Business Context and Reporting Period
Company: Knowles Corporation (KN)
Filing Type: Form 8-K (Current Report)
Date of Report: May 9, 2019
Event: Entry into a Material Definitive Agreement (Settlement Agreement) with an Investor Group led by Caligan Partners and Falcon Edge Capital.
Key Financial Metrics
This filing is a current report regarding corporate governance and a settlement agreement. It does not contain financial statements, revenue, profit, cash flow, margin, debt, or liquidity data. The filing text does not provide a clear value for any financial metrics.
Material Changes
- Board Expansion: The Board of Directors expanded from nine to ten members.
- Director Appointment: Steven F. Mayer (Investor Group Designee) was appointed as a Class III director and to the Audit Committee. His term expires at the 2019 Annual Meeting.
- Withdrawal of Proxy Contest: The Investor Group withdrew its notice of intent to nominate director candidates for the 2019 Annual Meeting.
- Ownership Threshold: The Investor Group must maintain a net long position of at least 4,549,989 shares (the "Ownership Minimum") to retain the board seat.
Guidance, Outlook, and Material Provisions
The Settlement Agreement establishes the following terms and restrictions:
- Future Director Nomination: The Company and Investor Group must cooperate to identify a mutually acceptable independent director within 120 days after the 2020 Annual Meeting. If no agreement is reached, the Board selects a director subject to Investor Group approval.
- Standstill Restrictions: The Investor Group is subject to a 10% ownership cap and restrictions on proxy contests, activist campaigns, and unsolicited takeover bids during the agreement term.
- Voting Agreement: The Investor Group agreed to vote its shares in accordance with the Board's recommendations at annual and special meetings, with exceptions for extraordinary transactions and specific proxy advisor recommendations.
- Non-Disparagement and Non-Sue: Both parties agreed not to make public statements about each other or sue one another, subject to exceptions.
- Termination: Either party may terminate the agreement with five business days' notice after the date that is 30 days prior to the 2021 Annual Meeting nomination deadline.
Investor Verification Checklist
- Verify the full text of the Settlement Agreement (Exhibit 10.1) for specific definitions of "extraordinary transactions" and exceptions to the voting agreement.
- Confirm the current share ownership percentage of the Investor Group to ensure compliance with the 4,549,989 share "Ownership Minimum."
- Monitor the 2020 Annual Meeting timeline for the selection of the next independent director.
- Review the press release (Exhibit 99.1) for any additional public commentary on the settlement.