UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 13, 2017
SeaWorld Entertainment, Inc.
(Exact name of Registrant as Specified in Its Charter)
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Delaware |
001-35883 |
27-1220297 |
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(State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
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9205 South Park Center Loop, Suite 400 Orlando, Florida |
32819 |
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(Address of Principal Executive Offices)
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(Zip Code) |
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Registrant’s Telephone Number, Including Area Code: (407) 226-5011
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
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Item 5.02 |
Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
As previously announced on March 24, 2017, funds affiliated with The Blackstone Group L.P. (“Seller”) have agreed to sell an approximately 21% interest in SeaWorld Entertainment, Inc. (the “Company”) to Sun Wise (UK) Co., Ltd (“Buyer”), an affiliate of Zhonghong Zhuoye Group Co., Ltd. (the “Sale”) pursuant to a Stock Purchase Agreement between Buyer and Seller (the “Stock Purchase Agreement”). In connection with the Sale, the Board of Directors of the Company (the “Board”) has determined that in order to compensate existing management for substantially delivering on the performance targets required under the terms of the 2.75x performance-vesting restricted shares, the Company will partially vest 60% of the outstanding 2.75x performance-vesting restricted shares held by certain of the Company’s equity plan participants upon the closing of the Sale, subject to continued service through such date. As of March 31, 2017, approximately 1.3 million 2.75x performance-vesting restricted shares were outstanding.
The Board considered that while these performance-vesting restricted shares are not otherwise expected to vest because the Sale proceeds to be paid at closing are not expected to satisfy the cumulative 2.75x return multiple on Seller’s invested capital required under the terms of the performance-vesting restricted shares, the Sale is expected to result in a cumulative return multiple on Seller’s invested capital of 2.67x, or 97% of targeted return. In addition, the required internal rate of return vesting condition of 15% will be significantly exceeded as a result of the Sale.
Under the terms of the Stock Purchase Agreement, if in certain circumstances the Buyer acquires a majority of the Company’s then outstanding common shares prior to the one-year anniversary of the closing of the Sale, then the Buyer is required as a condition to the closing of the acquisition that results in such majority ownership, to pay to the Seller, in respect of each share of common stock sold to the Buyer at the closing of the Sale, the excess, if any, of the highest price per share paid by the Buyer for shares of the Company’s common stock over $23.00 (the “Additional Payment”). As such, any outstanding unvested 2.75x performance-vesting restricted shares will not forfeit until the end of such one-year period.
Additionally, the Board considered that in accordance with the relevant accounting guidance, the Company would be required to recognize non-cash equity compensation expense of approximately $9.6 million related to any outstanding 2.75x performance-vesting restricted shares upon closing of the Sale, regardless of whether or not the shares vest in accordance with their terms. As a result of the modifications to the 2.75x performance-vesting restricted shares described herein, the Company expects to recognize a non-cash equity compensation expense of approximately $8.4 million, which is a reduction of $1.2 million from the expected charge had the modification not taken place. The Company also expects to pay cash accumulated dividends of approximately $1.3 million related to the modification.
In exchange for the Company modifying the 2.75x performance-vesting restricted shares to vest 60%, eight of the Company’s senior executives and David D’Alessandro, the Company’s Chairman of the Board, have individually agreed to forfeit the remaining 40% of their outstanding 2.75x performance-vesting restricted shares upon the closing of the Sale. In addition, in accordance with his Separation and Consulting Agreement which contractually obligates the Company to apply any modifications to his outstanding 2.75x performance-vesting restricted shares, Jim Atchison, the Company’s former President and Chief Executive Officer, will also vest in 60% of his 2.75x performance-vesting restricted shares and has agreed to forfeit the other 40% on the closing of the Sale. For all other current employees, the remaining 40% of their unvested 2.75x performance-vesting restricted shares will continue to be eligible to vest in accordance with their terms if Seller receives an Additional Payment from the Buyer sufficient to satisfy the 2.75x cumulative return multiple following the closing of the Sale.
Based on the modification described above, approximately 455,000 of the outstanding 2.75x performance-vesting restricted shares are expected to vest upon closing of the Sale. The number of 2.75x performance-vesting restricted shares held by the Company’s fiscal 2015 named executive officers that will fully vest in connection with the modification and consummation of the Sale is as follows: 63,771 shares for David D’Alessandro, 154,621 shares for Jim Atchison, 20,616 shares for G. Anthony (Tony) Taylor and 9,307 shares for Marc G. Swanson.
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Item 9.01 |
Financial Statements and Exhibits. |
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(d) |
Exhibits |
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Exhibit No. |
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Description |
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Exhibit 10.1 |
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Form of Amendment #1 to Restricted Stock Grant and Acknowledgment and Form of Restricted Stock Agreement |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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SEAWORLD ENTERTAINMENT, INC. |
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Date: April 14, 2017 |
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By: |
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/s/ G. Anthony (Tony) Taylor |
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Name: |
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G. Anthony (Tony) Taylor |
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Title: |
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Chief Legal Officer, General Counsel and Corporate Secretary |
FORM OF
AMENDMENT #1 TO
[RESTRICTED STOCK GRANT AND ACKNOWLEDGEMENT
(REPLACEMENT AWARD – FOR CLASS D UNITS AND EMPLOYEE UNITS)]
[RESTRICTED STOCK AWARD AGREEMENT
(2013 AWARD)]
This AMENDMENT #1 TO [RESTRICTED STOCK GRANT AND ACKNOWLEDGEMENT (REPLACEMENT AWARD – FOR CLASS D UNITS AND EMPLOYEE UNITS)] [RESTRICTED STOCK AWARD AGREEMENT (2013 AWARD)] (this “ Amendment ”) is made and entered into as of this 13th day of April 2017 (the “ Effective Date ”), by and between SeaWorld Entertainment, Inc., a Delaware corporation (the “ Company ”), and [NAME] (the “ Participant ”).
W I T N E S S E T H :
WHEREAS, the Company and Participant previously entered into that certain [Restricted Stock Grant and Acknowledgement (Replacement Award – for Class D Units and Employee Units)] [Restricted Stock Award Agreement (2013 Award)], as amended from time to time, dated as of [DATE], 2013 (the “ Award Agreement ”);
WHEREAS, Blackstone has entered into that certain Stock Purchase Agreement, dated as of March 24, 2017, between Sun Wise (UK) Co., Ltd, a private limited company incorporated under the laws of England and Wales, and the “Selling Partnerships” (as defined below), as amended, modified or supplemented from time to time (the “ Stock Purchase Agreement ”);
WHEREAS, the “ Selling Partnerships ” shall mean, collectively, SW Delaware L.P., SW Delaware A L.P., SW Delaware B L.P., SW Delaware C L.P., SW Delaware D L.P., SW Delaware E L.P., SW Delaware F L.P., SW Delaware Co-Invest L.P. and SW Delaware (GSO) L.P.; and
WHEREAS, the Board of Directors of the Company (the “ Board ”) and the Compensation Committee of the Board have approved an amendment to the Award Agreement as set forth herein.
NOW, THEREFORE, in consideration of the promises and mutual covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are mutually acknowledged, the Company and Participant hereby agree as follows:
1. Amendment to the [2.75x Performance Restricted Shares] [2.75x Exit-Vesting Restricted Shares] . The following shall be added to the end of [Schedule A Vesting Terms][Section 2(c)] of the Award Agreement:
[Notwithstanding the foregoing, subject to Participant’s continued employment with the Company through the Closing (as defined below) and provided the Participant has not violated the Restrictive Covenants set forth on Appendix A, sixty percent (60%) of the 2.75x Performance Restricted Shares (to the extent unvested and not otherwise forfeited as of the Closing) shall become Vested Shares upon the Closing. The remaining forty percent (40%) of the 2.75x Performance Restricted Shares that do not become Vested Shares in accordance with this paragraph shall be forfeited for no consideration immediately upon the Closing or, if earlier, upon the Termination Date. For purposes of this paragraph, “ Closing ” shall mean the consummation of the transactions contemplated by that certain Stock Purchase Agreement, dated as of March 24, 2017, between Sun Wise (UK) Co., Ltd, a private limited company incorporated under the laws of England and Wales, and SW Delaware L.P., SW Delaware A L.P., SW Delaware B L.P., SW Delaware C L.P., SW Delaware D L.P., SW Delaware E L.P., SW Delaware F L.P., SW Delaware Co-Invest L.P. and SW Delaware (GSO) L.P.]
[Notwithstanding the foregoing, subject to the Participant’s continued employment with the Company through the Closing (as defined below) and provided Participant has not engaged in a Restrictive Covenant Violation, sixty percent (60%) of the 2.75 Exit-Vesting Restricted Shares (to the extent unvested and not otherwise forfeited as of the Closing) shall vest and become nonforfeitable upon the Closing. The remaining forty percent (40%) of the 2.75x Exit-Vesting Restricted Shares shall be forfeited for no consideration immediately upon the Closing or, if earlier, upon the Termination Date. For purposes of this paragraph, “ Closing ” shall mean the consummation of the transactions contemplated by that certain Stock Purchase Agreement, dated as of March 24, 2017, between Sun Wise (UK) Co., Ltd, a private limited company incorporated under the laws of England and Wales, and SW Delaware L.P., SW Delaware A L.P., SW Delaware B L.P., SW Delaware C L.P., SW Delaware D L.P., SW Delaware E L.P., SW Delaware F L.P., SW Delaware Co-Invest L.P. and SW Delaware (GSO) L.P.]
2. Effective Date . This Amendment shall become effective on the Effective Date, provided that, this Amendment shall
be of no force or effect, shall crea te no rights or obligations on the part of any party hereto and shall automatically terminate on the termination of the Stock Purchase Agreement prior to the consummation of the transaction contemplated by the Stock Purchase Agreement in accordance with it s terms.
3. Investment Representations . The Participant represents and warrants that:
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the Participant is an accredited investor (as described below); |
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the Participant’s financial situation is such that the Participant can afford to bear the economic risk associated with the forfeiture of such [2.75 Performance Restricted Shares][2.75 Exit-Vesting Restricted Shares] (as defined in the Award Agreement) as set forth in this Amendment, has adequate means for providing for the Participant’s current needs and personal contingencies, and can afford to suffer a complete loss of the Participant’s Restricted Shares (as defined in the Award Agreement); |
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the Participant’s knowledge and experience in financial and business matters are such that the Participant is capable of valuating the merits and risks of the forfeiture of certain Restricted Shares; |
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the Participant agrees that other than as set forth in this Amendment, no representations or warranties have been made to the Participant or the Participant’s representatives concerning the Restricted Shares or the Company or their prospects or other matters; |
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the Participant has been given the opportunity to examine all documents and to ask questions of, and to receive answers from the Company and its representatives concerning the forfeiture of a portion of the [2.75 Performance Restricted Shares][ 2.75 Exit-Vesting Restricted Shares] and to obtain any additional information which the Participant deems necessary; |
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the Participant has been advised, and has been given ample opportunity, to consult with legal and financial advisors of Participant’s choice and is entering into this Amendment freely and voluntarily, whether Participant chose to consult such legal and financial advises with respect to this Amendment and the subject matter thereof; and |
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all information which the Participant has provided to the Company and its representatives concerning the Participant and the Participant’s financial position is complete and correct as of the date of this Amendment. |
“Accredited investor” means an “accredited investor” within the meaning of Rule 501(a) under the Securities Act of 1933, as amended. Participant is an “accredited investor” if Participant meets any of the following tests: (i) Participant is a director or executive officer of the Company; (ii) Participant has an individual net worth, or joint net worth with Participant’s spouse, at the time of this Amendment exceeding $1,000,000 (For purpose of this item, “net worth” means the excess of total assets at fair market value, including automobiles and other personal property but excluding the value of the primary residence of such natural person (and including property owned by a spouse other than the primary residence of the spouse), over total liabilities. The amount of any mortgage or other indebtedness secured by an investor’s primary residence should not be included as a “liability”, except to the extent the fair market value of the residence is less than the amount of such mortgage or other indebtedness.); (iii) Participant has individual income (excluding Participant’s spouse) in excess of $200,000 in both 2015 and 2016 and has a reasonable expectation of reaching the same income level in 2017; or (iv) Participant and Participant’s spouse had joint income in excess of $300,000 in both 2015 and 2016 and have a reasonable expectation of reaching the same income level in 2017.
4. Effect of Amendment . Except as expressly amended and modified by this Amendment, all provisions of the Award Agreement shall remain in full force and effect. This Amendment shall not be deemed to expressly or impliedly waive, amend or supplement any provision of the Award Agreement other than as set forth herein.
5. Choice of Law; Jurisdiction . This Amendment shall be governed by and construed in accordance with the laws of the state of Delaware without regard to conflicts of laws.
6. Counterparts . This Amendment may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.
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[Signatures to appear on the following pages.]
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IN WITNESS WHEREOF, the Company has exe cuted this Amendment as of the date first above written.
SEAWORLD ENTERTAINMENT, INC.
__________________________
By: Jack Roddy
Title: Chief Human Resources & Culture Officer
IN WITNESS WHEREOF, the Participant has executed this Amendment as of the date first above written.
PARTICIPANT
__________________________
[NAME]