder of Primo common stock who otherwise would be entitled to receive a fraction of a Cott common share pursuant to the offer (after aggregating all shares of Primo common stock validly tendered in the offer (and not validly withdrawn) by such holder and all shares of Primo common stock underlying vested Primo equity-based awards and stock purchase warrants (to the extent such equity-based awards and stock purchase warrants are in-the-money) held by such holder) will be paid an amount in cash (without interest) equal to such fractional part of a Cott common share multiplied by the volume weighted average sale price per share of Cott common shares on the NYSE for the consecutive period of ten trading days ending on the trading day immediately preceding the closing date.

Each holder of Primo common stock that was converted into the right to receive the transaction consideration in the first merger who otherwise would be entitled to receive a fraction of a Cott common share pursuant to the merger (after aggregating all shares of Primo common stock delivered by such holder and all shares of Primo common stock underlying vested Primo equity-based awards and stock purchase warrants (to the extent such equity-based awards and stock purchase warrants are in-the-money) held by such holder) will be entitled to receive, in lieu thereof, an amount in cash (without interest) equal to such fractional part of a Cott common share multiplied by the volume weighted average sale price per share of Cott common shares on the NYSE for the consecutive period of ten trading days ending on the trading day immediately preceding the closing date.

No such holder will be entitled to dividends, voting rights or any other rights in respect of any fractional Cott common share.

Exchange of Primo Stock Certificates for the Transaction Consideration

Cott has retained Computershare Trust Company of Canada as the exchange agent for the offer and the first merger to handle the exchange of shares of Primo common stock for the transaction consideration.

 

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To effect the exchange of shares of Primo common stock that were converted into the right to receive the transaction consideration in the first merger, promptly after the first effective time, the exchange agent will mail to each record holder of Primo shares of common stock or Primo equity-based awards an applicable letter of election and transmittal and instructions for surrendering the stock certificates or book-entry shares that formerly represented shares of Primo common stock for the transaction consideration. After valid surrender to the exchange agent of the stock certificates or book-entry shares that formerly represented shares of Primo common stock, together with a duly completed and validly executed letter of election and transmittal, the record holder of the surrendered shares of Primo common stock will be entitled to receive the transaction consideration payable in respect of such shares of Primo common stock (including cash in lieu of any fractional shares), and the payment of any dividends or other distributions, without interest, which prior to proper exchange of such shares had since become payable with respect to the Cott common shares issuable as stock consideration in respect of such shares.

After the first effective time, each stock certificate formerly representing shares of Primo common stock that has not been validly surrendered will represent only the right to receive upon such surrender the transaction consideration to which such holder is entitled in respect of such shares of Primo common stock represented by such certificate by virtue of the first merger and any dividends or other distributions payable to such holder upon such surrender.

Treatment of Primo Equity-Based Awards; Employee Stock Purchase Plan

Under the merger agreement, Primo equity and equity-based awards are treated as follows.

Vested in-the-Money Primo Options

Immediately prior to the first effective time, the portion of each option to acquire shares of Primo common stock that is then outstanding and unexercised and that has a per-share exercise price less than the amount of the cash consideration, to the extent vested in accordance with its terms as of the first effective time (whether by virtue of prior vesting or upon acceleration of such vesting in connection with the transactions, in accordance with the terms of such option), will be settled and paid to such holder in Primo shares (net of any Primo shares equal in value to the aggregate exercise price thereof and any applicable tax to be deducted or withheld in respect thereof) at a per-share price equal to the cash consideration, and such holder will have the right to submit an election to receive transaction consideration with respect to such settled and paid Primo shares in accordance with the terms and procedures described under the heading “The Offer – Elections and Proration”. Any vested Primo option with a per-share exercise price that is equal to or greater than the cash consideration will be cancelled for no consideration.

Unvested Primo Options

At the first effective time, the portion of each Primo option that is outstanding and unexercised as of immediately prior to the first effective time, and has not vested in accordance with its terms, will be cancelled in exchange for an option issued, immediately following the first effective time, under a Cott equity incentive plan, subject to the same vesting schedule in effect immediately prior to the first effective time, in each case, to purchase a number of Cott common shares equal to (a) the number of Primo shares subject to such unvested portion of such Primo option as of immediately prior to the first effective time, multiplied by (b) the equity award adjustment ratio, with an exercise price per share equal to (y) the exercise price per Primo share for which such Primo option was exercisable as of immediately prior to the first effective time, divided by (z) the equity award adjustment ratio. The “equity award adjustment ratio” is equal to 1.0229. The exercise price and the number of Cott common shares purchasable pursuant to the rollover options will be determined in a manner consistent with the requirements of Section 409A of the Code and, in the case of any such rollover option to which Section 422 of the Code applies, the exercise price and the number of Cott common shares purchasable pursuant to such rollover option will be determined subject to such adjustments as are necessary in order to satisfy the requirements of Section 424(a) of the Code.

 

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Vested Primo RSUs

Immediately prior to the first effective time, the portion of each Primo restricted stock unit award (“RSU”) that is then outstanding, to the extent vested in accordance with its terms as of the first effective time, will be settled and paid to such holder in Primo shares (net of any Primo shares equal in value to any applicable tax to be deducted or withheld in respect thereof) at a per-share price equal to the cash consideration, and such holder will have the right to submit an election to receive transaction consideration with respect to such settled and paid Primo shares in accordance with the terms and procedures described under the heading “The Offer – Elections and Proration”.

Unvested Primo RSUs

At the first effective time, the portion of each Primo RSU that is outstanding as of immediately prior to the first effective time that is not vested will be cancelled in exchange for a restricted stock unit award issued, immediately following the first effective time, under a Cott equity incentive plan, subject to the same vesting schedule in effect immediately prior to the first effective time, in each case, covering a number of Cott common shares that is equal to (i) the number of shares of Primo common stock subject to such unvested portion of such Primo RSU as of immediately prior to the first effective time, multiplied by (ii) the equity award adjustment ratio (after such conversion, “rollover RSUs”). Any rollover RSU issued will be subject to the same terms and conditions as set forth in the cancelled unvested Primo RSU to the extent such terms and conditions are required for compliance with Section 409A of the Code.

Primo LTPP Units

Immediately prior to the first effective time, each Primo LTPP unit award that is then outstanding, to the extent vested in accordance with its terms as of the first effective time based on achievement of performance goals through the first effective time, will be settled and paid to such holder in Primo shares (net of any Primo shares equal in value to any applicable tax to be deducted or withheld in respect thereof) and such holder will have the right to submit an election to receive transaction consideration with respect to such settled and paid Primo shares in accordance with the terms and procedures described under the heading “The Offer – Elections and Proration”. Any Primo LTPP unit that is not vested immediately prior to the first effective time will be cancelled for no consideration.

Primo DSUs

Immediately prior to the first effective time, each Primo DSU will be cancelled in exchange for the right to receive from Purchaser (without interest and less amounts to be withheld or deducted by Primo for taxes) an amount in cash equal to the product obtained by multiplying (i) the total number of Primo shares then subject to such Primo DSU by (ii) the cash consideration. Purchaser will pay to each holder of a Primo DSU the cash amount described in the immediately preceding sentence, and to Primo the cash amount to be withheld or deducted by Primo for taxes, in each case, within five business days following the first effective time. Primo will take all necessary action to terminate its amended and restated executive deferred compensation plan within 30 days prior to the first effective time in accordance with applicable Treasury regulations promulgated under the Code.

Primo Warrants

Immediately prior to the first effective time, each warrant to purchase shares of Primo common stock then outstanding and unexercised and that has a per-share exercise price less than the amount of the cash consideration will be settled and paid to such holder in Primo shares (net of any Primo shares equal in value to the aggregate exercise price thereof and any applicable tax to be deducted or withheld in respect thereof) at a per-share price equal to the cash consideration, and such holder will have the right to submit an election to receive transaction consideration with respect to such settled and paid Primo shares. Any warrant with an exercise price equal to or greater than the cash consideration will be cancelled for no consideration.

 

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2010 Employee Stock Purchase Plan

Prior to the time of Cott’s acceptance of any tender of shares, Primo intends to take all actions with respect to the Primo 2010 Employee Stock Purchase Plan (as amended, the “Primo ESPP”) such that the offering in progress thereunder as of January 13, 2020 will be the final offering under the Primo ESPP. Primo intends to (i) take all actions necessary such that within 20 days following January 13, 2020, notice shall be given to participants in the Primo ESPP that the date that is ten days from the date such notice is given shall be the last day of such offering (the “final purchase”); (ii) make such other pro-rata adjustments as may be necessary to reflect the final offering but otherwise treating such final offering as a fully effective and completed offering for all purposes and (iii) issue all shares of Primo common stock that Primo is obligated to issue to each participant under the Primo ESPP for such final offering promptly upon the close of the final purchase (and in any event no later than five days prior to the time of Cott’s acceptance of any tender of shares).

Other Equity-Based Incentive Plans

Prior to the time of Cott’s acceptance of any tender of shares, Primo intends to take all actions to terminate all of Primo’s equity-based incentive plans, long-term performance plan, amended and restated executive deferred compensation plan and non-employee director compensation policy.

Conditions to the Transactions

Completion of the transactions is subject to a number of conditions. If the conditions to the offer are satisfied or waived and the offer is completed, completion of the mergers is subject to further conditions, and the mergers will be completed as soon as practicable after the offer is completed subject to the satisfaction or waiver of such further conditions.

Conditions to the Offer

Completion of the offer is subject to a number of conditions. If such conditions are satisfied or waived and the offer is completed, the mergers will be completed as soon as practicable after the offer is completed, subject to the satisfaction of the conditions thereto. The Purchaser will not be required to, and Cott will not be required to cause the Purchaser to, accept for payment any tendered shares of Primo common stock until each of the following conditions has been satisfied or waived.

 

   

Minimum Condition – there shall have been validly tendered and not properly withdrawn shares of Primo common stock that, considered together with all other shares of Primo common stock (if any) beneficially owned by Cott, the Purchaser or their respective subsidiaries, represent a majority of the total number of shares of Primo common stock outstanding immediately prior to Cott’s acceptance of the tendered shares (giving effect to any shares issued in respect of equity awards as described under the heading “Merger Agreement – Treatment of Primo Equity-Based Awards; Employee Stock Purchase Plan”);

 

   

Regulatory Approval – any waiting period (and extensions thereof) applicable to the offer under the HSR Act shall have expired or been terminated;

 

   

Effectiveness of Form S-4 – the registration statement on Form S-4 relating to the exchange offer (of which this document is a part) shall have been declared effective by the SEC under the Securities Act, which occurred on February 11, 2020, and no stop order suspending the effectiveness of such Form S-4 shall have been issued by the SEC or proceedings for that purpose been initiated or threatened by the SEC;

 

   

No Material Adverse Effect – since January 13, 2020, there not having occurred any Company Material Adverse Effect (as defined herein) that is continuing as of the expiration date;

 

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Listing of Cott Common Shares – the Cott common shares issued in connection with the offer and the first merger shall have been approved for listing on the NYSE and the TSX, subject to official notice of issuance;

 

   

No Legal Prohibition – no governmental entity of competent jurisdiction shall have issued any judgment, temporary restraining order, preliminary or permanent injunction or other order that remains in effect preventing the consummation of the offer or the mergers, nor shall there be any pending or threatened (in writing) action by any governmental entity, or any law or order promulgated, entered, enforced, enacted, issued or deemed applicable to the offer or the mergers by any governmental entity which prohibits, or makes illegal the consummation of the offer or the mergers;

 

   

Accuracy of Primo’s Representations

 

   

(i) certain representations and warranties of Primo pertaining to Primo’s capital stock shall have been accurate in all respects as of the date of the merger agreement and as of the date of Cott’s acceptance of the tendered shares, except where the failure to be so accurate in all respects are, in the aggregate, de minimis in nature and amount and (ii) the representations and warranties of Primo pertaining to Primo’s capital stock (other than those referenced in clause (i)), subsidiaries, authority, takeover statutes, brokers and opinion of Primo’s financial advisor shall have been accurate in all material respects as of the date of the merger agreement and shall be accurate in all material respects at and as of the date of Cott’s acceptance of the tendered shares as if made on and as of such date;

 

   

certain representations and warranties of Primo pertaining to the absence of certain changes or events shall have been accurate in all respects as of the date of the merger agreement and shall be accurate in all respects at and as of the date of Cott’s acceptance of the tendered shares as if made on and as of such date; and

 

   

the representations and warranties of Primo set forth in Section 3 of the merger agreement (other than those referred to above) (i) shall have been accurate in all respects as of the date of the merger agreement and (ii) shall be accurate in all respects at and as of the date of Cott’s acceptance of the tendered shares as if made on and as of such date, except, in each case, that any inaccuracies in such representations and warranties will be disregarded for the purposes of determining the satisfaction of this condition if the circumstances giving rise to all such inaccuracies (considered collectively) do not collectively constitute, and would not reasonably be expected to collectively have, a material adverse affect on Primo;

 

   

Primo’s Compliance with Covenants – Primo shall have complied with or performed in all material respects all of the covenants and agreements that Primo is required to comply with or perform at or prior to the date of Cott’s acceptance of the tendered shares;

 

   

Primo Closing Certificate – Cott and Purchaser shall have received a certificate executed on behalf of Primo by Primo’s Chief Executive Officer and Chief Financial Officer confirming that certain conditions set forth in the merger agreement have been duly satisfied; and

 

   

Termination of Merger Agreement – the merger agreement shall not have been terminated in accordance with its terms.

The Purchaser expressly reserves the right to waive any offer condition or modify the terms of the offer, except that, without the prior written consent of Primo, the Purchaser will not, and Cott will not permit the Purchaser to, (1) decrease the offer consideration, (2) change the form of consideration payable in the offer, (3) decrease the maximum number of shares sought to be purchased in the offer, (4) impose conditions to the offer in addition to the offer conditions summarized above, (5) change the minimum condition, (6) amend, modify, or supplement any of the offer conditions in a manner adverse to Primo stockholders, (7) extend or otherwise change the expiration date of the offer (except to the extent permitted or required pursuant to the terms of the merger agreement), (8) provide any “subsequent offering period” in accordance with Rule 14d-11 under the Securities

 

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Act or (9) take any action (or fail to take any action) that would result in the first merger not qualifying for consummation pursuant to Section 251(h) of the DGCL. The offer may not be terminated by Cott prior to the expiration date (or any rescheduled expiration date) without Primo’s prior written consent, unless the merger agreement is terminated in accordance with its terms.

Conditions to the Mergers Following Completion of the Offer

The respective obligations of each party to effect the mergers are subject to the satisfaction or waiver of the following conditions:

 

   

Consummation of Offer – the Purchaser shall have accepted for payment and paid for all of the shares of Primo common stock validly tendered in the offer and not properly withdrawn; and

 

   

No Legal Prohibition – no governmental entity of competent jurisdiction shall have issued any judgment, temporary restraining order, preliminary or permanent injunction or other order that remains in effect preventing the consummation of the offer or the mergers, nor shall there be any pending or threatened (in writing) action by any governmental entity, or any law or order promulgated, entered, enforced, enacted, issued or deemed applicable to the offer or the mergers by any governmental entity which prohibits, or makes illegal the consummation of the offer or the mergers.

Material Adverse Effect

A “Company Material Adverse Effect” is defined by the merger agreement to mean any fact, circumstance, occurrence, event, development, change or effect (each, an “effect”) that, individually or when taken together with all other effects, has had or is reasonably likely to have a material adverse effect on (i) the business, financial condition or results of operations of Primo and is subsidiaries taken as a whole or (ii) the ability of Primo to fulfill its obligations under the merger agreement or to consummate the transactions on the terms set forth in the merger agreement; provided, however, that, none of the following effects, by itself or when aggregated with any one or more other effects, shall be deemed to be or constitute a Company Material Adverse Effect and none of the following effects, by itself or when aggregated with any one or more other effects, shall be taken into account when determining whether a Company Material Adverse Effect has occurred or is reasonably likely to occur for purposes of clause (i) above, if such effect arises out of or results from:

 

  (A)

(1) general market, economic or political conditions in the United States or other locations in which Primo or its subsidiaries have operations worldwide; (2) conditions (or any changes therein) in the industries in which Primo or any of its subsidiaries conducts business; or (3) any acts of terrorism or war, geopolitical or weather conditions or other force majeure events, in the case of each of clauses (1), (2) and (3), solely to the extent that such effects do not have and are not reasonably likely to have a disproportionate impact on the Primo and its subsidiaries, taken as a whole, relative to other companies operating in the same industries in which the Primo and its subsidiaries conduct business;

 

  (B)

changes in GAAP or other accounting standards (or the interpretation thereof by a third party governmental entity), solely to the extent that such changes do not have and are not reasonably likely to have a disproportionate impact on Primo and its subsidiaries, taken as a whole, relative to other companies operating in the same industries in which any Primo or any of its subsidiaries conducts business;

 

  (C)

changes in applicable law or regulatory conditions (or the interpretation thereof by a third party governmental entity), solely to the extent that such changes do not have and are not reasonably likely to have a disproportionate impact on the Primo and its subsidiaries, taken as a whole, relative to other companies operating in the same industries in which Primo or any of its subsidiaries conducts business;

 

  (D)

any failure by Primo or any of its subsidiaries to meet any public estimates or expectations of Primo’s bookings, revenue, earnings or other financial performance or results of operations for any period (it being understood that any underlying cause of any such failure may, subject to the other terms of this

 

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  definition, be taken into consideration when determining whether a Company Material Adverse Effect has occurred or is reasonably likely to occur);

 

  (E)

any effect (including the loss of any officer or employee, the loss of, or a change in any relationship with, any customer, governmental entity, supplier, vendor, investor, licensor, licensee or partner) arising or resulting from the announcement or pendency of the merger agreement, the offer, the merger or any of the other transactions contemplated by the merger agreement;

 

  (F)

any effect arising or resulting from (1) any action or inaction by Primo or any of its subsidiaries taken or omitted to be taken with the consent or at the request of Cott or the Purchaser, or (2) compliance by Primo with the terms of, or the taking of any action required by, the merger agreement; and

 

  (G)

any decline in Primo’s stock price or any decline in the market price or trading volume of the shares of Primo common stock on Nasdaq, in and of itself.

A “Parent Material Adverse Effect” is defined by the merger agreement to mean any effect that, individually or when taken together with all other effects, has had or is reasonably likely to have a material adverse effect on (i) the business, financial condition or results of operations of Cott and is subsidiaries taken as a whole or (ii) the ability of Cott, Holdings, the Purchaser and Merger Sub 2 to fulfill any of their obligations under the merger agreement or to consummate the transactions on the terms set forth in the merger agreement; provided, however, that, none of the following effects, by itself or when aggregated with any one or more other effects, shall be deemed to be or constitute a Parent Material Adverse Effect and none of the following effects, shall be deemed to be or constitute a Parent Material Adverse Effect and none of the following effects, by itself or when aggregated with any one or more other effects, shall be taken into account when determining whether a Parent Material Adverse Effect has occurred or is reasonably likely to occur for purposes of clause (i) above, if such effect arises out of or results from:

 

  (A)

(1) general market, economic or political conditions in the United States or other locations in which Cott or its subsidiaries have operations worldwide; (2) conditions (or any changes therein) in the industries in which Cott or any of its subsidiaries conducts business; or (3) any acts of terrorism or war, geopolitical or weather conditions or other force majeure events, in the case of each of clauses (1), (2) and (3), solely to the extent that such effects do not have and are not reasonably likely to have a disproportionate impact on the Cott and its subsidiaries, taken as a whole, relative to other companies operating in the same industries in which the Cott and its subsidiaries conduct business;

 

  (B)

changes in GAAP or other accounting standards (or the interpretation thereof by a third party governmental entity), solely to the extent that such changes do not have and are not reasonably likely to have a disproportionate impact on Cott and its subsidiaries, taken as a whole, relative to other companies operating in the same industries in which any Cott or any of its subsidiaries conducts business;

 

  (C)

changes in applicable law or regulatory conditions (or the interpretation thereof by a third party governmental entity), solely to the extent that such changes do not have and are not reasonably likely to have a disproportionate impact on the Cott and its subsidiaries, taken as a whole, relative to other companies operating in the same industries in which Cott or any of its subsidiaries conducts business;

 

  (D)

any failure by Cott or any of its subsidiaries to meet any public estimates or expectations of Cott’s bookings, revenue, earnings or other financial performance or results of operations for any period (it being understood that any underlying cause of any such failure may, subject to the other terms of this definition, be taken into consideration when determining whether a Parent Material Adverse Effect has occurred or is reasonably likely to occur);

 

  (E)

any effect (including the loss of any officer or employee, the loss of, or a change in any relationship with, any customer, governmental entity, supplier, vendor, investor, licensor, licensee or partner) arising or resulting from the announcement or pendency of the merger agreement, the offer, the mergers or any of the other transactions contemplated by the merger agreement;

 

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  (F)

any effect arising or resulting from compliance by Cott or the Purchaser with the terms of, or the taking of any action required by, the merger agreement; and

 

  (G)

any decline in Cott’s stock price or any decline in the market price or trading volume of the shares of Cott common shares on the NYSE, in and of itself.

Representations and Warranties

The merger agreement contains customary representations and warranties of the parties. These include representations and warranties of Primo with respect to:

 

   

organization, standing and power;

 

   

capital stock;

 

   

subsidiaries;

 

   

authority relative to the merger agreement and due execution and delivery of the merger agreement;

 

   

no conflicts or violations; required consents and approvals;

 

   

SEC filings and financial statements;

 

   

information supplied;

 

   

absence of undisclosed liabilities;

 

   

absence of certain changes and events;

 

   

title to assets;

 

   

litigation;

 

   

compliance with laws and regulations;

 

   

benefit plans;

 

   

employment matters;

 

   

environmental matters;

 

   

tax matters;

 

   

material contracts;

 

   

customers and suppliers and adequacy of supply;

 

   

insurance;

 

   

real property;

 

   

intellectual property;

 

   

related party transactions;

 

   

takeover statutes;

 

   

brokers;

 

   

fairness opinion of financial advisor;

 

   

product liability; and

 

   

absence of any other representations.

 

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The merger agreement also contains customary representations and warranties of Cott, Holdings, the Purchaser and Merger Sub 2, including with respect to:

 

   

organization, standing and power;

 

   

capital stock;

 

   

subsidiaries;

 

   

authority relative to the merger agreement and due execution and delivery of the merger agreement;

 

   

no conflicts or violations; required consents and approvals;

 

   

SEC and OSC filings and financial statements;

 

   

information supplied;

 

   

absence of undisclosed liabilities;

 

   

absence of certain changes and events;

 

   

title to assets;

 

   

litigation;

 

   

compliance with laws and regulations;

 

   

benefit plans;

 

   

employment matters;

 

   

environmental matters;

 

   

tax matters;

 

   

material contracts;

 

   

customers and suppliers and adequacy of supply;

 

   

insurance;

 

   

real property;

 

   

intellectual property;

 

   

related party transactions;

 

   

brokers;

 

   

stock ownership;

 

   

absence of purchaser activity;

 

   

interest in shares;

 

   

sufficiency of funds and validity of issuance;

 

   

commitment letter financing; and

 

   

absence of any other representations.

The representations and warranties contained in the merger agreement do not survive completion of the transactions. The representations, warranties and covenants made by Primo in the merger agreement are qualified by information contained in the disclosure schedules delivered to Cott, Holdings, the Purchaser and Merger Sub 2 in connection with the execution of the merger agreement. The representations, warranties and covenants made by Cott, Holdings, the Purchaser and Merger Sub 2 in the merger agreement are qualified by information

 

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contained in the disclosure schedules delivered to Primo in connection with the execution of the merger agreement. Stockholders are not direct third-party beneficiaries of these representations and warranties under the merger agreement and should not rely on any of the representations and warranties or any descriptions thereof as characterizations of the actual state of facts or condition of Primo or any of its affiliates or of Cott or any of its affiliates.

No Solicitation of Other Offers by Primo

Under the terms of the merger agreement, subject to certain exceptions described below, Primo has agreed that it will and will cause each of its subsidiaries, and Primo will direct its and its subsidiaries’ respective officers, directors, employees, attorneys, accountants, investment bankers, consultants, agents, financial advisors and other representatives (each of the forgoing being “representatives”) to immediately cease and cause to be terminated any solicitation, knowing encouragement, discussions or negotiations with any persons (other than Cott) that are ongoing with respect to an acquisition proposal (as defined below). In addition, in the pre-closing period, Primo will not, and it will use its reasonable best efforts to ensure that each of its subsidiaries and Primo’s and its subsidiaries’ respective directors, officers and financial advisors, do not on Primo’s behalf, and Primo will use its reasonable best efforts to ensure its and its subsidiaries’ other representatives do not:

 

  (A)

solicit, initiate, knowingly induce or knowingly facilitate or encourage any inquiries or indications of interest regarding, or the making of any proposal or offer that constitutes, or could reasonably be expected to lead to, an acquisition proposal,

 

  (B)

engage in, continue or otherwise participate in any discussions or negotiations regarding, or furnish to any other person any non-public information in connection with, in response to, or for the purpose of soliciting, encouraging or facilitating an acquisition proposal or any proposal or offer that could reasonably be expected to lead to an acquisition proposal,

 

  (C)

adopt, approve, recommend, submit to stockholders or declare advisable any acquisition proposal,

 

  (D)

enter into any binding or nonbinding letter of intent, term sheet, merger agreement, acquisition agreement, agreement in principle or similar agreement with respect to an acquisition proposal or any proposal or offer that could reasonably be expected to lead to an acquisition proposal (other than certain confidentiality agreements entered into in accordance with the merger agreement),

 

  (E)

take any action or exempt any person (other than Cott and its subsidiaries) from the restriction on “business combinations” or any similar provision contained in applicable state takeover laws or Primo’s organizational or other governing documents, or

 

  (F)

resolve, publicly propose or agree to do any of the foregoing.

Under the merger agreement, Primo is obligated to (i) notify Cott orally and in writing promptly (and in no event later than 24 hours after receipt) after receiving an acquisition proposal or any inquiry, indication of interest, proposal, offer or request with respect to or that is reasonably likely to lead to an acquisition proposal, (ii) provide to Cott the identity of the person making the acquisition proposal and copies of any written materials related thereto (or, if oral, a summary of the material terms and conditions of the acquisition proposal), (iii) keep Cott reasonably informed of any material developments, discussions or negotiations regarding such acquisition proposal on a prompt (and in any event within 24 hours) basis, including by providing prompt (and in any event within 24 hours) notice of all material amendments or modifications thereto and all written materials subsequently provided in connection therewith and (iv) upon Cott’s request, inform Cott of the status of any such acquisition proposal.

Notwithstanding the prohibitions described above, Primo may (i) furnish information (including non-public information) with respect to Primo and its subsidiaries to the person who has made such acquisition proposal if Primo receives from such person an executed confidentiality agreement that (A) contains provisions that are materially no less favorable to Primo than those contained in the confidentiality agreement between Cott and

 

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Primo and (B) does not prohibit Primo from providing information to Cott in accordance with the terms of the merger agreement or complying with its obligations under Section 5.6 or Section 6.1 of the merger agreement, it being understood and agreed that such confidentiality agreement need not contain a standstill provision, and (ii) engage in or otherwise participate in discussions or negotiations with the person making such acquisition proposal and its representatives regarding such acquisition proposal if:

 

   

Primo or any of its representatives receives a bona fide, unsolicited written acquisition proposal from such person which was made or renewed on or after the date of the merger agreement and that did not result from an intentional breach of Primo’s non-solicitation obligations under the merger agreement; and

 

   

Primo’s board of directors determines in good faith after consultation with its independent financial advisor and outside legal counsel that such acquisition proposal constitutes or is reasonably expected to lead to a superior offer (as defined below) and that the failure to take such action would reasonably be expected to constitute a breach of the fiduciary duties of Primo’s board of directors under applicable law.

An “acquisition proposal” for purposes of the merger agreement means any inquiry, proposal, offer or indication of interest in making any offer or proposal from any person (other than Cott or Purchaser) relating to:

 

  (A)

any acquisition or purchase from Primo or any of its subsidiaries by any person or “group” (as defined in or under Section 13(d) of the Exchange Act), directly or indirectly, of more than a 15% beneficial or record interest in the total outstanding voting securities of Primo or any of its subsidiaries;

 

  (B)

any tender offer (including self-tender) or exchange offer that if consummated would result in any person or group owning (beneficially or on record) 15% or more of the total outstanding voting securities of Primo or any of its subsidiaries;

 

  (C)

any merger, consolidation, business combination, share exchange, issuance of securities, acquisition of securities, reorganization, recapitalization or other similar transaction involving Primo or any of its subsidiaries;

 

  (D)

any sale, lease, exchange, transfer, license or disposition (in each case, other than in the ordinary course of business) of more than 15% of the assets of Primo and its subsidiaries, taken as a whole (measured by revenue, net income or the lesser of book or fair market value thereof); or

 

  (E)

any combination of the foregoing.

Change of Recommendation

The merger agreement requires Primo’s board of directors to recommend to Primo stockholders that they accept the offer and tender their Primo shares into the offer (the “Primo recommendation”). In general, Primo’s board of directors may not change such recommendation unless it has determined that the failure to so change its recommendation would reasonably be expected to constitute a breach of the directors’ fiduciary duties under applicable law, including as a result of a superior offer or a change in circumstances, as more particularly described below.

More specifically, other than as described below (any of the following being an “adverse change recommendation”), Primo’s board of directors may not:

(A)    withhold, withdraw, qualify or modify in a manner adverse to Cott or the Purchaser, or resolve to or publicly propose or announce any intention to withhold, withdraw, qualify or modify in a manner adverse to Cott or the Purchaser, the Primo recommendation,

(B)    remove the Primo recommendation from or fail to include the Primo recommendation in the Schedule 14D-9, or

 

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(C)    approve, adopt, endorse, recommend or declare advisable, or publicly propose to approve, adopt, recommend or declare advisable, any acquisition proposal.

Subject to the terms of Section 6.1 of the merger agreement, the merger agreement permits Primo’s board of directors to make an adverse change recommendation under the following circumstances so long as (i) Primo’s board of directors determines in good faith after consultation with its independent financial advisor and outside legal counsel that the failure to take such action would reasonably be expected to constitute a breach of the fiduciary duties of Primo’s board of directors under applicable law; (ii) Primo has given Cott three business days’ prior written notice of its intention to make such adverse recommendation change; and (iii) Primo has given Cott three business days from the date of such notice to propose revisions to the merger agreement or make other proposals, and has negotiated in good faith with Cott:

(A)    in the event that Primo receives an unsolicited bona fide acquisition proposal (not as a result of any breach of Primo’s non-solicitation obligations under the merger agreement) that the board of directors has determined in good faith (after consultation with its financial and legal advisors of nationally recognized reputation and its outside legal counsel) is (i) reasonably likely to be consummated in accordance with its terms, taking into account all legal, regulatory and financing aspects (including certainty of financing and certainty of closing) of the proposal, the person making the proposal and other aspects of the proposal that Primo’s board of directors deems relevant; and (ii) if consummated, would be more favorable from a financial point of view to the Primo stockholders (in their capacity as such) than the transactions contemplated by the merger agreement after giving effect to any proposals made by Cott (a “superior offer”); provided that for purposes of a “superior offer,” the references to “15%” in the definition of “acquisition proposal” are deemed to be references to “50%”; or

(B)    in the event of any material effect (i) that becomes known to the Primo board of directors after January 13, 2020; (ii) that was not known to and reasonably foreseeable by the Primo board of directors that authorized the execution of the merger agreement as of the date thereof; and (iii) does not relate to (x) an acquisition proposal or (y) any effect relating to Cott, the Purchaser or any of their respective affiliates.

Conduct of Business During Pendency of the Transactions

Restrictions on Primo’s Operations

The merger agreement provides for certain restrictions on Primo’s and its subsidiaries’ activities until either the completion of the mergers or the termination of the merger agreement. In general, except as may be required by applicable law, with the prior written consent of Cott, as may be required or expressly permitted by the merger agreement or as set forth in the disclosure schedule delivered by Primo to Cott and the Purchaser concurrently with the signing of the merger agreement, Primo and its subsidiaries are required to conduct their business in the ordinary course consistent with past practice and to use their commercially reasonable efforts to preserve their assets and keep intact their business organization, keep available the services of officers and employees and preserve its relationships with manufacturers, suppliers, vendors, distributors, Governmental Entities, customers, licensors, licensees and others with which it has material business dealings. In addition, Primo must promptly notify Cott of (i) any knowledge of any notice from any person alleging that the consent of such person is or may be required in connection with the mergers or any of the transactions, (ii) any material event or occurrence not in the ordinary course of the Primo or its subsidiaries’ business, and of any event which could reasonably be expected to have a material adverse effect on Primo and (iii) any action commenced, or, to Primo’s knowledge threatened, relating to or involving Primo or any of its subsidiaries that relates to the consummation of the transactions contemplated by the merger agreement.

In addition, except as may be required by law, the merger agreement or as set forth in the disclosure schedule delivered by Primo to Cott and the Purchaser concurrently with the signing of the merger agreement, neither Primo nor its subsidiaries may, among other things:

 

   

(i) establish a record date for, declare, set aside or pay any dividends on, or make any other distributions in respect of, any of its capital stock or other equity interests, (ii) except as contemplated

 

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by the merger agreement in connection with the exercise or vesting of any Primo equity-based awards and warrants in accordance with their respective terms, purchase, redeem or otherwise acquire shares of capital stock or other equity interests of Primo or any of its subsidiaries or (iii) split, combine, reclassify or otherwise amend the terms of any of its capital stock or other equity interests or repurchase any of its equity interests;

 

   

issue, sell, pledge, transfer or encumber any shares of Primo common stock, any securities of any subsidiary or any instrument convertible into or exchangeable for any capital stock, equity interest or other security of Primo or its subsidiaries, except in connection with the exercise or settlement of any Primo equity-based awards and warrants outstanding prior to the date of the merger agreement;

 

   

adopt, amend, authorize or propose to amend its certificate of incorporation or bylaws (or similar charter or organizational documents);

 

   

create or form any subsidiary, acquire any equity interest in any other person or enter into any joint venture, partnership, limited liability corporation or similar arrangement;

 

   

acquire or agree to acquire (i) by merging or consolidating with, purchasing a substantial equity interest in or a substantial portion of the assets of or making an investment in or loan or capital contribution to, any other entity, except any such transactions that are for cash consideration not in excess of $1,000,000 individually, or $5,000,000 for all such transactions by Primo and its subsidiaries in the aggregate, and except for loans, advances, contributions or investments between or among Primo and any direct or indirect wholly-owned subsidiaries or (ii) any assets that are otherwise material to Primo and its subsidiaries, in each case, outside of the ordinary course of business;

 

   

sell, lease, license, transfer, assign or otherwise encumber in whole or in part of any of its material properties, assets or rights or any interest therein, subject to certain exceptions set forth in the merger agreement;

 

   

propose or adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of Primo or any of its subsidiaries, except for the transactions;

 

   

(i) incur, assume, guarantee or otherwise become liable for, any indebtedness, or (ii) make any loans, advances or capital contributions to, or investments in, or enter into any transactions that would create indebtedness of, any other Person, in each case, other than Primo or any direct or indirect wholly-owned subsidiary of Primo or otherwise in the ordinary course of business;

 

   

incur any capital expenditure or authorization or commitment with respect thereto (except that Primo and its subsidiaries may incur any capital expenditure, authorization or commitment that: does not exceed (A) $750,000 individually and $7,500,000 in the aggregate during any fiscal quarter or (B) the thresholds in a capital expense budget made available to Cott for such capital expenditure, authorization or commitment);

 

   

(i) pay, discharge, settle or satisfy any claims, liabilities or obligations in excess of $400,000 individually or $600,000 in the aggregate, other than as reflected or reserved against in Primo’s most recent audited financial statements filed with the SEC or incurred in the ordinary course since the date of such financial statements or incurred in connection with the merger agreement and the transactions (including legal and financial advisors fees and expenses), (ii) cancel any material indebtedness (iii) waive, release, grant or transfer any right of material value or (iv) commence any legal action, except in connection with a breach of the merger agreement or any other agreements contemplated thereby or in the ordinary course of business consistent with past practice;

 

   

compromise, settle or release any pending or threatened legal action other than settlements or releases that involve only the payment of money damages in an amount not greater than $600,000 in the aggregate, in any case without the imposition of any equitable relief on, or the admission of wrongdoing by, Primo or any of its subsidiaries;

 

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change its financial accounting methods, accounting periods, principles or practices, except insofar as may have been required by a change in GAAP or applicable law;

 

   

revalue any of its assets other than in the ordinary course of business or as required by GAAP consistently applied;

 

   

(i) settle, compromise or enter into any closing agreement or advance pricing agreement with respect to any liability for material taxes, (ii) amend any material tax return, (iii) enter into any contract with, or request any ruling from, any governmental entity, in each case relating to material taxes, (iv) make or change any material tax election, (v) change any tax accounting period for purposes of a material tax or material method of tax accounting, (vi) take any material position on a tax return inconsistent with a position taken on a tax return previously filed, (vii) extend or waive any statute of limitations with respect to a material tax, (viii) surrender any claim for a material refund of taxes or (ix) fail to timely file correct and complete any material tax returns as required by applicable law;

 

   

change its fiscal year;

 

   

except as may be required by the terms of any Primo employee benefit plan, the terms of the merger agreement or applicable law, (i) grant any equity or equity-based compensation to any Primo employee or independent contractor or independent consultant, (ii) materially increase the compensation, bonus or other benefits to any Primo employee or independent contractor or independent consultant outside the ordinary course of business consistent with past practice during the twelve months prior to the date of the merger agreement, (iii) adopt or enter into any collective bargaining agreement or other similar labor union contract, (iv) take any action to accelerate the vesting or payment of any material compensation or material benefit under any employee benefit plan, (v) establish or adopt any new material employee benefit plan, or amend or modify any material employee benefit plan;

 

   

(i) hire any employee or engage any independent consultant or contractor (who is natural person), other than hiring or engaging any non-executive officer employee or independent consultant or contractor (who is a natural person) in the ordinary course of business with an annual base salary or other compensation of less than $150,000 or (ii) hire, promote or terminate (other than for cause or in accordance with the terms of any agreement currently in effect) any employee or independent consultant or independent contractor other than actions taken in the ordinary course of business with respect to any non-executive officer employee with an annual base salary of less than $150,000;

 

   

reduce the amount of any insurance coverage provided by existing insurance policies;

 

   

renew or enter into any non-compete, exclusivity or similar agreement that would restrict or limit, in any material respect, Primo or its subsidiaries from engaging or competing in any line of business or geographic area;

 

   

enter into any new lease of real property or materially amend the terms of any existing lease of real property;

 

   

forgive any loans to any employees, officers or directors of Primo or any of its subsidiaries, or any of their respective affiliates or associates;

 

   

(i) enter into any new line of business or (ii) start to conduct a line of business of Primo or any of its subsidiaries in a geographic area where it is not conducted as of the date of the merger agreement;

 

   

outside of the ordinary course of business, (i) amend, modify, terminate or waive, or exercise any material right or remedy under, any material contract or (ii) enter into, amend, terminate or waive, or exercise any material right or remedy under, any contract which if entered into prior to the date of the merger agreement would have been a material contract;

 

   

commence any new offering period under the 2010 Employee Stock Purchase Plan;

 

   

adopt or implement any stockholder rights plan or similar arrangement; or

 

   

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

 

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Restrictions on Cott’s Operations

The merger agreement provides for certain restrictions on Cott’s and its subsidiaries’ activities until either the completion of the mergers or the termination of the merger agreement. In general, except as may be required by applicable law, as may be required or expressly permitted by the transactions or as set forth in the disclosure schedule delivered by Cott to Primo concurrently with the execution of the merger agreement, Cott will not:

 

   

(i) other than regular quarterly dividends consistent with past practice, declare or pay any dividends on, or make any other distributions in respect of, any of its capital stock or other equity interests or (ii) split, combine, reclassify or otherwise amend the terms of any of its capital stock or other equity interests, except, in each case of the foregoing clauses (i) and (ii), for transactions that would require an adjustment to transaction consideration pursuant to the merger agreement, and for which the proper adjustment is made;

 

   

adopt, amend, authorize or propose to amend Cott’s articles of amalgamation or by-laws (or similar charter or organizational documents) in a manner that would be disproportionately adverse to the holders of Primo common stock relative to the treatment of existing holders of Cott common shares;

 

   

acquire or agree to acquire (i) by merging or consolidating with, purchasing a substantial equity interest in or a substantial portion of the assets of, any other entity, except any such transactions that are for cash consideration not in excess of $15,000,000 individually, or $50,000,000 for all such transactions by Cott and its subsidiaries in the aggregate, and except for loans, advances, contributions or investments between or among Cott and any direct or indirect wholly-owned subsidiaries or (ii) any assets that are otherwise material to Cott and its subsidiaries, in each case, outside of the ordinary course of business;

 

   

propose or adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization;

 

   

(i) incur, assume, guarantee, refinance or otherwise become liable for, any indebtedness, or amend, modify or refinance any indebtedness, in each case, in excess of $10,000,000 individually, or $30,000,000 for all transactions by Cott and its subsidiaries in the aggregate, or (ii) make any loans, advances or capital contributions to, or investments in, any other Person in excess of $10,000,000 individually, or $30,000,000 for all such transactions by Cott and its subsidiaries in the aggregate, in each case, other than Cott intercompany loans or otherwise in the ordinary course of business;

 

   

take or cause to be taken any action that would reasonably be expected to prevent the consummation of the transactions on or before the outside date; or

 

   

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

Regulatory Efforts

Cott and Primo agreed to use their respective reasonable best efforts to consummate the offer and the other transactions, including (i) the preparation and filing of all forms, registrations, applications and notices required to be filed under applicable law to consummate the offer and the mergers (including the registration statement, the offer documents, the Schedule 14D-9, and the prospectus/offer of which this description is a part), (ii) the satisfaction of the conditions to consummating the offer and the mergers, (iii) taking all reasonable actions necessary to obtain (and cooperating with each other in obtaining) any consent, authorization, order or approval of, or any exemption by, any governmental entity (which actions will include furnishing all information and documentary material required under the HSR Act) required to be obtained or made by Cott, the Purchaser, Primo or any of their respective subsidiaries in connection with the offer or the mergers or the taking of any action contemplated by the merger agreement and (iv) the execution and delivery of any reasonable additional instruments necessary to consummate the offer and the mergers.

Additionally, each of Cott, the Purchaser and Primo will use their respective reasonable best efforts to fulfill all conditions precedent to the offer and the mergers and will not take any action after the date of the merger

 

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agreement that would reasonably be expected to materially delay the obtaining of, or result in not obtaining, any permission, approval or consent from any such governmental entity necessary to be obtained to consummate the offer and the mergers.

Cott and Primo will each keep the other apprised of the status of matters relating to the completion of the offer and work cooperatively in connection with obtaining all required consents, authorizations, orders or approvals of, or any exemptions by, any governmental entity. In that regard, prior to the consummation of the mergers, each party will promptly consult with the other parties to the merger agreement with respect to and provide any reasonable information and assistance as the other parties may reasonably request with respect to (and, in the case of correspondence, provide the other parties (or their counsel) copies of) all material notices, submissions, or filings made by such party with any governmental entity regarding any antitrust laws or any other information supplied by such party to, or correspondence with, a governmental entity regarding any antitrust laws and in connection with the merger agreement and the offer and the mergers. Each party to the merger agreement will promptly inform the other parties to the merger agreement, and if in writing, furnish the other parties with copies of (or, in the case of oral communications, advise the other parties orally of) any material communication from or to any governmental entity relating to any antitrust laws and regarding the offer and the mergers, and afford the other parties a reasonable opportunity to review and discuss in advance, and consider in good faith the views of the other parties in connection with, any proposed communication with any such governmental entity relating to any antitrust laws.

Access

The merger agreement provides that, for purposes of furthering the transactions, each party will upon reasonable advance notice afford the other and its officers, directors, employees, attorneys, accountants, investment bankers, consultants, agents, financial advisors and other advisors reasonable access during normal business hours, throughout the period prior to the first effective time, to its and its subsidiaries’ senior management personnel, properties, contracts, tax returns, employee plans, information related to intellectual property rights, books and records and, during such period, each party will, and will cause its subsidiaries to, without limitation to the preceding obligations, make available to the other party all other information concerning its business, properties and personnel as such other party may reasonably request.

However, no party will be required to provide access to or make available to any person any document or information that would be reasonably likely to materially interfere with the conduct of its business operations, would violate any of its obligations with respect to confidentiality or privacy or is subject to any attorney-client or work-product privilege or would otherwise contravene applicable laws.

The parties have agreed that all information provided to them or their respective officers, directors, employees, attorneys, accountants, investment bankers, consultants, agents, financial advisors and other advisors in connection with the merger agreement and the consummation of the transactions will be governed in accordance with the confidentiality agreement between the parties.

Employee Matters

The merger agreement provides that, as soon as reasonably practicable after the consummation of the first merger, Cott will permit, or will cause its subsidiaries to permit, (i) employees of Primo or any of its subsidiaries who are employed as of immediately prior to the first effective time and who continue to be employed by the surviving company or any of its subsidiaries following the first effective time (the “continuing employees”), to participate in the benefit programs of Cott or its subsidiaries to the same extent as similarly situated employees of Cott or its subsidiaries or (ii) permit such continuing employees to continue participating in the Primo benefit programs to the extent Cott continues such programs after the first effective time.

During a period commencing at the first effective time and ending six months thereafter, each continuing employee will be provided with an annual rate of base salary or base wage and an annual target cash bonus

 

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opportunity or commission plan that is, in the aggregate, no less favorable than the annual rate of base pay or base wage and annual target cash bonus opportunity or commission plan, as applicable, provided to similarly situated employees of Cott or its subsidiaries; provided that if any continuing employee is assigned to a different role within Cott’s business, such continuing employee will be provided with an annual compensation package that is, in the aggregate, no less favorable than the annual compensation package of Cott employees similarly situated to such continuing employee’s new role.

Cott will fully recognize the service of each continuing employee and will credit (for all purposes, including eligibility to participate, vesting, benefit accrual, vacation and leave entitlement, and severance benefits) service with Primo or its subsidiaries (or predecessor employers to the extent Primo or any subsidiary provides such past service credit) to the extent recognized by Primo or any subsidiary under the comparable employee benefit plans, programs and policies of Cott, the surviving company or any of their respective subsidiaries, as applicable, in which continuing employees become participants; provided that such recognition of service will not operate to duplicate any benefits of a continuing employee with respect to the same period of service.

Under each post-closing plan that provides medical, dental, pharmaceutical or vision insurance benefits, Cott will use its reasonable best efforts to (A) cause any pre-existing condition limitations or eligibility requirements under such plan to be waived with respect to each continuing employee, and (B) credit each continuing employee for an amount equal to any eligible expenses incurred by such continuing employee in the plan year that includes the first effective time for purposes of any applicable deductible, copayments and out-of-pocket expense requirements under any such post-closing plan to the extent such expenses would have been credited under the terms of the applicable Primo benefit plans (subject to receipt from Primo or the applicable insurer of any reasonably required information).

Cott agreed to assume and honor in accordance with their terms as in effect immediately prior to the first effective time certain change in control plans, policies and contracts and other arrangements applicable to any current or former employee of Primo, and all written employment, severance, retention, incentive, change in control and termination contracts (including any change in control provisions therein) between Primo or its subsidiaries and any current or former employee of Primo.

Primo and its subsidiaries, Cott and the Purchaser have the right to terminate the employment of any continuing employee at any time, for any lawful reason, without severance or other payment obligation, except as required by applicable law, Primo’s severance policy or any applicable employment agreement.

If directed by Cott not later than 15 business days prior to the closing date, Primo will take (or cause to be taken) all actions necessary or appropriate to terminate, effective no later than the day prior to the closing date, the Primo 401(k) plan. If Cott so directs Primo to terminate the Primo 401(k) plan, then, prior to and conditioned upon termination of the Primo 401(k) plan, Primo will take any action necessary to fully vest any unvested amounts of the accounts of all participants in the Primo 401(k) plan that are impacted by such termination. If Cott directs Primo to terminate its 401(k) plan, then Cott will permit each participant in the Primo 401(k) plan who is a continuing employee to make rollover contributions of “eligible rollover distributions” (within the meaning of Section 401(a)(31) of the Code, including any promissory notes evidencing outstanding loans) in an amount equal to the eligible rollover distribution portion of the account balance distributed to each such continuing employee from the Primo 401(k) plan to the Cott 401(k) plan. If Cott does not direct Primo to terminate its 401(k) plan, then Cott will merge the Primo 401(k) plan with and into the Cott 401(k) Plan as soon as practicable following the first effective time and ensure that the continuing employees are provided benefits that are no less favorable than those provided to similarly situated Cott service providers.

Resignations and Appointments of Primo Officers and Directors

Prior to the first effective time, Primo will use its reasonable best efforts to cause each officer and director of each of Primo and each of its subsidiaries to execute and deliver a letter effectuating his or her resignation as a

 

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director or officer (but not as an employee of Primo or any of its subsidiaries, which employment status will not be affected by such resignation) of such entity effective as of the first effective time.

If the closing date occurs after, or fewer than ten business days before, the mailing of Cott’s proxy materials for its 2020 annual shareowner meeting, Cott shall appoint Billy D. Prim and Susan E. Cates (the “Primo appointees”), or, if applicable, a replacement nominee, to the Cott board of directors, which appointment shall be made (i) if the closing date occurs prior to the date of Cott’s 2020 annual shareowner meeting, immediately following Cott’s 2020 annual shareowner meeting, and (ii) if the closing date occurs on or after the date of Cott’s 2020 annual shareowner meeting, by written consent or special meeting of Cott’s board of directors immediately after the closing date. If the closing date occurs at least ten business days prior to the mailing of Cott’s proxy materials for its annual shareowner meeting, then Cott shall use its reasonable best efforts to include the Primo appointees, or, if applicable, replacement nominee(s), on the list of nominees for which Cott board of directors shall solicit proxies at such meeting. The Primo appointees (or, if applicable, replacement nominee(s)) shall serve until the 2021 annual meeting of the shareowners of Cott, unless such person earlier resigns or is removed for cause in accordance with Cott’s articles of amalgamation and by-laws, as applicable.

Name Change

As soon as reasonably practicable after the closing date, Cott shall take all action necessary to cause its articles of amalgamation to be amended to reflect a change in Cott’s name to “Primo Water Corporation” and commence taking all action necessary to rebrand the business of Cott under such new name.

Third Party Consents

Primo will use its commercially reasonable efforts to obtain waivers and consents from any and all third parties with respect to certain contracts listed on the disclosure schedule delivered to Cott; provided, that, in connection with obtaining such waivers and consents, Primo will not agree to any change to such contracts without the prior written consent of Cott, which consent will not be unreasonably withheld, delayed or denied.

Financing Covenants

Primo will, and will cause its subsidiaries to, use its (and their) commercially reasonable efforts to, and will use its commercially reasonable efforts to cause its representatives to, cooperate as reasonably requested by Cott to assist Cott and any of its affiliates in the arrangement and syndication or placement of debt financing for the purpose of financing any amounts payable by Cott, Holdings, the Purchaser and Merger Sub 2, including but not limited to the cash consideration, merger consideration and transaction fees and expenses, or refinancing of existing debt of Primo and/or its subsidiaries, which cooperation may include:

 

   

having Primo designate members of senior management of Primo to execute customary authorization letters with respect to offering and syndication documents and materials, offering memoranda, prospectuses, private placement memoranda, information memoranda and packages, rating agency materials and documents similar to the foregoing (collectively, “offering documents”) and making senior management of Primo and its subsidiaries available for meetings, presentations, due diligence sessions and drafting sessions with proposed lenders, underwriters, initial purchasers or placement agents, and sessions with rating agencies, and otherwise cooperating with the marketing efforts for any financing;

 

   

assisting with the preparation of offering documents in connection with a financing and furnishing Cott and its financing sources with financial statements or projections and other similar information about Primo and its subsidiaries;

 

   

using commercially reasonable efforts to cause Primo’s independent accountants to cooperate in connection with a financing, including by providing accountant’s comfort letters and consents

 

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customary for financings similar to the financing at issue and assisting with the preparation of customary pro forma financial statements to be included in the offering documents or reasonably required by the financing sources and their respective agents;

 

   

cooperating with and facilitating due diligence by Cott’s potential financing sources and the establishment of bank and other accounts in connection with a financing to be effective on the closing date;

 

   

if requested by Cott at least ten business days prior to the expiration date, furnishing to Cott and its financing sources all information regarding Primo and its subsidiaries that is requested by Cott and required by regulatory authorities under applicable “beneficial ownership,” “know your customer” and anti-money laundering rules and regulations, including the Patriot Act, at least five business days prior to the expiration date;

 

   

using commercially reasonable efforts to assist in the preparation of, and execution and delivery of financing documents (including guarantee and collateral documents) and to facilitate the pledging of collateral (including delivery of stock and other equity certificates of Primo and its subsidiaries on the closing date);

 

   

assisting Parent in obtaining consents, approvals, authorizations, instruments, customary payoff letters, lien terminations and instruments of discharge to allow for the payoff, discharge, and termination in full of any indebtedness for borrowed money, bonds, debenture notes or other similar instruments of Primo or its subsidiaries that Cott desires to payoff, discharge, and terminate or that is otherwise subject to mandatory prepayment (however described) as a result of the acceptance of the offer or the consummation of the mergers;

 

   

cooperating with Cott and its subsidiaries’ legal counsel in connection with any legal opinions that such legal counsel may be required to deliver in connection with any financing; and

 

   

refraining from instituting against any lenders or financing sources, and causing its representatives and affiliates to refrain from instituting any actions against any lenders or financing sources, claims proceedings arising under or in connection with the merger agreement, the commitment letter or other financing arrangements or any transactions contemplated.

Primo also agreed to allow reasonable use of Primo’s and its subsidiaries’ logos and other trademarks in connection with a financing in a manner that is customary for similar transactions, provided that such logos and trademarks are used in a manner that is not intended to, and is not reasonably likely to, harm or disparage Primo or its subsidiaries.

Notwithstanding the covenants set forth above, nothing in the merger agreement will require Primo to (A) waive or amend any terms of the merger agreement or agree to pay any fees (including any commitment or similar fees) or reimburse any expenses prior to the acceptance time for which it has not received prior reimbursement, (B) enter into, or have any material liability or obligation under, any definitive agreement, certificate or other document that is effective prior to the acceptance time (other than delivery of customary authorization letters in connection with Cott’s financing of the transactions) or pass resolutions or consents to approve or authorize the execution of Cott’s financing of the transactions, (C) take any action that, in Primo’s good faith determination, would unreasonably interfere with the conduct of the business of Primo and its subsidiaries, (D) provide any information the disclosure of which is prohibited or restricted under applicable law or that, in Primo’s reasonable good faith determination, would violate any attorney-client privilege or any confidentiality obligation binding on Primo or any of its subsidiaries, (E) be required to give any indemnities in connection with Cott’s financing of the transactions that are effective prior to the acceptance time, (F) provide any legal opinion or other opinion of counsel, or (G)