DEFM14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

SCHEDULE 14A

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

 

Filed by the Registrant  ☒                              Filed by a Party other than the Registrant  ☐

Check the appropriate box:

 

  Preliminary Proxy Statement
  Confidential, for use of the Commission Only (as permitted by Rule 14a-6(e)(2))
  Definitive Proxy Statement
  Definitive Additional Materials
  Soliciting Material Pursuant to § 240.14a-12.

MCAFEE CORP.

(Name of Registrant as Specified in its Charter)

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box):

  No fee required.
  Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
  1)  

 

     

  2)  

Aggregate number of securities to which transaction applies:

 

     

  3)  

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

     

  4)  

Proposed maximum aggregate value of transaction:

 

     

  5)  

Total fee paid:

 

     

  Fee paid previously with preliminary materials:
  Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.
  1)  

Amount previously paid:

 

     

  2)  

Form, Schedule or Registration Statement No.:

 

     

  3)  

Filing Party:

 

     

  4)  

Date Filed:

 

     

 

 

 


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McAfee Corp.

6220 America Center Drive

San Jose, CA 95002

January 4, 2022

Dear McAfee Stockholder:

You are cordially invited to attend a special meeting (including any adjournments or postponements thereof, the “Special Meeting”) of stockholders of McAfee Corp. (“McAfee” or the “Company”) to be held on February 9, 2022, at 10:00 a.m., Pacific time. Due to the possible public health impact of the coronavirus (COVID-19) and to support the well-being of our employees and stockholders, McAfee will hold the Special Meeting virtually via the Internet at www.virtualshareholdermeeting.com/MCFE2022SM. You will not be able to attend the Special Meeting physically in person. For purposes of attendance at the Special Meeting, all references in this proxy statement to “present in person” or “in person” shall mean virtually present at the Special Meeting.

At the Special Meeting, you will be asked to consider and vote on (i) a proposal to adopt the Agreement and Plan of Merger, dated as of November 5, 2021, as amended, among Condor BidCo, Inc., a Delaware corporation (“Parent”), Condor Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Subsidiary”), and McAfee (as amended from time to time, the “Merger Agreement”), (ii) a proposal to approve, on a non-binding advisory basis, the compensation that may be paid or become payable to McAfee’s named executive officers that is based on or otherwise related to the Merger Agreement and the transactions contemplated by the Merger Agreement (the “Compensation Proposal”), and (iii) a proposal to adjourn the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting. Parent and Merger Subsidiary are entities that are affiliated with Advent International Corporation and Permira Advisers LLC, each a private equity investment firm. Pursuant to the terms of the Merger Agreement, Merger Subsidiary will merge with and into McAfee and the separate corporate existence of Merger Subsidiary will cease, with McAfee continuing as the surviving corporation and a wholly owned subsidiary of Parent (the “Merger”).

If the Merger is completed, you will be entitled to receive $26.00 in cash, without interest and less any applicable withholding taxes, for each share of McAfee common stock that you own (other than shares of unvested McAfee common stock that do not accelerate and become vested in connection with the Merger), unless you have properly and validly exercised and not withdrawn your appraisal rights.

The Board of Directors of McAfee (the “Board of Directors”), after considering the factors more fully described in the enclosed proxy statement, has: (i) determined that the Merger Agreement and the transactions contemplated thereby (including the Merger) are fair to and in the best interests of McAfee and McAfee’s stockholders, (ii) approved and declared advisable the Merger Agreement and any other agreement executed and delivered in connection with the Merger Agreement on the date thereof, and the transactions contemplated thereby (including the Merger), and (iii) resolved, subject to Section 6.03 of the Merger Agreement, to recommend adoption of the Merger Agreement by McAfee’s stockholders. The Board of Directors recommends that you vote: (1) “FOR” the adoption of the Merger Agreement; (2) “FOR,” on a non-binding advisory basis, the Compensation Proposal; and (3) “FOR” the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting.

The enclosed proxy statement provides detailed information about the Special Meeting, the Merger Agreement and the Merger. A copy of the Merger Agreement is attached as Annex A to the proxy statement.

The proxy statement also describes the actions and determinations of the Board of Directors in connection with its evaluation of the Merger Agreement and the Merger. You should carefully read and consider the entire


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enclosed proxy statement and its annexes, including, but not limited to, the Merger Agreement, as they contain important information about, among other things, the Merger and how it affects you.

Whether or not you plan to attend the Special Meeting in person, please sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying prepaid reply envelope or grant your proxy electronically over the Internet or by telephone (using the instructions provided in the enclosed proxy card). If you attend the Special Meeting and vote in person by virtual ballot, your vote will revoke any proxy that you have previously submitted.

If you hold your shares in “street name,” you should instruct your bank, broker or other nominee how to vote your shares in accordance with the voting instruction form that you will receive from your bank, broker or other nominee. Your bank, broker or other nominee cannot vote on any of the proposals, including the proposal to adopt the Merger Agreement, without your instructions.

Your vote is very important, regardless of the number of shares that you own. We cannot complete the Merger unless the proposal to adopt the Merger Agreement is approved by the affirmative vote of the holders of at least a majority of the outstanding shares of McAfee common stock entitled to vote at the Special Meeting.

If you have any questions or need assistance voting your shares, please contact our proxy solicitor:

Innisfree M&A Incorporated

501 Madison Avenue, 20th Floor

New York, NY 10022

Stockholders may call toll-free: (877) 750-8307

Banks & Brokers may call collect: (212) 750-5833

On behalf of the Board of Directors, I thank you for your support and appreciate your consideration of these matters.

 

Sincerely,

LOGO
Peter Leav

Chief Executive Officer

The accompanying proxy statement is dated January 4, 2022 and, together with the enclosed form of proxy card, is first being mailed on or about January 4, 2022.


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McAfee Corp.

6220 America Center Drive

San Jose, CA 95002

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD VIRTUALLY VIA THE INTERNET ON FEBRUARY 9, 2022

Notice is hereby given that a special meeting of stockholders (including any adjournments or postponements thereof, the “Special Meeting”) of McAfee Corp., a Delaware corporation (“McAfee”), will be held on February 9, 2022 at 10:00 a.m., Pacific time. Due to the possible public health impact of the coronavirus (COVID-19) and to support the well-being of our employees and stockholders, McAfee will hold the Special Meeting virtually via the Internet at www.virtualshareholdermeeting.com/MCFE2022SM. You will not be able to attend the Special Meeting physically in person. For purposes of attendance at the Special Meeting, all references in this proxy statement to “present in person” or “in person” shall mean virtually present at the Special Meeting. The Special Meeting is being held for the following purposes:

1. To consider and vote on the proposal to adopt the Agreement and Plan of Merger, dated as of November 5, 2021, as amended, among Condor BidCo, Inc., a Delaware corporation (“Parent”), Condor Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Subsidiary”), and McAfee (as amended from time to time, the “Merger Agreement”). Pursuant to the terms of the Merger Agreement, Merger Subsidiary will merge with and into McAfee and the separate corporate existence of Merger Subsidiary will cease, with McAfee continuing as the surviving corporation and a wholly owned subsidiary of Parent (the “Merger”);

2. To consider and vote on the proposal to approve, on a non-binding advisory basis, the compensation that may be paid or become payable to McAfee’s named executive officers that is based on or otherwise relates to the Merger Agreement and the transactions contemplated by the Merger Agreement (the “Compensation Proposal”); and

3. To consider and vote on any proposal to adjourn the Special Meeting to a later date or dates if necessary or appropriate to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting.

Only holders of McAfee common stock (“McAfee Stockholders”) of record as of the close of business on December 29, 2021, are entitled to notice of the Special Meeting and to vote at the Special Meeting or any adjournment, postponement or other delay thereof.

The Board of Directors of McAfee recommends that you vote: (1) “FOR” the adoption of the Merger Agreement; (2) “FOR,” on a non-binding advisory basis, the Compensation Proposal; and (3) “FOR” the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting.

Whether or not you plan to attend the Special Meeting in person, please sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying prepaid reply envelope or grant your proxy electronically over the Internet or by telephone (using the instructions provided in the enclosed proxy card). If you attend the Special Meeting and vote in person by virtual ballot, your vote will revoke any proxy that you have previously submitted. If you hold your shares in “street name,” you should instruct your bank, broker or other nominee how to vote your shares in accordance with the voting instruction form that you will receive from your bank, broker or other nominee. Your bank, broker or other nominee cannot vote on any of the proposals, including the proposal to adopt the Merger Agreement, without your instructions. If you sign, date and mail your proxy card without indicating how you wish to vote, your proxy will be counted as a vote “FOR” the adoption of the Merger Agreement, “FOR,” on a non-binding advisory basis, the Compensation Proposal and “FOR” the


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adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting.

 

By Order of the Board of Directors,

LOGO
Sayed Darwish

Senior Vice President and Chief Legal Officer

Dated: January 4, 2022


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YOUR VOTE IS IMPORTANT

WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON, WE ENCOURAGE YOU TO SUBMIT YOUR PROXY AS PROMPTLY AS POSSIBLE: (1) BY TELEPHONE; (2) THROUGH THE INTERNET; OR (3) BY SIGNING AND DATING THE ENCLOSED PROXY CARD AND RETURNING IT IN THE POSTAGE-PAID ENVELOPE PROVIDED. You may revoke your proxy or change your vote at any time before it is voted at the Special Meeting.

If you hold your shares in “street name,” you should instruct your bank, broker or other nominee how to vote your shares in accordance with the voting instruction form that you will receive from your bank, broker or other nominee. Your broker or other agent cannot vote on any of the proposals, including the proposal to adopt the Merger Agreement, without your instructions.

If you are a McAfee Stockholder of record, voting in person by virtual ballot at the Special Meeting will revoke any proxy that you previously submitted. If you hold your shares through a bank, broker or other nominee, you must obtain a “legal proxy” in order to vote in person at the Special Meeting.

If you fail to (1) return your proxy card, (2) grant your proxy electronically over the Internet or by telephone or (3) vote by virtual ballot in person at the Special Meeting, your shares will not be counted for purposes of determining whether a quorum is present at the Special Meeting and, if a quorum is present, will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement but will have no effect on the Compensation Proposal or the adjournment proposal.

You should carefully read and consider the entire accompanying proxy statement and its annexes, including, but not limited to, the Merger Agreement, along with all of the documents incorporated by reference into the accompanying proxy statement, as they contain important information about, among other things, the Merger and how it affects you. If you have any questions concerning the Merger Agreement, the Merger, the Special Meeting or the accompanying proxy statement, would like additional copies of the accompanying proxy statement or need help voting your shares of McAfee common stock, please contact our proxy solicitor:

Innisfree M&A Incorporated

501 Madison Avenue, 20th Floor

New York, NY 10022

Stockholders may call toll-free: (877) 750-8307

Banks & Brokers may call collect: (212) 750-5833


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TABLE OF CONTENTS

 

     Page  

SUMMARY

     1  

Parties Involved in the Merger

     1  

The Merger

     2  

Merger Consideration

     3  

Treatment of Vested Management Incentive Units and Class A Units

     5  

Material U.S. Federal Income Tax Consequences of the Merger

     5  

Appraisal Rights

     6  

Regulatory Approvals Required for the Merger

     7  

Closing Conditions

     7  

Financing of the Merger

     8  

Required Stockholder Approval

     9  

The Special Meeting

     10  

Recommendation of the McAfee Board of Directors

     10  

Opinion of Goldman Sachs & Co. LLC

     11  

Interests of McAfee’s Directors and Executive Officers in the Merger

     11  

Alternative Acquisition Proposals

     12  

Termination of the Merger Agreement

     13  

Effect on McAfee if the Merger Is Not Completed

     14  

The Voting Agreement

     14  

Amendment to Tax Receivable Agreement and OpCo LLC Agreement

     14  

QUESTIONS AND ANSWERS

     17  

FORWARD-LOOKING STATEMENTS

     25  

THE SPECIAL MEETING

     26  

Date, Time and Place

     26  

Purpose of the Special Meeting

     26  

Record Date; Shares Entitled to Vote; Quorum

     26  

Vote Required; Abstentions and Broker Non-Votes

     26  

Stock Ownership and Interests of Certain Persons

     27  

Voting of Proxies

     27  

Revocability of Proxies

     28  

Board of Directors’ Recommendation

     29  

Solicitation of Proxies

     29  

Anticipated Date of Completion of the Merger

     29  

 

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Appraisal Rights

     29  

Delisting and Deregistration of McAfee Class A Common Stock

     30  

Other Matters

     30  

Householding of Special Meeting Materials

     30  

Questions and Additional Information

     30  

THE MERGER

     31  

Parties Involved in the Merger

     31  

Effect of the Merger

     32  

Effect on McAfee If the Merger Is Not Completed

     32  

Merger Consideration

     33  

Treatment of Vested Management Incentive Units and Class A Units

     35  

Background of the Merger

     35  

Recommendation of the Board of Directors and Reasons for the Merger

     47  

Opinion of Goldman Sachs & Co. LLC

     50  

Certain Projected Financial Information

     60  

Interests of Executive Officers and Directors of McAfee in the Merger

     63  

Financing of the Merger

     67  

Closing and Effective Time

     70  

Appraisal Rights

     70  

Accounting Treatment

     76  

Material U.S. Federal Income Tax Consequences of the Merger

     76  

Regulatory Approvals Required for the Merger

     79  

PROPOSAL 1: ADOPTION OF THE MERGER AGREEMENT

     82  

Effects of the Merger; Directors and Officers; Certificate of Incorporation; Bylaws

     82  

Closing and Effective Time

     83  

Merger Consideration

     83  

Treatment of Vested Management Incentive Units and Class A Units

     85  

Exchange and Payment Procedures

     85  

Withholding

     86  

Representations and Warranties

     87  

Conduct of Business Pending the Merger

     90  

The “Go Shop” Period—Solicitation of Other Offers

     92  

The “No Shop” Period—No Solicitation of Other Offers

     94  

The Board of Directors’ Recommendation; Adverse Recommendation Change

     95  

 

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Employee Benefits

     97  

Efforts to Close the Merger

     98  

Cooperation with Debt/Preferred Equity Financing

     99  

Treatment of Certain Indebtedness

     101  

Indemnification and Insurance

     102  

Other Covenants

     103  

Conditions to the Closing of the Merger

     103  

Termination of the Merger Agreement

     105  

Termination Fee

     106  

Specific Performance

     107  

Limitations of Liability; Costs and Expenses

     108  

Amendment and Waiver

     109  

Governing Law and Venue, Waiver of Jury Trial

     109  

The Voting Agreement

     110  

Amendment to Tax Receivable Agreement and OpCo LLC Agreement

     110  

PROPOSAL 2: THE McAfee COMPENSATION PROPOSAL

     113  

Vote Required and Board of Directors Recommendation

     113  

PROPOSAL 3: ADJOURNMENT OF THE SPECIAL MEETING

     114  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     115  

FUTURE STOCKHOLDER PROPOSALS

     118  

WHERE YOU CAN FIND MORE INFORMATION

     119  

MISCELLANEOUS

     121  

 

ANNEX A—AGREEMENT AND PLAN OF MERGER, AS AMENDED

  

ANNEX B—VOTING AGREEMENT

  

ANNEX C—AMENDMENT TO TRA AND THE OPCO LLC AGREEMENT

  

ANNEX D—OPINION OF GOLDMAN SACHS & CO. LLC

  

ANNEX E—SECTION 262 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE

  

 

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SUMMARY

This summary highlights selected information from this proxy statement related to the merger of Condor Merger Sub, Inc. with and into McAfee Corp. (the “Merger”) and may not contain all of the information that is important to you. To understand the Merger more fully and for a more complete description of the legal terms of the Merger, you should carefully read and consider this entire proxy statement and the annexes to this proxy statement, including, but not limited to, the Merger Agreement (as defined below), along with all of the documents to which we refer in this proxy statement, as they contain important information about, among other things, the Merger and how it affects you. You may obtain the information incorporated by reference in this proxy statement without charge by following the instructions under the caption “Where You Can Find More Information.” The Merger Agreement is attached as Annex A to this proxy statement. You should carefully read and consider the entire Merger Agreement, which is the legal document that governs the Merger.

Except as otherwise specifically noted in this proxy statement, “McAfee,” “we,” “our,” “us,” the “Company” and similar words refer to McAfee Corp. Throughout this proxy statement, we refer to Condor BidCo, Inc. as “Parent” and Condor Merger Sub, Inc. as “Merger Subsidiary.” In addition, throughout this proxy statement we refer to the Agreement and Plan of Merger, dated November 5, 2021, as amended, among Parent, Merger Subsidiary and McAfee, as the “Merger Agreement,” our Class A common stock, par value $0.001 per share (the “Class A Common Stock”), together with our Class B common stock, par value $0.001 per share (the “Class B Common Stock”), as “Company Stock,” and the holders of Company Stock as “McAfee Stockholders.” Unless indicated otherwise, any other capitalized term used herein but not otherwise defined herein has the meaning assigned to such term in the Merger Agreement.

Parties Involved in the Merger

McAfee Corp.

McAfee, a Delaware corporation, is a global leader in online protection for consumers. Focused on protecting people, not just devices, McAfee consumer solutions adapt to users’ needs in an always online world, empowering them to live securely through integrated, intuitive solutions that protect their families and communities with the right security at the right moment. Founded in 1987 and headquartered in San Jose, California, McAfee currently serves customers from offices in North America, Europe, the Middle East, Latin America and Asia. McAfee Class A Common Stock is listed on The Nasdaq Global Select Market (“NASDAQ”) under the symbol “MCFE.”

Condor BidCo, Inc.

Parent was incorporated on November 4, 2021, solely for the purpose of engaging in the transactions contemplated by the Merger Agreement, and has not engaged in any activities other than in connection with or as contemplated by the Merger Agreement.

Condor Merger Sub, Inc.

Merger Subsidiary is a wholly owned subsidiary of Parent and was incorporated on November 4, 2021, solely for the purpose of engaging in the transactions contemplated by the Merger Agreement, and has not engaged in any activities other than in connection with or as contemplated by the Merger Agreement.

Parent and Merger Subsidiary are each affiliated with Advent International Corporation (“Advent”) and Permira Advisers LLC (“Permira” and collectively, the “Sponsors”). Advent is a leading private equity firm focused on investments in five core sectors, including business and financial services; health care; industrial; retail, consumer and leisure; and technology. Permira is a leading private equity firm focused on tech and tech-enabled investing, with a particular focus on digital consumer and enterprise cloud end markets. At the Effective

 

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Time (as defined in the section of this proxy statement captioned “—The Merger”), the Surviving Corporation (as defined in the section of this proxy statement captioned “—The Merger”) will be indirectly owned by the Sponsors and certain of their co-investors and affiliates.

In connection with the transactions contemplated by the Merger Agreement, (1) funds advised by the Sponsors and certain other co-investors (collectively, the “Equity Financing Sources”) have committed to capitalize Parent at the closing (the “Closing”) of the Merger (as defined in the section of this proxy statement captioned “—The Merger”) with an aggregate equity contribution equal to $5.2 billion, (2) JP Morgan Chase Bank, N.A., Bank of America, N.A., Credit Suisse AG, Cayman Islands Branch, Barclays Bank PLC, Citibank, N.A. (and/or its affiliates), HSBC Bank USA, National Association, Royal Bank of Canada, CPPIB Credit Investments III Inc., UBS AG, Stamford Branch, PSP Investments Credit II USA LLC, Bank of Montreal, KKR Corporate Lending (CA) LLC, Macquarie Capital Funding LLC, Mizuho Bank, Ltd., MUFG, Nomura Securities International, Inc., Wells Fargo Bank, National Association, BNP Paribas, Canadian Imperial Bank of Commerce, New York Branch, Citizens Bank, National Association, Credit Agricole Corporate and Investment Bank, Fifth Third Bank, National Association, Intesa Sanpaolo S.P.A., New York Branch, Keybank National Association, Natixis, New York Branch, Societe Generale, Standard Chartered Bank, Stifel Bank & Trust, Sumitomo Mitsui Banking Corporation, The Toronto-Dominion Bank, New York Branch and The Bank of Nova Scotia have agreed to provide Parent with debt financing consisting of a $6.66 billion first lien term loan facility, a $1 billion first lien cash flow revolving facility and a $2.32 billion senior unsecured bridge facility (which may be replaced with senior notes issued through a Rule 144A or other private placement) and (3) Parent has obtained preferred equity financing in an aggregate principal amount of up to $800 million from PSP Investments Credit USA LLC and NB Andes LP. Such amounts will be used to fund the aggregate purchase price required to be paid at the Closing and to also fund certain other payments (including the Required Amounts (as defined in the section of this proxy statement captioned “—Financing of the Merger”)), subject to the terms and conditions of the Merger Agreement.

In addition, funds advised by the Sponsors and certain other co-investors (the “Fee Funding Sources”) have agreed to guarantee certain obligations of Parent or Merger Subsidiary under the Merger Agreement, subject to an aggregate cap equal to $600,030,000, including the Parent Termination Fee (as defined in the section of this proxy statement captioned “—Financing of the Merger”) and certain fees and expenses payable by Parent or Merger Subsidiary as specified in the Merger Agreement. For more information, please see the section of this proxy statement captioned “The Merger—Financing of the Merger.”

The Merger

Upon the terms and subject to the conditions of the Merger Agreement, Merger Subsidiary will merge with and into McAfee and the separate corporate existence of Merger Subsidiary will cease, with McAfee continuing as the surviving corporation and as a wholly owned subsidiary of Parent (the “Surviving Corporation”). As a result of the Merger, the Class A Common Stock will no longer be publicly traded and will be delisted from NASDAQ. In addition, the Class A Common Stock will be deregistered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and McAfee will no longer file periodic reports with the United States Securities and Exchange Commission (the “SEC”). If the Merger is completed, you will not own any shares of capital stock of the Surviving Corporation. The time at which the Merger will become effective will occur upon the filing of a certificate of merger with the Secretary of State of the State of Delaware in accordance with the applicable provision of the General Corporation Law of the State of Delaware (the “DGCL”) (the time of such filing and the acceptance for record by the Secretary of State of the State of Delaware, or such later time as may be agreed in writing by Parent, Merger Subsidiary and McAfee and specified in the certificate of merger, being referred to herein as the “Effective Time”).

 

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Merger Consideration

Company Stock

At the Effective Time, each then outstanding share of Company Stock (other than (A) shares of Company Stock (i) held by McAfee as treasury stock, (ii) owned by Parent or Merger Subsidiary, (iii) owned by any direct or indirect wholly owned subsidiary of McAfee or Parent (other than Merger Subsidiary) or (iv) owned by McAfee Stockholders who have properly and validly exercised and not withdrawn their statutory rights of appraisal in respect of such shares of Company Stock in accordance with Section 262 of the DGCL (the shares in clause (A), collectively, the “Excluded Shares”) and (B) shares of unvested Company Stock that do not accelerate and become vested in connection with the Merger (referred to in this proxy statement as “Company Restricted Shares” and as further discussed in the section of this proxy statement captioned “—Merger Consideration—Treatment of Company Stock Awards”)) will automatically be canceled and extinguished and converted into the right to receive an amount in cash equal to $26.00, without interest (the “Per Share Consideration” and the aggregate consideration, the “Merger Consideration”).

At or prior to the Effective Time, Parent will deposit (or cause to be deposited) an amount of cash sufficient to pay the Merger Consideration with a designated paying agent for payment of each share of Company Stock (other than Excluded Shares and certain Company Restricted Shares converted to Cash Awards) outstanding immediately prior to the Effective Time. For more information, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Exchange and Payment Procedures.”

After the Merger is completed, you will have the right to receive the Per Share Consideration, but you will no longer have any rights as a McAfee Stockholder (except that McAfee Stockholders who properly and validly exercise and do not withdraw their appraisal rights will not be entitled to receive the Per Share Consideration and instead shall have the right to receive payment for the “fair value” of their shares determined pursuant to an appraisal proceeding, as contemplated by Delaware law). For more information on appraisal rights, please see the section of this proxy statement captioned “The Merger—Appraisal Rights.”

Treatment of Company Equity Awards

Pursuant to the Merger Agreement, immediately prior to the Effective Time:

 

   

Each in-the-money option to purchase Company Stock (referred to in this proxy statement as a “Company Stock Option”) that is outstanding and vested (including, without limitation, each Company Stock Option that accelerates and becomes vested by its terms in connection with the Merger) will be canceled and converted into the right to receive, without interest, an amount in cash determined by multiplying the excess of the Per Share Consideration over the exercise price of the Company Stock Option by the number of shares of Company Stock subject to such option as of immediately prior to the Effective Time. Each option to purchase Company Stock that is not in-the-money (whether or not vested) shall be canceled for no consideration.

 

   

Each restricted stock unit (referred to in this proxy statement as a “Company RSU”) and each performance stock unit (referred to in this proxy statement as a “Company PSU”, and collectively with the Company Stock Options, Company Restricted Shares and Company RSUs, the “Company Awards”) with respect to Company Stock that is then outstanding and vested (including each Company RSU and each Company PSU that accelerates and becomes vested by its terms in connection with the Merger) will be canceled and converted into the right to receive, without interest, an amount in cash equal to the number of shares of Company Stock subject to the vested Company RSU or Company PSU award as of immediately prior to the Effective Time multiplied by the Per Share Consideration.

 

   

Each Company Award that is then outstanding and not vested (other than options to purchase Company Stock that are not in-the-money) will be converted into a cash award (referred to in this proxy statement as a “Cash Award”), which will remain subject to the same time-vesting terms and conditions that apply immediately prior to the consummation of the Merger, and will be paid out on the

 

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next payroll date following the applicable vesting date, so long as the applicable portion becomes vested prior to the applicable holder’s termination of service, and will be subject to vesting, payment, and other conditions that are no less favorable to each such holder than those that applied to the corresponding Company Award immediately prior to the consummation of the Merger. Each Cash Award will provide the applicable holder with the opportunity to be paid an amount in cash equal to:

 

   

with respect to each Cash Award deriving from an in-the-money Company Stock Option that is not vested, (i) the excess of the Per Share Consideration over the option exercise price of such in-the-money Company Stock Option multiplied by (ii) the number of shares of Company Stock subject to such in-the-money Company Stock Option as of immediately prior to the Effective Time; and

 

   

with respect to each Cash Award deriving from a Company Restricted Share, Company RSU, or Company PSU that is not vested (i) the number of shares of Company Stock subject to such Company Restricted Share, Company RSU, or Company PSU as of immediately prior to the Effective Time multiplied by (ii) the Per Share Consideration; provided, that (A) in the case of a Company PSU that is not vested and that has an applicable one-year performance period that ends on or ended prior to the Effective Time, for purposes of determining the number of shares of Company Stock subject to such Company PSU to be converted into a Cash Award, such Company PSU shall be deemed earned based on the actual performance of McAfee during such performance period, and (B) in the case of a Company PSU that is not vested and that has an applicable one-year performance period that ends after the Effective Time, for purposes of determining the number of shares of Company Stock subject to such Company PSU to be converted into a Cash Award, the number of shares of Company Stock subject to such Company PSU shall be determined as though such performance conditions were satisfied at the applicable target levels.

Following the execution of the Merger Agreement, McAfee and the purchasing parties have further agreed that, in connection with the closing of the transactions contemplated by the Merger Agreement and generally subject to an applicable individual’s continued employment or other service to McAfee and its affiliates through the time that is immediately prior to the closing (except as described below), the following accelerated vesting terms will apply effective as of immediately prior to the Closing (collectively, the “Special Vesting Opportunity”):

 

   

each individual whose employment or other service to the Company and its affiliates commenced prior to January 1, 2021, will become vested in an additional number of then-outstanding unvested Company Awards having an aggregate dollar value (determined based on the amount payable in respect of such outstanding Company Awards pursuant to the Merger Agreement and without regard to vesting conditions) equal to the excess, if any, of (i) 25% of the combined total dollar value associated with the individual’s then-outstanding unvested Company Awards (other than any Company Awards granted after the execution of the Merger Agreement) and then-outstanding unvested Management Incentive Units of OpCo LLC (as defined below) over (ii) the total dollar value associated with the individual’s then-outstanding unvested Company Awards, and then-outstanding unvested Management Incentive Units of OpCo LLC, in each case, that will vest or otherwise accelerate by their terms or the terms of the Merger Agreement in connection with the consummation of the Merger; and

 

   

each individual whose employment or other service to the Company and its affiliates commenced on or after January 1, 2021, but before November 1, 2021, will become vested in an additional number of then-outstanding unvested Company Awards having an aggregate dollar value (determined based on the amount payable in respect of such outstanding Company Awards pursuant to the Merger Agreement and without regard to vesting conditions) equal to the excess, if any, of (i) 12.5% of the combined total dollar value associated with the individual’s then outstanding-unvested Company Awards (other than any Company Awards granted after the execution of the Merger Agreement) over (ii) the total value associated with such individual’s then-outstanding unvested Company Awards that will otherwise accelerate by their terms or the terms of the Merger Agreement in connection with the consummation of the Merger.

 

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The Special Vesting Opportunity will not apply with respect to any employee or other service provider that remains employed by, or is providing services to, McAfee or any of its affiliates as of immediately prior to the Closing if, as of the time of the Closing, the service provider’s employment or other service is scheduled to transfer to an affiliate of the buyer of McAfee’s Enterprise business unit (i.e., because of a delayed transfer of subsidiaries in certain non-U.S. jurisdictions) pursuant to the divestiture transaction that closed on July 27, 2021. To the extent that any Company Awards vest pursuant to the Special Vesting Opportunity, (i) the dollar value of the applicable award holder’s Cash Awards received in exchange for Company Awards, that do not vest in connection with the Closing will be reduced on a dollar-for-dollar basis by the dollar value of the Special Vesting Opportunity, with the offset being applied in reverse chronological order (i.e., starting with the amount payable on the latest vesting date after the consummation of the Merger (the “Closing Date”) and, to the extent necessary, proceeding to the next latest vesting date, etc.), (ii) such vesting will be deemed to take place immediately prior to the Closing for all purposes of the Merger Agreement, and (iii) such Company Awards so impacted by the Special Vesting Opportunity will become vested pursuant to the terms of the Merger Agreement as of immediately prior to the Closing. For the avoidance of doubt, no Company Awards will vest and accelerate with respect to the Special Vesting Opportunity if the holder would have already become vested as of the Closing in respect of at least 25% or 12.5%, as applicable, of the combined total dollar value of his or her then-outstanding unvested Company Awards (other than any Company Awards granted after the execution of the Merger Agreement) and then-outstanding unvested Management Incentive Units of OpCo LLC pursuant to the terms thereof or the terms of the Merger Agreement.

The Merger Agreement contemplates that McAfee may request Parent’s consent (which consent may not be unreasonably withheld, conditioned or delayed) to the vesting of Company Awards held by current or former employees and service providers prior to the Effective Time that would otherwise not vest in accordance with their terms or the Special Vesting Opportunity described above.

Treatment of Vested Management Incentive Units and Class A Units

The Board of Directors of McAfee (the “Board of Directors”) shall take all actions so that all Management Incentive Units of Foundation Technology Worldwide LLC, a Delaware limited liability company (“OpCo LLC”), shall be vested in full as of immediately prior to the Exchange and Redemption (as defined below) and (i) McAfee will require each holder of vested Management Incentive Units and each holder of Class A Units of OpCo LLC to effect an exchange of all such holder’s vested Management Incentive Units for New Class A Units (as defined in the Second Amended and Restated Limited Liability Company Agreement of OpCo LLC dated as of October 21, 2020 (the “OpCo LLC Agreement”)) of OpCo LLC, and, thereafter, will require each holder to effect a redemption of all of such Class A Units of OpCo LLC (including New Class A Units, if applicable) and shares of Class B Common Stock, in exchange for shares of Class A Common Stock (the “Exchange and Redemption”) and (ii) each share of Class B Common Stock, if any, will automatically be cancelled immediately upon the consummation of the Exchange and Redemption, such that no shares of Class B Common Stock remain outstanding immediately prior to the Effective Time.

Material U.S. Federal Income Tax Consequences of the Merger

The receipt of cash by McAfee Stockholders in exchange for shares of Class A Common Stock in the Merger will be a taxable transaction to McAfee Stockholders for U.S. federal income tax purposes. Such receipt of cash by each McAfee Stockholder that is a U.S. Holder (as defined under the section, “The Merger—Material U.S. Federal Income Tax Consequences of the Merger”) generally will result in the recognition of gain or loss in an amount equal to the difference, if any, between the amount of cash that such U.S. Holder receives in the Merger and such U.S. Holder’s adjusted tax basis in the shares of Class A Common Stock surrendered pursuant to the Merger by such McAfee Stockholder. Backup withholding taxes

 

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may also apply to the cash payments made pursuant to the Merger, unless such U.S. Holder complies with certification procedures under the backup withholding rules.

A McAfee Stockholder that is a Non-U.S. Holder (as defined under the section, “The Merger—Material U.S. Federal Income Tax Consequences of the Merger”) generally will not be subject to U.S. federal income tax with respect to the exchange of Class A Common Stock for cash in the Merger unless such Non-U.S. Holder has certain connections to the United States, but may be subject to backup withholding tax unless the Non-U.S. Holder complies with certain certification procedures or otherwise establishes a valid exemption from backup withholding tax.

McAfee Stockholders should read the section of this proxy statement captioned “The Merger—Material U.S. Federal Income Tax Consequences of the Merger.”

McAfee Stockholders should consult their tax advisors in light of their particular circumstances and any consequences arising under U.S. federal, state, local and non-U.S. income and other tax consequences relating to the Merger.

Appraisal Rights

If the Merger is consummated and certain conditions are met, McAfee Stockholders who continuously hold shares of Company Stock through the Effective Time, who do not vote in favor of the adoption of the Merger Agreement, who properly and validly demand appraisal of their shares, and who do not withdraw their demands or otherwise lose their rights to seek appraisal will be entitled to seek appraisal of their shares in connection with the Merger under Section 262 of the DGCL. This means that McAfee Stockholders may be entitled to have their shares of Company Stock appraised by the Delaware Court of Chancery, and to receive payment in cash of the “fair value” of their shares of Company Stock, exclusive of any elements of value arising from the accomplishment or expectation of the Merger, together with interest to be paid on the amount determined to be fair value, if any, as determined by the court (or in certain circumstances described in further detail in the section of this proxy statement captioned “The Merger—Appraisal Rights,” on the difference between the amount determined to be the fair value and the amount paid by the Surviving Corporation in the Merger to each McAfee Stockholder entitled to appraisal prior to the entry of judgment in any appraisal proceeding). Due to the complexity of the appraisal process, McAfee Stockholders who wish to seek appraisal of their shares are encouraged to seek the advice of legal counsel with respect to the exercise of appraisal rights.

McAfee Stockholders considering seeking appraisal should be aware that the fair value of their shares as determined pursuant to Section 262 of the DGCL could be more than, the same as, or less than the value of the consideration that they would receive pursuant to the Merger Agreement if they did not seek appraisal of their shares of Company Stock.

To exercise appraisal rights, McAfee Stockholders must: (i) submit a written demand for appraisal to McAfee before the vote is taken on the proposal to adopt the Merger Agreement; (ii) not submit a proxy or otherwise vote in favor of the proposal to adopt the Merger Agreement; (iii) continue to hold shares of Company Stock of record through the Effective Time; and (iv) strictly comply with all other procedures for exercising appraisal rights under the DGCL. Failure to follow exactly the procedures specified under the DGCL may result in the loss of appraisal rights. In addition, the Delaware Court of Chancery will dismiss appraisal proceedings in respect of McAfee unless certain stock ownership conditions are satisfied by the McAfee Stockholders seeking appraisal. The DGCL requirements for exercising appraisal rights are described in further detail in this proxy statement, which is qualified in its entirety by Section 262 of the DGCL, the relevant section of the DGCL regarding appraisal rights. A copy of Section 262 of the DGCL is reproduced in Annex E to this proxy statement. If you hold your shares of Company Stock through a bank, broker or other

 

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nominee and you wish to exercise appraisal rights, you should consult with your bank, broker or other nominee to determine the appropriate procedures for the making of a demand for appraisal on your behalf by your bank, broker or other nominee. For more information, please see the section of this proxy statement captioned “The Merger—Appraisal Rights.”

Regulatory Approvals Required for the Merger

HSR Act, U.S. Antitrust Matters, CFIUS and Other Regulatory Approvals

Under the Merger Agreement, the Merger cannot be completed until the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), has expired or been terminated and approvals, consents, waivers or clearances under certain other antitrust laws or other regulatory laws have been obtained. McAfee and Parent made the filings required under the HSR Act on November 19, 2021. The applicable waiting period under the HSR Act expired on December 20, 2021.

Under the Merger Agreement, the Merger cannot be completed until CFIUS Approval (as defined in this section of this proxy statement entitled “Proposal 1: Adoption of the Merger Agreement—Conditions to the Closing of the Merger”) has been obtained from the interagency Committee on Foreign Investment in the United States (“CFIUS”) has been obtained. McAfee and Parent submitted a draft joint voluntary notice (the “Draft CFIUS Notice”) to CFIUS with respect to the Merger and the other transactions contemplated by the Merger Agreement on December 1, 2021. CFIUS provided comments to the Draft CFIUS Notice on December 13, 2021, and McAfee and Parent submitted a final joint voluntary notice to CFIUS with respect to the Merger and the other transactions contemplated by the Merger Agreement on December 23, 2021.

Under the Merger Agreement, the Merger cannot be completed until at least 60 days have elapsed since McAfee submitted the notification to the U.S. Department of State’s Directorate of Defense Trade Controls (“DDTC”) pursuant to Section 122.4(b) of the International Traffic in Arms Regulations (“ITAR”). McAfee submitted the notification to DDTC on November 20, 2021.

Closing Conditions

The obligations of McAfee, Parent and Merger Subsidiary, as applicable, to consummate the Merger are subject to the satisfaction or waiver of customary conditions, including (among other conditions), the following:

 

   

the approval and adoption of the Merger Agreement by the requisite affirmative vote of McAfee Stockholders entitled to vote at the Special Meeting;

 

   

the expiration or early termination of the applicable waiting period under the HSR Act and the receipt of approvals, consents, waivers or clearances under certain other antitrust laws or regulatory laws;

 

   

CFIUS Approval having been obtained;

 

   

at least 60 days having elapsed since McAfee’s submission of the notification to DDTC pursuant to Section 122.4(b) of ITAR;

 

   

the absence of any laws, injunctions or court orders in certain jurisdictions enjoining or otherwise prohibiting the consummation of the Merger;

 

   

in the case of Parent and Merger Subsidiary, the absence, since the date of the Merger Agreement, of any continuing change, event, fact, condition, circumstance, or occurrence that has had or would reasonably be expected to have a material adverse effect on the business, financial condition or results of operations of McAfee and its subsidiaries (together, the “McAfee Group”), taken as a whole, and subject to certain defined limitations and exceptions in the Merger Agreement;

 

   

the accuracy of the representations and warranties of McAfee, Parent and Merger Subsidiary in the Merger Agreement, subject to materiality qualifiers, as of the date of the Merger Agreement and the Effective Time or the date in respect of which such representation or warranty was specifically made; and

 

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the performance in all material respects by McAfee, Parent and Merger Subsidiary of their respective obligations required to be performed by them under the Merger Agreement at or prior to the Effective Time.

Financing of the Merger

The obligation of Parent and Merger Subsidiary to consummate the Merger is not subject to any financing condition. We anticipate that the total amount of funds necessary to complete the Merger and the related transactions, and to pay the fees and expenses required to be paid at the closing of the Merger by Parent and Merger Subsidiary under the Merger Agreement, will be approximately $14 billion. This amount includes funds needed to: (1) pay McAfee Stockholders the amounts due under the Merger Agreement for their Company Stock (other than Excluded Shares and certain Company Restricted Shares that are converted into Cash Awards), (2) make payments in respect of our outstanding and vested Company Awards payable in connection with the Closing, and (3) make payments of all indebtedness outstanding under that certain First Lien Credit Agreement, dated as of September 29, 2017, by and among McAfee, LLC, as borrower, McAfee Finance 2 LLC, Morgan Stanley Senior Funding, Inc., as administrative agent and collateral agent and the lenders party thereto from time to time (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”) (collectively, the “Required Amounts”).

The Equity Financing Sources have committed to capitalize Parent at the Closing with an aggregate equity contribution equal to $5.2 billion, subject to the terms and conditions set forth in signed equity commitment letters, each dated as of November 5, 2021 (collectively, the “Equity Commitment Letters”; such financing, the “Equity Financing”). McAfee is an express third-party beneficiary of the Equity Commitment Letters solely with respect to enforcing Parent’s right to cause the commitments under the Equity Commitment Letters by each Equity Financing Source to be funded to Parent in accordance with the Equity Commitment Letters, and to cause Parent to enforce its rights against each such Equity Financing Source to perform its funding obligations under the applicable Equity Commitment Letter, in each case subject to (i) the limitations and conditions set forth in each Equity Commitment Letter and (ii) the terms and conditions of the Merger Agreement.

McAfee, Parent and the Fee Funding Sources have entered into certain Fee Funding Agreements dated as of November 5, 2021 (the “Fee Funding Agreements”), pursuant to which, subject to the terms and conditions contained therein, each Fee Funding Source has guaranteed a portion of the payment of the Parent Termination Fee, and certain fees and expenses expressly payable by Parent or Merger Subsidiary pursuant to the Merger Agreement.

In addition, in connection with the Merger Agreement, (i) Merger Subsidiary entered into a debt commitment letter, dated as of November 5, 2021 (as amended, supplemented or otherwise modified, the “Debt Commitment Letter”) with JPMorgan Chase Bank, N.A., Bank of America, N.A., Credit Suisse AG, Cayman Islands Branch, Barclays Bank PLC, Citibank, N.A. (and/or its affiliates), HSBC Bank USA, National Association, Royal Bank of Canada, CPPIB Credit Investments III Inc., UBS AG, Stamford Branch and PSP Investments Credit II USA LLC (collectively, the “Lenders”) (which Debt Commitment Letter was subsequently amended and restated as of November 23, 2021 to add each of Bank of Montreal, KKR Corporate Lending (CA) LLC, Macquarie Capital Funding LLC, Mizuho Bank, Ltd., MUFG, Nomura Securities International, Inc., Wells Fargo Bank, National Association, BNP Paribas, Canadian Imperial Bank of Commerce, New York Branch, Citizens Bank, National Association, Credit Agricole Corporate and Investment Bank, Fifth Third Bank, National Association, Intesa Sanpaolo S.P.A., New York Branch, Keybank National Association, Natixis, New York Branch, Societe Generale, Standard Chartered Bank, Stifel Bank & Trust, Sumitomo Mitsui Banking Corporation, The Toronto-Dominion Bank, New York Branch and The Bank of Nova Scotia as Lenders), pursuant to which the Lenders have committed to provide debt financing consisting of a $6.66 billion first lien term loan facility, a $1 billion first lien cash flow revolving facility and a $2.32 billion senior unsecured bridge facility (which may be replaced with senior notes issued through a Rule 144A or other private placement) (collectively, the “Debt Financing”), and (ii) Condor TopCo, LLC, a Delaware limited liability company

 

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(“TopCo”), entered into a preferred equity commitment letter, dated as of November 5, 2021 (as amended, supplemented or otherwise modified, the “Preferred Equity Commitment Letter” and, together with the Equity Commitment Letters and the Debt Commitment Letter, the “Commitment Letters”) with PSP Investments Credit USA LLC and NB Andes LP (collectively, the “Preferred Equity Financing Sources” and together with the Lenders, the “Debt/Preferred Equity Financing Sources”) pursuant to which the Preferred Equity Financing Sources have agreed to provide preferred equity financing in an aggregate principal amount of up to $800 million (the “Preferred Equity Financing” and, together with the Debt Financing, the “Debt/Preferred Equity Financing;” the Debt/Preferred Equity Financing together with the Equity Financing, the “Financing”). The obligations of the Debt/Preferred Equity Financing Sources to provide debt financing under the Debt Commitment Letter and to provide preferred equity financing under the Preferred Equity Commitment Letter are subject to a number of customary conditions. For more information, please see the section of this proxy statement captioned “The Merger—Financing of the Merger.”

Each of Parent and Merger Subsidiary has agreed to use reasonable best efforts to take, or cause to be taken, all actions and do, or cause to be done, all things necessary, advisable or proper to obtain the proceeds of the Financing contemplated by the Commitment Letters on or prior to the Closing Date on the terms and conditions and in the amounts described in the Commitment Letters (including any “flex” provisions) or such other terms and conditions that are more favorable to Parent and Merger Subsidiary.

McAfee has agreed to use reasonable best efforts to, and to cause its subsidiaries to use reasonable best efforts to, and to use reasonable best efforts to cause its and their respective representatives to, provide such cooperation as is reasonably requested by Parent and is necessary in connection with the Debt/Preferred Equity Financing and customarily provided for borrowers or issuers in financings of the type contemplated by the Debt Commitment Letter (or permanent take-out financing incurred in lieu of the bridge facility contemplated under the Debt Commitment Letter) or the Preferred Equity Commitment Letter, as applicable, subject to the terms set forth in the Merger Agreement. For more information, please see the section of this proxy statement captioned “The Merger Agreement—Cooperation with Debt/Preferred Equity Financing.”

Required Stockholder Approval

The affirmative vote of the holders of a majority of the outstanding shares of Company Stock is required to adopt the Merger Agreement (the “Company Stockholder Approval”). As of the close of business on December 29, 2021 (the “Record Date”), 219,617,651 votes constitute a majority of the outstanding shares of Company Stock. Approval of the proposal to approve, on a non-binding advisory basis, the compensation that may be paid or become payable to McAfee’s named executive officers that is based on or otherwise relates to the Merger Agreement and the transactions contemplated by the Merger Agreement (the “Compensation Proposal”) and the proposal to adjourn the Special Meeting (the “adjournment proposal”), whether or not a quorum is present, requires the affirmative vote of a majority of the shares of Company Stock present in person or represented by proxy at the Special Meeting and entitled to vote on the subject matter. The approval of the Compensation Proposal is on a non-binding advisory basis and is not a condition to the completion of the Merger.

As of December 25, 2021, our directors and executive officers beneficially owned and were entitled to vote, in the aggregate, 963,562 shares of Company Stock, representing approximately 0.22% of the shares of Company Stock outstanding as of December 25, 2021.

TPG VII Manta AIV I, L.P., TPG VII Manta Finance I, L.P., TPG VII Manta Blocker Co-Invest I, L.P., TPG VII Side-by-Side Separate Account I, L.P., TPG VII Manta Holdings II, L.P., TPG VII Manta AIV Co-Invest, L.P., and Intel Americas, Inc. (collectively, the “Supporting Stockholders”) entered into a voting agreement with Parent, dated as of November 5, 2021 (the “Voting Agreement”). The Supporting Stockholders collectively own 65,591,599 shares of Class A Common Stock and 227,349,460 shares of Class B Common Stock representing approximately 35.86% of the total outstanding Class A Common Stock and 89.40% of the

 

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total outstanding Class B Common Stock, respectively, or approximately 67.91% of the total voting power of the Company Stock as of December 14, 2021. Pursuant to the Voting Agreement, the Supporting Stockholders have agreed, among other things, to vote their shares of Company Stock in favor of the proposal to adopt the Merger Agreement and against any competing transaction so long as the Merger Agreement has not been terminated and the Board of Directors has not made an Adverse Recommendation Change (as defined and described in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—The Board of Directors’ Recommendation; Adverse Recommendation Change”). For more information, see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—The Voting Agreement.”

We currently expect that our directors and executive officers will vote all of their respective shares of Company Stock: (1) “FOR” the adoption of the Merger Agreement; (2) “FOR,” on a non-binding advisory basis, the Compensation Proposal; and (3) “FOR” the adjournment proposal.

The Special Meeting

Date, Time and Place

A special meeting of McAfee Stockholders to consider and vote on the proposal to adopt the Merger Agreement will be held on February 9, 2022 at 10:00 a.m., Pacific time (the “Special Meeting”). Due to the possible public health impact of the coronavirus (COVID-19) and to support the wellbeing of our employees and McAfee Stockholders, McAfee will hold the Special Meeting virtually via the Internet at www.virtualshareholdermeeting.com/MCFE2022SM (the “virtual meeting website”).

You will not be able to attend the Special Meeting physically in person. For purposes of attendance at the Special Meeting, all references in this proxy statement to “present in person” or “in person” shall mean virtually present at the Special Meeting.

Record Date; Shares Entitled to Vote

You are entitled to vote at the Special Meeting if you owned shares of Company Stock at the close of business on the Record Date. Each holder of Company Stock shall be entitled to one (1) vote for each such share owned at the close of business on the Record Date.

Quorum

As of the Record Date, there were 439,235,299 shares of Company Stock outstanding and entitled to vote at the Special Meeting. The holders of a majority of the shares of Company Stock issued and outstanding and entitled to vote, present in person or represented by proxy, will constitute a quorum at the Special Meeting.

Recommendation of the McAfee Board of Directors

The Board of Directors has: (i) determined that the Merger Agreement and the transactions contemplated thereby (including the Merger) are fair and in the best interests of McAfee and the McAfee Stockholders, (ii) approved and declared advisable the Merger Agreement and any other agreement executed and delivered in connection with the Merger Agreement on the date thereof (collectively, the “Transaction Documents”) and the transactions contemplated by the Merger Agreement (including the Merger) and by the Transaction Documents, and (iii) resolved, subject to Section 6.03 of the Merger Agreement, to recommend adoption of the Merger Agreement by the McAfee Stockholders.

The Board of Directors recommends that you vote: (1) “FOR” the adoption of the Merger Agreement; (2) “FOR,” on a non-binding advisory basis, the Compensation Proposal; and (3) “FOR” the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting.

 

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Prior to the adoption of the Merger Agreement by McAfee Stockholders, under certain circumstances, the Board of Directors may withdraw or change the foregoing recommendation if it determines in good faith (after consultation with its financial advisor and its outside legal counsel), in response to an Acquisition Proposal or an Intervening Event, the failure to do so would reasonably be expected to be inconsistent with the Board of Directors’ fiduciary duties to McAfee Stockholders under Delaware law. However, the Board of Directors cannot withdraw or change the foregoing recommendation unless it complies with certain procedures in the Merger Agreement, including, but not limited to, negotiating with Parent in good faith over a three (3) business day period to amend the Merger Agreement to obviate the need for such change in recommendation, after which the Board of Directors shall have determined that the failure to make an Adverse Recommendation Change (as defined in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—The Board of Directors’ Recommendation: Adverse Recommendation Change”) would reasonably be expected to be inconsistent with the Board of Directors’ fiduciary duties under Delaware law. The termination of the Merger Agreement by McAfee or Parent in connection with an Adverse Recommendation Change will result in the payment by McAfee of a termination fee (the “Company Termination Fee”) of either (i) $145,632,500 if the Merger Agreement is terminated before the Cut-Off Date (as defined in the section of this proxy statement captioned “—Alternative Acquisition Proposals”) to enter into a definitive agreement to consummate an alternative transaction contemplated by a Superior Proposal (as defined in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—The “Go Shop” Period—Solicitation of Other Offers”) made by an Excluded Party (as defined in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—The “Go Shop” Period—Solicitation of Other Offers”) or its Affiliates or (ii) $291,265,000, in the case of any other such termination. For more information, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—The Board of Directors’ Recommendation; Adverse Recommendation Change.”

Opinion of Goldman Sachs & Co. LLC

Goldman Sachs & Co. LLC (“Goldman Sachs”) rendered to the Board of Directors its oral opinion, subsequently confirmed in its written opinion dated November 5, 2021, that, as of the date of the written opinion and based upon and subject to the factors and assumptions set forth therein, the $26.00 in cash per share of Company Stock to be paid to the holders (other than Parent, an affiliate of GIC Private Ltd. (“GIC” and such affiliate, “Snowlake”) and their respective affiliates) of shares of Company Stock, taken in the aggregate, pursuant to the Merger Agreement was fair from a financial point of view to the holders of such shares of Company Stock.

The full text of the written opinion of Goldman Sachs, dated November 5, 2021, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex D. The summary of Goldman Sachs’ opinion contained in this proxy statement is qualified in its entirety by reference to the full text of Goldman Sachs’ written opinion. Goldman Sachs provided advisory services and its opinion for the information and assistance of the Board of Directors in connection with its consideration of the transaction. The Goldman Sachs opinion does not constitute a recommendation as to how any holder of shares of Company Stock should vote with respect to such transaction or any other matter.

For more information, see the section of this proxy statement captioned “The Merger—Opinion of Goldman Sachs & Co. LLC.”

Interests of McAfee’s Directors and Executive Officers in the Merger

When considering the foregoing recommendation of the Board of Directors that you vote to approve the proposal to adopt the Merger Agreement, McAfee Stockholders should be aware that McAfee’s directors and executive officers may have interests in the Merger that are different from, or in addition to, McAfee

 

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Stockholders more generally. In (1) evaluating and negotiating the Merger Agreement, (2) approving the Merger Agreement and the Merger and (3) recommending that the Merger Agreement be adopted by McAfee Stockholders, the Board of Directors was aware of and considered these interests, among other matters, to the extent that these interests existed at the time. These interests include:

 

   

Company Awards and Management Incentive Units held by executive officers and directors will be treated as described in the section of this proxy statement captioned “The Merger—Interests of McAfee’s Directors and Executive Officers in the Merger—Treatment of Equity Awards;”

 

   

eligibility of McAfee’s executive officers to receive severance payments and benefits (including equity award vesting acceleration) under their severance agreements with McAfee, as described in more detail in the section of this proxy statement captioned “The Merger—Interests of McAfee’s Directors and Executive Officers in the Merger—Executive Severance Arrangements;” and

 

   

continued indemnification and directors’ and officers’ liability insurance to be provided by the Surviving Corporation.

If the proposal to adopt the Merger Agreement is approved, the shares of Company Stock held by McAfee directors and executive officers will be treated in the same manner as outstanding shares of Company Stock held by all other McAfee Stockholders. For more information, see the section of this proxy statement captioned “The Merger—Interests of McAfee’s Directors and Executive Officers in the Merger.”

Alternative Acquisition Proposals

The “Go Shop” Period—Solicitation of Other Acquisition Proposals

Under the Merger Agreement, from the date of the Merger Agreement until 11:59 p.m., New York City time on (a) December 20, 2021 (such date, the “No Shop Period Start Date”) or (b) in respect of any Excluded Party, January 4, 2022 (the “Cut-Off Date” and such period, the “Go Shop Period”), McAfee, its subsidiaries and their respective directors, officers, employees and other representatives have the right to, among other things, directly or indirectly: (i) solicit, initiate, propose, facilitate, encourage or induce any inquiries regarding any proposal or inquiry that constitutes, could constitute or is reasonably expected to lead to, an Acquisition Proposal, or the making, submission or announcement of one or more Acquisition Proposals from any person or its representatives, or encourage, facilitate or assist, any proposal, inquiry or offer that could reasonably be expected to lead to, result in or constitute an Acquisition Proposal; (ii) subject to entry into an Acceptable Confidentiality Agreement (as defined in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—The ‘Go Shop’ Period—Solicitation of Other Offers”), provide any non-public information to, any third person with the intent to facilitate the making of an Acquisition Proposal (as defined in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—The ‘Go Shop’ Period—Solicitation of Other Offers”); (iii) continue, enter into, participate or otherwise engage in discussions or negotiations with any third person (and its representatives) with respect to an Acquisition Proposal (or any proposal or inquiry that could constitute or reasonably be expected to lead to an Acquisition Proposal); and (iv) otherwise cooperate with, assist, participate in or take any action to facilitate any Acquisition Proposal or any other proposals that could reasonably be expected to lead to, result in or constitute any Acquisition Proposal.

The “No Shop” Period—No Solicitation of Other Acquisition Proposals

Under the Merger Agreement, (a) with respect to any Excluded Party, on the Cut-Off Date or (b) with respect to any person or “group” who is not an Excluded Party, on the No Shop Period Start Date, McAfee has agreed to, and to cause its subsidiaries to, and to instruct its and its subsidiaries representatives to, promptly cease and cause to be terminated any solicitation, discussions or negotiations with any third party or its representatives that could reasonably be expected to lead to or relating to an Acquisition Proposal and must promptly terminate all physical and electronic data room access previously granted to any such third party or its representatives, cease providing any further non-public information of McAfee or any of its subsidiaries to any such third party or

 

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its representatives and request the return or destruction of any copies of, studies based upon and/or any extracts or summaries from, any non-public information of McAfee or its subsidiaries in such third party’s possession or control.

Under the Merger Agreement, during the period commencing on (a) with respect to any Excluded Party, the Cut-Off Date, or (b) with respect to any person or “group” who is not an Excluded Party, the No Shop Period Start Date and, in each case, continuing until the earlier of the valid termination of the Merger Agreement or the Effective Time, neither McAfee nor any of its subsidiaries may, and must instruct and not authorize or knowingly permit its and its subsidiaries’ representatives to, directly or indirectly: (i) solicit, initiate, propose, knowingly induce, facilitate or knowingly encourage the making, submission or announcement of any Acquisition Proposal or any inquiries that could reasonably be expected to lead to, result in or constitute an Acquisition Proposal; (ii) enter into or participate in any discussions or negotiations with, or provide any non-public information relating to McAfee or its subsidiaries to, any third party relating to, an Acquisition Proposal, for the purpose of knowingly facilitating, inducing or encouraging an Acquisition Proposal; or (iii) except for an Acceptable Confidentiality Agreement, enter into a contract relating to an Acquisition Proposal.

Notwithstanding the foregoing restrictions, under certain specified circumstances, at any time prior to obtaining the Company Stockholder Approval, McAfee may, among other things, provide non-public information relating to McAfee or its subsidiaries to, and engage or participate in negotiations or discussions with, a third party or its representatives in respect of an unsolicited written Acquisition Proposal from such third party (including any Excluded Party, at any time) that did not result from any breach in any material respect of certain McAfee’s obligations, as described in the immediately preceding paragraph, if (and only if), subject to complying with certain procedures described in the subsequent paragraph, the Board of Directors determines in good faith (after consultation with its financial advisor and its outside legal counsel) that such Acquisition Proposal either constitutes a Superior Proposal or would reasonably be expected to lead to or result in a Superior Proposal. For more information, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—The ‘No Shop’ Period—No Solicitation of Other Offers.”

Both during the Go Shop Period and after the No Shop Period Start Date but prior to the adoption of the Merger Agreement by McAfee Stockholders, McAfee is entitled to terminate the Merger Agreement for the purpose of entering into an agreement in respect of a Superior Proposal if it complies with certain procedures in the Merger Agreement, including, but not limited to, negotiating with Parent in good faith over a three (3) business day period in an effort to amend the terms and conditions of the Merger Agreement so that such Superior Proposal no longer constitutes a “Superior Proposal” relative to the transactions contemplated by the Merger Agreement, as amended pursuant to such negotiations.

The termination of the Merger Agreement by McAfee following the Board of Directors’ authorization for McAfee to enter into a definitive agreement to consummate an alternative transaction contemplated by a Superior Proposal (assuming the Company has complied in all material respects with Section 6.03(b) and (c) of the Merger Agreement with respect to such Superior Proposal) will result in the payment by McAfee of a termination fee of either (i) $145,632,500 if the Merger Agreement is terminated before the Cut-Off Date to enter into a definitive agreement to consummate an alternative transaction with an Excluded Party or its affiliates or (ii) $291,265,000, in the case of any other such termination. For more information, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—The Board of Directors’ Recommendation; Adverse Recommendation Change.”

Termination of the Merger Agreement

In addition to the circumstances described above, Parent and McAfee have certain rights to terminate the Merger Agreement under customary circumstances, including by mutual written agreement, the imposition of laws, temporary restraining orders, preliminary injunctions or permanent injunctions in certain jurisdictions that

 

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permanently enjoin or otherwise permanently prohibit the consummation of the Merger, certain uncured breaches of the Merger Agreement by the other party, if the Merger has not been consummated by 11:59 p.m., New York City time on August 2, 2022 (as subject to certain potential extensions, the “End Date” (as further described in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Termination of the Merger Agreement”)), if McAfee Stockholders fail to adopt the Merger Agreement at the Special Meeting (or any adjournment or postponement thereof), if prior to obtaining the Company Stockholder Approval, an Adverse Recommendation Change shall have occurred, or if prior to obtaining the Company Stockholder Approval the Company terminates the Merger Agreement to enter into a definitive agreement with respect to a Superior Proposal (subject to the terms and conditions with respect thereto set forth in the Merger Agreement). Under some circumstances, (i) McAfee is required to pay Parent a termination fee equal to either $145,632,500 or $291,265,000; and (ii) Parent is required to pay McAfee a termination fee equal to $582,530,000. Please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Termination Fee.”

Effect on McAfee if the Merger Is Not Completed

If the Merger Agreement is not adopted by McAfee Stockholders, or if the Merger is not completed for any other reason:

 

  i.

McAfee Stockholders will not be entitled to, nor will they receive, any payment for their respective shares of Company Stock pursuant to the Merger Agreement;

 

  ii.

(a) McAfee will remain an independent public company; (b) the Class A Common Stock will continue to be listed and traded on NASDAQ and registered under the Exchange Act; and (c) McAfee will continue to file periodic reports with the SEC; and

 

  iii.

under certain specified circumstances, (a) McAfee will be required to pay Parent a termination fee of either $145,632,500 or $291,265,000, or (b) Parent will be required to pay McAfee a termination fee of $582,530,000, in each case, upon the termination of the Merger Agreement. For more information, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Termination Fee.”

Please see the section of this proxy statement captioned “The Merger—Effect on McAfee if the Merger Is Not Completed.”

The Voting Agreement

The Supporting Stockholders, which collectively own 65,951,599 shares of Class A Common Stock and 227,349,460 shares of Class B Common Stock representing approximately 35.86% of the total outstanding Class A Common Stock and 89.40% of the total outstanding Class B Common Stock, respectively, or approximately 67.91% of the total voting power of the Company Stock as of December 14, 2021, entered into the Voting Agreement with Parent. Pursuant to the Voting Agreement, the Supporting Stockholders have agreed, among other things, to vote their shares of Company Stock in favor of the proposal to adopt the Merger Agreement and against any competing transaction so long as the Merger Agreement has not been terminated and the Board of Directors has not made an Adverse Recommendation Change. A copy of the Voting Agreement is attached as Annex B to this proxy statement and is incorporated herein by reference.

Amendment to Tax Receivable Agreement and OpCo LLC Agreement

Concurrent with the initial public offering of the Class A Common Stock and related reorganization transactions undertaken in connection with such initial public offering, McAfee, OpCo LLC and certain of their affiliates entered into a tax receivable agreement dated as of October 21, 2020 (the “TRA”) with (1) certain members of OpCo LLC who retained OpCo LLC units after McAfee’s initial public offering and (2) certain of the affiliates of such members. The TRA provides for payment by McAfee to such members and certain of their

 

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affiliates (collectively, the “TRA beneficiaries”) of 85% of the benefits, if any, that McAfee is deemed to realize (calculated using certain assumptions) as a result of (i) all or a portion of McAfee’s allocable share of existing tax basis in the assets of OpCo LLC (and its subsidiaries) acquired in connection with the reorganization transactions undertaken in connection with McAfee’s initial public offering, (ii) increases in McAfee’s allocable share of existing tax basis in the assets of OpCo LLC (and its subsidiaries) and tax basis adjustments in the assets of OpCo LLC (and its subsidiaries) as a result of sales or exchanges of OpCo LLC units after McAfee’s initial public offering, (iii) certain tax attributes of the corporations McAfee acquired in connection with such reorganization transactions (including their allocable share of existing tax basis in the assets of OpCo LLC (and its subsidiaries)), and (iv) certain other tax benefits related to entering into the TRA, including tax benefits attributable to payments under the TRA. The increases in McAfee’s allocable share of existing tax basis in OpCo LLC assets and tax basis adjustments generated over time may increase (for tax purposes) depreciation and amortization deductions available to members of OpCo LLC and, therefore, may reduce the amount of tax that McAfee would otherwise be required to pay in the future in respect of taxable income and gain allocated to McAfee with respect to OpCo LLC units.

Concurrent with the entry into the TRA on October 21, 2020, the limited liability company operating agreement of OpCo LLC was amended and restated to be in the form of the OpCo LLC Agreement. The OpCo LLC Agreement contemplates, among other things, the quarterly distribution of cash to the members of OpCo LLC (which entity is intended to be classified as a partnership for U.S. federal income tax purposes) intended to be sufficient to cover such members’ respective U.S. federal, state and local income tax liability (as determined in accordance with the OpCo LLC Agreement). Such tax liability relates to the net amount of taxable income and gain allocated to such members for the relevant taxable period (or as a result of any capital shifts or guaranteed payments for the use of capital) with respect to OpCo LLC units held by such members. These tax distributions result in the outflow of cash from OpCo LLC to members of the OpCo LLC each quarter.

On November 5, 2021, in connection with the execution of the Merger Agreement, McAfee and OpCo LLC and certain of their affiliates entered into an amendment to the TRA and the OpCo LLC Agreement (the “Amendment”) with TPG Global, LLC and Intel Americas, Inc. (in their capacities as the “TPG Nominee” and the “Intel Nominee” respectively as such terms are defined under the TRA) and certain other TRA beneficiaries and members of OpCo LLC, in accordance with the terms of the TRA and the OpCo LLC Agreement. A copy of the Amendment is attached as Annex C to this proxy statement and is incorporated herein by reference.

The Amendment (i) amends the TRA and the OpCo LLC Agreement (as further described below) and (ii) provides for certain covenants regarding tax reporting and tax-related actions after the closing of the Merger.

The Amendment provides for (i) the payment of amounts due under the TRA with respect to McAfee’s 2020 U.S. federal income tax year in accordance with the terms of the TRA up to an aggregate amount of $2,000,000, which payments shall be paid no later than 10 business days prior to the Closing Date, (ii) the suspension of all other payments under the TRA from and after November 5, 2021 and (iii) the amendment of the TRA by inserting a new Section 7.19 into the TRA effective as of immediately prior to and contingent upon the occurrence of the Effective Time which will result in the TRA (and all of McAfee’s future obligations thereunder, including the obligation to make any of the foregoing suspended payments) terminating immediately prior to the Effective Time. The Amendment also includes agreements among the parties thereto regarding the preparation of tax returns for tax periods that end on, before or include the Closing Date and limits actions that may be taken by McAfee, OpCo LLC and certain of their controlled affiliates after the closing of the Merger to the extent such actions may have an effect on items reflected on such tax returns.

The Amendment also (i) suspends all tax distributions under the OpCo LLC Agreement from and after November 5, 2021 for so long as the Amendment is in effect, and (ii) provides that from and after the Effective Time, no person or entity shall have any obligation to make or pay tax distributions under the OpCo LLC Agreement.

 

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In the event the Merger Agreement is terminated in accordance with its terms, the Amendment shall become null and void ab initio and all payments that were suspended under the TRA pursuant to the Amendment, and all tax distributions that were suspended under the OpCo LLC Agreement pursuant to the Amendment, shall be made by McAfee and OpCo LLC as if the Amendment had never been executed.

The Amendment will result in (i) the suspension of certain in payments under the TRA with respect to McAfee’s 2021 U.S. federal income tax year in aggregate and (ii) contingent upon the occurrence of the Effective Time under the Merger Agreement, a permanent elimination of certain payments under the TRA that would have otherwise been payable to the TRA beneficiaries under the TRA with respect to McAfee’s 2021 U.S. federal income tax year. The Amendment will also eliminate any obligation of McAfee to make a payment under the TRA as a result of a change of control of McAfee, which would be substantial. The Amendment also will result in (i) the suspension of certain tax distributions by OpCo LLC under the OpCo LLC Agreement with respect to McAfee’s 2021 and 2022 U.S. federal income tax years and (ii) contingent upon the occurrence of the Effective Time under the Merger Agreement, a permanent elimination of an obligation to make such tax distributions under the OpCo LLC Agreement.

For more information with respect to the Amendment, please see our other filings with the SEC, including the section in our 2021 Proxy Statement captioned “Amendment to Tax Receivable Agreement and OpCo LLC Agreement” below and a copy of the Amendment which is included as Exhibit 99.2 to McAfee’s Current Report on Form 8-K, filed on November 8, 2021. A copy of the TRA is included as Exhibit 10.2 to McAfee’s Current Report on Form 8-K, filed on October 26, 2020, and a copy of the OpCo LLC Agreement is included as Exhibit 10.1 to McAfee’s Current Report on Form 8-K, filed on October 26, 2020.

 

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QUESTIONS AND ANSWERS

The following questions and answers address some commonly asked questions regarding the Merger, the Merger Agreement and the Special Meeting. These questions and answers may not address all questions that are important to you. You should carefully read and consider the more detailed information contained elsewhere in this proxy statement and the annexes to this proxy statement, including, but not limited to, the Merger Agreement, along with all of the documents we refer to in this proxy statement, as they contain important information about, among other things, the Merger and how it affects you. You may obtain the information incorporated by reference in this proxy statement without charge by following the instructions under the caption, “Where You Can Find More Information.”

Q: Why am I receiving these materials?

A: The Board of Directors is furnishing this proxy statement and form of proxy card to the holders of shares of Company Stock in connection with the solicitation of proxies to be voted at the Special Meeting.

Q: When and where is the Special Meeting?

A: Due to the possible public health impact of the coronavirus (COVID-19) and to support the well-being of our employees and McAfee Stockholders, McAfee will hold the Special Meeting virtually via the Internet at the virtual meeting website. You will not be able to attend the Special Meeting physically in person.

Q: What am I being asked to vote on at the Special Meeting?

A: You are being asked to vote on the following proposals:

 

   

to adopt the Merger Agreement pursuant to which Merger Subsidiary will merge with and into McAfee, and McAfee will become a wholly owned subsidiary of Parent;

 

   

to approve, on a non-binding advisory basis, the Compensation Proposal; and

 

   

to approve the adjournment of the Special Meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting.

Q: Who is entitled to vote at the Special Meeting?

A: McAfee Stockholders as of the Record Date are entitled to notice of the Special Meeting and to vote at the Special Meeting. Each holder of Company Stock on the Record Date shall be entitled to cast one (1) vote on each matter properly brought before the Special Meeting for each share of Company Stock owned by such holder at the close of business on the Record Date.

Q: May I attend the Special Meeting and vote in person?

A: Yes. If you are a McAfee Stockholder of record, you may attend the Special Meeting virtually via the Internet at the virtual meeting website on February 9, 2022 and complete a virtual ballot, whether or not you sign and return your proxy card. If you are a McAfee Stockholder of record, you will need your assigned 16-digit control number to vote shares electronically at the Special Meeting. The control number can be found on the proxy card, voting instruction form, or other applicable proxy notices.

Even if you plan to attend the Special Meeting in person, to ensure that your shares will be represented at the Special Meeting, we encourage you to sign, date and return the enclosed proxy card in the accompanying prepaid reply envelope or grant your proxy electronically over the Internet or by telephone (using the instructions provided in the enclosed proxy card). If you attend the Special Meeting and complete a virtual ballot, your vote will revoke any proxy previously submitted.

 

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If you hold your shares in “street name,” you should instruct your bank, broker or other nominee how to vote your shares in accordance with the voting instruction form that you will receive from your bank, broker or other nominee. Your broker or other agent cannot vote on any of the proposals, including the proposal to adopt the Merger Agreement, without your instructions. If you hold your shares in “street name,” you may not vote your shares in person at the Special Meeting unless you obtain a “legal proxy” from your bank, broker or other nominee.

Q: As a McAfee Stockholder, what will I receive if the Merger is completed?

A: Upon completion of the Merger, you will be entitled to receive the Per Share Consideration of $26.00 in cash, without interest and less any applicable withholding taxes, for each share of Company Stock that you own (other than certain Company Restricted Shares), unless you have properly and validly exercised and not withdrawn your appraisal rights under the DGCL. For example, if you own 100 shares of Class A Common Stock, you will receive $2,600 in cash in exchange for your shares of Class A Common Stock, without interest and less any applicable withholding taxes.

Q: What will I receive for my Company Awards, Management Incentive Units of OpCo LLC, and Class A Units of OpCo LLC in the Merger?

A: Pursuant to the Merger Agreement, immediately prior to the Effective Time:

 

   

Each in-the-money Company Stock Option that is outstanding and vested (including, without limitation, each Company Stock Option that accelerates and becomes vested by its terms in connection with the Merger) will be canceled and converted into the right to receive, without interest, an amount in cash determined by multiplying the excess of the Per Share Consideration over the exercise price of the Company Stock Option by the number of shares of Company Stock subject to such option as of immediately prior to the Effective Time.

 

   

Each Company RSU and Company PSU that is then outstanding and vested as of the Effective Time (including each Company RSU and Company PSU that accelerates and becomes vested by its terms in connection with the Merger) will be canceled and converted into the right to receive, without interest, an amount in cash equal to the number of shares of Company Stock subject to the vested Company RSU or Company PSU award as of immediately prior to the Effective Time multiplied by the Per Share Consideration.

 

   

Each Management Incentive Unit of OpCo LLC that is outstanding and unvested will become vested in full. In respect of each share of Company Stock received in connection with the Exchange and Redemption of vested Management Incentive Units and Class A Units of OpCo LLC, the holder will receive the same Per Share Consideration payable to other holders of Company Stock (other than Excluded Shares and certain Company Restricted Shares).

 

   

Each Company Award that is then outstanding and not vested (other than options to purchase Company Stock that are not in-the-money) will be converted into a Cash Award, which will remain subject to the same time-vesting terms and conditions that apply immediately prior to the Effective Time, and will be paid out on the next payroll date following the applicable vesting date, so long as the applicable portion becomes vested prior to the applicable holder’s termination of service. Each Cash Award will be subject to vesting, payment, and other conditions that are no less favorable to each such holder than those that applied to the corresponding Company Award immediately prior to the consummation of the Merger. Each Cash Award will provide each applicable holder with the opportunity to be paid an amount in cash equal to:

 

   

with respect to Cash Awards deriving from an in-the-money Company Stock Option that is not vested, (i) the excess of the Per Share Consideration over the option exercise price of such in-the-money Company Stock Option multiplied by (ii) the number of shares of

 

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Company Stock subject to such in-the-money Company Stock Option as of immediately prior to the Effective Time; and

 

   

with respect to Cash Awards deriving from a Company Restricted Share, Company RSU or Company PSU that is not vested (i) the number of shares of Company Stock subject to such Company Restricted Share, Company RSU or Company PSU as of immediately prior to the Effective Time multiplied by (ii) the Per Share Consideration; provided, that (A) in the case of a Company PSU that is not vested and that has an applicable one-year performance period that ends on or ended prior to the Effective Time, for purposes of determining the number of shares of Company Stock subject to such Company PSU converted into a Cash Award, such Company PSU shall be deemed earned based on the actual performance of McAfee during such performance period, and (B) in the case of a Company PSU that is not vested and that has an applicable one-year performance period that ends after the Effective Time, for purposes of determining the number of shares of Company Stock subject to such Company PSU converted into a Cash Award, the number of shares of Company Stock subject to such Company PSU shall be determined as though such performance conditions were satisfied at the applicable target levels.

 

   

In addition, following the execution of the Merger Agreement, McAfee and the other parties to the Merger Agreement further agreed that, in connection with the closing of the transactions contemplated by the Merger Agreement, generally subject to an applicable individual’s continued employment or other service to McAfee and its affiliates through the time that is immediately prior to the closing (except as described below), the following Special Vesting Opportunity will apply effective as of immediately prior to the closing:

 

   

each individual whose employment or other service to the Company and its affiliates commenced prior to January 1, 2021, will become vested in an additional number of then-outstanding unvested Company Awards having an aggregate dollar value (determined based on the amount payable in respect of such outstanding Company Awards pursuant to the Merger Agreement and without regard to vesting conditions) equal to the excess, if any, of (i) 25% of the combined total dollar value associated with the individual’s then-outstanding unvested Company Awards (other than any Company Awards granted after the execution of the Merger Agreement) and then-outstanding unvested Management Incentive Units of OpCo LLC (as defined below) over (ii) the total dollar value associated with the individual’s then-outstanding unvested Company Awards, and then-outstanding unvested Management Incentive Units of OpCo LLC, in each case, that will vest or otherwise accelerate by their terms or the terms of the Merger Agreement in connection with the consummation of the Merger; and

 

   

each individual whose employment or other service to the Company and its affiliates commenced on or after January 1, 2021, but before November 1, 2021, will become vested in an additional number of then-outstanding unvested Company Awards having an aggregate dollar value (determined based on the amount payable in respect of such outstanding Company Awards pursuant to the Merger Agreement and without regard to vesting conditions) equal to the excess, if any, of (i) 12.5% of the combined total dollar value associated with the individual’s then outstanding-unvested Company Awards (other than any Company Awards granted after the execution of the Merger Agreement) over (ii) the total value associated with such individual’s then-outstanding unvested Company Awards that will otherwise accelerate by their terms or the terms of the Merger Agreement in connection with the consummation of the Merger.

 

   

The Special Vesting Opportunity will not apply with respect to any employee or other service provider that remains employed by, or is providing services to, McAfee or any of its affiliates as of immediately prior to the Closing if, as of the time of the Closing, the service provider’s employment or other service is scheduled to transfer to an affiliate of the buyer of McAfee’s Enterprise business unit (i.e., because of a delayed transfer of subsidiaries in certain non-U.S.

 

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jurisdictions) pursuant to the divestiture transaction that closed on July 27, 2021. To the extent that any Company Awards vest pursuant to the Special Vesting Opportunity, (i) the dollar value of the applicable award holder’s Cash Awards received in exchange for Company Awards, that do not vest in connection with the Closing will be reduced on a dollar-for-dollar basis by the dollar value of the Special Vesting Opportunity, with the offset being applied in reverse chronological order (i.e., starting with the amount payable on the latest vesting date after the consummation of the Merger (the “Closing Date”) and, to the extent necessary, proceeding to the next latest vesting date, etc.), (ii) such vesting will be deemed to take place immediately prior to the Closing for all purposes of the Merger Agreement, and (iii) such Company Awards so impacted by the Special Vesting Opportunity will become vested pursuant to the terms of the Merger Agreement as of immediately prior to the Closing. For the avoidance of doubt, no Company Awards will vest and accelerate with respect to the Special Vesting Opportunity if the holder would have already become vested as of the Closing in respect of at least 25% or 12.5%, as applicable, of the combined total dollar value of his or her then-outstanding unvested Company Awards (other than any Company Awards granted after the execution of the Merger Agreement) and then-outstanding unvested Management Incentive Units of OpCo LLC pursuant to the terms thereof or the terms of the Merger Agreement.

Q: What vote is required to adopt the Merger Agreement?

A: The affirmative vote of the holders of a majority of the outstanding shares of Company Stock is required to adopt the Merger Agreement.

If a quorum is present at the Special Meeting, the failure of any McAfee Stockholder of record to: (i) submit a signed proxy card; (ii) grant a proxy over the Internet or by telephone (using the instructions provided in the enclosed proxy card); or (iii) vote in person by virtual ballot at the Special Meeting will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement. If you hold your shares in “street name” and a quorum is present at the Special Meeting, the failure to instruct your bank, broker or other nominee how to vote your shares will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement. If a quorum is present at the Special Meeting, abstentions will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement. Each “broker non-vote” will also count as a vote “AGAINST” the proposal to adopt the Merger Agreement, but will have no effect on the Compensation Proposal or any proposal to adjourn the Special Meeting to a later date or dates to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting. If you properly sign your proxy card but do not mark the boxes showing how your shares should be voted on a matter, the shares represented by your properly signed proxy will be voted: (1) “FOR” the adoption of the Merger Agreement; (2) “FOR,” on a non-binding advisory basis, the Compensation Proposal; and (3) “FOR” the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting.

Q: Have any McAfee Stockholders already agreed to approve the proposal to adopt the Merger Agreement?

A: Yes. TPG VII Manta AIV I, L.P., TPG VII Manta Finance I, L.P., TPG VII Manta Blocker Co-Invest I, L.P., TPG VII Side-by-Side Separate Account I, L.P., TPG VII Manta Holdings II, L.P., TPG VII Manta AIV Co-Invest, L.P., and Intel Americas, Inc., which collectively own 65,591,599 shares of Class A Common Stock and 227,349,460 shares of Class B Common Stock representing approximately 35.86% of the total outstanding Class A Common Stock and 89.40% of the total outstanding Class B Common Stock, respectively, or approximately 67.91% of the total voting power of the Company Stock as of December 14, 2021, have entered into the Voting Agreement with Parent. Pursuant to the Voting Agreement, the foregoing entities have agreed, among other things, to vote their shares of Company Stock in favor of the proposal to adopt the Merger Agreement and against any competing transaction so long as the Merger Agreement has not been terminated and

 

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the Board of Directors has not made an Adverse Recommendation Change. For more information, see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—The Voting Agreement.”

Q: What happens if the Merger is not completed?

A: If the Merger Agreement is not adopted by McAfee Stockholders or if the Merger is not completed for any other reason, McAfee Stockholders will not receive any payment for their shares of Company Stock. Instead, McAfee will remain an independent public company, the Class A Common Stock will continue to be listed and traded on NASDAQ and registered under the Exchange Act, and we will continue to file periodic reports with the SEC.

Under specified circumstances, (a) McAfee will be required to pay Parent a termination fee of either $145,632,500 or $291,265,000, or (b) Parent will be required to pay McAfee a termination fee of $582,530,000, in each case, upon the termination of the Merger Agreement, as described in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Termination Fee.”

Q: Why are McAfee Stockholders being asked to cast a non-binding advisory vote to approve the Compensation Proposal?

A: The Exchange Act and applicable SEC rules thereunder require McAfee to seek a non-binding advisory vote with respect to certain payments that could become payable to its named executive officers in connection with the Merger.

Q: What vote is required to approve the Compensation Proposal?

A: The affirmative vote of the holders of a majority of the shares present in person or represented by proxy at the Special Meeting and entitled to vote on the subject matter is required for approval of the Compensation Proposal.

Q: What will happen if McAfee Stockholders do not approve the Compensation Proposal at the Special Meeting?

A: Approval of the Compensation Proposal is not a condition to the completion of the Merger. The vote with respect to the Compensation Proposal is an advisory vote and will not be binding on McAfee. Therefore, if the other requisite stockholder approvals are obtained and the Merger is completed, the amounts payable under the Compensation Proposal will continue to be payable to McAfee’s named executive officers in accordance with the terms and conditions of the applicable agreements.

Q: What do I need to do now?

A: You should carefully read and consider this entire proxy statement and the annexes to this proxy statement, including, but not limited to, the Merger Agreement, along with all of the documents that we refer to in this proxy statement, as they contain important information about, among other things, the Merger and how it affects you. Then sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying reply envelope, or grant your proxy electronically over the Internet or by telephone (using the instructions provided in the enclosed proxy card), so that your shares can be voted at the Special Meeting. If you hold your shares in “street name,” please refer to the voting instruction forms provided by your bank, broker or other nominee to vote your shares.

Q: Should I surrender my book-entry shares now?

A: No. After the Merger is completed, the paying agent will send each holder of record a letter of transmittal and written instructions that explain how to exchange shares of Company Stock represented by such holder’s book-entry shares for the Per Share Consideration.

 

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Q: What happens if I sell or otherwise transfer my shares of Company Stock after the Record Date but before the Special Meeting?

A: The Record Date for the Special Meeting is earlier than the date of the Special Meeting and the date the Merger is expected to be completed. If you sell or transfer your shares of Company Stock after the Record Date but before the Special Meeting, unless special arrangements (such as provision of a proxy) are made between you and the person to whom you sell or otherwise transfer your shares and each of you notifies McAfee in writing of such special arrangements, you will transfer the right to receive the Per Share Consideration, if the Merger is completed, to the person to whom you sell or transfer your shares, but you will retain your right to vote those shares at the Special Meeting. Even if you sell or otherwise transfer your shares of Company Stock after the Record Date, we encourage you to sign, date and return the enclosed proxy card in the accompanying reply envelope or grant your proxy electronically over the Internet or by telephone (using the instructions provided in the enclosed proxy card).

Q: What is the difference between holding shares as a McAfee Stockholder of record and as a beneficial owner?

A: If your shares are registered directly in your name with our transfer agent, American Stock Transfer & Trust Company, LLC (“AST”), you are considered, with respect to those shares, to be the “stockholder of record.” In this case, this proxy statement and your proxy card have been sent directly to you by McAfee.

If your shares are held through a bank, broker or other nominee, you are considered the “beneficial owner” of shares of Company Stock held in “street name.” In that case, this proxy statement has been forwarded to you by your bank, broker or other nominee who is considered, with respect to those shares, to be the stockholder of record. As the beneficial owner, you have the right to direct your bank, broker or other nominee how to vote your shares by following their instructions for voting. You are also invited to attend the Special Meeting. However, because you are not the stockholder of record, you may not vote your shares in person at the Special Meeting unless you obtain a “legal proxy” from your bank, broker or other nominee.

Q: How may I vote?

A: If you are a McAfee Stockholder of record (that is, if your shares of Company Stock are registered in your name with AST, our transfer agent), there are four (4) ways to vote:

 

   

by signing, dating and returning the enclosed proxy card in the accompanying prepaid reply envelope;

 

   

by visiting the Internet at the address on your proxy card;

 

   

by calling toll-free (within the U.S. or Canada) at the phone number on your proxy card; or

 

   

by attending the Special Meeting virtually via the Internet at the virtual meeting website and completing a virtual ballot.

A control number, located on your proxy card, is designed to verify your identity and allow you to vote your shares of Company Stock, and to confirm that your voting instructions have been properly recorded when voting electronically over the Internet or by telephone (using the instructions provided in the enclosed proxy card). Please be aware that, although there is no charge for voting your shares, if you vote electronically over the Internet by visiting the address on your proxy card or by telephone by calling the phone number on your proxy card, in each case, you may incur costs such as Internet access and telephone charges for which you will be responsible.

Even if you plan to attend the Special Meeting in person, you are strongly encouraged to vote your shares of Company Stock by proxy. If you are a record holder or if you obtain a “legal proxy” to vote shares that you beneficially own, you may still vote your shares of Company Stock in person by virtual ballot at the Special Meeting even if you have previously voted by proxy. If you are present at the Special Meeting and vote in person by virtual ballot, your previous vote by proxy will not be counted.

 

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If your shares are held in “street name” through a bank, broker or other nominee, you may vote through your bank, broker or other nominee by completing and returning the voting form provided by your bank, broker or other nominee, or, if such a service is provided by your bank, broker or other nominee, electronically over the Internet or by telephone. To vote over the Internet or by telephone through your bank, broker or other nominee, you should follow the instructions on the voting form provided by your bank, broker or nominee.

Q: If my broker holds my shares in “street name,” will my broker vote my shares for me?

A: No. Your bank, broker or other nominee is permitted to vote your shares on any proposal currently scheduled to be considered at the Special Meeting only if you instruct your bank, broker or other nominee how to vote. You should follow the procedures provided by your bank, broker or other nominee to vote your shares. Without instructions, your shares will not be voted on such proposals, which will have the same effect as if you voted against adoption of the Merger Agreement but will have no effect on the Compensation Proposal or the adjournment proposal.

Q: May I change my vote after I have mailed my signed and dated proxy card?

A: Yes. If you are a McAfee Stockholder of record, you may change your vote or revoke your proxy at any time before it is voted at the Special Meeting by:

 

   

signing another proxy card with a later date and returning it to us prior to the Special Meeting;

 

   

submitting a new proxy electronically over the Internet or by telephone after the date of the earlier submitted proxy;

 

   

delivering a written notice of revocation to the Secretary of McAfee; or

 

   

by attending the Special Meeting virtually via the Internet at the virtual meeting website and completing a virtual ballot.

If you hold your shares of Company Stock in “street name,” you should contact your bank, broker or other nominee for instructions regarding how to change your vote. You may also vote in person at the Special Meeting if you obtain a “legal proxy” from your bank, broker or other nominee.

Q: What is a proxy?

A: A proxy is your legal designation of another person to vote your shares of Company Stock. The written document describing the matters to be considered and voted on at the Special Meeting is called a “proxy statement.” The document used to designate a proxy to vote your shares of Company Stock is called a “proxy card.” Peter Leav, our President and Chief Executive Officer, is the proxy holder for the Special Meeting, with full power of substitution and re-substitution.

Q: If a McAfee Stockholder gives a proxy, how are the shares voted?

A: Regardless of the method you choose to vote, the individuals named on the enclosed proxy card, or your proxies, will vote your shares in the way that you indicate. When completing the Internet or telephone process or the proxy card, you may specify whether your shares should be voted for or against or to abstain from voting on all, some or none of the specific items of business to come before the Special Meeting.

If you properly sign your proxy card but do not mark the boxes showing how your shares should be voted on a matter, the shares represented by your properly signed proxy will be voted: (1) “FOR” the adoption of the Merger Agreement; (2) “FOR,” on a non-binding advisory basis, the Compensation Proposal; and (3) “FOR” the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting.

 

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Q: What should I do if I receive more than one (1) set of voting materials?

A: Please sign, date and return (or grant your proxy electronically over the Internet or by telephone using the instructions provided in the enclosed proxy card) each proxy card and voting instruction card that you receive.

You may receive more than one (1) set of voting materials, including multiple copies of this proxy statement and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one (1) brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a McAfee Stockholder of record and your shares are registered in more than one (1) name, you will receive more than one (1) proxy card.

Q: Where can I find the voting results of the Special Meeting?

A: McAfee intends to publish final voting results in a Current Report on Form 8-K to be filed with the SEC following the Special Meeting. All reports that McAfee files with the SEC are publicly available when filed. For more information, please see the section of this proxy statement captioned “Where You Can Find More Information.”

Q: When do you expect the Merger to be completed?

A: We are working toward completing the Merger as quickly as possible and currently expect to complete the Merger in the first half of 2022. However, the exact timing of completion of the Merger cannot be predicted because the Merger is subject to the closing conditions specified in the Merger Agreement, many of which are outside of our control.

Q: Who can help answer my questions?

A: If you have any questions concerning the Merger, the Special Meeting or the accompanying proxy statement, would like additional copies of the accompanying proxy statement or need help voting your shares of Company Stock, please contact our proxy solicitor:

Innisfree M&A Incorporated

501 Madison Avenue, 20th Floor

New York, NY 10022

Stockholders may call toll-free: (877) 750-8307

Banks & Brokers may call collect: (212) 750-5833

 

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FORWARD-LOOKING STATEMENTS

This proxy statement, and any document to which McAfee refers in this proxy statement, contains “forward-looking statements.” Such forward-looking statements include statements relating to McAfee’s strategy, goals, future focus areas, the value of, timing and prospects of the proposed Merger. These forward-looking statements are based on McAfee management’s beliefs and assumptions and on information currently available to management. Forward-looking statements include all statements that are not historical facts and may be identified by terms such as “expects,” “believes,” “plans,” or similar expressions and the negatives of those terms. These forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements, expressed or implied by the forward-looking statements, including:

 

   

risks related to the satisfaction of the conditions to closing the Merger (including the failure to obtain necessary regulatory approvals and the requisite approval of McAfee Stockholders) in the anticipated timeframe or at all;

 

   

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

 

   

risks related to disruption of management’s attention from McAfee’s ongoing business operations due to the Merger;

 

   

disruption from the Merger making it difficult to maintain business and operational relationships, including retaining and hiring key personnel and maintaining relationships with McAfee’s customers, vendors and others with whom it does business;

 

   

significant transaction costs associated with the Merger;

 

   

the risk of litigation and/or regulatory actions related to the Merger;

 

   

the possibility that general economic conditions, and conditions and uncertainty caused by the COVID-19 pandemic, could cause information technology spending to be reduced or purchasing decisions to be delayed;

 

   

an increase in insurance claims;

 

   

an increase in customer cancellations;

 

   

the inability to increase sales to existing customers and to attract new customers;

 

   

McAfee’s failure to integrate future acquired businesses successfully;

 

   

the timing and success of new product introductions by McAfee or its competitors;

 

   

changes in McAfee’s pricing policies or those of its competitors;

 

   

developments with respect to legal or regulatory proceedings;

 

   

the inability to achieve revenue growth or to enable margin expansion;

 

   

changes in McAfee’s estimates with respect to its long-term corporate tax rate; and

 

   

such other risks and uncertainties described more fully in documents filed with or furnished to the SEC by McAfee, including under the heading “Risk Factors” in McAfee’s Annual Report on Form 10-K previously filed with the SEC on March 1, 2021 and under Item 1A “Risk Factors” in its Quarterly Report on Form 10-Q previously filed with the SEC on November 9, 2021.

All information provided in this proxy statement is as of the date hereof and McAfee undertakes no duty to update this information except as required by law.

 

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THE SPECIAL MEETING

The enclosed proxy is solicited on behalf of the Board of Directors for use at the Special Meeting.

Date, Time and Place

The Special Meeting will be held on February 9, 2022 at 10:00 a.m., Pacific time. Due to the possible public health impact of the coronavirus (COVID-19) and to support the well-being of our employees and McAfee Stockholders, McAfee will hold the special meeting virtually via the Internet at the virtual meeting website. You will not be able to attend the Special Meeting physically in person.

Purpose of the Special Meeting

At the Special Meeting, we will ask McAfee Stockholders to vote on proposals to: (i) adopt the Merger Agreement; (ii) approve, on a non-binding advisory basis, the Compensation Proposal; and (iii) adjourn the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting.

Record Date; Shares Entitled to Vote; Quorum

Only McAfee Stockholders of record as of the Record Date are entitled to notice of the Special Meeting and to vote at the Special Meeting. A list of McAfee Stockholders entitled to vote at the Special Meeting will be available at our principal executive offices located at 6220 America Center Drive, San Jose, CA 95002, during regular business hours for a period of no less than 10 days before the Special Meeting and at the virtual meeting website during the Special Meeting. As of the Record Date, there were 186,306,016 shares of Class A Common Stock outstanding and entitled to vote at the Special Meeting and 252,929,283 shares of Class B Common Stock outstanding and entitled to vote at the Special Meeting.

The holders of a majority of the stock issued and outstanding and entitled to vote in person or as represented by proxy will constitute a quorum at the Special Meeting. In the event that a quorum is not present at the Special Meeting, it is expected that the meeting will be adjourned to solicit additional proxies.

Vote Required; Abstentions and Broker Non-Votes

Each share of Company Stock outstanding at the close of business on the Record Date is entitled to one vote on each of the proposals to be considered at the Special Meeting.

The affirmative vote of the holders of a majority of the outstanding shares of Company Stock is required to adopt the Merger Agreement. As of the Record Date, 219,617,651 votes constitute a majority of the outstanding shares of Company Stock. Adoption of the Merger Agreement by the requisite outstanding shares of Company Stock as of the Record Date is a condition to the closing of the Merger.

The affirmative vote of the holders of a majority of the outstanding shares of Company Stock present in person or represented by proxy at the Special Meeting and entitled to vote on the subject matter is required to approve, on a non-binding advisory basis, the Compensation Proposal.

Approval of the proposal to adjourn the Special Meeting, whether or not a quorum is present, requires the affirmative vote of a majority of the outstanding shares of Company Stock present in person or represented by proxy at the Special Meeting and entitled to vote on the subject matter.

If a McAfee Stockholder abstains from voting, that abstention will have the same effect as if the McAfee Stockholder voted “AGAINST” the proposal to adopt the Merger Agreement and “AGAINST” the proposal to

 

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approve, on a non-binding advisory basis, the Compensation Proposal. For McAfee Stockholders who attend the Special Meeting or are represented by proxy and abstain from voting, the abstention will have the same effect as if the McAfee Stockholder voted “AGAINST” any proposal to adjourn the Special Meeting to a later date to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting.

Each “broker non-vote” will also count as a vote “AGAINST” the proposal to adopt the Merger Agreement but will have no effect on the Compensation Proposal or any proposal to adjourn the Special Meeting to a later date or dates to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting. A so-called “broker non-vote” results when banks, brokers and other nominees return a valid proxy voting upon a matter or matters for which the applicable rules provide discretionary authority but do not vote on a particular proposal because they do not have discretionary authority to vote on the matter and have not received specific voting instructions from the beneficial owner of relevant shares. McAfee does not expect any broker non-votes at the Special Meeting because the rules applicable to banks, brokers and other nominees only provide brokers with discretionary authority to vote on proposals that are considered routine, whereas each of the proposals to be presented at the Special Meeting is considered non-routine. As a result, no broker will be permitted to vote your shares of Company Stock at the Special Meeting without receiving instructions. Failure to instruct your broker on how to vote your shares of Company Stock will have the same effect as a vote “against” the proposal to adopt the Merger Agreement.

Stock Ownership and Interests of Certain Persons

Shares Held by McAfee’s Directors and Executive Officers

As of December 25, 2021, our directors and executive officers beneficially owned and were entitled to vote, in the aggregate, 607,462 shares of Class A Common Stock and 356,100 shares of Class B Common Stock, representing approximately 0.22% of the shares of Company Stock outstanding on December 25, 2021.

We currently expect that our directors and executive officers will vote all of their respective shares of Company Stock (1) “FOR” the adoption of the Merger Agreement, (2) “FOR,” on a non-binding advisory basis, the Compensation Proposal, and (3) “FOR” the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting.

Shares Held by the Supporting Stockholders

The Supporting Stockholders, which collectively own 65,591,599 shares of Class A Common Stock and 227,349,460 shares of Class B Common Stock representing approximately 35.86% of the total outstanding Class A Common Stock and 89.40% of the total outstanding Class B Common Stock, respectively, or approximately 67.91% of the total voting power of the Company Stock as of December 14, 2021, have entered into the Voting Agreement with Parent. Pursuant to the Voting Agreement, the Supporting Stockholders have agreed, among other things, to vote their shares of Company Stock in favor of the proposal to adopt the Merger Agreement and against any competing transaction so long as the Merger Agreement has not been terminated and the Board of Directors has not made an Adverse Recommendation Change. For more information, see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—The Voting Agreement.”

Voting of Proxies

If your shares are registered in your name with our transfer agent, AST, you may cause your shares to be voted by returning a signed and dated proxy card in the accompanying prepaid envelope, or you may vote in person at the Special Meeting. Additionally, you may grant a proxy electronically over the Internet or by telephone (using the instructions provided in the enclosed proxy card). You must have the enclosed proxy card

 

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available and follow the instructions on the proxy card in order to grant a proxy electronically over the Internet or by telephone. Based on your proxy cards or Internet and telephone proxies, the proxy holders will vote your shares according to your directions.

If you plan to attend the Special Meeting and wish to vote in person, you will be given a virtual ballot at the Special Meeting. If your shares are registered in your name, you are encouraged to vote by proxy even if you plan to attend the Special Meeting in person. If you attend the Special Meeting and vote in person by virtual ballot, your vote will revoke any previously submitted proxy.

Voting instructions are included on your proxy card. All shares represented by properly signed and dated proxies received in time for the Special Meeting will be voted at the Special Meeting in accordance with the instructions of the McAfee Stockholder. Properly signed and dated proxies that do not contain voting instructions will be voted: (1) “FOR” adoption of the Merger Agreement; (2) “FOR,” on a non-binding advisory basis, the Compensation Proposal; and (3) “FOR” the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting.

If your shares are held in “street name” through a bank, broker or other nominee, you may vote through your bank, broker or other nominee by completing and returning the voting form provided by your bank, broker or other nominee or attending the Special Meeting and voting in person with a “legal proxy” from your bank, broker or other nominee. If such a service is provided, you may vote over the Internet or telephone through your bank, broker or other nominee by following the instructions on the voting form provided by your bank, broker or other nominee. If you do not return your bank’s, broker’s or other nominee’s voting form, do not vote via the Internet or telephone through your bank, broker or other nominee, if possible, or do not attend the Special Meeting and vote in person with a “legal proxy” from your bank, broker or other nominee, it will have the same effect as if you voted “AGAINST” the proposal to adopt the Merger Agreement but will not have any effect on the Compensation Proposal or the adjournment proposal.

Revocability of Proxies

If you are a McAfee Stockholder of record, you may change your vote or revoke your proxy at any time before it is voted at the Special Meeting by:

 

   

signing another proxy card with a later date and returning it to us prior to the Special Meeting;

 

   

submitting a new proxy electronically over the Internet or by telephone after the date of the earlier submitted proxy;

 

   

delivering a written notice of revocation to the Secretary of McAfee; or

 

   

attending the Special Meeting virtually via the Internet at the virtual meeting website and completing a virtual ballot.

If you have submitted a proxy, your appearance at the Special Meeting will not have the effect of revoking your prior proxy, provided that you do not vote in person or submit an additional proxy or revocation, which, in each case, will have the effect of revoking your proxy.

If you hold your shares of Company Stock in “street name,” you should contact your bank, broker or other nominee for instructions regarding how to change your vote. You may also vote in person at the Special Meeting if you obtain a “legal proxy” from your bank, broker or other nominee.

Any adjournment, postponement or other delay of the Special Meeting, including for the purpose of soliciting additional proxies, will allow McAfee Stockholders who have already sent in their proxies to revoke them at any time prior to their use at the Special Meeting as adjourned, postponed or delayed.

 

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Board of Directors’ Recommendation

The Board of Directors has: (i) determined that the Merger Agreement and the transactions contemplated thereby (including the Merger) are fair to and in the best interests of McAfee and the McAfee Stockholders, (ii) approved and declared advisable the Merger Agreement, the Transaction Documents and the transactions contemplated thereby (including the Merger), and (iii) resolved, subject to Section 6.03 of the Merger Agreement, to recommend adoption of the Merger Agreement by the McAfee Stockholders.

The Board of Directors recommends that you vote: (1) “FOR” the adoption of the Merger Agreement; (2) “FOR,” on a non-binding advisory basis, the Compensation Proposal; and (3) “FOR” the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting.

Solicitation of Proxies

The expense of soliciting proxies will be borne by McAfee. We have retained Innisfree M&A Incorporated (“Innisfree”), a proxy solicitation firm, to solicit proxies in connection with the Special Meeting at a cost of approximately $15,000 plus expenses. We will also indemnify Innisfree against losses arising out of its provision of these services on our behalf. In addition, we may reimburse banks, brokers and other nominees representing beneficial owners of shares for their expenses in forwarding soliciting materials to such beneficial owners. Proxies may be solicited personally or by telephone, email, fax, over the Internet or other means of communication, without additional compensation to our directors, officers and employees.

Anticipated Date of Completion of the Merger

Assuming timely satisfaction of necessary closing conditions, including the approval by McAfee Stockholders of the proposal to adopt the Merger Agreement, we anticipate that the Merger will be consummated in the first half of 2022.

Appraisal Rights

If the Merger is consummated, McAfee Stockholders who continuously hold shares of Company Stock through the Effective Time, who do not vote in favor of the adoption of the Merger Agreement, who properly demand appraisal of their shares, and who do not withdraw their demands or otherwise lose their rights to seek appraisal will be entitled to seek appraisal of their shares in connection with the Merger under Section 262 of the DGCL. This means that holders of shares of Company Stock who perfect their appraisal rights, who do not thereafter withdraw their demand for appraisal, and who follow the procedures in the manner prescribed by Section 262 of the DGCL may be entitled to have their shares appraised by the Delaware Court of Chancery and to receive payment in cash of the “fair value” of their shares of Company Stock, exclusive of any elements of value arising from the accomplishment or expectation of the Merger, as determined by the Delaware Court of Chancery, together with interest to be paid on the amount determined to be fair value, if any (or in certain circumstances described in further detail in the section of this proxy statement captioned “The Merger—Appraisal Rights,” on the difference between the amount determined to be the fair value and the amount paid by the Surviving Corporation in the Merger to each McAfee Stockholder entitled to appraisal prior to the entry of judgment in any appraisal proceeding). Due to the complexity of the appraisal process, McAfee Stockholders who wish to seek appraisal of their shares are encouraged to review Section 262 of the DGCL carefully and to seek the advice of legal counsel with respect to the exercise of appraisal rights.

McAfee Stockholders considering seeking appraisal should be aware that the fair value of their shares as determined pursuant to Section 262 of the DGCL could be more than, the same as or less than the value of the consideration that they would receive pursuant to the Merger Agreement if they did not seek appraisal of their shares.

 

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To exercise your appraisal rights, you must: (i) submit a written demand for appraisal to McAfee before the vote is taken on the adoption of the Merger Agreement; (ii) not submit a proxy or otherwise vote in favor of the proposal to adopt the Merger Agreement; (iii) continue to hold your shares of Company Stock of record through the Effective Time; and (iv) strictly comply with all other procedures for exercising appraisal rights under Section 262 of the DGCL. Your failure to follow exactly the procedures specified under Section 262 of the DGCL may result in the loss of your appraisal rights. In addition, the Delaware Court of Chancery will dismiss appraisal proceedings in respect of the Merger unless certain stock ownership conditions are satisfied by the McAfee Stockholders seeking appraisal. The DGCL requirements for exercising appraisal rights are described in further detail in the section of this proxy statement captioned “The Merger—Appraisal Rights,” which is qualified in its entirety by Section 262 of the DGCL, the relevant section of the DGCL regarding appraisal rights. A copy of Section 262 of the DGCL is reproduced and attached as Annex E to this proxy statement and incorporated herein by reference. If you hold your shares of Company Stock through a bank, brokerage firm or other nominee and you wish to exercise appraisal rights, you should consult with your bank, brokerage firm or other nominee to determine the appropriate procedures for the making of a demand for appraisal by such bank, brokerage firm or nominee.

Delisting and Deregistration of McAfee Class A Common Stock

If the Merger is completed, the shares of Class A Common Stock will be delisted from NASDAQ and deregistered under the Exchange Act, and shares of Class A Common Stock will no longer be publicly traded.

Other Matters

At this time, we know of no other matters to be voted on at the Special Meeting. If any other matters properly come before the Special Meeting, your shares of Company Stock will be voted in accordance with the discretion of the appointed proxy holders.

Householding of Special Meeting Materials

Unless we have received contrary instructions, we may send a single copy of this proxy statement to any household at which two (2) or more McAfee Stockholders reside if we believe the McAfee Stockholders are members of the same family. Each McAfee Stockholder in the household will continue to receive a separate proxy card. This process, known as “householding,” reduces the volume of duplicate information received at your household and helps to reduce our expenses.

If you would like to receive your own set of our disclosure documents, please contact us using the instructions set forth below. Similarly, if you share an address with another McAfee Stockholder and together both of you would like to receive only a single set of our disclosure documents, please contact us using the instructions set forth below.

If you are a McAfee Stockholder of record, you may contact us by writing to McAfee at 6220 America Center Drive, San Jose, CA 95002, or by calling McAfee at (866) 648-8133 and requesting to speak with our investor relations department. Eligible McAfee Stockholders of record receiving multiple copies of this proxy statement can request householding by contacting us in the same manner. If a bank, broker or other nominee holds your shares, please contact your bank, broker or other nominee directly.

Questions and Additional Information

If you have any questions concerning the Merger, the Special Meeting or this proxy statement, would like additional copies of this proxy statement or need help voting your shares of Company Stock, please contact our proxy solicitor:

Innisfree M&A Incorporated

501 Madison Avenue, 20th Floor

New York, NY 10022

Stockholders may call toll-free: (877) 750-8307

Banks & Brokers may call collect: (212) 750-5833

 

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THE MERGER

This discussion of the Merger is qualified in its entirety by reference to the Merger Agreement, which is attached to this proxy statement as Annex A and incorporated into this proxy statement by reference. You should carefully read and consider the entire Merger Agreement, which is the legal document that governs the Merger, because this document contains important information about the Merger and how it affects you.

Parties Involved in the Merger

McAfee Corp.

6220 America Center Drive

San Jose, CA 95002

(866) 622-3911

McAfee, a Delaware corporation, is a global leader in online protection for consumers. Focused on protecting people, not just devices, McAfee consumer solutions adapt to users’ needs in an always online world, empowering them to live securely through integrated, intuitive solutions that protect their families and communities with the right security at the right moment. Founded in 1987 and headquartered in San Jose, California, McAfee currently serves customers from offices in North America, Europe, the Middle East, Latin America and Asia. The Class A Common Stock is listed on NASDAQ under the symbol “MCFE.”

Condor BidCo, Inc.

c/o Permira Advisers LLC

320 Park Avenue, 28th Floor

New York, NY 10022

(212) 386-7480

Parent was incorporated on November 4, 2021, solely for the purpose of engaging in the transactions contemplated by the Merger Agreement, and has not engaged in any business activities other than in connection with the transactions contemplated by the Merger Agreement and arranging of the financing in connection with the Merger.

Condor Merger Sub, Inc.

c/o Permira Advisers LLC

320 Park Avenue, 28th Floor

New York, NY 10022

(212) 386-7480

Merger Subsidiary is a wholly owned subsidiary of Parent and was incorporated on November 4, 2021, solely for the purpose of engaging in the transactions contemplated by the Merger Agreement, and has not engaged in any business activities other than in connection with the transactions contemplated by the Merger Agreement and arranging of the financing in connection with the Merger. Upon completion of the Merger, Merger Subsidiary will merge with and into McAfee and will cease to exist.

Parent and Merger Subsidiary are entities that are affiliated with the Sponsors. Advent is a leading private equity firm focused on investments in five core sectors, including business and financial services; health care; industrial; retail, consumer and leisure; and technology. Permira is a leading private equity firm focused on tech and tech-enabled investing, with a particular focus on digital consumer and enterprise cloud end markets. At the Effective Time, the Surviving Corporation will be indirectly owned by the Sponsors and certain of their co-investors and affiliates.

 

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In connection with the transactions contemplated by the Merger Agreement, (1) the Equity Financing Sources have committed to capitalize Parent at the Closing with an aggregate equity contribution equal to $5.2 billion and (2) JP Morgan Chase Bank, N.A., Bank of America, N.A., Credit Suisse AG, Cayman Islands Branch, Barclays Bank PLC, Citibank, N.A. (and/or its affiliates), HSBC Bank USA, National Association, Royal Bank of Canada, CPPIB Credit Investments III Inc., UBS AG, Stamford Branch, PSP Investments Credit II USA LLC, Bank of Montreal, KKR Corporate Lending (CA) LLC, Macquarie Capital Funding LLC, Mizuho Bank, Ltd., MUFG, Nomura Securities International, Inc., Wells Fargo Bank, National Association, BNP Paribas, Canadian Imperial Bank of Commerce, New York Branch, Citizens Bank, National Association, Credit Agricole Corporate and Investment Bank, Fifth Third Bank, National Association, Intesa Sanpaolo S.P.A., New York Branch, Keybank National Association, Natixis, New York Branch, Societe Generale, Standard Chartered Bank, Stifel Bank & Trust, Sumitomo Mitsui Banking Corporation, The Toronto-Dominion Bank, New York Branch and The Bank of Nova Scotia have agreed to provide Parent with debt financing consisting of a $6.66 billion first lien term loan facility, a $1 billion first lien cash flow revolving facility and a $2.32 billion senior unsecured bridge facility (which may be replaced with senior notes issued through a Rule 144A or other private placement). Additionally, Parent has obtained preferred equity financing in an aggregate principal amount of up to $800 million from PSP Investments Credit USA LLC and NB Andes LP pursuant to the Preferred Equity Commitment Letter. In addition, the Fee Funding Sources have agreed to guarantee certain obligations of Parent or Merger Subsidiary under the Merger Agreement, subject to an aggregate cap equal to $600,030,000, including the Parent Termination Fee and certain fees and expenses payable by Parent or Merger Subsidiary as specified in the Merger Agreement. Such amounts will be used to fund the aggregate purchase price required to be paid at the closing of the Merger and to also fund certain other payments (including the Required Amounts), subject to the terms and conditions of the Merger Agreement. For more information, please see the section of this proxy statement captioned “—Financing of the Merger.”

Effect of the Merger

Upon the terms and subject to the conditions of the Merger Agreement, Merger Subsidiary will merge with and into McAfee and the separate corporate existence of Merger Subsidiary will cease, with McAfee continuing as the Surviving Corporation. As a result of the Merger, McAfee will become a wholly owned subsidiary of Parent, and the Class A Common Stock will no longer be publicly traded and will be delisted from NASDAQ. In addition, the Company Stock will be deregistered under the Exchange Act, and we will no longer file periodic reports with the SEC. If the Merger is completed, you will not own any shares of the capital stock of the Surviving Corporation.

The Effective Time will occur upon the filing of a certificate of merger with the Secretary of State of the State of Delaware (or at such later time as McAfee, Parent and Merger Subsidiary may agree in writing and specify in the certificate of merger).

Effect on McAfee If the Merger Is Not Completed

If the Merger Agreement is not adopted by McAfee Stockholders, or if the Merger is not completed for any other reason:

 

  i.

McAfee Stockholders will not be entitled to, nor will they receive, any payment for their respective shares of Company Stock pursuant to the Merger Agreement;

 

  ii.

(a) McAfee will remain an independent public company; (b) the Class A Common Stock will continue to be listed and traded on NASDAQ and registered under the Exchange Act; and (c) McAfee will continue to file periodic reports with the SEC;

 

  iii.

we anticipate that (a) management will operate the business in a manner similar to that in which it is being operated today and (b) McAfee Stockholders will be subject to similar types of risks and uncertainties as those to which they are currently subject, including, but not limited to, risks and

 

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  uncertainties with respect to McAfee’s business, prospects and results of operations, as such may be affected by, among other things, the highly competitive industry in which McAfee operates and economic conditions;

 

  iv.

the price of the Class A Common Stock may decline significantly, and if that were to occur, it is uncertain when, if ever, the price of the Class A Common Stock would return to the price at which it trades as of the date of this proxy statement;

 

  v.

the Board of Directors will continue to evaluate and review McAfee’s business operations, strategic direction and capitalization, among other things, and will make such changes as are deemed appropriate; irrespective of these efforts, it is possible that no other transaction acceptable to the Board of Directors will be offered or that McAfee’s business, prospects and results of operations will be adversely impacted; and

 

  vi.

under specified circumstances, McAfee will be required to pay Parent a termination fee of either $145,632,500 or $291,265,000, upon the termination of the Merger Agreement, as described in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Termination Fee.”

Merger Consideration

Company Stock

At the Effective Time, each then outstanding share of Company Stock (other than (A) Excluded Shares, which include, for example, shares of Company Stock owned by McAfee Stockholders who have properly and validly exercised and not withdrawn their statutory rights of appraisal in accordance with Section 262 of the DGCL and (B) certain Company Restricted Shares that will be converted into Cash Awards (as further discussed in the section of this proxy statement captioned “—Merger Consideration— Treatment of Company Equity Awards”)) outstanding as of immediately prior to the Effective Time will be cancelled and automatically converted into the right to receive the Per Share Consideration, without interest and less any applicable withholding taxes.

After the Merger is completed, you will have the right to receive the Per Share Consideration in respect of each share of Company Stock that you owned as of immediately prior to the Merger (without interest and less any applicable withholding taxes), but you will no longer have any other rights as a McAfee Stockholder (except that McAfee Stockholders who properly and validly exercise and do not withdraw their appraisal rights will not receive the Per Share Consideration and instead have a right to receive payment of the “fair value” of their shares as determined pursuant to an appraisal proceeding, as contemplated by Delaware law). For more information, please see the section of this proxy statement captioned “—Appraisal Rights.”

Treatment of Company Equity Awards

Pursuant to the Merger Agreement, immediately prior to the Effective Time:

 

   

Each in-the-money Company Stock Option that is outstanding and vested (including each Company Stock Option that accelerates and becomes vested by its terms in connection with the Merger) will be canceled and converted into the right to receive, without interest, an amount in cash determined by multiplying the excess of the Per Share Consideration over the exercise price of the Company Stock Option by the number of shares of Company Stock subject to such option as of immediately prior to the Effective Time. Each option to purchase Company Stock that is not in-the-money (whether or not vested) shall be canceled for no consideration.

 

   

Each Company RSU and Company PSU that is outstanding and vested as of the Effective Time (including each Company RSU and each Company PSU that accelerates and becomes vested by its terms in connection with the Merger) will be canceled and converted into the right to receive, without

 

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interest, an amount in cash equal to the number of shares of Company Stock subject to the vested Company RSU or Company PSU award as of immediately prior to the Effective Time multiplied by the Per Share Consideration.

 

   

Each award payable in a fixed amount of cash issued in connection with McAfee’s initial public offering to employees in certain jurisdictions, and each right to receive previously accrued but not yet paid cash dividends or distributions in respect of Company Awards, Class A Units of OpCo LLC, or Management Incentive Units of OpCo LLC (collectively, “Company Cash Rights”) will be assumed, honored, or continued in accordance with its terms.

 

   

Each Company Award that is then outstanding and not vested (other than options to purchase Company Stock that are not in-the-money) will be converted into a Cash Award, which will remain subject to the same time-vesting terms and conditions that apply immediately prior to the Effective Time, and will be paid out on the next payroll date following the applicable vesting date, so long as the applicable portion becomes vested prior to the applicable holder’s termination of service. Each Cash Award will be subject to vesting, payment, and other conditions that are no less favorable to each such holder than those that applied to the corresponding Company Award immediately prior to the consummation of the Merger. Each Cash Award will provide each applicable holder with the opportunity to be paid an amount in cash equal to:

 

   

with respect to each Cash Award deriving from an in-the-money Company Stock Option that is not vested, (i) the excess of the Per Share Consideration over the option exercise price of such in-the-money Company Stock Option multiplied by (ii) the number of shares of Company Stock subject to such in-the-money Company Stock Option as of immediately prior to the closing; and

 

   

with respect to each Cash Award deriving from a Company Restricted Share, Company RSU, or Company PSU that is not vested (i) the number of shares of Company Stock subject to such Company Restricted Share, Company RSU, or Company PSU as of immediately prior to the closing multiplied by (ii) the Per Share Consideration; provided, that (A) in the case of a Company PSU that is not vested and that has an applicable one-year performance period that ends on or ended prior to the closing, for purposes of determining the number of shares of Company Stock subject to such Company PSU to be converted into a Cash Award, such Company PSU shall be deemed earned based on the actual performance of McAfee during such performance period, and (B) in the case of a Company PSU that is not vested and that has an applicable one-year performance period that ends after the closing, for purposes of determining the number of shares of Company Stock subject to such Company PSU to be converted into a Cash Award, the number of shares of Company Stock subject to such Company PSU shall be determined as though such performance conditions were satisfied at the applicable target levels.

Following the execution of the Merger Agreement, McAfee and the purchasing parties have further agreed that, in connection with the closing of the transactions contemplated by the Merger Agreement and generally subject to an applicable individual’s continued employment or other service to McAfee and its affiliates through the time that is immediately prior to the closing (except as described below), the following Special Vesting Opportunity will apply effective as of immediately prior to the closing:

 

   

each individual whose employment or other service to the Company and its affiliates commenced prior to January 1, 2021 will become vested in an additional number of then-outstanding unvested Company Awards having an aggregate dollar value (determined based on the amount payable in respect of such outstanding Company Awards pursuant to the Merger Agreement and without regard to vesting conditions) equal to the excess, if any, of (i) 25% of the combined total dollar value associated with the individual’s then-outstanding unvested Company Awards (other than any Company Awards granted after the execution of the Merger Agreement) and then-outstanding unvested Management Incentive Units of OpCo LLC over (ii) the total dollar value associated with such individual’s then-outstanding unvested Company Awards and then-outstanding unvested Management Incentive Units of OpCo LLC,

 

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in each case, that will vest or otherwise accelerate by their terms or the terms of the Merger Agreement in connection with the consummation of the Merger; and

 

   

each individual whose employment or other service to the Company and its affiliates commenced on or after January 1, 2021 but before November 1, 2021 will become vested in an additional number of then-outstanding unvested Company Awards (determined based on the amount payable in respect of such outstanding Company Awards pursuant to the Merger Agreement and without regard to vesting conditions) equal to the excess, if any, of (i) 12.5% of the combined total value associated with such individual’s then-outstanding unvested Company Awards (other than any Company Awards granted after the execution of the Merger Agreement) over (ii) the total value associated with such individual’s then-outstanding unvested Company Awards that will otherwise accelerate by their terms or the terms of the Merger Agreement in connection with the consummation of the Merger.

The Special Vesting Opportunity will not apply with respect to any employee or other service provider that remains employed by, or is providing services to, McAfee or any of its affiliates as of immediately prior to the Closing if, as of the time of the Closing, the service provider’s employment or other service is scheduled to transfer to an affiliate of the buyer of McAfee’s Enterprise business unit (i.e., because of a delayed transfer of subsidiaries in certain non-U.S. jurisdictions) pursuant to the divestiture transaction that closed on July 27, 2021. To the extent that any Company Awards vest pursuant to the Special Vesting Opportunity, (i) the dollar value of the applicable award holder’s Cash Awards received in exchange for Company Awards that do not vest in connection with the Closing Date will be reduced on a dollar-for-dollar basis by the dollar value of the Special Vesting Opportunity to such employee or other service provider, with the offset being applied in reverse chronological order (i.e., starting with the amount payable on the latest vesting date after the Closing Date and, to the extent necessary, proceeding to the next latest vesting date, etc.), (ii) such vesting will be deemed to take place immediately prior to the Closing for all purposes of the Merger Agreement, and (iii) such Company Awards so impacted by the Special Vesting Opportunity will become vested pursuant to the Merger Agreement as of immediately prior to the Closing. For the avoidance of doubt, no Company Awards will vest and accelerate with respect to the Special Vesting Opportunity if the holder would have already become vested as of the Closing in respect of at least 25% or 12.5%, as applicable, of the combined total dollar value of his or her then-outstanding unvested Company Awards (other than any Company Awards granted after the execution of the Merger Agreement) and then-outstanding unvested Management Incentive Units of OpCo LLC pursuant to the terms thereof or the terms of the Merger Agreement.

The Merger Agreement contemplates that McAfee may request Parent’s consent (which consent may not be unreasonably withheld, conditioned or delayed) to the vesting of Company Awards held by current or former employees and service providers prior to the Effective Time that would otherwise not vest in accordance with their terms or the Special Vesting Opportunity described above.

Treatment of Vested Management Incentive Units and Class A Units

Immediately prior to the Effective Time, the Board of Directors shall take all actions so that all Management Incentive Units of OpCo LLC shall be vested in full and (i) McAfee will require each holder of vested Management Incentive Units, each holder of Class A Units of OpCo LLC and each holder of Class B Common Stock to effect the Exchange and Redemption and (ii) each share of Class B Common Stock, if any, will automatically be canceled immediately upon the consummation of the Exchange and Redemption, such that no shares of Class B Common Stock remain outstanding immediately prior to the Effective Time.

Background of the Merger

As part of our ongoing consideration and evaluation of our long-term strategic goals and plans, the Board of Directors and McAfee’s senior management periodically review, consider and assess our operations and financial performance, as well as overall industry conditions, as they may affect those strategic goals and plans. This

 

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review includes, among other items, the consideration of potential opportunities for business combinations, acquisitions, divestitures and other financial and strategic alternatives, in each case to maximize potential value for McAfee Stockholders.

During the second half of 2019, OpCo LLC and its significant stockholders (i.e., TPG and Intel) (the “significant stockholders”) evaluated several strategic alternatives, including a potential initial public offering and the potential acquisition of OpCo LLC by a third party. In connection with such evaluation, Advent, Permira and GIC all entered into separate confidentiality agreements with OpCo LLC. They, along with several other potentially interested parties, had meetings with the prior management team of OpCo LLC in September and October 2019. After such meetings, for various reasons, no transaction between any of such parties and OpCo LLC progressed further at that time. Further, OpCo LLC did not complete an initial public offering in 2019. None of the parties with whom OpCo LLC had discussions at the time currently is restricted from making a proposal to acquire OpCo LLC.

Between July 2020 and early October 2020, OpCo LLC and the significant stockholders again evaluated whether there was market interest in a potential acquisition of OpCo LLC as an alternative to the initial public offering process that OpCo LLC was simultaneously pursuing. As part of this process, representatives from Goldman Sachs & Co. LLC and Morgan Stanley & Co. LLC contacted 28 potential strategic parties. Except as set forth immediately below, none of such parties, and no members of the Consortium (as defined below), participated in this process. OpCo LLC received one non-binding preliminary written proposal throughout this process from Strategic Party B. This non-binding preliminary written proposal was received on October 7, 2020 and signaled the interest of Strategic Party B in acquiring only OpCo LLC’s consumer business but made clear that Strategic Party B was not interested in acquiring all of OpCo LLC. In addition, Strategic Party B indicated it was unable to pay an all-cash purchase price, and would have required the stockholders of OpCo LLC to accept equity in Strategic Party B as part of the transaction consideration for such acquisition. Because Strategic Party B’s letter was preliminary in nature, the significant uncertainty as to whether the proposed transaction would materialize (and at what price), the fact that Strategic Party B was unable to pay an all-cash purchase price and the private stockholders of OpCo LLC would have been required to accept equity in Strategic Party B as part of the transaction consideration for the proposed acquisition, the imminence of OpCo LLC’s initial public offering in the following two weeks and the fact that this was a proposal for only a part of OpCo LLC, OpCo LLC and the significant stockholders elected not to pursue this alternative further. Conversations with Strategic Party B did not progress beyond a preliminary phase.

McAfee’s initial public offering of its Class A Common Stock on NASDAQ (the “IPO”) priced after market close on October 21, 2020, and trading commenced on October 22, 2020.

In late 2020, management of McAfee and the Board of Directors considered whether there might be market interest in a potential divestiture of McAfee’s Enterprise business (“Enterprise”). The Board of Directors launched a process for the evaluation of potential interest in Enterprise, which process lasted from December 2020 until McAfee and an affiliate of Symphony Technology Group entered into a definitive transaction agreement on March 6, 2021. The Enterprise transaction closed on July 27, 2021. Crosspoint and Advent entered into separate confidentiality agreements with McAfee in December 2020 and February 2021, respectively, in connection with the Enterprise transaction (due to the possibility that the prior confidentiality agreement in 2019 between McAfee and Advent could potentially expire during the Enterprise sale process). Both Crosspoint and Advent participated in meetings with representatives from Goldman Sachs as well as members of McAfee management during the early stages of the Enterprise transaction. Neither Crosspoint nor Advent reached the final rounds of this process.

In May 2021, consistent with the Board of Directors’ directives to regularly evaluate potential strategic alternatives, and to assess whether there was any market interest in potential acquisition of McAfee that could be presented to the Board of Directors for consideration, management of McAfee requested Goldman Sachs and Morgan Stanley, consistent with their roles as financial advisors to McAfee, to lead high-level, preliminary discussions with potential bidders. Given the increasing importance of cybersecurity at this time, McAfee determined that it would be prudent to assess market interest in McAfee’s business.

 

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In total, representatives from Goldman Sachs and Morgan Stanley, upon consultation with and at the direction of McAfee senior management, contacted 23 potential financial and strategic parties. In May and June of 2021, members of McAfee’s management team, engaged with a variety of potential bidders as set forth in greater detail below, including Advent, Permira, CPPIB, Crosspoint, and entities referred to herein as Financial Party A, Financial Party B, Financial Party C, Financial Party D, Financial Party E, Financial Party F, Financial Party G, Strategic Party A and Strategic Party B. In May and June of 2021, representatives from Goldman Sachs and Morgan Stanley had telephone conversations and meetings with Financial Party A, Financial Party B, Financial Party C, Financial Party D, Financial Party E and Financial Party F.

On May 12, 2021 and May 18, 2021, representatives from Goldman Sachs and Morgan Stanley held an introductory meeting with members of Permira’s management team regarding a general introduction regarding a potential acquisition of McAfee.

On May 17, 2021, Timothy Millikin, a director on the Board of Directors who was nominated by TPG (the “sponsor director”) spoke with Bryan Taylor, a Managing Partner of Advent (the “Advent representative”), by phone. During this conversation, the sponsor director mentioned that representatives of Goldman Sachs would be reaching out to Advent regarding a potential acquisition of McAfee. On May 18, representatives from Goldman Sachs held a meeting with Advent to provide a general introduction regarding a potential acquisition of McAfee. Advent did not enter into a new confidentiality agreement with McAfee, as the prior confidentiality agreement executed in February 2021 between the parties remained in effect.

On May 23, 2021, McAfee entered into a confidentiality agreement with Permira, as the prior confidentiality agreement in 2019 between McAfee and Permira had expired.

On May 25, 2021, McAfee entered into a confidentiality agreement with Strategic Party A. Also on May 25, McAfee entered into a confidentiality agreement with Financial Party A.

On May 26, 2021, McAfee entered into a confidentiality agreement with Financial Party B as well as one with Financial Party C. Also on May 26, representatives from Goldman Sachs and Morgan Stanley, as well as members of McAfee management, had a telephone conversation with Financial Party C to discuss an overview of McAfee’s business generally. Also on May 26, representatives from Goldman Sachs and Morgan Stanley, as well as members of McAfee management, held a meeting with Financial Party A.

On May 27, 2021, McAfee entered into a confidentiality agreement with Strategic Party B. Also on May 27, members of McAfee management had separate telephone conversations with Strategic Party A and Financial Party B to discuss an overview of McAfee’s business generally. Also on May 27, representatives from Goldman Sachs and Morgan Stanley and members of McAfee management held a meeting with Permira at which a management presentation was given by McAfee management.

On May 28, 2021, representatives from Goldman Sachs and Morgan Stanley, as well as members of McAfee management, held an introductory meeting with Advent in which representatives from McAfee gave a management presentation to Advent. Also on May 28, members of McAfee management had a telephone conversation with Strategic Party B to discuss an overview of McAfee’s business generally. Also on May 28, the sponsor director engaged in a telephone conversation with representatives from Advent related to Advent’s due diligence of McAfee.

On May 29, 2021, a representative from Advent contacted representatives from Goldman Sachs to request that Advent be permitted to formally partner with Permira, and permission was granted by McAfee shortly thereafter. Additionally, representatives from Advent and Permira separately discussed with representatives from Goldman Sachs their desire, and sought McAfee’s permission, to partner together in any potential transaction and form a consortium with Crosspoint to acquire McAfee, which Advent and Permira acknowledged would require McAfee’s consent. McAfee granted permission to Advent and Permira to partner together and with Crosspoint because of, among other things, the large amount of equity financing that would be required to consummate any acquisition of McAfee and the greater likelihood that such financing could be obtained if Advent, Permira and Crosspoint were permitted to partner together to provide this financing.

 

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On May 30, 2021, McAfee entered into a confidentiality agreement with Financial Party D.

On June 1, 2021, McAfee entered into a confidentiality agreement with Financial Party E.

On June 2, 2021, McAfee entered into separate confidentiality agreements with CPPIB and Financial Party F.

On June 3, 2021, McAfee entered into a confidentiality agreement with Crosspoint. Also on June 3, representatives from Goldman Sachs and Morgan Stanley as well members of McAfee management held a meeting with CPPIB at which a management presentation was given by McAfee management.

During late May and June 2021, representatives from Goldman Sachs and Morgan Stanley conducted separate meetings with Advent, Permira, Crosspoint, CPPIB and each of Strategic Party A, Strategic Party B, Financial Party A, Financial Party B, Financial Party C, Financial Party D, Financial Party E, Financial Party F and Financial Party G. The purpose of these meetings was to assess each party’s interest in a potential acquisition of McAfee. These parties generally declined to respond to further invitations to submit a proposal or ceased engaging with representatives from Goldman Sachs and Morgan Stanley with respect to a potential acquisition of McAfee. The sponsor director also had telephone conversations with Financial Party G and Financial Party F on June 7 and June 10, respectively; while the purpose of such conversations was to discuss the general status of McAfee’s business, there was no discussion of potential price or material terms of a potential acquisition of McAfee.

On June 3, 2021, representatives from Financial Party C contacted representatives from Goldman Sachs by telephone and indicated that they would not pursue further a potential acquisition of McAfee.

On June 4, 2021, representatives from Strategic Party A contacted representatives from Goldman Sachs by telephone and indicated that they would be potentially interested in a preferred equity financing commitment, but would not be interested in leading a transaction. Although representatives from Goldman Sachs subsequently introduced Strategic Party A to certain members of the Consortium, Strategic Party A did not pursue further a potential acquisition of McAfee.

On or around this time, each of Financial Party A and Strategic Party B ceased engaging in discussions with representatives from Goldman Sachs and Morgan Stanley, and neither pursued further a potential acquisition of McAfee.

On June 12, 2021, representatives from Goldman Sachs held a meeting with GIC regarding a potential acquisition of McAfee.

On June 16, 2021, a senior investment professional from Advent contacted a senior investment professional from TPG by telephone to express Advent’s seriousness with respect to a potential acquisition of McAfee.

On June 17, 2021 members of McAfee management and representatives from Advent, Permira and Crosspoint held a meeting by video conference. At this meeting, Advent, Permira and Crosspoint expressed continued interest in a potential acquisition of McAfee, with Advent and Permira leading the potential consortium.

Also on June 17, 2021, the Board of Directors held a board meeting by video conference. Also in attendance were members of McAfee management, as well as representatives from Ropes & Gray LLP (“Ropes”), outside legal counsel to McAfee. Management of McAfee provided an update to the Board of Directors about the recent discussions with potential interested parties, including Advent, Permira and Crosspoint. A representative from Ropes then reviewed with the Board of Directors their fiduciary duties under Delaware law. Discussion ensued among the directors. The Board of Directors then approved the continued outreach by representatives from Goldman Sachs and Morgan Stanley to potential parties to assess the interest level of those potential parties to enter into a transaction with McAfee.

 

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On or around June 21 through June 26, 2021, representatives from Goldman Sachs and the sponsor director had various discussions with representatives from Advent, including the Advent representative, and Permira, including discussing additional requests for due diligence information of McAfee. Bryan Taylor was formerly a partner at TPG (having left that position in September 2017) and the prior chairman of the board of directors of OpCo LLC (having left that position in July 2017).

On June 23, 2021, representatives from Goldman Sachs and Morgan Stanley sent a process letter to Advent, Permira, Crosspoint, CPPIB, Financial Party B, Financial Party D, Financial Party F and Financial Party G, requesting submissions of preliminary, non-binding written indications of interest on an adjusted equity value basis that outline the terms and conditions of a potential transaction with McAfee. Shortly thereafter, Financial Party D contacted representatives from Goldman Sachs to inform them that they would no longer pursue a potential acquisition of McAfee.

Throughout late June 2021, CPPIB communicated to Goldman Sachs its interest in partnering with Advent regarding a potential transaction given Advent’s prior experience in the security software industry. McAfee denied this request due to its desire to have more separate bidders, and representatives of Goldman Sachs instructed CPPIB to bid independently.

On June 25, 2021, certain members of McAfee management and representatives from Goldman Sachs and Morgan Stanley held a meeting with Financial Party G, at which Financial Party G indicated interest in a potential acquisition of McAfee.

On June 29, 2021, representatives from Financial Party D contacted representatives from Goldman Sachs by telephone and indicated that they would not pursue further a potential acquisition of McAfee.

On June 30, 2021, four potentially interested parties submitted non-binding written indications of interest for an acquisition of McAfee based on limited preliminary information, in each case subject to further diligence. Advent, Permira and Crosspoint submitted a joint, non-binding indication of interest at an enterprise value of $15.0 billion, inclusive of certain presumed but unverified tax benefits. CPPIB submitted a separate non-binding indication of interest at an enterprise value of $14.25 billion, and noted that its bid was premised on the ability to partner with at least one other private equity investor. Financial Party G submitted a non-binding indication of interest at an enterprise value of $14 billion, and similarly noted that it would seek to partner with at least one other like-minded private equity investor. Financial Party F submitted a written non-binding indication of interest that did not include an enterprise value. Also, on June 30, 2021, Financial Party B submitted a separate oral indication of interest that did not include an enterprise value and was also premised on the ability to partner with at least one other investor. All other potential interested parties elected not to submit any proposal (whether orally or in writing) and did not pursue further a potential acquisition of McAfee.

Each of the four written non-binding indications of interest included a preliminary estimate from each interested party of McAfee’s adjusted equity value, exclusive of net debt, and (for several proposals) inclusive of certain tax assets that would be delivered to a potential acquirer. These estimates were highly preliminary, were subject to diligence caveats and did not include or express any fixed per share price that would be paid that would facilitate comparison across bidders. However, Goldman Sachs estimated various illustrative per share values implied by each of the non-binding indication of interests based on a number of assumptions, including assumptions with respect to the dividends and debt payments that McAfee anticipated making in respect of the sale of the Enterprise business, and cash forecasted to be generated through the end of 2021. Goldman Sachs’ illustrative estimates of implied per share values with respect to each non-binding indication of interest was as follows: $26.87 per share for Advent, Permira and Crosspoint’s; $26.45 per share for CPPIB’s; $24.63 per share for Financial Party G’s; $22.83 per share for Financial Party F’s; and $25.50 to $26.50 per share for Financial Party B’s.

On July 2, 2021, the Board of Directors held a board meeting. Also in attendance were members of McAfee management, and representatives from Goldman Sachs and Ropes. Representatives from Goldman Sachs briefed the Board of Directors on the status of discussions with potential parties, including Advent, Permira and Crosspoint’s continued interest in pursuing a transaction with McAfee. Representatives from Goldman Sachs

 

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reviewed with the Board of Directors the indications of interest received to date. Representatives from Goldman Sachs also provided an overview of the proposed transaction timeline, with potential buyers conducting diligence through July 2021 and submitting final bids by the first week of August 2021. A representative from Ropes then reviewed with the Board of Directors their fiduciary duties under Delaware law. The Board of Directors discussed potential conflicts of interest that could arise in connection with a potential transaction, including the acceleration of potential payments to be made under the TRA upon an acquisition of McAfee. The Board of Directors further discussed possible alternatives to eliminate or mitigate any such potential conflicts should they arise, and to align the interests of pre-IPO stockholders of McAfee and all other McAfee Stockholders in obtaining the highest available price in any acquisition of McAfee. Following discussion, the Board of Directors provided direction to Goldman Sachs on the guidance to provide the various bidders.

On July 3, 2021, representatives from Goldman Sachs advised Financial Party B that it could partner with Financial Party G, given both that Financial Party B and Financial Party G had indicated an interest in partnering with one another, as well as the significant equity financing requirements to consummate an acquisition. Around this time, representatives from Goldman Sachs separately advised Financial Party F that their proposal was not actionable on the pricing terms set forth in their proposal and encouraged them to submit more favorable pricing terms. Financial Party F declined to submit more favorable terms and, with certain exceptions (described below), did not pursue further a potential acquisition of McAfee.

On July 4, 2021, representatives from Goldman Sachs and Morgan Stanley formally connected Financial Party B with Financial Party G to form a joint consortium.

On July 5, 2021, a representative from Goldman Sachs communicated that McAfee had granted permission to Advent, Permira and Crosspoint to utilize ADIA as a potential equity financing source.

McAfee granted permission to CPPIB (on July 9, 2021) to partner with Advent, Permira and Crosspoint (Advent and Permira as lead investors, with CPPIB and Crosspoint as named co-investors and ADIA (on July 9, 2021) and GIC (on July 12, 2021) as equity financing sources, collectively, the “Consortium”) regarding a potential transaction. Permission was granted to CPPIB because of, among other things, CPPIB’s interest in partnering with Advent and Permira, which interest CPPIB had previously communicated to representatives of Goldman Sachs.

Also on July 9, 2021, representatives from each of Financial Party B and Financial Party G notified a representative from Goldman Sachs that they would no longer pursue a potential acquisition of McAfee, indicating that they had decided not to proceed. Going forward as from this date, the sole bidder materially engaging in the process was the Consortium.

On July 12, 2021, McAfee also granted permission to GIC to transfer its interest in McAfee to Parent, and to receive equity in Parent as payment therefor.

On July 14, 15 and 16, 2021, members of McAfee management held a series of meetings jointly attended by Advent, Permira, CPPIB, Crosspoint and ADIA. On or around this time, representatives from Goldman Sachs and the sponsor director communicated with representatives from Advent, which communications primarily related to a potential acquisition of McAfee. During this time, Ropes prepared a form of merger agreement and forms of other transaction agreements that could be delivered to a potential strategic acquirer or a potential financial acquirer, should there be sufficient interest in and a determination by the Board of Directors to further pursue a potential acquisition of McAfee. On July 16, 2021, a draft form of merger agreement was provided by McAfee to the Consortium.

On July 20, 2021, representatives from Goldman Sachs and Morgan Stanley sent a process letter to the Consortium requesting submission of a definitive written proposal for the acquisition of McAfee by August 5, 2021 and noting that the Board of Directors would consider such matters as it deemed appropriate in evaluating such proposals, including (i) price, (ii) certainty and timing of closing such a transaction and (iii) the draft transaction documents. The July 20, 2021 bid process letter specifically requested bids on a per share basis.

On July 30, 2021, Fried, Frank, Harris, Shriver & Jacobson LLP (“Fried Frank”), counsel to the Consortium, sent an issues list to Ropes, which identified issues for discussion in the draft merger agreement. The issues list

 

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also indicated that the Consortium would expect to receive a customary voting agreement from certain significant stockholders of McAfee in connection with any transaction. Such voting agreement would require, among other things, that certain significant stockholders of McAfee vote in favor of the contemplated transaction (subject to certain exceptions) with the Consortium.

On July 30, 2021, the Board of Directors held a board meeting by video conference. Also present were members of McAfee management, as well as representatives from Goldman Sachs and Ropes. Representatives from Goldman Sachs then provided an overview of the diligence process. Ropes reviewed with the Board of Directors their fiduciary duties under Delaware law, and also reviewed the issues list with respect to the draft merger agreement provided by Fried Frank. Discussion ensued among the directors. With input from representatives from Goldman Sachs and Ropes, the Board of Directors also discussed potential conflicts of interest, including the acceleration of potential payments due under the TRA. A representative from Ropes informed the Board of Directors that each of TPG and Intel had agreed that they would be willing to waive any acceleration of TRA payments otherwise due upon a change of control of McAfee in order to obtain the highest price per share for all McAfee Stockholders. In addition, certain preliminary, projected financial information was reviewed with the Board of Directors, including preliminary projections that had been prepared by McAfee on May 29, 2021 and subsequently made available to prospective bidders (the “May 29 Projections”), as well as certain other preliminary, projected financial information. In addition, certain preliminary, projected financial information was reviewed with the Board of Directors. The Board of Directors asked questions and discussion ensued.

The Board of Directors instructed representatives from Goldman Sachs and Ropes to notify Fried Frank that a full markup of the merger agreement would be required before a substantive discussion on the merger agreement could occur.

On July 30 and August 1, 2021, the sponsor director had telephone conversations with Financial Party F during which the sponsor director encouraged Financial Party F to consider leading a potential acquisition of McAfee, as well as general discussions around the quality of McAfee’s business.

On August 3, 2021, representatives of Ropes and Fried Frank spoke by telephone. During such conversation, representatives of Ropes indicated to representatives of Fried Frank that a full markup of the merger agreement would be required before a substantive discussion on the merger agreement could occur.

On or around August 4 through August 7, 2021, various telephone conversations between representatives from McAfee and Advent occurred regarding the Consortium’s due diligence requests.

On August 10 through August 17, 2021, representatives from Goldman Sachs spoke with Permira on the current nature of their interest in a transaction and encouraged them to advance and complete their diligence and improve the terms of their proposal.

On August 14, 2021, Fried Frank, on behalf of the Consortium, submitted to Ropes a full markup of the merger agreement, which, among other things, reflected the Consortium’s expectation that certain significant stockholders of McAfee sign a voting agreement in connection with any contemplated transaction.

On August 17, 2021, representatives from Goldman Sachs spoke with Advent and Permira and encouraged Advent and Permira and other members of the Consortium to improve the terms of their proposal and to move quickly to be in a position to execute a transaction. Permira called representatives from Goldman Sachs and indicated that the Consortium continued to have open diligence issues that prevented them from improving their terms or making a final proposal.

On August 19, 2021, McAfee terminated discussions with the Consortium, due to, among other things, disagreements about the terms and timeline upon which any transaction would occur as well as disagreements about access to due diligence materials related to McAfee.

 

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On September 7, 2021, McAfee publicly announced an underwritten public offering of 20,000,000 shares of its Class A Common Stock by certain selling McAfee Stockholders, which public offering was completed on September 14, 2021.

On September 23, 2021, in a conversation about other topics with representatives from Goldman Sachs, Financial Party G confirmed they continued to not have interest in a potential acquisition of McAfee.

On October 6, 2021, a representative from Advent contacted the sponsor director by telephone and discussed the Consortium’s potential interest in re-engaging with McAfee regarding a potential acquisition of McAfee. Shortly thereafter, the representative from Advent discussed with McAfee management and representatives from Goldman Sachs the Consortium’s potential interest in re-engaging.

On October 8, 2021, representatives from Goldman Sachs, as well as members of McAfee management, held a meeting with representatives from Advent, Permira, CPPIB, Crosspoint, ADIA and GIC to discuss McAfee’s third quarter financials. At this meeting, there was no discussion of the potential price or material terms of a potential acquisition of McAfee.

On October 13, 2021, Advent, Permira, Crosspoint and CPPIB submitted a revised non-binding proposal to McAfee providing for an acquisition by the Consortium of McAfee at a price per share of $25.00 in cash, representing a premium over the closing price of $20.60 per share on that day, or approximately 21%. This proposal also attached a further revised markup of the merger agreement. In comparison to the August 14, 2021 markup that was submitted by Fried Frank, the October 13, 2021 markup, which, included, among other things, a higher proposed Parent Termination Fee, a lower proposed Company Termination Fee and favorable changes to the go-shop and no-shop provisions, certain critical definitions, the financing covenants, the representations and warranties, and the conduct of business covenant. The October 13, 2021 proposal also contained a request that McAfee sign a letter with Advent, Permira, Crosspoint and CPPIB providing for four weeks of exclusivity.

On October 14, 2021, the Board of Directors held a board meeting. Also in attendance were members of McAfee management and representatives from Goldman Sachs and Ropes. Representatives from Goldman Sachs reviewed with the Board of Directors the terms of the Consortium’s October 13, 2021 proposal, as well as Goldman Sachs’ preliminary financial analysis of the $25.00 price per share proposed in the October 13 proposal. A representative from Ropes reviewed with the Board of Directors their fiduciary duties under Delaware law, and then also reviewed with the Board of Directors the material terms of the October 13 markup of the merger agreement and the request for exclusivity. Discussion ensued among the directors. The Board of Directors deliberated on the improved terms of the October 13 proposal, including the request by Advent, Permira, Crosspoint and CPPIB for exclusivity. The Board of Directors instructed its legal and financial advisors to speak with Advent, Permira, Crosspoint and CPPIB’s advisors and seek to further improve the terms of the October 13 proposal.

At the board meeting, it was also discussed that an affiliate of GIC that is a current McAfee Stockholder was having discussions to join the Consortium. Neither GIC nor such affiliate had at the time or currently has any representative on the Board of Directors. Further, neither was privy to any of the discussions or developments being discussed by the Board of Directors or involved in any discussions between McAfee and the Consortium. Additional discussion ensued among the directors. Subsequent to the October 14, 2021 board meeting, at the direction of the Board of Directors, a representative from Goldman Sachs conveyed to the Consortium that they would need to improve their proposed per share price to an amount above $25.00 per share.

Shortly after this meeting of the Board of Directors, a representative from Goldman Sachs communicated to the Consortium that McAfee would not enter into an exclusivity agreement in connection with the ongoing negotiations and that the Consortium would need to further improve the $25.00 per share offer price. Because of this, McAfee did not enter into any exclusivity agreement with representatives from the Consortium or any members thereof prior to execution of the merger agreement.

 

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On October 15, 2021, representatives from Goldman Sachs and members of McAfee management held a meeting with Advent, Permira, CPPIB and Crosspoint to discuss due diligence matters.

On October 19, 2021, representatives from Goldman Sachs and members of McAfee management held another meeting with Advent, Permira, CPPIB and Crosspoint to discuss due diligence matters. Also on October 19, 2021, in accordance with the instructions of the Board of Directors, Ropes prepared a revised draft of the merger agreement that made numerous changes to Fried Frank’s most recent draft that were favorable to McAfee, and Ropes sent that draft to Fried Frank. These changes, among other things: provided that the quarterly dividend would be paid; permitted McAfee to make certain “Tax Distributions” (as defined under the OpCo LLC Agreement) to members of OpCo LLC; provided that McAfee would be permitted to make certain payments that it had previously been expecting to make in 2022 unrelated to any change of control of McAfee in accordance with the express terms of the TRA that were unrelated to the proposed transaction (the “Ordinary Course TRA Payments”); lowered the proposed Company Termination Fee to 1.25% or 2.5%; increased the proposed Parent Termination Fee to 7%; and revised various provisions including the go-shop and no-shop provisions, the Board of Directors’ right to make an adverse recommendation change, the treatment of equity awards, the closing conditions, the financing of the transaction, efforts to obtain regulatory clearances, the conduct of business covenant, the representations and warranties, and termination rights. In this draft, Ropes also included language indicating that certain parties to the TRA would agree to the termination of the TRA effective upon closing and to the waiver of the accelerated termination payment contemplated by the TRA that would otherwise result from the transaction. The draft further specified that, to the extent that McAfee would otherwise have made any payments under the TRA absent a transaction, those amounts would be paid out by McAfee prior to closing.

On October 21, 2021, the sponsor director had a telephone conversation with Financial Party F in which Financial Party F expressed potential interest in a private investment in public equity (“PIPE”) transaction involving McAfee. However, Financial Party F did not provide any specificity regarding terms or timing of such proposed PIPE transaction, and Financial Party F made clear that it was not willing to consider an acquisition of 100% of the equity interests of McAfee. Also on October 21, representatives from Goldman Sachs and members of McAfee management held a meeting with representatives from Advent, Permira, CPPIB and Crosspoint to discuss due diligence matters.

On October 22, 2021, representatives from Goldman Sachs and members of McAfee management held meetings with representatives from the Consortium to discuss due diligence matters.

On October 23, 2021, Fried Frank sent a revised draft of the merger agreement to Ropes. Among other things, the October 23 revised merger agreement accepted the 1.25% or 2.5% proposed Company Termination Fee, proposed a 5% Parent Termination Fee, revised various provisions including changes to the go-shop and no-shop provisions, the Board of Directors’ right to make an adverse recommendation change, the treatment of equity awards, the closing conditions, the financing of the transaction, efforts to obtain regulatory clearances, the conduct of business covenant, the representations and warranties, and termination rights.

On October 25, 2021, members of McAfee management along with representatives from each of Goldman Sachs and Ropes met to discuss the revised terms proposed in the October 23 revised merger agreement. Consistent with the Board of Directors’ instruction to management and McAfee’s advisers, the group discussed how to improve further the terms of the merger agreement for all McAfee Stockholders generally. Also on October 25, 2021 members of McAfee management held telephone conversations with representatives from the Consortium to discuss certain items related to McAfee’s balance sheet.

On October 26, 2021, representatives from Goldman Sachs and Morgan Stanley and members of McAfee management held meetings with representatives from the Consortium to discuss certain items related to human resources and cybersecurity matters. Also on October 26, 2021 and on October 27, 2021, representatives of Ropes and Fried Frank held telephone conversations to discuss the draft merger agreement sent by Fried Frank on October 23, 2021.

 

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On October 27, 2021, Ropes sent to Fried Frank an initial draft of a voting agreement to be signed by TPG and Intel, pursuant to which TPG and Intel would agree to vote, at a meeting of the McAfee Stockholders, their respective shares of Company Stock in favor of the adoption of the merger agreement. The terms of the voting agreement provided that the voting support provided therein by TPG and Intel would immediately cease in the event that the Board of Directors made an Adverse Recommendation Change or terminated the merger agreement.

Also on October 27, 2021, a representative from Goldman Sachs, representatives from Deloitte and members of McAfee management held a meeting with representatives from the Consortium concerning the proposed transaction, including the financial and other terms.

On October 28, 2021, Ropes sent a further revised draft of the merger agreement to Fried Frank. The revised draft of the merger agreement contained proposed revisions related to, among other things, the treatment of equity awards, the closing conditions, the financing of the transaction, efforts to obtain regulatory clearances, the terms of the “go shop” provision and the “no shop” provision, the Board of Directors’ right to make an adverse recommendation change, the conduct of business covenant, representations and warranties, termination rights, the proposed Parent Termination Fee and other matters. Also on October 28, representatives from Goldman Sachs and members of McAfee management held telephone conversations with representatives from the Consortium to discuss certain items related to due diligence and operating matters.

On October 29, 2021, the Board of Directors held a meeting. Also present were members of McAfee management, as well as representatives from Goldman Sachs and Ropes. A representative from Goldman Sachs noted that negotiations with the Consortium were continuing, and that as part of its most recent proposal, the Consortium had requested that McAfee suspend its quarterly dividend and for the TRA counterparties to waive the Ordinary Course TRA Payments. The Board of Directors directed Goldman Sachs and McAfee management to continue to seek a more favorable price per share from the Consortium.

A representative from Goldman Sachs then reviewed with the Board of Directors the current financial terms of the proposed transaction. Discussion ensued among the directors. A representative from Goldman Sachs noted that Financial Party F had contacted the sponsor director to propose a PIPE transaction with McAfee, but that Financial Party F was not interested in an acquisition of all of McAfee, and that it was unclear how serious Financial Party F was with respect to the PIPE transaction or what timeline Financial Party F was contemplating for such a transaction. A representative from Goldman Sachs also noted that they recently spoke again with Financial Party G to assess Financial Party G’s willingness to make a proposal to acquire McAfee. However, Financial Party G declined to make a proposal.

During the meeting, a representative from Ropes reviewed with the Board of Directors their fiduciary duties under Delaware law, and also reviewed with the Board of Directors the status of the negotiations on the merger agreement. The representative from Ropes noted that while substantial progress had been made on the principal transaction agreements, certain open issues remained. In particular, the representative from Ropes noted that the parties were still negotiating, among other open points, the closing conditions, acceleration of equity awards, financing of the transaction, certain critical definitions, efforts to obtain regulatory clearances, the terms of the “go shop” provision and the “no shop” provision, the Board of Directors’ rights to make an adverse recommendation change, the quarterly dividend, the Tax Distributions and the Ordinary Course TRA Payments, the proposed Parent Termination Fee and other matters. The directors deliberated on the open points and instructed members of management and representatives from Goldman Sachs and Ropes to seek to obtain the most favorable terms possible for McAfee Stockholders.

The chief financial officer of McAfee then reviewed with the Board of Directors the proposed long term strategic plan (the “Strategic Plan”) for McAfee, and discussed numerous topics relevant to the Strategic Plan, including assumptions and financial projections underlying the Strategic Plan. Certain assumptions reflected in the financial projections prepared in connection with the Strategic Plan had been updated from prior assumptions that had been

 

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made in connection with the May 29 Projections. The updated assumptions were based on subsequent developments, including without limitation the potential impact of recently announced M&A transactions and market activity that impacted McAfee’s competitive landscape, as well as additional strategic planning meetings conducted with the input of a new executive officer who joined after McAfee became a consumer-only company. The updated assumptions reflected in the financial projections resulted in lower forecasted growth in McAfee’s Earnings Before Interest, Taxes, Depreciation, and Amortization (“EBITDA”) as compared to the May 29 Projections, among other updates. Discussion then ensued among the directors on the Strategic Plan. After deliberation, the Board of Directors approved the Strategic Plan as financial projections of the McAfee business and instructed representatives from Goldman Sachs to provide the Strategic Plan to the Consortium.

Also on October 29, representatives from Goldman Sachs and members of McAfee management held a meeting with the Consortium to discuss due diligence matters.

On October 30, 2021, representatives from Ropes and Fried Frank spoke by phone to address a number of provisions in the merger agreement, including among others the closing conditions, acceleration of equity awards, equity financing of the transaction and the marketing period, the “ordinary course” and “material adverse effect” definitions, efforts to obtain regulatory clearances, the terms of the “go shop” provision and the “no shop” provision, the Board of Directors’ rights to make an adverse recommendation change, the conduct of business covenant (including the quarterly dividend, the Tax Distributions and the Ordinary Course TRA Payments), the representations and warranties, and the size of the proposed Parent Termination Fee, among other provisions. Later that day, Fried Frank sent a revised draft of the voting agreement to Ropes, as well as drafts of the equity commitment letter and the fee funding agreement to be signed by each applicable member of the Consortium.

Between October 31 to November 4, 2021, representatives from Goldman Sachs engaged in numerous discussions with the Consortium regarding the financial terms of the proposed transaction. During this period, Ropes and Fried Frank also convened numerous meetings to negotiate the terms of, and exchanged numerous drafts of, the merger agreement, the voting agreement, the equity commitment letter, the fee funding agreement, the amendment to the TRA and the OpCo LLC Agreement and other transaction agreements.

On November 2, 2021, Fried Frank sent a revised draft of the merger agreement to Ropes. Also on November 2, the sponsor director had a telephone conversation with a representative from Advent to discuss due diligence matters relating to McAfee. The sponsor director also reiterated the Board of Directors’ feedback that the Consortium should increase the proposed price per share; a representative from Goldman Sachs separately communicated this guidance to Permira.

On November 3, 2021, Ropes and Fried Frank spoke by phone to negotiate certain provisions of the merger agreement, including among other terms, the “material adverse effect” definition, terms of the go shop provision and the no shop provision, the Board of Directors’ rights to make an adverse recommendation change, the marketing period, the conduct of the business covenant, the covenant regarding efforts to obtain regulatory clearances, the size of the proposed Parent Termination Fee and other provisions. Also on November 3, Fried Frank provided to Ropes draft debt commitment letters and the proposed equity contribution agreement to be signed by an affiliate of GIC. Also on November 3, representatives from Goldman Sachs and the sponsor director had several separate conversations with representatives from each of Advent and Permira.

On November 4, 2021, representatives of Advent and Permira, on behalf of the Consortium, spoke by phone with representatives of Goldman Sachs. On that call, the representatives of Advent and Permira, on behalf of the Consortium, delivered a proposal to resolve a number of open points. Later on November 4, 2021, Fried Frank sent a written proposal, which reflected the terms previously conveyed to Goldman Sachs, to Ropes. The proposal, among other things, proposed a price per share of $25.75; limited acceleration of equity awards, permitted McAfee to make the Tax Distributions to members of OpCo LLC; required that the TRA be terminated conditional upon the occurrence of the Closing; required the Ordinary Course TRA Payments to be canceled; required that the quarterly dividend be suspended; provided for a proposed 5% Parent Termination Fee; accepted proposed compromises on the “material adverse effect” and “intervening event” definitions, and other matters.

 

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On November 4, 2021, representatives from Goldman Sachs and the sponsor director had separate telephone conversations with representatives from Advent and Permira, and a representative from McAfee had a separate telephone conversation with representatives from Advent, regarding the proposal, including potential modifications to the terms of the merger agreement that would raise the price per share to $26.00 in cash (representing a premium over the then-current share price of approximately 22.6%) and suspend and, upon the closing of the Merger, terminate McAfee’s obligation to make the Tax Distributions to members of OpCo LLC. Ropes sent a counterproposal (the “McAfee Counterproposal”) back to Fried Frank containing these modifications and otherwise in general accepting the other terms of the Consortium’s November 4 proposal. After additional discussion between the parties, the Consortium agreed to the McAfee Counterproposal. Also on November 4, representatives from Goldman Sachs and the sponsor director had separate telephone conversations with representatives from Advent and Permira clarifying the terms of the limited acceleration of equity awards. Also on November 4, Fried Frank provided to Ropes draft preferred equity commitment letters.

During the evening of November 4, 2021, the Board of Directors held a board meeting by video conference. A representative from Goldman Sachs provided an update to the Board of Directors and communicated that the Consortium had agreed to increase the price per Class A Common Stock share to $26.00 in cash and otherwise described the McAfee Counterproposal that had been accepted by the Consortium. The representative from Goldman Sachs noted that this approach was consistent with the Board of Directors’ previous discussions. A representative from Goldman Sachs then reviewed its financial analyses and rendered to the Board of Directors its oral opinion, which was subsequently confirmed by delivery of a written opinion dated November 5, 2021, to the Board of Directors to the effect that, as of such date and based upon and subject to the factors and assumptions set forth in Goldman Sachs’ written opinion, the $26.00 in cash per share of Company Stock to be paid to the McAfee Stockholders (other than Parent, Snowlake and their respective Affiliates), taken in the aggregate, pursuant to the Merger Agreement, was fair, from a financial point of view, to such McAfee Stockholders as further described in the section “—Opinion of Goldman Sachs & Co. LLC”.

A representative from Ropes then reviewed with the Board of Directors their fiduciary duties under Delaware law. The representative from Ropes next reviewed with the Board of Directors the status of the negotiations with the Consortium and its advisors and that there were still items under negotiation in the draft merger agreement, and that Ropes and Goldman Sachs were still negotiating those items. The representative from Ropes reviewed with the Board of Directors the terms of the transaction agreements reflective of the McAfee Counterproposal, including, without limitation, the terms of the merger agreement, including without limitation the structure of the merger, limited acceleration of equity awards, the “go shop” provision, the “no shop” provision, the Board of Directors’ rights to make an adverse recommendation change, the proposed Company Termination Fee of 1.25% or 2.5%, and the proposed Parent Termination Fee of 5%, efforts to obtain regulatory clearances, closing conditions, the definition of “material adverse effect;” the voting agreement that would be signed by TPG and Intel to support the transaction and the fact that the voting support under that voting agreement would immediately cease upon the Board of Directors making an adverse recommendation change or upon termination of the merger agreement; suspension of the quarterly dividend; the amendment to the TRA and OpCo LLC Agreement to effect the suspension and, conditional upon the occurrence of the Closing, the elimination of certain payments due under the TRA (including the Ordinary Course TRA Payments and any change of control payments associated with the transaction) and Tax Distributions under the OpCo LLC Agreement; the equity commitment letters; the debt commitment letters; the fee funding agreements; and the agreement to be signed by the affiliate of GIC and the Consortium. Discussion then ensued among the Board of Directors and with their advisors. The directors discussed the favorable outcome on the improvement of the price to $26.00 per share in cash payable to all of the McAfee Stockholders generally, and instructed management, and representatives from Ropes and Goldman Sachs to resolve any remaining open points in a manner as favorable as possible to the McAfee Stockholders and otherwise in accordance with the Board of Directors’ instructions. Subject to that instruction, the Board of Directors authorized management to execute and deliver the merger agreement and the other transaction agreements once the McAfee Counterproposal had been reflected in the transaction agreements and any remaining open points had been resolved. The compensation committee of the Board of Directors also met and adopted resolutions to authorize the treatment of equity awards as provided in the merger agreement.

During the evening of November 4, 2021 and continuing throughout November 5, 2021, the parties memorialized the McAfee Counterproposal in the transaction agreements and continued to negotiate and resolve

 

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the open points in the merger agreement and the other transaction agreements. Late in the afternoon on November 5, several news outlets published a story that McAfee was considering a proposed transaction with the Consortium. At the close of trading on November 5, 2021, McAfee’s stock price had increased approximately 20% over the previous day’s closing price. Also on November 5, members of McAfee management and representatives from Goldman Sachs held a meeting with representatives from Advent, Permira, CPPIB and Crosspoint. In addition, on November 5, 2021, representatives from Goldman Sachs delivered to the Board of Directors an updated written presentation of certain financial analyses to reflect the most recent capitalization of McAfee included in the November 5, 2021 draft of the merger agreement. Late in the evening on November 5, the parties executed and delivered the Merger Agreement and the other principal transaction agreements, including the amendment to the TRA and OpCo LLC Agreement executed and delivered by holders of the requisite percentage of beneficiaries to the TRA.

Upon the execution of the Merger Agreement, all standstill provisions (that were contained in confidentiality agreements with prospective bidders) providing for a fall away upon a public announcement of a sale of McAfee, automatically released, except as set forth below. The confidentiality agreements between McAfee and three potentially interested parties each contained a standstill restriction and a “don’t ask, don’t waive” provision prohibiting the potentially interested parties from requesting that McAfee waive or amend the standstill restrictions, but did not provide for a fall away upon a public announcement of a sale of McAfee. On December 20, 2021, McAfee advised each of these three potentially interested parties that McAfee was waiving the standstill provision (including the “don’t ask, don’t waive” provision) in the confidentiality agreements in order to permit each of these parties to make a private and confidential acquisition proposal to the Board of Directors.

Also on November 5, 2021, Goldman Sachs delivered its written opinion to the Board of Directors to the effect that, as of the date of such written opinion, and based upon and subject to the factors and assumptions set forth therein, the $26.00 in cash per share of Company Stock to be paid to the McAfee Stockholders (other than Parent, Snowlake and their respective Affiliates), taken in the aggregate, pursuant to the Merger Agreement, was fair, from a financial point of view, to such McAfee Stockholders.

On the morning of November 8, 2021, McAfee and the Consortium publicly announced the entry into the Merger Agreement via a joint press release.

On November 19, 2021, McAfee, Parent and Merger Subsidiary executed an amendment to the Merger Agreement to remove certain jurisdictions from the closing conditions set forth in Sections 9.01(b) and 9.01(c) relating to certain regulatory approvals and restraints. Since the execution of the Merger Agreement, in connection with the Go Shop Period provided for in the Merger Agreement, which expired at 11:59 p.m. New York City Time on December 20, 2021, at the direction of the Board of Directors, representatives from Goldman Sachs and Morgan Stanley have communicated with 37 additional parties, consisting of 18 potential strategic parties and 19 potential financial sponsors, to gauge such parties’ interest in making an alternative Acquisition Proposal. McAfee did not execute a confidentiality agreement with any of those 37 parties. To date, no party has made an alternative Acquisition Proposal.

Recommendation of the Board of Directors and Reasons for the Merger

Recommendation of the Board of Directors

The Board of Directors has: (i) determined that the Merger Agreement and the transactions contemplated thereby (including the Merger) are fair to and in the best interests of McAfee and the McAfee Stockholders, (ii) approved and declared advisable the Merger Agreement, the Transaction Documents and the transactions contemplated thereby (including the Merger) and thereby, and (iii) resolved, subject to Section 6.03 of the Merger Agreement, to recommend adoption of the Merger Agreement by the McAfee Stockholders.

The Board of Directors recommends that you vote: (1) “FOR” the adoption of the Merger Agreement; (2) “FOR,” on a non-binding advisory basis, the Compensation Proposal; and (3) “FOR” the

 

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adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting.

Reasons for the Merger

In evaluating the Merger Agreement and the Merger, the Board of Directors consulted with McAfee’s management and its legal and financial advisors and, in reaching its decision to, among other things, approve the Merger Agreement and the Merger and to recommend that McAfee Stockholders approve and adopt the Merger Agreement, the Board of Directors considered a variety of factors, including the following:

 

   

historical information regarding (i) McAfee’s business, financial performance and results of operations, (ii) market prices, volatility and trading activity with respect to the Company Stock, and (iii) market prices with respect to other industry participants and general market indices;

 

   

current information regarding (i) McAfee’s business, prospects, financial condition, operations, technology, products, services, management, competitive position and strategic business goals and objectives, (ii) general economic, industry and financial market conditions, (iii) geopolitical conditions (including, without limitation, tariffs and COVID-19) which are affecting McAfee’s business, and (iv) opportunities and competitive factors within McAfee’s industry;

 

   

ongoing efforts and uncertainty relating to COVID-19;

 

   

the changing competitive landscape, including acquisitions and dispositions by competitors and solicitation by competitors of McAfee of customers (including OEMs) of McAfee’s business;

 

   

the historically high stock prices of public companies in equity markets generally;

 

   

the prospects and likelihood of realizing superior benefits through remaining an independent company, risks associated with remaining an independent company, and possible alternative business strategies;

 

   

the potential for third parties other than Parent to enter into strategic relationships with or to seek to acquire McAfee, including a review of McAfee’s dealings with other possible buyers in the past and assessment of the likelihood that a third party would offer a higher price than the price per share of Company Stock offered by Parent;

 

   

the timing of the Merger and the risk that if McAfee does not accept the Parent offer now (as provided for in the Merger Agreement), it may not have another opportunity to do so or to accept a comparable opportunity;

 

   

the fact that the value of the Merger Consideration as provided for in the Merger Agreement represents a substantial premium above McAfee’s stock price prior to news of the transaction being publicly available;

 

   

the fact that the amount of cash to be received for each outstanding share of Company Stock is fixed and will not be reduced if the share price of Company Stock declines prior to the effective time of the Merger;

 

   

the fact that representatives from McAfee and Goldman Sachs conducted a review of McAfee’s strategic alternatives and, in connection therewith, contacted numerous potential counterparties regarding their interest in a potential acquisition of McAfee;

 

   

the belief of the Board of Directors that it is preferable to enter into the Merger Agreement with Parent instead of any of the other prospective interested parties in the strategic alternatives process in light of the prices offered by those other prospective interested parties, the lack of interest by prospective interested parties and the fact that those other prospective interested parties made significantly less progress on due diligence, particularly in light of:

 

   

(1) the risk that continuing with the strategic process was unlikely to result in a transaction at a more attractive price than offered by Parent in the Merger and that a “failed” attempt to sell McAfee could be detrimental to McAfee; and

 

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(2) the fact that McAfee had the Go Shop Period in which to seek a higher priced offer;

 

   

the fact that, under the terms of the Merger Agreement, McAfee and Parent have agreed to use their reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable law to consummate the Merger and the others transactions contemplated by the Merger Agreement as promptly as practicable, including (i) preparing and filing as promptly as practicable after the date hereof with any Governmental Authority all documentation to effect all necessary filings, notices, petitions, statements, registrations, submissions of information, financial statements, records, applications and other documents, in each case, as required; (ii) obtaining and maintaining as required by the Merger Agreement all approvals, consents, registrations, permits, authorizations, licenses, waivers, and other confirmations required to be obtained from any Governmental Authority that are necessary to consummate the transactions contemplated by the Merger Agreement; (iii) defending or contesting any action, suit or proceeding challenging this Agreement or the transactions contemplated hereby; and (iv) executing and delivering any additional instruments necessary to consummate the transactions contemplated hereby;

 

   

the fact that the Sponsors are well-known private equity sponsors;

 

   

the fact that (1) the Merger Agreement contains a “go shop” provision permitting McAfee to actively solicit parties to seek to obtain a higher offer during the Go-Shop Period together with the payment of the Company Termination Fee, (2) after the Go Shop Period, McAfee can still entertain unsolicited acquisition proposals that are more favorable from a financial perspective, (3) the Merger Agreement obligates McAfee to pay Parent the Company Termination Fee under specified circumstances, which could discourage the making of a competing acquisition proposal or adversely impact the price offered in such a proposal;

 

   

the fact that the Merger Agreement obligates Parent to pay a termination fee of 5% of the equity value of McAfee to McAfee under specified circumstances, and that funds affiliated with each Sponsor and certain other co-investors have signed a Fee Funding Agreement to backstop the payment of such fee;

 

   

the belief of the Board of Directors that an acquisition by Parent has a reasonable likelihood of closing without potential issues under applicable antitrust and competition laws or potential issues from any regulatory authorities;

 

   

the fact that the adoption of the Merger Agreement is not subject to the approval of Parent’s stockholders;

 

   

the absence of a financing condition to the closing of the Merger, and Parent’s representations and warranties relating to the equity commitment letters, the agreement between Snowlake and the Consortium, the debt commitment letters and preferred equity commitment letters, the fee funding agreements and solvency;

 

   

the written opinion of Goldman Sachs rendered to the Board of Directors that, as of the date of such written opinion and based upon and subject to the factors and assumptions set forth therein, the $26.00 in cash per share of Company Stock to be paid to the McAfee Stockholders (other than Parent, Snowlake and their respective Affiliates), taken in the aggregate, pursuant to the Merger Agreement, was fair, from a financial point of view, to such McAfee Stockholders; for more information, see the section of this proxy statement captioned “The Merger—Opinion of Goldman Sachs & Co. LLC;”

 

   

the fact that McAfee will no longer exist as an independent public company after Closing and the McAfee Stockholders will forgo any future increase in the value of their equity interest in McAfee that might result from its possible growth, change or expansion;

 

   

the possible negative effect of the Merger and public announcement of the Merger on McAfee’s financial performance, operating results and stock price and McAfee’s relationships with customers, suppliers, other business partners, management and employees;

 

   

the fact that the Merger Agreement imposes restrictions on the conduct of McAfee’s business in the pre-closing period, which may adversely affect McAfee’s business in the event the Merger is not

 

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completed (including by delaying or preventing McAfee from pursuing business opportunities that may arise or by precluding actions that would be advisable if McAfee were to remain an independent company);

 

   

the risks involved with the Merger and the likelihood that McAfee and Parent will be able to complete the Merger, the possibility that the Merger might not be consummated and McAfee’s prospects going forward without the combination with Parent;

 

   

the substantial transaction expenses to be incurred in connection with the Merger and the negative impact of such expenses on McAfee’s cash reserves and operating results should the Merger not be completed;

 

   

the fact that TPG and Intel were signing a voting agreement with Parent to vote in favor of the adoption of the Merger Agreement and against any other acquisition proposal, and the fact that the voting support under such voting agreement ceases immediately upon an adverse recommendation change or the termination of the Merger Agreement;

 

   

the fact that the Amendment is being entered into in connection with the Merger Agreement so as to suspend and subject to the occurrence of Closing, terminate any tax distributions payable by McAfee to members under the OpCo LLC Agreement and to suspend certain payment obligations under and, subject to the occurrence of Closing, to terminate the TRA and to eliminate any payment obligation of McAfee to the parties thereto that would otherwise have become due as a result of the Merger under the original terms of the TRA;

 

   

the fact that the Merger Agreement requires McAfee to suspend the payment of its quarterly dividend;

 

   

all known interests of directors and executive officers of McAfee in the Merger that may be different from, or in addition to, their interests as McAfee Stockholders or the interests of other McAfee Stockholders generally, including (i) rights and benefits pursuant to the TRA and in respect of tax distributions payable by McAfee to members under the OpCo LLC Agreement, as modified by the Amendment and (ii) that certain officers of McAfee are entitled to severance and other benefits pursuant to agreements with McAfee in connection with certain qualifying terminations occurring after the consummation of the Merger; and

 

   

all other factors the Board of Directors deems relevant.

After considering the foregoing potentially negative and potentially positive factors, the Board of Directors concluded that the potentially positive factors relating to the merger agreement and the merger substantially outweighed the potentially negative factors.

The foregoing discussion of the information and factors considered by the Board of Directors is not exhaustive, but is intended to reflect the material factors considered by the Board of Directors in its consideration of the Merger. In view of the complexity, and the large number of the factors considered, the Board of Directors, both individually and collectively, did not quantify or assign any relative or specific weight to the various factors. Rather, the Board of Directors based its recommendation on the totality of the information presented to and considered by it. In addition, individual members of the Board of Directors may have given different weights to different factors.

The foregoing discussion of the information and factors considered by the Board of Directors is forward-looking in nature. This information should be read in light of the factors set forth in the section entitled “Forward-Looking Statements” beginning on page 25 of this proxy statement.

Opinion of Goldman Sachs & Co. LLC

Goldman Sachs rendered to the Board of Directors its oral opinion, subsequently confirmed in its written opinion dated November 5, 2021, that, as of the date of the written opinion and based upon and subject to the

 

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factors and assumptions set forth in the opinion, the $26.00 in cash per share of Company Stock to be paid to the holders (other than Parent, Snowlake and their respective affiliates) of shares of Company Stock, taken in the aggregate, 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 November 5, 2021, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex D. The summary of Goldman Sachs’ opinion contained in this proxy statement is qualified in its entirety by reference to the full text of Goldman Sachs’ written opinion. Goldman Sachs provided advisory services and its opinion for the information and assistance of the Board of Directors in connection with its consideration of the merger. The Goldman Sachs opinion does not constitute a recommendation as to how any holder of shares of Company Stock should vote with respect to the merger, 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;

 

   

McAfee’s annual report on Form 10-K for the fiscal year ended December 26, 2020;

 

   

McAfee’s Registration Statement on Form S-1, including the prospectus contained therein dated September 9, 2021, relating to the public offering of shares of Class A Common Stock;

 

   

certain interim reports to stockholders and Quarterly Reports on Form 10-Q of McAfee;

 

   

certain other communications from McAfee to its stockholders;

 

   

certain publicly available research analyst reports for McAfee; and

 

   

certain internal financial analyses and forecasts for McAfee prepared by its management, as approved for Goldman Sachs’ use by McAfee, which are referred to as the “Forecasts”.

Goldman Sachs also held discussions with members of the senior management of McAfee regarding their assessment of the past and current business operations, financial condition and future prospects of McAfee; reviewed the reported price and trading activity for the shares of Class A Common Stock; compared certain financial and stock market information for McAfee 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 software industry; 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 the Board of Directors’ 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, it, without assuming any responsibility for independent verification thereof. In that regard, Goldman Sachs assumed with the Board of Directors’ consent that the Forecasts have been reasonably prepared on a basis reflecting the best then available estimates and judgments of the management of McAfee. 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 McAfee or any of its 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 merger would be obtained without any adverse effect on the expected benefits of the merger in any way meaningful to Goldman Sachs’ analysis. Goldman Sachs assumed that the transaction would 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 did not address the underlying business decision of McAfee to engage in the merger or the relative merits of the merger as compared to any strategic alternatives that may be available to

 

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McAfee; nor did it address any legal, regulatory, tax or accounting matters. Goldman Sachs’ opinion addresses only the fairness from a financial point of view, as of the date of its opinion, to the holders (other than Parent, Snowlake and their respective affiliates) of shares of Company Stock, of the $26.00 in cash per share of Company Stock to be paid to such holders, taken in the aggregate, 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 merger 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 merger, including any payments (and any waiver of rights to receive any such payments) under the Tax Receivable Agreement, dated October 21, 2020, by and among McAfee, Foundation Technology Worldwide LLC (“OpCo”) and the other parties thereto, any distributions under the Second Amended and Restated Limited Liability Company Agreement of OpCo, dated as of October 21, 2020 (the “OpCo LLC Agreement”) and any exchange of units or redemption of units or shares of Class B Common Stock pursuant to the OpCo LLC Agreement, the Contribution and Subscription Agreement by and among Snowlake, Parent and the other parties thereto, dated as of November 5, 2021, any allocation of the aggregate consideration payable to the holders of shares of Company Stock pursuant to the Merger Agreement, including among the holders of Class A Common Stock and Class B Common Stock, the fairness of the transaction to, or any consideration received in connection therewith by, the holders of any other class of securities, creditors, or other constituencies of McAfee; 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 McAfee, or class of such persons, in connection with the merger, whether relative to the $26.00 in cash per share to be paid to the holders (other than Parent, Snowlake and their respective affiliates) of shares of Company Stock, taken in the aggregate, pursuant to the Merger Agreement or otherwise. Goldman Sachs’ opinion did not express any opinion as to the prices at which the shares of Class A Common Stock will trade at any time, as to the potential effects of volatility in the credit, financial and stock markets on McAfee, Parent or the Merger, or as to the impact of the merger on the solvency or viability of McAfee or Parent or the ability of McAfee or Parent to pay their respective obligations when they come due. 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 its written 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 written opinion. Goldman Sachs’ advisory services and its opinion were provided for the information and assistance of the Board of Directors in connection with its consideration of the merger and such opinion does not constitute a recommendation as to how any holder of shares of Company Stock should vote with respect to such merger or any other matter. Goldman Sachs’ opinion was approved by a fairness committee of Goldman Sachs.

Summary of Financial Analyses

The following is a summary of the material financial analyses delivered by Goldman Sachs to the Board of Directors in connection with rendering to the Board of Directors 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 November 5, 2021, the last trading day before the public announcement of the transaction, and is not necessarily indicative of current market conditions.

Implied Premia and Multiples

Goldman Sachs calculated and compared certain implied premia and multiples described below based on the $26.00 in cash per share of Company Stock to be paid to the holders (other than Parent, Snowlake and their respective affiliates) of shares of Company Stock pursuant to the Merger Agreement.

 

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Goldman Sachs calculated the implied premia represented by the $26.00 in cash per share of Company Stock relative to:

 

   

$21.21, the unaffected closing price for the Class A Common Stock on November 4, 2021, the last trading day prior to media reports regarding a potential sale of McAfee (the “Current Share Price”);

 

   

$21.78, the volume weighted average price (“VWAP”) of the Class A Common Stock over the 10-trading day time period ended November 4, 2021 (“10-day VWAP”);

 

   

$21.59, the VWAP of the Class A Common Stock over the 20-trading day time period ended November 4, 2021 (“20-day VWAP”); and

 

   

$21.74, the VWAP of the Class A Common Stock over the 30-trading day time period ended November 4, 2021 (“30-day VWAP”).

The results of these calculations and comparisons were as follows:

 

Class A Common Stock Reference Price

   Implied Premium Represented by
$26.00 in Cash per Share of
Company Stock
 

Current Share Price of $21.21

     23

10-day VWAP of $21.78

     19

20-day VWAP of $21.59

     20

30-day VWAP of $21.74

     20

In addition, Goldman Sachs calculated an implied equity value for McAfee for purposes of calculating the following multiples by multiplying the $26.00 in cash per share of Company Stock by the total number of fully diluted outstanding shares of Company Stock as of November 4, 2021, as provided by the management of McAfee and approved for Goldman Sachs’ use by the management of McAfee. Goldman Sachs then calculated an implied enterprise value of McAfee by adding to the implied equity value it calculated the net debt of McAfee as of September 25, 2021, as provided by the management of McAfee and approved for Goldman Sachs’ use by the management of McAfee.

Using the foregoing, Goldman Sachs calculated the following implied multiples:

 

   

the implied enterprise value for McAfee as a multiple of calendar years 2021 and 2022 revenues of McAfee, based on Institutional Brokers’ Estimate System (“IBES”) consensus estimates and as reflected in the Forecasts; and

 

   

the implied enterprise value for McAfee as a multiple of the estimates of McAfee’s earnings before interest, taxes, depreciation, and amortization (“EBITDA”) (including stranded costs related to divestitures but excluding stock-based compensation, amortization of acquired intangibles and other one-time expenses) (“Adj. EBITDA”) for calendar years 2021 and 2022, based on IBES consensus estimates and as reflected in the Forecasts.

The results of these calculations were as follows:

 

Implied Enterprise Value as a Multiple of:

   Implied Multiples  
   Current Share Price of $21.21      $26.00 per share of McAfee
Company Stock
 

CY21 EV/Revenue (Forecasts)

     6.2x        7.4x  

CY21 EV/Revenue (Consensus Estimates)

     6.4x        7.6x  

CY22 EV/Revenue (Forecasts)

     5.5x        6.5x  

CY22 EV/Revenue (Consensus Estimates)

     5.7x        6.8x  

CY21 EV/Adj. EBITDA (Forecasts)

     13.7x        16.3x  

CY21 EV/Adj. EBITDA (Consensus Estimates)

     15.3x        18.2x  

CY22 EV/Adj. EBITDA (Forecasts)

     11.4x        13.5x  

CY22 EV/Adj. EBITDA (Consensus Estimates)

     12.6x        15.0x  

 

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Selected Public Company Comparables

Goldman Sachs reviewed and compared certain financial and stock market information for McAfee to corresponding financial and stock market information for the following publicly traded corporations in the security software industry (collectively referred to as the “Selected Companies”):

 

   

NortonLifeLock Inc. (“Norton”); and

 

   

Avast PLC (“Avast”).

Although neither of the Selected Companies is directly comparable to McAfee, the companies included were chosen because they are publicly traded companies with operations that for purposes of analysis may be considered similar to certain operations of McAfee.

Goldman Sachs calculated and compared next-twelve month (“NTM”) Adj. EBITDA multiples for McAfee and each of the selected companies, based on financial and trading data as of November 4, 2021, information Goldman Sachs obtained from Capital IQ, publicly available historical data, market data and IBES consensus estimates. NTM Adj. EBITDA multiples for McAfee were calculated based on the Forecasts and for Norton and Avast were calculated based on IBES consensus estimates. Goldman Sachs calculated average NTM EV/Adj. EBITDA multiples over certain time periods prior to and including November 4, 2021.

The results of these calculations are summarized as follows:

 

NTM EV/Adj. EBITDA Multiples Over Time(1)

 

Average in

   McAfee      Norton      Avast  

2021

     13.1x        11.6x        14.1x  

2020

     10.0x        10.0x        14.0x  

2019

     N/A        10.3x        10.9x  

2018

     N/A        8.5x        9.6x  

2017

     N/A        9.4x        N/A  

Average over last

        

1-Month

     13.2x        11.6x        N/A  

1-Year

     12.8x        11.5x        14.1x  

3-Year

     N/A        10.5x        12.8x  

November 4, 2021

     12.8x        11.4x        14.6 (2) 

 

(1)

Defined as EBITDA adjusted to exclude stock-based compensation, amortization of acquired intangibles and other one-time expenses.

(2)

Reflects Avast unaffected multiple as of July 14, 2021 (undisturbed by Norton/Avast merger rumors).

Illustrative Discounted Cash Flow Analysis

Using the Forecasts, Goldman Sachs performed an illustrative discounted cash flow analysis on McAfee to derive a range of illustrative present values per share of Company Stock. Using discount rates ranging from 7.5% to 8.5%, reflecting estimates of McAfee’s weighted average cost of capital, and the mid-year convention, Goldman Sachs discounted to present value as of September 25, 2021 (i) estimates of unlevered free cash flow including stock-based compensation (“UFCF”) for McAfee for the years 2021 through 2025 as reflected in the Forecasts and (ii) a range of illustrative terminal values for McAfee, which were calculated by applying perpetuity growth rates ranging from 1.0% to 2.5%, to a terminal year estimate of the free cash flow to be generated by McAfee, as provided by management of McAfee and approved for Goldman Sachs’ use by management of McAfee (which analysis implied exit terminal year NTM Adj. EBITDA multiples ranging from 8.4x to 12.7x). Goldman Sachs derived such discount rates by application of the Capital Asset Pricing Model, which requires certain company-specific inputs, including the company’s target capital structure weightings, the

 

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cost of long-term debt, after-tax yield on permanent excess cash, if any, future applicable marginal cash tax rate and a beta for the company, 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 enterprise values for McAfee by adding the range of present values it derived as described above. Goldman Sachs then subtracted from the range of illustrative enterprise values it derived for McAfee the net debt of McAfee as of September 25, 2021, as provided by the management of McAfee and approved for Goldman Sachs’ use by management of McAfee, to derive a range of illustrative equity values for McAfee. Goldman Sachs then divided the range of illustrative equity values it derived by the number of fully diluted outstanding shares of McAfee, as provided by the management of McAfee and approved for Goldman Sachs’ use by management of McAfee, using the treasury stock method, to derive a range of illustrative present values per share of Company Stock ranging from $19.45 to $29.89.

Illustrative Present Value of Future Share Price Analysis

Goldman Sachs performed an illustrative analysis of the implied present value of an illustrative future value per share of Company Stock, which is designed to provide an indication of the present value of a theoretical future value of a company’s equity as a function of such company’s estimated future Adj. EBITDA and assumed one-year forward enterprise value to Adj. EBITDA multiples. For this analysis, Goldman Sachs used the Forecasts for each of the fiscal years 2022 through 2024. Goldman Sachs first calculated the implied enterprise values for McAfee as of December 31 for each of the years 2021 to 2023 by applying enterprise value to NTM Adj. EBITDA multiples of 10.0x to 14.0x to NTM Adj. EBITDA estimates for each of the years 2022 to 2024 based on the Forecasts. These illustrative multiple estimates were derived by Goldman Sachs utilizing its professional judgment and experience, taking into account current and historical enterprise value to NTM Adj. EBITDA multiples for McAfee and current and historical enterprise value to NTM Adj. EBITDA multiples for certain selected companies (as described above under “—Selected Public Company Comparables Analysis”). Goldman Sachs then subtracted the amount of McAfee’s forecasted net debt as of December 31, 2021 to 2023, each as provided by the management McAfee and approved for Goldman Sachs’ use by the management of McAfee, to derive a range of illustrative equity values for McAfee as of December 31 for each of the years 2021 to 2023. Goldman Sachs then divided the results by the number of projected year-end fully diluted shares of Company Stock for each of the years 2021 to 2023, as provided by the management of McAfee and approved for Goldman Sachs’ use by the management of McAfee, to derive a range of implied future share prices. Goldman Sachs then discounted the December 31, 2021 to December 31, 2023 implied future share prices back to September 25, 2021 using an illustrative discount rate of 8.5% to derive implied present values of future shares prices as of September 25, 2021. Goldman Sachs then added to the implied present values of future shares prices the total present values, as of September 25, 2021, using an illustrative discount rate of 8.5%, of forecasted dividends through each of the years 2021 to 2023, as provided by the management of McAfee and approved for Goldman Sachs’ use by the management of McAfee. The illustrative discount rate of 8.5% reflected an estimate of McAfee’s cost of equity. Goldman Sachs derived such discount rate by application of the Capital Asset Price 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. This analysis resulted in a range of implied present values of $17.80 to $31.01 per share of Company Stock.

Selected Transactions Analysis

Goldman Sachs analyzed certain publicly available information relating to the following selected transactions in the software industry since 2015. For each of the selected transactions where information was publicly available, Goldman Sachs calculated and compared the implied EV/ NTM EBITDA of the applicable target company based on the total consideration paid in the transaction as a multiple of the target company’s NTM EBITDA based on IBES estimates at the time each such selected transaction was announced.

 

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

The following table presents the results of this analysis:

 

Announcement Year

  

Target

  

Acquiror

   Deal Value
(in billions)
     EV/NTM
EBITDA
 

2021

   Avast PLC – Stock Election    NortonLifeLock Inc.    $ 8.3        15.0x/9.9x (1) 

2021

   Avast PLC – Cash Election    NortonLifeLock Inc.      9.0        16.5/10.9 (1) 

2021

   Proofpoint, Inc.    Thoma Bravo      12.2        54.1  

2021

   McAfee Corp. (Enterprise business)    Symphony Technology Group      4.0        11.9  

2020

   Endurance International Group Holdings, Inc.    Clearlake Capital Group L.P.      3.0        10.4  

2019

   Symantec Corporation    Broadcom Inc.,      10.7        27.5/8.2 (1) 

2019

   Carbonite, Inc.    OpenText      1.4        9.1  

2019

   LogMeIn, Inc.    Francisco Partners and Evergreen Coast Capital (Elliot Management)      4.5        11.1  

2019

   Sophos Group plc    Thoma Bravo      3.9        31.5  

2018

   Imperva, Inc.    Thoma Bravo      1.7        34.7  

2017

   Barracuda Networks, Inc.    Thoma Bravo      1.4        19.0  

2016

   LinkedIn Corporation    Microsoft Corp.      26.3        24.9  

2016

   NortonLifeLock Inc.    Symantec Corporation      2.5        23.9  

2016

   AVG Technologies N.V.    Avast Software s.r.o      1.4        7.6  

2016

   Infoblox Inc.    Vista Equity Partners      1.4        19.4  

2015

   HomeAway Inc.    Expedia Inc.      3.4        24.7  

Median

              20.1x  

Mean

              19.0x  

 

(1)

Pro forma synergized EBITDA multiple.

(2)

Avast multiple calculated based on the closing price of Norton common stock on November 4, 2021.

Based on the results of the foregoing calculations and Goldman Sachs’ analyses of the various transactions and its professional judgment and experience, Goldman Sachs selected a reference range of EV/NTM EBITDA multiples of 11.1x to 19.0x and applied such range to McAfee’s NTM Adj. EBITDA as reflected in the Forecasts, to derive a range of implied enterprise values for McAfee. Goldman Sachs then subtracted net debt for McAfee as of September 25, 2021, as provided by the management of McAfee and approved for Goldman Sachs’ use by the management of McAfee, from the range of implied enterprise values to determine a range of implied equity values for McAfee. Goldman Sachs then divided these equity values by the number of fully diluted outstanding shares of Company Stock, as provided by the management of McAfee and approved for Goldman Sachs’ use by the management of McAfee, using the treasury stock method. This analysis resulted in a range of implied equity values per share of Company Stock of $19.89 to $37.26.

 

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Premia Paid Analysis

Goldman Sachs reviewed and analyzed, using publicly available information, the acquisition premia for all-cash acquisition transactions announced from 2012 through November 4, 2021, involving a public company based in the United States as the target where the disclosed enterprise values for the transaction was greater than $1 billion. For the entire period, using publicly available information, Goldman Sachs calculated the median, 20th percentile and 80th percentile premia of the price paid in the transactions relative to the target’s last undisturbed closing stock price prior to announcement of the transaction. This analysis indicated a median premium of 29.5% across the period. This analysis also indicated a 20th percentile premium of 15.7% and 80th percentile premium of 54.1% across the period. Using this analysis, Goldman Sachs applied a reference range of illustrative premia of 15.7% to 54.1% to the unaffected closing price per share of Company Stock of $21.21 as of November 4, 2021 and calculated a range of implied equity values per share of Company Stock of $24.54 to $32.68.

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 McAfee or the contemplated merger.

Goldman Sachs prepared these analyses for purposes of Goldman Sachs’ providing its opinion to the Board of Directors as to the fairness from a financial point of view of the merger consideration to be paid to the holders (other than Parent, Snowlake and their respective affiliates) of shares of Company Stock, taken in the aggregate, 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 McAfee, Parent, Goldman Sachs or any other person assumes responsibility if future results are materially different from those forecast.

The Merger Consideration was determined through arm’s-length negotiations between McAfee and Parent and was approved by the Board of Directors. Goldman Sachs provided advice to McAfee during these negotiations. Goldman Sachs did not, however, recommend any specific merger consideration to McAfee or the Board of Directors or that any specific merger consideration constituted the only appropriate consideration for the merger.

As described above, Goldman Sachs’ opinion to the Board of Directors was one of many factors taken into consideration by the Board of Directors in making its determination to approve the transaction. 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 as Annex D.

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

 

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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 McAfee, Parent, any of their respective affiliates and third parties, including TPG Global, LLC (“TPG Global”) and Intel Corporation (“Intel”), each of which is an affiliate of a significant stockholder of McAfee, and Advent, Permira, Canada Pension Plan Investment Board (“CPPIB”) and Crosspoint Capital Partners LP (“Crosspoint”), each of which is an affiliate of a significant equityholder of Parent, and any of their respective affiliates and, as applicable, portfolio companies, or any currency or commodity that may be involved in the transaction.

Goldman Sachs acted as financial advisor to McAfee in connection with, and participated in certain of the negotiations leading to, the transaction. Goldman Sachs has provided certain financial advisory and/or underwriting services to McAfee and/or its affiliates from time to time for which its Investment Banking Division has received, and may receive, compensation, including having acted as joint bookrunner with respect to the initial public offering (the “Company IPO”) of 37,000,000 shares of Class A Common Stock in October 2020; as a financial advisor to McAfee with respect to its sale of certain assets and liabilities of its Enterprise business in March 2021; and as co-lead manager with respect to the public offering by McAfee of 20,000,000 shares of Class A Common Stock in September 2021. During the two year period ended November 5, 2021, Goldman Sachs has recognized compensation for financial advisory and/or underwriting services provided by its Investment Banking Division to McAfee and/or its affiliates of approximately $37,200,000.

Goldman Sachs has also provided certain financial advisory and/or underwriting services to TPG Global and/or its affiliates and portfolio companies from time to time for which its Investment Banking Division has received, and may receive, compensation, including having acted as financial advisor to AirTrunk Pte Ltd., a former portfolio company of TPG Global, with respect to its sale in April 2020; as joint lead bookrunner with respect to the public offering by Allogene Therapeutics, Inc., a portfolio company of TPG Global, of 13,457,447 shares of its common stock in June 2020; as joint bookrunner with respect to the initial public offering by Kangji Medical Holdings Limited, a portfolio company of TPG Global, of 259,207,125 of its ordinary shares in June 2020; as financial advisor to Wellsky Corporation, a portfolio company of TPG Global, with respect to its recapitalization in September 2020; as financial advisor to LLamasoft, Inc., a former portfolio company of TPG Global, with respect to its sale in November 2020; as bookrunner with respect to the initial public offering by Airbnb, Inc., a portfolio company of TPG Global, of 56,323,531 shares of its Class A common stock in December 2020 and the private offering by Airbnb, Inc. of 0% Convertible Senior Notes due 2026 (aggregate principal amount of $2,000,000,000) in March 2021; as bookrunner with respect to the private offering by Spotify Technology, a portfolio company of TPG Global, of 0% Exchangeable Senior Notes due 2026 (aggregate principal amount of $1,300,000,000) in February 2021; and as junior lead manager with respect to the initial public offering by LifeStance Health Group Inc., a portfolio company of TPG Global, of 46,000,000 shares of its common stock in June 2021. During the two year period ended November 5, 2021, Goldman Sachs has recognized compensation for financial advisory and/or underwriting services provided by its Investment Banking Division to TPG Global and/or its affiliates of approximately $240,700,000.

Goldman Sachs has also have provided certain financial advisory and/or underwriting services to Intel and/or its affiliates from time to time for which its Investment Banking Division has received, and may receive, compensation, including having acted as financial advisor to Intel with respect to the sale of its 5G smartphone modem business in December 2019; as bookrunner with respect to the public offering by Intel of its 2.450% Senior Notes due 2029, 3.250% Senior Notes due 2049 and 3.100% Senior Notes due 2060 (aggregate principal amount $2,250,000,000) in February 2020; as bookrunner with respect to the public offering by Intel of its 3.400% Senior Notes due 2025, 3.750% Senior Notes due 2027, 3.900% Senior Notes due 2030, 4.600% Senior Notes due 2040, 4.750% Senior Notes due 2050 and 4.950% Senior Notes due 2060 (aggregate principal amount $8,000,000,000) in March 2020; as bookrunner with respect to the sale by Intel Capital Corporation, an affiliate of Intel, of ordinary shares of Ozon Holdings plc in May 2021; and as bookrunner with respect to the public offering by Intel of 1.600% Senior Notes due 2028, 2.000% Senior Notes due 2031, 2.800% Senior Notes due 2041, 3.050% Senior Notes due 2051 and 3.200% Senior Notes due 2061 (aggregate principal amount $5,000,000,000) in August 2021. During the two year period ended November 5, 2021, Goldman Sachs has recognized compensation for financial advisory and/or underwriting services provided by its Investment Banking Division to Intel and/or its affiliates of approximately $16,800,000.

 

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Goldman Sachs has also provided certain financial advisory and/or underwriting services to Advent and/or its affiliates and portfolio companies from time to time for which its Investment Banking Division has received, and may receive, compensation, including having acted as financial advisor to Advent with respect to its acquisitions of Cobham plc and Olaplex Holdings Inc. in January 2020; as bookrunner with respect to the issuance by thyssenkrupp Elevator AG, a portfolio company of Advent, of high yield bonds (aggregate principal amount of $3,069,000,000) in June 2020; as bookrunner with respect to the initial public offering by InPost S.A., an affiliate of Integer.pl S.A., a portfolio company of Advent, of 500,000,000 of its ordinary shares in January 2021; as financial advisor to Cobham plc., a portfolio company of Advent, with respect to its sale of Cobham Aerospace Connectivity in February 2021 and Cobham Missions Systems in June 2021; as left lead bookrunner with respect to the initial public offering by Olaplex Holdings Inc., a portfolio company of Advent, of 67,000,000 shares of its common stock in September 2021; and as left lead bookrunner with respect to the initial public offering by Definitive Healthcare Solutions Inc., a portfolio company of Advent, of 15,555,555 shares of its Class A common stock in September 2021. During the two year period ended November 5, 2021, Goldman Sachs has recognized compensation for financial advisory and/or underwriting services provided by its Investment Banking Division to Advent and/or its affiliates of approximately $208,800,000.

Goldman Sachs has also provided certain financial advisory and/or underwriting services to Permira and/or its affiliates and portfolio companies from time to time for which its Investment Banking Division has received, and may receive, compensation, including having acted as financial advisor to Permira Advisers (UK), an affiliate of Permira, with respect to its acquisition of a majority stake in Golden Goose in June 2020; as joint bookrunner with respect to the initial public offering by Allegro.eu, a portfolio company of Permira, of 187,826,087 of its ordinary shares in September 2020 and the public offering of 76,500,000 of its ordinary shares in March 2021; as lead left bookrunner with respect to the issuance by Lowell Financial Ltd., a portfolio company of Permira, of EUR/GBP high yield bonds (aggregate principal amount of £400,000,000 plus €1,340,000,000) in October 2020 and UER/GBP high yield bonds (aggregate principal amount of £117,000,000) in December 2020; as joint bookrunner with respect to the initial public offering by Dr. Martens plc, a portfolio company of Permira, of 350,000,000 of its ordinary shares in January 2021; as bookrunner with respect to the sale by Permira of 12,000,000 shares of TeamViewer, a portfolio company of Permira, in February 2021; and as left lead bookrunner with respect to the initial public offering by Informatica Inc., a portfolio company of Permira and CPPIB, of 29,000,000 shares of its Class A common stock in October 2021. During the two year period ended November 5, 2021, Goldman Sachs has recognized compensation for financial advisory and/or underwriting services provided by its Investment Banking Division to Permira and/or its affiliates of approximately $107,300,000.

Goldman Sachs has also provided certain financial advisory and/or underwriting services to CPPIB and/or its affiliates and portfolio companies from time to time for which its Investment Banking Division has received, and may receive, compensation, including having acted as financial advisor to Ultimate Software Group, a portfolio company of CPPIB, with respect to its merger with Kronos Incorporated in April 2020; as financial advisor to GlobalLogic Inc., a portfolio company of CPPIB, with respect to its sale in July 2021; as financial advisor to Apollo Global Management LLC, an investment partner of CPPIB, with respect to its sale of a stake in Hilton Grand Vacations Inc. in August 2021; as financial advisor to ChargePoint Inc., a portfolio company of CPPIB, with respect to its acquisition of ViriCiti B.V. in August 2021; and as left lead bookrunner with respect to the initial public offering by Informatica Inc., a portfolio company of Permira and CPPIB, of 29,000,000 shares of its Class A common stock in October 2021. During the two year period ended November 5, 2021, Goldman Sachs has recognized compensation for financial advisory and/or underwriting services provided by its Investment Banking Division to CPPIB and/or its affiliates of approximately $104,800,000.

Goldman Sachs has also provided certain financial advisory and/or underwriting services to the Government of Canada, and/or its agencies, and instrumentalities and their respective affiliates from time to time for which its Investment Banking Division has recognized, and may recognize, compensation. CPPIB is wholly-owned by the Government of Canada.

 

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Goldman Sachs may also in the future provide financial advisory and/or underwriting services to McAfee, Parent, TPG, Intel, Advent, Permira, CPPIB, Crosspoint, the Government of Canada and/or its agencies and instrumentalities, and their respective affiliates and/or, as applicable, portfolio companies for which its Investment Banking Division may receive compensation. Affiliates of Goldman Sachs also may have co-invested

with TPG Global, Advent, Permira, CPPIB, Crosspoint and their respective affiliates from time to time and may have invested in limited partnership units of affiliates of TPG Global, Advent, Permira, CPPIB or Crosspoint from time to time and may do so in the future.

The Board of Directors 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 merger. Pursuant to a letter agreement dated November 5 , 2021, McAfee engaged Goldman Sachs to act as its financial advisor in connection with the merger. The engagement letter between McAfee and Goldman Sachs provides for a transaction fee of approximately $35 million, plus a discretionary fee of up to approximately $7 million, all of which is contingent upon consummation of the transaction. In addition, McAfee 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.

Certain Projected Financial Information

Summary of Projections

Except for a financial outlook with respect to the current fiscal quarter and year issued in connection with its ordinary course earnings announcements, McAfee does not, as a matter of course, publicly disclose forecasts or projections as to future performance, earnings or other results due to the inherent unpredictability of the underlying assumptions, estimates and projections, especially over the longer term periods. As a result, McAfee does not endorse unaudited prospective financial information as a reliable indication of future results. However, McAfee is including a summary of: (1) certain previously nonpublic, unaudited prospective financial information prepared by its management for the fiscal years 2021-2024 (the “May 29 Projections”); and (2) certain previously nonpublic, unaudited prospective financial information prepared by its management for the fiscal years 2021-2025 (the “Management Projections” and, together with the May 29 Projections, the “Projections”).

The May 29 Projections were made available to the Board of Directors and also made available to Parent and Merger Subsidiary at Parent’s request in connection with their due diligence review, as well as to certain bidders. The May 29 Projections were not approved by the Board of Directors, were not provided to or made available to or used by Goldman Sachs for the purpose of performing financial analyses in connection with the rendering of its opinion to the Board of Directors, were prepared prior to the divestiture of Enterprise and prior to the preparation of the Management Projections, and were based on assumptions that may now be outdated.

The Management Projections were made available to, and approved by, the Board of Directors in connection with its evaluation of the Merger and the Per Share Merger Consideration. The Management Projections were also made available to Parent and Merger Subsidiary at Parent’s request in connection with their due diligence review, and the Management Projections were made available to and used by Goldman Sachs with the approval of McAfee management for the purpose of performing financial analyses in connection with the rendering of its opinion to the Board of Directors.

The following table presents a summary of the May 29 Projections.

 

(in millions)    2021      2022      2023      2024  

Gross Revenue

   $ 1,962      $ 2,285      $ 2,664      $ 3,075  
  

 

 

    

 

 

    

 

 

    

 

 

 

Net Revenue

   $ 1,858      $ 2,177      $ 2,557      $ 2,967  
  

 

 

    

 

 

    

 

 

    

 

 

 

Gross Margin

   $ 1,496      $ 1,731      $ 2,018      $ 2,343  
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted EBITDA(1)

   $ 823      $ 1,104      $ 1,421      $ 1,734  

 

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The following table presents a summary of the Management Projections.

 

(in millions)    2021      2022      2023      2024      2025  

Gross Revenue

   $ 2,008      $ 2,268      $ 2,510      $ 2,672      $ 2,818  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net Revenue

   $ 1,905      $ 2,161      $ 2,398      $ 2,558      $ 2,703  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Gross Margin

   $ 1,540      $ 1,724      $ 1,894      $ 2,011      $ 2,113  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted EBITDA(1)

   $ 866      $ 1,042      $ 1,214      $ 1,304      $ 1,378  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Unlevered Free Cash Flow (less stock-based compensation)(2)

   $ 414      $ 608      $ 829      $ 896      $ 912  

 

Notes:

 

(1)

Adjusted EBITDA is a non-GAAP financial measure, which is defined as adjusted operating income less depreciation expense plus certain other non-operating costs. Adjusted operating income is defined as net income (loss), excluding the impact of amortization of intangible assets, equity-based compensation expense, interest expense, foreign exchange (gain) loss, net, taxes, and certain other operating and non-operating costs. Adjusted EBITDA for the May 29 Projections also excludes expenses related to being a publicly traded company.

(2)

Goldman Sachs arithmetically calculated the line item entitled “Unlevered Free Cash Flow” based on the information provided in the Management Projections. “Unlevered Free Cash Flow” is a non-GAAP financial measure which we define as net cash provided by operating activities plus interest payments less capital expenditures. For purposes of the Management Projections made available to and used by Goldman Sachs with the approval of McAfee management for the purpose of performing financial analyses in connection with the rendering of its opinion to the Board of Directors, Unlevered Free Cash Flow was presented less stock-based compensation.

Important Information Regarding the Projections

The Projections were developed by McAfee management on a standalone basis without giving effect to the Merger and the other transactions contemplated by the Merger Agreement. Furthermore, the Projections do not take into account the effect of any failure of the transactions contemplated by the Merger Agreement to be completed. Although the Projections are presented with numerical specificity, they were based on numerous variables and assumptions made by McAfee management with respect to industry performance, general business, economic, regulatory, market and financial conditions and other future events, as well as matters specific to McAfee’s business, all of which are difficult or impossible to predict accurately and many of which are beyond McAfee’s control. The Projections constitute forward-looking information and are subject to many risks and uncertainties that could cause actual results to differ materially from the results forecasted in the Projections, including, but not limited to, McAfee’s performance, industry performance, general business and economic conditions, customer requirements, staffing levels, competition, adverse changes in applicable laws, regulations or rules, the ability to successfully pursue and complete acquisitions, and the various risks set forth in McAfee’s reports filed with the SEC. There can be no assurance that the Projections will be realized or that actual results will not be significantly higher or lower than the Projections. The Projections cover several years, and such information by its nature becomes less reliable with each successive year. In addition, the Projections will be affected by McAfee’s ability to achieve strategic goals, objectives and targets over the applicable periods. The Projections reflect assumptions as to certain business decisions that are subject to change and cannot, therefore, be considered a guarantee of future operating results, and this information should not be relied on as such. The inclusion of the Projections should not be regarded as an indication that McAfee, Goldman Sachs, their respective officers, directors, affiliates, advisors, or other representatives or anyone who received this information then considered, or now considers, them a reliable prediction of future results, and this information should not be relied upon as such. The inclusion of the Projections in this proxy statement should not be regarded as an indication that the Projections will be necessarily predictive of actual future results. No representation is made or has been made by McAfee or its affiliates, advisors, officers, directors, representatives or any other person regarding the Projections or McAfee’s ultimate performance compared to such information. The Projections should be evaluated, if at all, in conjunction with the historical financial statements and other

 

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information about McAfee contained in McAfee’s public filings with the SEC. For more information, please see the section of this proxy statement captioned “Where You Can Find More Information.” In light of the foregoing factors, and the uncertainties inherent in the Projections, stockholders are cautioned not to place undue, if any, reliance on the Projections.

The Projections were not prepared with a view toward public disclosure or with a view toward complying with the published guidelines of the SEC regarding projections or accounting principles generally accepted in the United States (“GAAP”), or the guidelines established by the American Institute of Certified Public Accountants with respect to prospective financial information. Neither McAfee’s independent auditor nor any other independent accountant has compiled, examined or performed any procedures with respect to the Projections, nor have they expressed any opinion or any other form of assurance on such information or its achievability.

Unlevered Free Cash Flow and Adjusted EBITDA contained in the Management Projections summarized above are each a “non-GAAP financial measure,” which is a financial performance measure that is not calculated in accordance with GAAP. The non-GAAP financial measures used in the Management Projections were relied upon by Goldman Sachs with the approval of McAfee management for purposes of its opinion and by the Board of Directors in connection with its evaluation of the Merger. The SEC rules which would otherwise require a reconciliation of a non-GAAP financial measure to a GAAP financial measure do not apply to non-GAAP financial measures included in disclosures relating to a proposed business combination such as the Merger if the disclosure is included in a document such as this proxy statement. In addition, reconciliations of non-GAAP financial measures were not relied upon by Goldman Sachs for purposes of its opinion or by the Board of Directors in connection with its evaluation of the Merger. Accordingly, McAfee has not provided a reconciliation of the financial measures included in the Management Projections to the relevant GAAP financial measures. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-GAAP financial measures as used by McAfee may not be comparable to similarly titled amounts used by other companies. Furthermore, there are limitations inherent in non-GAAP financial measures because they exclude charges and credits that are required to be included in a GAAP presentation. Accordingly, these non-GAAP financial measures should be considered together with, and not as an alternative to, financial measures prepared in accordance with GAAP.

The Projections are included in this proxy statement not to influence any stockholder to make any investment decision with respect to the Merger, including whether or not to seek appraisal rights with respect to their shares of McAfee common stock. The Management Projections are included in this proxy statement solely to give stockholders access to the nonpublic, unaudited prospective financial information that was made available to, and approved by, the Board of Directors, and made available to Goldman Sachs, Parent and Merger Subsidiary, in connection with their respective evaluations of Merger. The May 29 Projections are included in this proxy statement solely to give stockholders access to nonpublic, unaudited prospective financial information that was made available to provided potential purchasers in connection with a potential transaction involving the Company. The Projections were based on estimates, assumptions and judgments made by McAfee management at the time of their preparation and speak only as of such times. Except as required by applicable securities laws, McAfee does not intend to update or otherwise revise the Projections to reflect circumstances existing after the date when made or to reflect the occurrence of future events, even in the event that any or all of the underlying assumptions are shown to be in error.

Important Information Regarding the Management Projections

The prospective financial information (“management projections”) included in this document has been prepared by, and is the responsibility of, McAfee’s management. PricewaterhouseCoopers LLP has not audited, reviewed, examined, compiled nor applied agreed-upon procedures with respect to the accompanying management projections and, accordingly, PricewaterhouseCoopers LLP does not express an opinion or any other form of assurance with respect thereto. The PricewaterhouseCoopers LLP report incorporated by reference in this document relates to McAfee’s previously issued financial statements. It does not extend to the management projections and should not be read to do so.

 

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Interests of Executive Officers and Directors of McAfee in the Merger

In considering the recommendation of the Board of Directors that the McAfee Stockholders adopt the Merger Agreement, the McAfee Stockholders should be aware that the executive officers and directors of McAfee have certain interests in the Merger that may be different from, or in addition to, the interests of the McAfee Stockholders generally. The Board of Directors was aware of these interests and considered them, among other matters, in approving the Merger Agreement and the transactions contemplated hereby, including the Merger, and in making their recommendation that the McAfee Stockholders adopt the Merger Agreement.

For purposes of this disclosure,

 

   

the current executive officers of McAfee are:

 

   

Peter Leav, President, Chief Executive Officer and Director;

 

   

Venkat Bhamidipati, Executive Vice President and Chief Financial Officer;

 

   

Ashish Agarwal, Senior Vice President, Strategy and Corporate Development; and

 

   

Gagandeep Singh, Executive Vice President, Chief Product & Revenue Officer.

Outstanding Shares Held by Executive Officers and Directors

The following table sets forth for each person who has been an executive officer or member of the Board of Directors at any time since the beginning of McAfee’s 2020 fiscal year (i) the number of shares of Company Stock beneficially owned as of December 25, 2021 (which, for clarity, includes shares of Company Stock for which vested Management Incentive Units and Class A Units of OpCo LLC are exchangeable on an as-converted basis, but excludes shares of Company Stock for which unvested Management Incentive Units of OpCo LLC would be exchangeable following vesting as well as shares of Company Stock subject to outstanding Company Awards) and (ii) the aggregate consideration that would be payable for such shares of Company Stock in connection with the Merger based on the Per Share Consideration.

 

     Number of
Shares of
Company
Stock
   Aggregate
Consideration
for Company
Stock

Peter Leav

   942,112    $24,494,912

Venkat Bhamidipati

   383,131    $9,961,406

Ashish Agarwal

   224,686    $5,841,836

Gagandeep Singh

      $0

Christopher Young (1)

      $0

Michael Berry (2)

      $0

John Giamatteo (3)

   322,408    $8,382,608

Terry Hicks (4)

   864,021    $22,464,546

Ashutosh Kulkarni (5)

   173,174    $4,502,524

Lynne Doherty McDonald (6)

   816,751    $21,235,526

Sohaib Abbasi

   78,947    $2,052,622

Mary Cranston

   59,356    $1,543,256

Tim Millikin

      $0

Elizabeth Willard

   35,982    $935,532

Jon Winkelried

      $0

Jeff Woolard

      $0

Gunther Bright

      $0

Emily Rollins

      $0

Christine Kornegay

   95,009    $2,470,234

 

(1)

Christopher Young’s employment with us terminated on February 3, 2020.

(2)

Michael Berry’s employment with us terminated on March 13, 2020.

 

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(3)

John Giamatteo’s employment with us terminated on January 10, 2020.

(4)

Terry Hicks’ employment with us terminated on October 1, 2021.

(5)

Ashutosh Kulkarni’s employment with us terminated on January 1, 2021.

(6)

Lynne Doherty McDonald’s employment with us terminated on July 27, 2021.

Treatment of Company Equity Awards

In connection with the Merger, the equity awards held by McAfee’s executive officers and directors will be treated as described above. In addition, McAfee has entered into certain arrangements with its executive officers and directors relating to their equity awards, as described below.

Each of the Management Incentive Unit, Company RSU and Company PSU award agreements with Peter Leav and Venkat Bhamidipati provide that in the event of a change in control, such as the Merger, vesting of Peter Leav’s and Venkat Bhamidipati’s awards will accelerate in full (and, in the case of Company PSUs, will be deemed earned based on the greater of target performance and actual performance of McAfee and/or OpCo, LLC, as applicable, through the date of the change in control (or an earlier date selected for administrative convenience)) as of immediately prior to the change in control, provided that Peter Leav or Venkat Bhamidipati, as applicable, remains employed through the date of the change in control.

Gagandeep Singh’s offer letter provides that if he remains employed through the date of a change of control, such as the Merger, that occurs within twelve (12) months of his start date, 25% of his Company RSUs will vest as of immediately prior to such change in control.

In connection with McAfee’s initial public offering (or, with respect to Gagandeep Singh, his commencement of employment with McAfee), McAfee entered into change in control severance agreements (the “Severance Agreements”) with our executive officers (other than Peter Leav). Pursuant to the terms of the Severance Agreements, if an executive officer’s employment is terminated without cause (as defined in the Severance Agreement), or the executive officer terminates the executive officer’s employment with McAfee for good reason (as defined in the Severance Agreement), in either case, during the period beginning three (3) months prior to, and ending 18 months following, the consummation of a change in control, such as the Merger (a “Qualifying Termination”), all of the executive officer’s unvested time-based equity awards will accelerate and vest in full as of the date of the executive officer’s termination of employment and all performance-based equity awards granted following McAfee’s initial public offering will vest as of the separation date based on the higher of target performance and actual performance through the date of termination of employment, as applicable, in accordance with the documents governing such performance-based equity award.

Additionally, the Company RSU award agreements with each of McAfee’s non-employee directors provide that in the event of a change in control, such as the Merger, all then-outstanding Company RSUs subject to the award will accelerate and vest in full immediately prior to such change in control.

The following table sets forth, as of December 14, 2021, for each of McAfee’s executive officers and directors, the number of unvested Management Incentive Units of OpCo LLC, unvested Company RSUs and Company PSUs, and the estimated consideration that each such holder would be entitled to receive in respect of such unvested Management Incentive Units of OpCo LLC and unvested Company Awards in connection with the Merger, assuming that the price per share of the Company Stock is $26.00, which equals the Per Share Consideration, and for Company PSUs eligible to be earned based on our 2021 fiscal year performance, based on 130% of the target number of shares of Company Stock subject to such Company PSUs, and for Company PSUs eligible to to be earned based on our performance for our 2022 fiscal year or 2023 fiscal year, based on the target number of shares of Company Stock subject to awards of Company PSUs.

 

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    Number of
Unvested
Management
Incentive
Units
    Total
Consideration
for Unvested
Management
Incentive
Units(1)
    Number of
Shares
Underlying
Unvested
Company
RSUs(2)
    Total
Consideration
for Unvested
Company
RSUs(1)
    Number of
Shares
Underlying
Unvested
Company
PSUs(2)
    Total
Consideration
for Unvested
Company
PSUs (1)
    Aggregate
Consideration
for Unvested
Management
Incentive Units
and Company
Awards(1)
 

Peter Leav

    702,924     $ 16,069,756       1,579,380     $ 48,132,984       543,311     $ 16,557,883     $ 80,760,623  

Venkat Bhamidipati

    550,000     $ 12,681,350       736,619     $ 19,152,094       0     $ 0     $ 31,833,444  

Ashish Agarwal

    118,396     $ 2,615,166       321,420     $ 8,356,920       83,003     $ 2,158,078     $ 13,130,164  

Gagandeep Singh

    0     $ 0       1,143,118     $ 29,721,068       0     $ 0     $ 29,721,068  

Sohaib Abbasi

    0     $ 0       18,135     $ 471,510       0     $ 0     $ 471,510  

Mary Cranston

    0     $ 0       18,135     $ 471,510       0     $ 0     $ 471,510  

Tim Millikin

    0     $ 0       0     $ 0       0     $ 0     $ 0  

Kathy Willard

    0     $ 0       18,135     $ 471,510       0     $ 0     $ 471,510  

John Winkelried

    0     $ 0       0     $ 0       0     $ 0     $ 0  

Jeff Woolard

    0     $ 0       0     $ 0       0     $ 0     $ 0  

Gunther Bright

    0     $ 0       7,575     $ 196,950       0     $ 0     $ 196,950  

Emily Rollins

    0     $ 0       6,878     $ 178,828       0     $ 0     $ 178,828  

 

(1)

Inclusive of deferred cash payments payable in respect of Peter Leav’s Company RSU and Company PSU awards. No former executive officers hold unvested Management Incentive Units, unvested Company RSUs, or unvested Company PSUs.

(2)

Company RSUs and Company PSUs held by our executive officers that are not vested as of the Effective Time (after giving effect to any accelerated vesting) will be converted into Cash Awards as described above.

Peter Leav Employment Agreement

McAfee has entered into an employment agreement with Peter Leav, which provides for severance benefits if his employment is terminated in certain circumstances and provides for certain change in control benefits.

Under the terms of Peter Leav’s employment agreement, if McAfee terminates Peter Leav’s employment without cause (as defined in the employment agreement) or if Peter Leav resigns for good reason (as defined in the employment agreement), in either case, within two years following a change in control, Peter Leav would be entitled to (i) two times the sum of his then-current annual base salary and target bonus opportunity, payable over a 24-month period; (ii) any earned but unpaid annual bonus related to the completed fiscal year preceding the fiscal year in which termination of employment occurs, payable in accordance with regular payroll practices; (iii) an annual bonus for the year in which the termination date occurs, with payment based on actual performance during the year of termination, pro-rated to reflect the number of days during the bonus year in which Peter Leav was employed by McAfee, payable in accordance with regular payroll practices; and (iv) provided that Peter Leav timely elects to receive continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), a COBRA subsidy that, on an after-tax basis, is equal to the employer-paid portion of the premium equivalent for active employees who elect the same type of medical, dental and vision coverage during the 24-month period that follows Peter Leav’s termination of employment (or, if earlier, the time at which Peter Leav becomes eligible for group health coverage from another employer), payable on a monthly basis during such period.

For an estimate of the value of the severance payments described above that would be payable to Peter Leav upon a qualifying termination on December 14, 2021, see “—Quantification of Payments and Benefits to McAfee’s Executive Officers” below.

Executive Severance Agreements

Pursuant to the terms of the Severance Agreements, if an executive officer (other than Peter Leav) experiences a Qualifying Termination, the executive officer is entitled to receive severance in an amount equal to the sum of (i) one and one-half (1.5) times the sum of the executive officer’s then-current base salary and target

 

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annual bonus opportunity, payable in a lump sum, (ii) a prorated annual bonus, based on actual performance for the year in which the termination occurs, payable at the time McAfee typically pays annual bonuses to senior executives of McAfee and its affiliates generally, (iii) if the executive officer elects continuation coverage under our health plan, a monthly amount equal to the employer portion of the monthly premiums paid under McAfee’s group health plans (as of the date of the executive officer’s termination of employment) for up to 18 months, and (iv) full acceleration of unvested time-based equity awards and full acceleration of performance-based equity awards granted after the initial public offering based on the greater of target performance and actual performance through the termination date.

In addition, if the severance payments and benefits provided under any employment agreement, offer letter, or prior severance agreement with an executive, as applicable, is greater than the payments and benefits payable under the executive’s Severance Agreement, the executive will continue to be entitled to the excess payments and benefits.

For an estimate of the value of the severance payments described above that would be payable to the executive officers upon a Qualifying Termination on December 14, 2021, see “—Quantification of Payments and Benefits to McAfee’s Executive Officers” below.

Letter Agreement with Ashish Agarwal

Under Ashish Agarwal’s letter agreement with McAfee, Ashish is entitled to a change-in-control bonus equal to $250,000 if Ashish remains employed as of the date of the Merger.

Indemnification and Insurance

Pursuant to the terms of the Merger Agreement, McAfee’s directors and executive officers will be entitled to certain ongoing indemnification from Parent and the Surviving Corporation and coverage for a period of six (6) years following the effective time under directors’ and officers’ liability insurance policies from the Surviving Corporation. This indemnification and insurance coverage is further described in the section captioned “Proposal 1: Adoption of the Merger Agreement—Indemnification and Insurance.”

Quantification of Payments and Benefits to McAfee’s Named Executive Officers

The table below sets forth the amount of payments and benefits that each of McAfee’s named executive officers would receive in connection with the Merger, assuming (i) that the Merger were consummated and each such named executive officer experienced a Qualifying Termination on December 14, 2021 (which is the assumed date solely for purposes of this golden parachute compensation disclosure); (ii) a per share price of the Company Stock of $26.00; (iii) that each named executive officer’s base salary rate and annual target bonus opportunity remain unchanged from those in effect as of the date of this proxy statement; and (iv) none of the named executive officers’ equity awards that are outstanding as of December 14, 2021 vest or are forfeited, and none of the named executive officers are granted additional equity awards, in each case prior to the date of the executive’s termination. In addition, these amounts do not attempt to forecast any additional awards, grants, or forfeitures that may occur prior to the Effective Time or any awards that, by their terms, vest irrespective of the Merger prior to December 14, 2021. As a result of the foregoing assumptions, which may or may not actually occur or be accurate on the relevant date, including the assumptions described in the footnotes to the table, the actual amounts, if any, to be received by an executive officer may differ materially from the amounts set forth below.

For purposes of this discussion, “single-trigger” refers to benefits that arise as a result of the completion of the Merger and “double -trigger” refers to benefits that require two conditions, which are the completion of the Merger and a qualifying termination.

 

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Golden Parachute Compensation

 

Name

  Cash ($)     Equity
($)(1)
     Pension
/NQDC

($)
     Perquisites
/Benefits

($)
     Tax
Reimbursement

($)
     Other
($)
     Total ($)  

Peter Leav

  $ 4,923,576 (2)    $ 80,760,623      $ 0      $ 0      $ 0      $ 0      $ 85,684,199  

Venkat Bhamidipati

  $ 2,175,110 (3)    $ 31,833,444      $ 0      $ 0      $ 0      $ 0      $ 34,008,554  

Ashish Agarwal

  $ 1,363,481 (4)    $ 13,130,164      $ 0      $ 0      $ 0      $ 0      $ 14,493,645  

 

(1)

Equity Award Treatment. This amount includes the full “single-trigger” accelerated vesting of the unvested Management Incentive Units of OpCo LLC and the unvested Company RSUs and Company PSUs held by Peter Leav, the full “single-trigger” accelerated vesting of the unvested Management Incentive Units of OpCo LLC and unvested Company RSUs held by Venkat Bhamidipati, in each case, inclusive of any deferred cash amounts associated with such awards. With respect to Ashish Agarwal, this amount includes $3,282,541 in “single-trigger” Company Awards held by Ashish Agarwal pursuant to the Special Vesting Opportunity, and $9,847,623 “double-trigger” accelerated vesting of Company Awards that will be converted into Cash Awards as described above.

(2)

Reflects the “double-trigger” cash severance amounts that Peter Leav is entitled to under the terms of his employment agreement, as described above.

(3)

Reflects the “double-trigger” cash severance amounts that Venkat Bhamidipati is entitled to under the terms of his Severance Agreement, as described above.

(4)

Reflects the “double-trigger” cash severance amounts that Ashish Agarwal is entitled to under the terms of his Severance Agreement and the “single-trigger” change in control bonus that Ashish Agarwal is entitled to under the terms of his letter agreement, in each case, as described above.

Financing of the Merger

We anticipate that the total amount of funds necessary to complete the Merger and the related transactions, and to pay the fees and expenses required to be paid at the Closing by Parent and Merger Subsidiary under the Merger Agreement, will be approximately $14 billion. This amount includes funds needed to: (1) pay Merger Consideration in respect of the Company Stock (other than Excluded Shares and certain Company Restricted Shares), (2) make payments in respect of our vested and outstanding Company Awards payable in connection with the Closing, and (3) make payments of all indebtedness outstanding under the Credit Agreement (collectively, the “Required Amounts”).

TopCo, Parent and Merger Subsidiary have obtained committed financing consisting of (i) equity to be provided by the Equity Financing Sources pursuant to the terms of the Equity Commitment Letters, (ii) debt financing to be provided pursuant to the Debt Commitment Letter by the lenders party thereto and (iii) preferred equity financing to be provided pursuant to the Preferred Equity Commitment Letter. In connection with the Merger Agreement, Parent and Merger Subsidiary have delivered to McAfee copies of the Commitment Letters. Notwithstanding anything in the Merger Agreement to the contrary, in no event shall the receipt or availability of any funds or financing (including the financing contemplated by the Commitment Letters) by or to Parent or any of its affiliates or any other financing transaction be a condition to any of the obligations of Parent or Merger Subsidiary under the Merger Agreement.

Equity Financing

Pursuant to the Equity Commitment Letters, and subject to the terms and conditions thereof, the Equity Financing Sources have committed to capitalize Parent at the Closing with an aggregate equity contribution equal to $5.2 billion for the purpose of funding the Required Amounts. The obligations of each Equity Financing Source to provide the equity financing under the Equity Commitment Letters are subject to a number of conditions, including, but not limited to: (i) satisfaction in full, or waiver by Parent in writing of each the conditions to the obligations of Parent to consummate the transactions set forth in Sections 9.01 and 9.02 of the

 

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Merger Agreement (other than those conditions that by their terms or nature are to be satisfied at the Closing of the Merger; provided, that those other conditions are satisfied or waived at the Closing), (ii) the substantially concurrent consummation of the Merger in accordance with the terms of the Merger Agreement, and (iii) the Debt/Preferred Equity Financing (or any alternative thereto in accordance with the Merger Agreement), if applicable, (A) has been funded or (B) would be funded if the Closing were to occur. We refer to the equity financing described in the preceding sentence as the “Equity Financing.”

The obligation of the Equity Financing Sources to fund the equity commitment will automatically and immediately terminate upon the earliest to occur of: (i) the consummation of the closing of the Merger, (ii) the valid termination of the Merger Agreement in accordance with its terms, (iii) the full satisfaction of any final judgment against Parent in any action that includes an award of damages or the payment of any amount due in connection with the Fee Funding Agreements, (iv) the commencement by McAfee of any lawsuit or other legal processing asserting any claim against any Equity Financing Source or any of the Investor Parties (as defined in the Equity Commitment Letters) under, in respect of, or relating to, the Merger Agreement, the Fee Funding Agreements, the Confidentiality Agreement (as defined below) or the Equity Commitment Letters or the transactions contemplated thereby, subject to certain exceptions for permitted claims, and (v) each Equity Financing Source contributing to Parent cash in immediately available funds in an aggregate amount equal to its equity commitment set forth in the applicable Equity Commitment Letter. As used in this proxy statement, the term “Confidentiality Agreement” means collectively, (i) that certain letter agreement between Advent and McAfee dated February 5, 2021, (ii) that certain letter agreement between Crosspoint Capital Partners L.P. and McAfee dated June 3, 2021, (iii) that certain letter agreement between Permira and McAfee dated May 23, 2021 and (iv) that certain letter agreement between Canada Pension Plan Investment Board and McAfee dated June 2, 2021.

McAfee is an express third-party beneficiary of the Equity Commitment Letters solely with respect to enforcing Parent’s right to cause the commitments under the Equity Commitment Letters by each Equity Financing Source to be funded to Parent in accordance with the Equity Commitment Letters, and to cause Parent to enforce its rights against each Equity Financing Source to perform its funding obligations under the applicable Equity Commitment Letter, in each case subject to (i) the limitations and conditions set forth in each applicable Equity Commitment Letter and (ii) the terms and conditions of the Merger Agreement.

Debt Financing

The Debt Commitment Letter provides that the lenders party thereto will provide, upon the terms and subject to the conditions set forth in the Debt Commitment Letter, in the aggregate up to $9.98 billion in debt financing (not all of which is expected to be drawn at the closing of the Merger), consisting of the following:

 

   

$6.66 billion senior secured first lien term loan facility;

 

   

$1 billion senior secured first lien revolving credit facility; and

 

   

$2.32 billion senior unsecured bridge facility (which may be replaced with senior notes issued through a Rule 144A or other private placement).

We refer to the debt financing described above as the “Debt Financing.” The proceeds of the Debt Financing will be used (i) to effect the Merger and related transactions on the Closing Date, (ii) for working capital, capital expenditures and other general corporate purposes and (iii) to pay fees and expenses related to the Merger and related transactions.

The obligations of the lenders party to the Debt Commitment Letter to provide the Debt Financing under the Debt Commitment Letter are subject to a number of customary conditions, including, but not limited to (as applicable):

 

   

the absence of a Material Adverse Effect since November 5, 2021;

 

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the consummation of the Merger in accordance with the Merger Agreement (without giving effect to any amendment or waiver that would be materially adverse to the interests of the lenders in their capacity as such without the consent of the commitment parties);

 

   

subject to certain limitations and exceptions, the accuracy in all material respects as of the closing of the Merger of certain specified representations and warranties in the Merger Agreement and certain specified representations and warranties in the loan documents;

 

   

the Equity Financing shall have occurred or, substantially concurrently with the initial funding of the Debt Financing, shall occur; and

 

   

solely with respect to the senior unsecured bridge facility, Parent and Merger Subsidiary shall have used commercially reasonable efforts to provide a marketing period (the “Debt Commitment Letter Marketing Period”) of at least 12 consecutive business days (subject to certain blackout dates) following receipt of certain required financial information regarding McAfee.

As of the date hereof, definitive documentation governing the Debt Financing contemplated by the Debt Commitment Letter has not been finalized and, accordingly, the actual terms of the Debt Financing may differ from those described in this proxy statement.

Preferred Equity Financing

The Preferred Equity Commitment Letter provides that the purchasers party thereto will provide, upon the terms and subject to the conditions set forth in the Preferred Equity Commitment Letter, in the aggregate up to $800 million in preferred equity financing.

We refer to the preferred equity financing described above as the “Preferred Equity Financing”, and together with the Debt Financing, the “Debt/Preferred Equity Financing”. The proceeds of the Preferred Equity Financing will be used (i) to effect the Merger and related transactions on the Closing Date, (ii) for working capital, capital expenditures and other general corporate purposes and (iii) to pay fees and expenses related to the Merger and related transactions.

The obligations of the purchasers party to the Preferred Equity Commitment Letter to provide the Preferred Equity Financing under the Preferred Equity Commitment Letter are subject to a number of customary conditions, including, but not limited to (as applicable):

 

   

the absence of a Material Adverse Effect since November 5, 2021;

 

   

the consummation of the Merger in accordance with the Merger Agreement (without giving effect to any amendment or waiver that would be materially adverse to the interests of the lenders in their capacity as such without the consent of the commitment parties);

 

   

subject to certain limitations and exceptions, the accuracy in all material respects as of the closing of the Merger of certain specified representations and warranties in the Merger Agreement and certain specified representations and warranties in the loan documents; and

 

   

the Equity Financing and the Debt Financing shall have occurred or, substantially concurrently with the initial funding of the Preferred Equity Financing, shall occur.

As of the date hereof, definitive documentation governing the Preferred Equity Financing contemplated by the Preferred Equity Commitment Letter has not been finalized and, accordingly, the actual terms of the Preferred Equity Financing may differ from those described in this proxy statement.

Fee Funding Agreements

Pursuant to the Fee Funding Agreements, subject to the terms and conditions contained therein, each Fee Funding Source has agreed to guarantee a portion of the payment of: (1) the aggregate amount of the Parent

 

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Termination Fee (as defined under the caption “The Merger—Termination Fee”) solely if and when payable by Parent pursuant to the Merger Agreement; (2) certain enforcement expenses solely if and when payable by Parent in connection with certain legal proceedings and defaults under the Merger Agreement; and (3) certain reimbursement obligations solely if and when payable by Parent pursuant to the indemnification obligations to McAfee and its representatives in connection with the Debt Financing. We refer to the obligations set forth in the preceding sentence as the “Guaranteed Obligations.” The obligations of the Fee Funding Sources under the respective Fee Funding Agreements are subject to an aggregate cap equal to $600,030,000.

Subject to specified exceptions, each of the Fee Funding Agreements will terminate automatically and immediately upon the earliest of:

 

   

the closing of the Merger, if the closing of the Merger occurs, and all amounts owed by Parent at the closing of the Merger pursuant to the Merger Agreement are duly paid; and

 

   

120 days following the termination of the Merger Agreement if McAfee has not made a claim in writing for payment of any Guaranteed Obligation to Parent by such date, subject to certain exceptions as set forth in the Fee Funding Agreements.

Closing and Effective Time

The closing of the Merger will take place at 7:00 a.m., California time, as soon as possible, but in any event no later than the third (3rd) business day after the satisfaction or waiver of all conditions to closing of the Merger (as described under the caption, “Proposal 1: Adoption of the Merger Agreement—Conditions to the Closing of the Merger”), other than conditions that by their terms are to be satisfied at the Closing, but subject to the satisfaction or waiver of such conditions; provided that if a specified marketing period (being the first period of fifteen (15) business days following the later of (i) the date on which Parent has been provided the required financial information regarding McAfee required by the Debt Commitment Letter and (ii) the date on which certain closing conditions set forth in Merger Agreement are satisfied, subject to certain exceptions set forth in the Merger Agreement) has not ended as of such date, the closing of the Merger shall instead occur on the earlier of (i) a date during the marketing period specified by Parent in writing to McAfee on no fewer than two (2) business days’ notice and (ii) the third (3rd) business day immediately following the last day of the marketing period, in each case, subject to the satisfaction or waiver of conditions to closing of the Merger, other than conditions that by their terms are to be satisfied at the Closing, but subject to the satisfaction or waiver of such conditions.

Appraisal Rights

If the Merger is consummated, McAfee Stockholders who continuously hold shares of Company Stock through the Effective Time, who do not vote in favor of the adoption of the Merger Agreement, who properly demand appraisal of their shares, and who otherwise comply with the statutory requirements of Section 262 of the DGCL (“Section 262”) will be entitled to seek appraisal of their shares in connection with the Merger under Section 262. The following discussion is not a complete statement of the law pertaining to appraisal rights under the DGCL and is qualified in its entirety by the full text of Section 262, which is attached to this proxy statement as Annex E and incorporated herein by reference. The following summary does not constitute any legal or other advice and does not constitute a recommendation that McAfee Stockholders exercise their appraisal rights under Section 262. All references in Section 262 and in this summary to a “stockholder,” “holder of shares of Company Stock” or “McAfee Stockholder” are to the record holder of shares of Company Stock unless otherwise expressly noted herein. Only a holder of record of shares of Company Stock is entitled to demand appraisal of the shares registered in that holder’s name. A person having a beneficial interest in shares of Company Stock held of record in the name of another person, such as a bank, broker, fiduciary (such as a trustee, guardian or custodian), depositary or other nominee, must act promptly to cause the record holder to follow the steps summarized below properly and in a timely manner to perfect appraisal rights. If you hold your shares of Company Stock through a bank, broker, fiduciary, depositary or other nominee and you wish to exercise appraisal rights, you should consult with your bank, broker or the other nominee.

 

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Under Section 262, if the Merger is completed, holders of shares of Company Stock who: (i) submit a written demand for appraisal of their shares; (ii) do not vote in favor of the adoption of the Merger Agreement; (iii) continuously are the record holders of such shares through the Effective Time; and (iv) otherwise exactly follow the procedures set forth in Section 262 may be entitled to have their shares appraised by the Delaware Court of Chancery and to receive payment in cash of the “fair value” of the shares of Company Stock, exclusive of any element of value arising from the accomplishment or expectation of the Merger, together with interest to be paid on the amount determined to be fair value, if any, as determined by the court. However, after an appraisal petition has been filed, Section 262 provides that the Delaware Court of Chancery will dismiss appraisal proceedings as to all McAfee Stockholders who have asserted appraisal rights unless (a) the total number of shares for which appraisal rights have been pursued and perfected exceeds 1% of the outstanding shares of Company Stock as measured in accordance with subsection (g) of Section 262; or (b) the value of the aggregate Per Share Consideration in respect of the shares of Company Stock for which appraisal rights have been pursued and perfected exceeds $1 million (conditions (a) and (b) referred to as the “ownership thresholds”). Unless the Delaware Court of Chancery, in its discretion, determines otherwise for good cause shown, interest on an appraisal award will accrue and compound quarterly from the Effective Time through the date the judgment is paid at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during such period. However, at any time before the Delaware Court of Chancery enters judgment in the appraisal proceedings, the Surviving Corporation may voluntarily pay to each McAfee Stockholder entitled to appraisal an amount in cash pursuant to subsection (h) of Section 262, in which case such interest will accrue after the time of such payment only on an amount that equals the difference, if any, between the amount so paid and the “fair value” of the shares as determined by the Delaware Court of Chancery, in addition to any interest accrued prior to the time of such voluntary cash payment, unless paid at such time. The Surviving Corporation is under no obligation to make such voluntary cash payment prior to such entry of judgment.

Under Section 262, where a merger is to be submitted for approval at a meeting of stockholders, such as the Special Meeting, the corporation, not less than 20 days prior to the meeting, must notify each of its stockholders who was such on the record date for notice of such meeting with respect to shares for which appraisal rights are available that appraisal rights are available and include in the notice a copy of Section 262. This proxy statement constitutes McAfee’s notice to McAfee Stockholders that appraisal rights are available in connection with the Merger, and the full text of Section 262 is attached to this proxy statement as Annex E. In connection with the Merger, any holder of shares of Company Stock who wishes to exercise appraisal rights, or who wishes to preserve such holder’s right to do so, should review this discussion and Annex E carefully. Failure to strictly comply with the requirements of Section 262 in a timely and proper manner may result in the loss of appraisal rights under the DGCL. A McAfee Stockholder who loses his, her or its appraisal rights will be entitled to receive the Per Share Consideration described in the Merger Agreement. Moreover, because of the complexity of the procedures for exercising the right to seek appraisal of shares of Company Stock, McAfee believes that if a McAfee Stockholder considers exercising such rights, that McAfee Stockholder should seek the advice of legal counsel.

McAfee Stockholders wishing to exercise the right to seek an appraisal of their shares of Company Stock must do ALL of the following:

 

   

the McAfee Stockholder must not vote in favor of the proposal to adopt the Merger Agreement;

 

   

the McAfee Stockholder must deliver to McAfee a written demand for appraisal before the vote by the McAfee Stockholders on the Merger Agreement at the Special Meeting;

 

   

the McAfee Stockholder must continuously hold the shares of Company Stock from the date of making the demand through the Effective Time (a stockholder will lose appraisal rights if the stockholder transfers the shares before the Effective Time); and

 

   

the McAfee Stockholder (or any person who is the beneficial owner of shares of Company Stock held either in a voting trust or by a nominee on behalf of such person) or the Surviving Corporation must

 

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file a petition in the Delaware Court of Chancery requesting a determination of the fair value of the shares within 120 days after the Effective Time. The Surviving Corporation is under no obligation to file any petition and has no intention of doing so.

In addition, one of the ownership thresholds articulated in Section 262(g) must be met.

Because a proxy that does not contain voting instructions will, unless revoked, be voted in favor of the adoption of the Merger Agreement, a McAfee Stockholder who votes by proxy and who wishes to exercise appraisal rights must vote against the adoption of the Merger Agreement, abstain or not vote the shares.

Filing Written Demand

Any holder of shares of Company Stock wishing to exercise appraisal rights must deliver to McAfee, before the vote on the adoption of the Merger Agreement at the Special Meeting at which the proposal to adopt the Merger Agreement will be submitted to McAfee Stockholders, a written demand for the appraisal of the McAfee Stockholder’s shares, and that McAfee Stockholder must not vote or submit a proxy in favor of the adoption of the Merger Agreement. A holder of shares of Company Stock exercising appraisal rights must hold of record the shares on the date the written demand for appraisal is made and must continue to hold the shares of record through the Effective Time. A proxy that is submitted and does not contain voting instructions will, unless revoked, be voted in favor of the adoption of the Merger Agreement, and it will constitute a waiver of the McAfee Stockholder’s appraisal rights. Therefore, a McAfee Stockholder who submits a proxy and who wishes to exercise appraisal rights must submit a proxy containing instructions to vote against the adoption of the Merger Agreement or abstain from voting, or otherwise fail to vote, on the adoption of the Merger Agreement. Neither voting against the adoption of the Merger Agreement nor abstaining from voting or failing to vote on the proposal to adopt the Merger Agreement will, in and of itself, constitute a written demand for appraisal satisfying the requirements of Section 262. The written demand for appraisal must be in addition to and separate from any proxy or vote on the adoption of the Merger Agreement. A proxy or vote against the adoption of the Merger Agreement will not constitute a demand. A McAfee Stockholder’s failure to make the written demand prior to the taking of the vote of McAfee Stockholders on the adoption of the Merger Agreement at the Special Meeting will constitute a waiver of appraisal rights.

Only a holder of record of shares of Company Stock is entitled to demand appraisal rights for the shares registered in that holder’s name. A demand for appraisal in respect of shares of Company Stock must be executed by or on behalf of the holder of record, and must reasonably inform McAfee of the identity of the holder and state that the person intends thereby to demand appraisal of the holder’s shares in connection with the Merger. If the shares are owned of record in a fiduciary or representative capacity, such as by a trustee, guardian or custodian, such demand must be executed by or on behalf of the record owner, and if the shares are owned of record by more than one (1) person, as in a joint tenancy and tenancy in common, the demand must be executed by or on behalf of all joint owners. An authorized agent, including an authorized agent for two (2) or more joint owners, may execute a demand for appraisal on behalf of a holder of record; however, the agent must identify the record owner or owners and expressly disclose that, in executing the demand, the agent is acting as agent for the record owner or owners.

MCAFEE STOCKHOLDERS WHO HOLD THEIR SHARES IN BROKERAGE OR BANK ACCOUNTS OR OTHER NOMINEE FORMS AND WHO WISH TO EXERCISE APPRAISAL RIGHTS SHOULD CONSULT WITH THEIR BANK, BROKER OR OTHER NOMINEES, AS APPLICABLE, TO DETERMINE THE APPROPRIATE PROCEDURES FOR THE BANK, BROKER OR OTHER NOMINEE TO MAKE A DEMAND FOR APPRAISAL OF THOSE SHARES. A PERSON HAVING A BENEFICIAL INTEREST IN SHARES HELD OF RECORD IN THE NAME OF ANOTHER PERSON, SUCH AS A BANK, BROKER OR OTHER NOMINEE, MUST ACT PROMPTLY TO CAUSE THE RECORD HOLDER TO FOLLOW PROPERLY AND IN A TIMELY MANNER THE STEPS NECESSARY TO PERFECT APPRAISAL RIGHTS.

 

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All demands for appraisal pursuant to Section 262 should be in writing and should be mailed or delivered to:

McAfee Corp.

Attention: Senior Vice President and Chief Legal Officer

6220 America Center Drive

San Jose, CA 95002

with a copy to:

Ropes & Gray LLP

1900 University Avenue

East Palo Alto, CA 94303

Attention: Paul S. Scrivano, Esq.

At any time within 60 days after the Effective Time, any holder of shares of Company Stock who has delivered a written demand to McAfee and who has not commenced an appraisal proceeding or joined that proceeding as a named party may withdraw his, her or its demand for appraisal and accept the Per Share Consideration offered pursuant to the Merger Agreement by delivering to McAfee a written withdrawal of the demand for appraisal. However, any such attempt to withdraw the demand made more than 60 days after the Effective Time shall require written approval of the Surviving Corporation. No appraisal proceeding in the Delaware Court of Chancery will be dismissed as to any McAfee Stockholder without the approval of the Delaware Court of Chancery, and such approval may be conditioned upon such terms as the Delaware Court of Chancery deems just; provided, however, that this provision shall not affect the right of any McAfee Stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party to withdraw such McAfee Stockholder’s demand for appraisal and to accept the Per Share Consideration within 60 days after the Effective Time.

Notice by the Surviving Corporation

If the Merger is completed, within 10 days after the Effective Time, the Surviving Corporation will notify each holder of shares of Company Stock who has properly made a written demand for appraisal pursuant to Section 262, and who has not voted in favor of the adoption of the Merger Agreement, that the Merger has become effective and the effective date thereof.

Filing a Petition for Appraisal

Within 120 days after the Effective Time, but not thereafter, the Surviving Corporation or any holder of shares of Company Stock who has complied with Section 262 and is entitled to seek appraisal under Section 262 (including for this purpose any beneficial owner of shares of Company Stock held either in a voting trust or by a nominee on behalf of such person) may commence an appraisal proceeding by filing a petition in the Delaware Court of Chancery, with a copy served on the Surviving Corporation in the case of a petition filed by a McAfee Stockholder (or beneficial owner), demanding a determination of the fair value of the shares held by all dissenting McAfee Stockholders entitled to appraisal. The Surviving Corporation is under no obligation, and has no present intention, to file a petition, and McAfee Stockholders should not assume that the Surviving Corporation will file a petition or initiate any negotiations with respect to the fair value of the shares of Company Stock. Accordingly, any holders of shares of Company Stock who desire to have their shares appraised should initiate all necessary action to perfect their appraisal rights in respect of their shares of Company Stock within the time and in the manner prescribed in Section 262. The failure of a holder of Company Stock to file such a petition within the period specified in Section 262 could nullify the McAfee Stockholder’s previous written demand for appraisal.

 

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Within 120 days after the Effective Time, any holder of shares of Company Stock who has complied with the requirements of Section 262 and who is entitled to appraisal rights thereunder will be entitled, upon written request, to receive from the Surviving Corporation a statement setting forth the aggregate number of shares of Company Stock not voted in favor of the adoption of the Merger Agreement and with respect to which McAfee has received demands for appraisal, and the aggregate number of holders of such shares. The Surviving Corporation must mail such statement to the requesting McAfee Stockholder within 10 days after receipt by the Surviving Corporation of the written request for such a statement or within 10 days after the expiration of the period for delivery of demands for appraisal, whichever is later. A beneficial owner of shares of Company Stock held either in a voting trust or by a nominee on behalf of such person may, in such person’s own name, file a petition seeking appraisal or request from the Surviving Corporation the statement described in the two previous sentences. As noted above, however, the demand for appraisal can only be made by a McAfee Stockholder of record.

If a petition for an appraisal is duly filed by a holder of shares of Company Stock or a beneficial owner and a copy thereof is served upon the Surviving Corporation, the Surviving Corporation will then be obligated within 20 days after such service to file with the Delaware Register in Chancery a duly verified list containing the names and addresses of all McAfee Stockholders who have demanded payment for their shares and with whom agreements as to the value of their shares have not been reached. Upon the filing of any such petition, the Delaware Court of Chancery may order that notice of the time and place fixed for the hearing on the petition be mailed to the Surviving Corporation and all of the McAfee Stockholders shown on such verified list at the addresses stated therein. Such notice will also be published at least one (1) week before the day of the hearing in a newspaper of general circulation published in the City of Wilmington, Delaware, or in another publication determined by the Delaware Court of Chancery. The costs of these notices are borne by the Surviving Corporation. After notice to McAfee Stockholders as required by the court, the Delaware Court of Chancery is empowered to conduct a hearing on the petition to determine those McAfee Stockholders who have complied with Section 262 and who have become entitled to appraisal rights thereunder. The Delaware Court of Chancery may require the McAfee Stockholders who demanded appraisal of their shares to submit their stock certificates (if any) to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings and, if any McAfee Stockholder fails to comply with that direction, the Delaware Court of Chancery may dismiss that McAfee Stockholder from the proceedings. The Delaware Court of Chancery will dismiss appraisal proceedings as to all McAfee Stockholders who assert appraisal rights unless one of the ownership thresholds is met.

Determination of Fair Value

After determining the holders of Company Stock entitled to appraisal and that at least one of the ownership thresholds described above has been satisfied as to McAfee Stockholders seeking appraisal rights, the appraisal proceeding will be conducted in accordance with the rules of the Delaware Court of Chancery, including any rules specifically governing appraisal proceedings. Through such proceeding, the Delaware Court of Chancery will determine the “fair value” of the shares of Company Stock, exclusive of any element of value arising from the accomplishment or expectation of the Merger, together with interest, if any, to be paid upon the amount determined to be the fair value (subject, in the case of interest payments, to any voluntary cash payments made by the surviving corporation pursuant to subsection (h) of Section 262 that have the effect of limiting the sum on which interest accrues as described below). In determining fair value, the Delaware Court of Chancery will take into account all relevant factors. Unless the court in its discretion determines otherwise for good cause shown, interest from the Effective Time through the date of payment of the judgment will be compounded quarterly and will accrue at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the Effective Time and the date of payment of the judgment. However, at any time before the Delaware Court of Chancery enters judgment in the appraisal proceedings, the Surviving Corporation may pay to each McAfee Stockholder entitled to appraisal an amount in cash, in which case such interest will accrue after the time of such payment only on an amount that equals the difference, if any, between the amount so paid and the “fair value” of the shares as determined by the Delaware Court of Chancery, in addition to any interest accrued prior to the time of such voluntary payment, unless paid at such time.

 

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In Weinberger v. UOP, Inc., the Supreme Court of Delaware discussed the factors that could be considered in determining fair value in an appraisal proceeding, stating that “proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court” should be considered, and that “[f]air price obviously requires consideration of all relevant factors involving the value of a company.” The Delaware Supreme Court stated that, in making this determination of fair value, the court must consider market value, asset value, dividends, earnings prospects, the nature of the enterprise and any other facts that could be ascertained as of the date of the Merger that throw any light on future prospects of the merged corporation. Section 262 provides that fair value is to be “exclusive of any element of value arising from the accomplishment or expectation of the Merger.” In Cede & Co. v. Technicolor, Inc., the Delaware Supreme Court stated that such exclusion is a “narrow exclusion [that] does not encompass known elements of value,” but which rather applies only to the speculative elements of value arising from such accomplishment or expectation.

In Weinberger, the Supreme Court of Delaware also stated that “elements of future value, including the nature of the enterprise, which are known or susceptible of proof as of the date of the Merger and not the product of speculation, may be considered.”

McAfee Stockholders considering seeking appraisal should be aware that the fair value of their shares as so determined by the Delaware Court of Chancery could be more than, the same as or less than the consideration they would receive pursuant to the Merger if they did not seek appraisal of their shares and that an opinion of an investment banking firm as to the fairness from a financial point of view of the consideration payable in a merger is not an opinion as to, and does not in any manner address, fair value under Section 262. No representation is made as to the outcome of the appraisal of fair value as determined by the Delaware Court of Chancery, and McAfee Stockholders should recognize that such an appraisal could result in a determination of a value higher or lower than, or the same as, the Per Share Consideration. Neither McAfee nor Parent anticipates offering more than the Per Share Consideration to any McAfee Stockholder exercising appraisal rights, and each of McAfee and Parent reserves the rights to make a voluntary cash payment pursuant to subsection (h) of Section 262 and to assert, in any appraisal proceeding, that for purposes of Section 262, the “fair value” of a share of Company Stock is less than the Per Share Consideration. If a petition for appraisal is not timely filed, or if neither of the ownership thresholds described above has been satisfied as to McAfee Stockholders seeking appraisal rights, then the right to an appraisal will cease. The costs of the appraisal proceedings (which do not include attorneys’ fees or the fees and expenses of experts) may be determined by the Delaware Court of Chancery and charged upon the parties as the Delaware Court of Chancery deems equitable under the circumstances. Upon application of a McAfee Stockholder, the Delaware Court of Chancery may also order that all or a portion of the expenses incurred by a McAfee Stockholder in connection with an appraisal proceeding, including, without limitation, reasonable attorneys’ fees and the fees and expenses of experts, be charged pro rata against the value of all the shares entitled to be appraised. In the absence of such determination or assessment, each party bears its own expenses.

If any McAfee Stockholder who demands appraisal of his, her or its shares of Company Stock under Section 262 fails to perfect, or loses or successfully withdraws, such holder’s right to appraisal, the McAfee Stockholder’s shares of Company Stock will be deemed to have been converted at the Effective Time into the right to receive the Per Share Consideration, without interest. A McAfee Stockholder will fail to perfect, or effectively lose or withdraw, the holder’s right to appraisal if no petition for appraisal is filed within 120 days after the Effective Time, if neither of the ownership thresholds described above is met or if the McAfee Stockholder properly delivers to the Surviving Corporation a written withdrawal of the holder’s demand for appraisal and an acceptance of the Per Share Consideration in accordance with Section 262.

From and after the Effective Time, no McAfee Stockholder who has demanded appraisal rights will be entitled to vote such shares of Company Stock for any purpose or to receive payment of dividends or other distributions on the stock, except dividends or other distributions on the holder’s shares of Company Stock, if any, payable to McAfee Stockholders as of a time prior to the Effective Time. If no petition for an appraisal is filed, if neither of the ownership thresholds described above is met, or if the McAfee Stockholder delivers to the

 

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Surviving Corporation a written withdrawal of the demand for an appraisal and an acceptance of the Merger, either within 60 days after the Effective Time or thereafter with the written approval of the Surviving Corporation, then the right of such McAfee Stockholder to an appraisal will cease. Once a petition for appraisal is filed with the Delaware Court of Chancery, however, the appraisal proceeding may not be dismissed as to any McAfee Stockholder without the approval of the court, and such approval may be conditioned upon such terms as the court deems just; provided, however, that the foregoing shall not affect the right of any McAfee Stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party to withdraw such McAfee Stockholder’s demand for appraisal and to accept the terms offered upon the Merger within 60 days after the Effective Time.

Failure to comply strictly with all of the procedures set forth in Section 262 may result in the loss of a McAfee Stockholder’s statutory appraisal rights. Consequently, any McAfee Stockholder wishing to exercise appraisal rights is encouraged to consult legal counsel before attempting to exercise those rights.

Accounting Treatment

The Merger will be accounted for as a “purchase transaction” for financial accounting purposes.

Material U.S. Federal Income Tax Consequences of the Merger

The following discussion is a summary of certain material U.S. federal income tax consequences of the Merger that may be relevant to U.S. Holders and Non-U.S. Holders (each as defined below) of shares of Class A Common Stock whose shares are converted into the right to receive cash pursuant to the Merger. This discussion is limited to McAfee Stockholders who hold their shares of Class A Common Stock as “capital assets” within the meaning of Section 1221 of the Code (generally, property held for investment purposes). This discussion is based upon the Internal Revenue Code of 1986, as amended (the “Code”), Treasury Regulations promulgated under the Code, rulings and other published positions of the Internal Revenue Service (the “IRS”) and judicial decisions, all as in effect on the date of this proxy statement and all of which are subject to change or differing interpretations at any time, possibly with retroactive effect. Any such change or differing interpretation could affect the accuracy of the statements and conclusions set forth in this discussion. No assurance can be given that the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax considerations described in this discussion. No advance ruling has been or will be sought from the IRS regarding any matter discussed below.

This discussion is for general information purposes only and does not purport to be a complete analysis of all of the U.S. federal income tax considerations that may be relevant to particular holders in light of their particular facts and circumstances, or to McAfee Stockholders subject to special rules under the U.S. federal income tax laws, including, for example, but not limited to:

 

   

banks and other financial institutions;

 

   

mutual funds;

 

   

insurance companies;

 

   

brokers or dealers in securities, currencies or commodities;

 

   

dealers or traders in securities subject to a mark-to-market method of accounting with respect to shares of Class A Common Stock (by vote or value);

 

   

regulated investment companies and real estate investment trusts;

 

   

retirement plans, individual retirement and other deferred accounts;

 

   

tax-exempt organizations, governmental agencies, instrumentalities or other governmental organizations and pension funds;

 

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holders that are holding shares of Class A Common Stock as part of a “straddle,” hedge, constructive sale, or other integrated transaction or conversion transaction or similar transactions;

 

   

U.S. Holders (as defined below) whose functional currency is not the U.S. dollar;

 

   

Partnerships, other entities classified as partnerships for U.S. federal income tax purposes, “S corporations,” or any other pass-through entities for U.S. federal income tax purposes (or investors in such entities);

 

   

expatriated entities subject to Section 7874 of the Code;

 

   

holders that are required to accelerate the recognition of any item of gross income as a result of such income being recognized on an “applicable financial statement”;

 

   

persons subject to the alternative minimum tax;

 

   

U.S. expatriates and former citizens or long-term residents of the United States;

 

   

except as noted below, holders that own or have owned (directly, indirectly or constructively) five percent or more of Class A Common Stock (by vote or value);

 

   

grantor trusts;

 

   

controlled foreign corporations, passive foreign investment companies, and corporations that accumulate earnings to avoid U.S. federal income tax;

 

   

holders that received their shares of Class A Common Stock in a compensatory transaction, through a tax qualified retirement plan or pursuant to the exercise of options or warrants;

 

   

holders that own a direct or indirect equity interest in Parent following the Merger;

 

   

holders that hold their Class A Common Stock through a bank, financial institution or other entity, or a branch thereof, located, organized or resident outside the United States; and

 

   

holders that do not vote in favor of the Merger and that properly demand appraisal of their shares under Section 262 of the DGCL.

This discussion does not address any U.S. federal tax considerations other than those pertaining to the income tax (such as estate, gift or other non-income tax consequences) or any state, local or foreign income or non-income tax considerations. In addition, this discussion does not address any considerations arising under the Medicare contribution tax or any considerations in respect of any withholding required pursuant to the Foreign Account Tax Compliance Act of 2010 (including the Treasury Regulations promulgated thereunder and intergovernmental agreements entered into in connection therewith and any laws, regulations or practices adopted in connection with any such agreement). This summary does not describe any tax consequences relating to the Exchange and Redemption.

If a partnership (including an entity or arrangement, domestic or non-U.S., treated as a partnership for U.S. federal income tax purposes) is a beneficial owner of shares of Class A Common Stock, the U.S. federal income tax treatment of a partner in such partnership generally will depend upon the status of the partner, the activities of the partner and the partnership and certain determinations made at the partner level. Accordingly, partners in partnerships holding shares of Class A Common Stock should consult their tax advisors as to the particular tax consequences to them of the Merger.

THE U.S. FEDERAL INCOME TAX TREATMENT OF THE TRANSACTIONS DISCUSSED HEREIN TO ANY PARTICULAR MCAFEE STOCKHOLDER WILL DEPEND ON THE STOCKHOLDER’S PARTICULAR TAX CIRCUMSTANCES. WE URGE YOU TO CONSULT YOUR TAX ADVISOR WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES TO YOU IN CONNECTION WITH THE MERGER IN LIGHT OF YOUR OWN PARTICULAR CIRCUMSTANCES, INCLUDING U.S. FEDERAL, STATE, LOCAL AND NON-U.S. INCOME AND OTHER TAX CONSEQUENCES.

 

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U.S. Holders

This section applies to “U.S. Holders.” For purposes of this discussion, a “U.S. Holder” means a beneficial owner of shares of Class A Common Stock that is for U.S. federal income tax purposes:

 

   

an individual who is a citizen or resident of the United States;

 

   

a corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States or any state thereof or the District of Columbia;

 

   

an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or

 

   

a trust, if (i) a court within the United States is able to exercise primary supervision over the administration of such trust and one (1) or more “United States persons” (within the meaning of the Code) have the authority to control all substantial decisions of the trust or (ii) the trust validly elected to be treated as a United States person for U.S. federal income tax purposes.

The receipt of cash by a U.S. Holder in exchange for shares of Class A Common Stock pursuant to the Merger will be a taxable transaction for U.S. federal income tax purposes. In general, a U.S. Holder will recognize capital gain or loss in an amount equal to the difference, if any, between the amount of cash received and the U.S. Holder’s adjusted tax basis in the shares of Class A Common Stock surrendered pursuant to the Merger. A U.S. Holder’s adjusted tax basis generally will equal the amount that such U.S. Holder paid for the shares of Class A Common Stock. A U.S. Holder’s gain or loss on the disposition of shares of Class A Common Stock generally will be characterized as capital gain or loss. Any such gain or loss will be long-term capital gain or loss if such U.S. Holder’s holding period in such shares is more than one (1) year at the time of the completion of the Merger. A preferential tax rate on capital gain generally will apply to long-term capital gain of a non-corporate U.S. Holder (including individuals). The deductibility of capital losses is subject to limitations. U.S. Holders who hold different blocks of Class A Common Stock (shares of Class A Common Stock purchased or acquired on different dates or at different prices) should consult their tax advisor to determine how the above rules apply to them.

Non-U.S. Holders

This section applies to “Non-U.S. Holders.” For purposes of this discussion, a “Non-U.S. Holder” means a beneficial owner of Class A Common Stock that is neither a U.S. Holder nor an entity or arrangement treated as a partnership for U.S. federal income tax purposes.

Subject to the discussion of backup withholding below, a Non-U.S. Holder generally will not be subject to U.S. federal income or withholding tax in respect of gain recognized in connection with the Merger, unless:

 

   

the gain is effectively connected with a trade or business of such Non-U.S. Holder in the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment or fixed base maintained by such Non-U.S. Holder in the United States), in which case such gain generally will be subject to U.S. federal income tax at rates generally applicable to U.S. persons, and, if the Non-U.S. Holder is a corporation, such gain may also be subject to the branch profits tax at a rate of 30% (or a lower rate under an applicable income tax treaty);

 

   

such Non-U.S. Holder is an individual who is present in the United States for 183 days or more in the taxable year of disposition of shares of Class A Common Stock pursuant to the Merger, and certain other specified conditions are met, in which case such gain will be subject to U.S. federal income tax at a rate of 30% (or a lower rate under an applicable income tax treaty), which gain may be offset by certain U.S. source capital losses of such Non-U.S. Holder, provided the Non-U.S. Holder has timely filed U.S. federal income tax returns with respect to such losses; or

 

   

shares of Class A Common Stock constitute a United States real property interest (a “USRPI”) by reason of the Company’s status as a “United States real property holding corporation” for U.S. federal income tax purposes (“USRPHC”) at any time during the shorter of the five- year period preceding the

 

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effective date of the Merger or such Non-U.S. Holder’s holding period with respect to the applicable shares of Class A Common Stock (the “Relevant Period”) and, if shares of our common stock are regularly traded on an established securities market (within the meaning of Section 897(c)(3) of the Code), such Non-U.S. Holder owns (directly, indirectly or constructively) more than 5% of our common stock at any time during the Relevant Period, in which case such gain will be subject to U.S. federal income tax at rates generally applicable to U.S. persons (as described in the first bullet point above), except that the branch profits tax will not apply. Generally, a corporation is a USRPHC if the fair market value of its USRPIs equals or exceeds 50% of the sum of the fair market value of its worldwide real property interests plus its other assets used or held for use in a trade or business. For this purpose, USRPIs generally include land, improvements and associated personal property. Although there can be no assurances in this regard, we believe that we are not, and have not been, a USRPHC at any time during the five-year period preceding the Merger. Non-U.S. Holders are encouraged to consult their own tax advisors regarding the possible consequences to them if we are a USRPHC.

Information Reporting and Backup Withholding

Generally, information reporting requirements may apply in connection with payments made to U.S. Holders or Non-U.S. Holders in connection with the Merger.

Backup withholding of tax (currently, at a rate of 24%) generally will apply to the proceeds received by a U.S. Holder pursuant to the Merger, unless the U.S. Holder provides the applicable withholding agent with a properly completed and executed IRS Form W-9 providing such U.S. Holder’s correct taxpayer identification number and certifying that such holder is not subject to backup withholding, or otherwise establishes an exemption, and otherwise complies with the backup withholding rules. Backup withholding of tax may also apply to the proceeds received by a Non-U.S. Holder pursuant to the Merger, unless the Non-U.S. Holder provides the applicable withholding agent with a properly completed and executed IRS Form W-8BEN or IRS Form W-8BEN-E (or other applicable IRS Form W-8), attesting to such Non-U.S. Holder’s status as a non-U.S. person and otherwise complies with applicable certification requirements.

Backup withholding is not an additional tax. The amount of any backup withholding from a payment to a U.S. Holder or Non-U.S. Holder generally will be allowed as a credit against such holder’s U.S. federal income tax liability, if any, and may entitle such holder to a refund, provided that the required information is timely furnished to the IRS.

THE DISCUSSION ABOVE IS BASED ON CURRENT LAW. LEGISLATIVE, ADMINISTRATIVE OR JUDICIAL CHANGES OR INTERPRETATIONS, WHICH CAN APPLY RETROACTIVELY, COULD AFFECT THE ACCURACY OF THE STATEMENTS SET FORTH THEREIN. THIS DISCUSSION IS FOR GENERAL INFORMATION PURPOSES ONLY. IT DOES NOT ADDRESS TAX CONSIDERATIONS THAT MAY VARY WITH, OR ARE CONTINGENT ON, YOUR INDIVIDUAL CIRCUMSTANCES OR THE APPLICATION OF ANY U.S. NON-INCOME TAX LAWS OR THE LAWS OF ANY STATE, LOCAL OR NON-U.S. JURISDICTION AND HOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING SUCH MATTERS AND THE TAX CONSEQUENCES OF THE MERGER TO THEM IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES.

Regulatory Approvals Required for the Merger

General

McAfee and Parent have agreed to cooperate with each other and use their reasonable best efforts to take all action necessary to comply with all applicable regulatory notification requirements, and, subject to certain limitations, to obtain regulatory approvals required to consummate the Merger and the other transactions

 

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contemplated by the Merger Agreement. These approvals include approval under the HSR Act, CFIUS Approval, the submission to DDTC of any required notifications under Section 122.4(b) of ITAR, and certain other applicable antitrust and foreign direct investment laws (whether domestic or foreign).

HSR Act and U.S. Antitrust Matters

Under the HSR Act and the rules promulgated thereunder, the Merger may not be completed until McAfee and Parent each files a Notification and Report Form with the Antitrust Division of the U.S. Department of Justice (“DOJ”) and the Federal Trade Commission (“FTC”), and the applicable waiting period has expired or been terminated. A transaction notifiable under the HSR Act may not be completed until the expiration of a 30-calendar-day waiting period following the parties’ filings of their respective HSR Act notification and report forms. If the FTC or DOJ issues a request for additional information and documents (which we refer to as the “Second Request”) prior to the expiration of the initial waiting period, the parties must observe a second 30-day waiting period, which would begin to run only after both parties have substantially complied with the Second Request, unless the waiting period is terminated earlier or the parties otherwise agree to extend the waiting period.

McAfee and Parent each filed a Notification and Report Form with respect to the Merger with the FTC and DOJ on November 19, 2021. The applicable waiting period under the HSR Act expired on December 20, 2021.

At any time before or after consummation of the Merger, notwithstanding the termination or expiration of the waiting period under the HSR Act, the FTC or the DOJ could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the completion of the Merger, 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 Merger, any state could take such action under the antitrust laws as it deems necessary or desirable in the public interest. Such action could include seeking to enjoin the completion of the Merger or seeking divestiture of substantial assets of the parties. Private parties may also seek to take legal action under the antitrust laws under certain circumstances. We cannot be certain that a challenge to the Merger will not be made or that, if a challenge is made, we will prevail.

Other Regulatory Approvals

Under the Merger Agreement, the Merger cannot be completed until the parties receive CFIUS Approval. McAfee and Parent submitted the Draft CFIUS Notice to CFIUS with respect to the Merger and the other transactions contemplated by the Merger Agreement on December 1, 2021. CFIUS provided comments to the Draft CFIUS Notice on December 13, 2021, and McAfee and Parent submitted a final joint voluntary notice to CFIUS with respect to the Merger and the other transactions contemplated by the Merger Agreement on December 23, 2021.

Under the Merger Agreement, the Merger cannot be completed until at least 60 days have elapsed since McAfee submitted the notification to the DDTC pursuant to Section 122.4(b) of ITAR. McAfee submitted the notification to DDTC on November 20, 2021.

Additionally, the Merger is also subject to the filing or submission of, or obtaining of, certain necessary notices, clearances, approvals, waivers or consents by the antitrust and other regulatory authorities in other jurisdictions, including the Anti-Monopoly Law of China 2007 and SAMR Interim Provisions on the Review of Concentration of Undertakings of 2020 (The People’s Republic of China), Council Regulation (EC) No. 139/2004 on the control of concentrations between undertakings (European Union), Swiss Federal Act on Cartels and Other Restrictions of Competition of 1995, as amended, and Ordinance of the Control of Concentrations of Undertakings 1996, as amended (Switzerland), Turkish Law on Protection of Competition No. 4054, as amended, and Communiqué No. 2010/4 on Mergers and Acquisitions Requiring the Approval of Competition Board (Turkey), Articles L. 151-1 et seq. and R. 151-1 et seq. of the French Monetary and Financial

 

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Code as per last amendment on 31 December 2019 (Décret no 2019-1590) (France), Italian Law Decree No. 21 of 15 March 2012, also referred to as the Law on Golden Powers or Golden Powers Regulation (GPR), as per last amendment on 8 April 2020 (Decree No 23 of April 8, 2020) (Italy), Spanish Act on the legal regime of capital movements and economic transactions abroad (the Act 19/2003) as per last amendment on 24 June 2021 (Royal Decree Law 12/2021) (Spain), and UK National Security and Investment Act 2021 (United Kingdom). The Merger cannot be completed until McAfee and Parent obtain clearance to consummate the Merger or the applicable waiting periods have expired or been terminated in such jurisdictions. McAfee and Parent, in consultation and cooperation with each other, made antitrust or other filings with the authorities of such jurisdictions.

 

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PROPOSAL 1: ADOPTION OF THE MERGER AGREEMENT

The following summary describes the material provisions of the Merger Agreement. The descriptions of the Merger Agreement in this summary and elsewhere in this proxy statement are not complete and are qualified in their entirety by reference to the Merger Agreement, a copy of which is attached to this proxy statement as Annex A and incorporated into this proxy statement by reference. You should carefully read and consider the entire Merger Agreement, which is the legal document that governs the Merger, because this summary may not contain all the information about the Merger Agreement that is important to you. The rights and obligations of the parties are governed by the express terms of the Merger Agreement and not by this summary or any other information contained in this proxy statement.

The representations, warranties, covenants and agreements described below and included in the Merger Agreement (i) were made only for purposes of the Merger Agreement and as of specific dates; (ii) were made solely for the benefit of the parties to the Merger Agreement; and (iii) may be subject to important qualifications, limitations and supplemental information agreed to by McAfee, Parent and Merger Subsidiary in connection with negotiating the terms of the Merger Agreement. In addition, the representations and warranties have been included in the Merger Agreement for the purpose of allocating contractual risk among McAfee, Parent and Merger Subsidiary rather than to establish matters as facts, and may be subject to standards of materiality applicable to such parties that differ from those applicable to investors. McAfee Stockholders are not third-party beneficiaries under the Merger Agreement and should not rely on the representations, warranties, covenants and agreements or any descriptions thereof as characterizations of the actual state of, acts or condition of McAfee, Parent or Merger Subsidiary or any of their respective affiliates or businesses. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Merger Agreement. In addition, you should not rely on the covenants in the Merger Agreement as actual limitations on the respective businesses of McAfee, Parent and Merger Subsidiary, because the parties may take certain actions that are either expressly permitted in the confidential disclosure letter to the Merger Agreement or as otherwise consented to by the appropriate party, which consent may be given without prior notice to the public. The Merger Agreement is described below, and included as Annex A, only to provide you with information regarding its terms and conditions, and not to provide any other factual information regarding McAfee, Parent, Merger Subsidiary or their respective businesses. Accordingly, the representations, warranties, covenants and other agreements in the Merger Agreement should not be read alone, and you should read the information provided elsewhere in this document and in our filings with the SEC regarding McAfee and our business.

Effects of the Merger; Directors and Officers; Certificate of Incorporation; Bylaws

The Merger Agreement provides that, subject to the terms and conditions of the Merger Agreement, and in accordance with the DGCL, at the Effective Time (as defined in the section of this proxy statement captioned “—Closing and Effective Time”): (i) Merger Subsidiary will be merged with and into McAfee, with McAfee becoming a wholly owned subsidiary of Parent; (ii) the separate corporate existence of Merger Subsidiary will thereupon cease; and (iii) McAfee will continue as the Surviving Corporation.

At the Effective Time, the initial directors of the Surviving Corporation will be the directors of Merger Subsidiary as of immediately prior to the Effective Time, each to hold office in accordance with the certificate of incorporation and bylaws of the Surviving Corporation until their respective successors are duly elected or appointed and qualified in accordance with applicable law. At the Effective Time, the initial officers of the Surviving Corporation will be the officers of McAfee as of immediately prior to the Effective Time, each to hold office in accordance with the certificate of incorporation and bylaws of the Surviving Corporation until their respective successors are duly appointed and qualified in accordance with applicable law. At the Effective Time, the certificate of incorporation of the Surviving Corporation will remain the certificate of incorporation of McAfee as in effect immediately prior to the Effective Time, until thereafter amended as provided therein or by applicable law, and the bylaws of the Surviving Corporation will remain the bylaws of McAfee as in effect immediately prior to the Effective Time, until thereafter amended as provided therein or in the certificate of incorporation of the Surviving Corporation or by applicable law.

 

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Closing and Effective Time

The Closing will take place at 7:00 a.m., California time, as soon as possible, but in any event no later than the third (3rd) business day following the satisfaction or waiver of all conditions to closing of the Merger (described below under the caption, “—Conditions to the Closing of the Merger”) (other than those conditions to be satisfied at the closing of the Merger) or such other time or on such other date or at such other place as agreed to by Parent and McAfee. However, if a specified marketing period (being the first period of fifteen (15) business days following the later of (i) the date on which Parent has been provided the required financial information regarding McAfee required by the Debt Commitment Letter and (ii) the date on which certain closing conditions set forth in the Merger Agreement are satisfied, subject to certain exceptions set forth in the Merger Agreement), has not ended at the time of the satisfaction or waiver of all conditions to closing of the Merger (other than those conditions to be satisfied at the closing of the Merger), the closing of the Merger will then occur on the date that is the earlier of (i) any day during such marketing period specified by Parent to McAfee on no less than two (2) business days’ notice to McAfee and (ii) the third (3rd) business day immediately following the final day of such marketing period, in each case subject to the satisfaction or waiver of all conditions to closing of the Merger (other than those conditions to be satisfied at the closing of the Merger).

On the Closing Date, the parties will file a certificate of merger with the Secretary of State for the State of Delaware as provided under the DGCL. The time at which the Merger will become effective will occur at the Effective Time.

Merger Consideration

Company Stock

At the Effective Time, by virtue of the Merger and without any action required by any McAfee Stockholder or any other person, each share of Company Stock (including, for the avoidance of doubt, each share of Class A Common Stock resulting from the exchange of vested Management Incentive Units, Class A Units and Class B Common Stock for Class A Common Stock in accordance with the OpCo LLC Agreement) (other than Company Restricted Shares that will be converted into Cash Awards and Excluded Shares, which include, for example, shares of Company Stock owned by McAfee Stockholders who have properly and validly exercised and not withdrawn their statutory rights of appraisal under Section 262 of the DGCL) outstanding as of immediately prior to the Effective Time will be canceled and extinguished, and automatically converted into the right to receive the Per Share Consideration, without interest and less any applicable withholding taxes.

Treatment of Company Equity Awards

Pursuant to the Merger Agreement, immediately prior to the Effective Time:

 

   

Each in-the-money Company Stock Option that is outstanding and vested (including each Company Stock Option that accelerates and becomes vested by its terms in connection with the Merger) will be canceled and converted into the right to receive, without interest, an amount in cash determined by multiplying the excess of the Per Share Consideration over the exercise price of the Company Stock Option by the number of shares of Company Stock subject to such option as of immediately prior to the Effective Time. Each option to purchase Company Stock that is not in-the-money (whether or not vested) shall be canceled for no consideration.

 

   

Each Company RSU and Company PSU that is outstanding and vested as of the Effective Time (including each Company RSU and each Company PSU that accelerates and becomes vested by its terms in connection with the Merger) will be canceled and converted into the right to receive, without interest, an amount in cash equal to the number of shares of Company Stock subject to the vested Company RSU or Company PSU award as of immediately prior to the Effective Time multiplied by the Per Share Consideration.

 

   

Each Company Cash Right will be assumed, honored, or continued in accordance with its terms.

 

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Each Company Award that is then outstanding and not vested (other than options to purchase Company Stock that are not in-the-money) will be converted into a Cash Award, which will remain subject to the same time vesting terms and conditions that apply immediately prior to the Effective Time, will be paid out on the next payroll date following the applicable vesting date, so long as the applicable portion becomes vested prior to the applicable holder’s termination of service. Each Cash Award will be subject to vesting, payment and other conditions that are no less favorable to each such holder than those that applied to the corresponding Company Award immediately prior to the consummation of the Merger. Each Cash Award will provide each applicable holder with the opportunity to be paid an amount in cash equal to:

 

   

with respect to each Cash Award deriving from an in-the-money Company Stock Option that is not vested, (i) the excess of the Per Share Consideration over the option exercise price of such in-the-money Company Stock Option multiplied by (ii) the number of shares of Company Stock subject to such in-the-money Company Stock Option as of immediately prior to the closing; and

 

   

with respect to each Company Award deriving from a Company Restricted Share, Company RSU, or Company PSU that is not vested (i) the number of shares of Company Stock subject to such Company Restricted Shares, Company RSU, or Company PSU as of immediately prior to the closing multiplied by (ii) the Per Share Consideration; provided, that (A) in the case of a Company PSU that is not vested and that has an applicable one-year performance period that ends on or ended prior to the closing, for purposes of determining the number of shares of Company Stock subject to such Company PSU to be converted into a Cash Award, such Company PSU shall be deemed earned based on the actual performance of McAfee during such performance period, and (B) in the case of a Company PSU that is not vested and that has an applicable one-year performance period that ends after the closing, for purposes of determining the number of shares of Company Stock subject to such Company PSU to be converted into a Cash Award, the number of shares of Company Stock subject to such Company PSU shall be determined as though such performance conditions were satisfied at the applicable target levels.

Following the execution of the Merger Agreement, McAfee and the purchasing parties further agreed that, in connection with the closing of the transactions contemplated by the Merger Agreement and generally subject to an applicable individual’s continued employment or other service to McAfee and its affiliates through the time that is immediately prior to the closing (except as described below), the following Special Vesting Opportunity will apply effective as of immediately prior to the closing:

 

   

each individual whose employment or other service to the Company and its affiliates commenced prior to January 1, 2021 will become vested in an additional number of then outstanding unvested Company Awards having an aggregate dollar value (determined based on the amount payable in respect of such outstanding Company Awards pursuant to the Merger Agreement and without regard to vesting conditions) equal to the excess, if any, of (i) 25% of the combined total value associated with such individual’s then-outstanding unvested Company Awards (other than any Company Awards granted after the execution of the Merger Agreement) and then outstanding unvested Management Incentive Units of OpCo LLC over (ii) the total value associated with such individual’s then-outstanding unvested Company Awards and then-outstanding unvested Management Incentive Units of OpCo LLC, in each case, that will vest or otherwise accelerate by their terms or the terms of the Merger Agreement in connection with the consummation of the Merger; and

 

   

each individual whose employment or other service to the Company and its affiliates commenced on or after January 1, 2021 but before November 1, 2021 will become vested in an additional number of then-outstanding unvested Company Awards (determined based on the amount payable in respect of such outstanding Company Awards implied by the Merger Agreement and without regard to vesting conditions) equal to the excess, if any, of (i) 12.5% of the combined total value associated with such individual’s then-outstanding unvested Company Awards (other than any Company Awards granted after the execution of the Merger Agreement) over (ii) the total value associated with such individual’s

 

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then-outstanding unvested Company Awards that will otherwise accelerate by their terms or the terms of the Merger Agreement in connection with the consummation of the Merger.

The Special Vesting Opportunity will not apply with respect to any employee or other service provider that remains employed by, or is providing services to, McAfee or any of its affiliates as of immediately prior to the Closing if, as of the time of the Closing, the service provider’s employment or other service is scheduled to transfer to an affiliate of the buyer of McAfee’s Enterprise business unit (i.e., because of a delayed transfer of subsidiaries in certain non-U.S. jurisdictions) pursuant to the divestiture transaction that closed on July 27, 2021. To the extent that any Company Awards vest pursuant to the dollar value of the Special Vesting Opportunity, (i) the dollar value of the applicable holder’s Cash Awards received in exchange for Company Awards that do not vest in connection with the Closing Date will be reduced on a dollar-for-dollar basis by the dollar value of the Special Vesting Opportunity to such employee or other service provider, with the offset being applied in reverse chronological order (i.e., starting with the amount payable on the latest vesting date after the Closing Date and, to the extent necessary, proceeding to the next latest vesting date, etc.), (ii) such vesting will be deemed to take place immediately prior to the Closing for all purposes of the Merger Agreement, and (iii) such Company Awards so impacted by the Special Vesting Opportunity will become vested pursuant to the Merger Agreement as of immediately prior to the Closing. For the avoidance of doubt, no Company Awards will vest and accelerate with respect to the Special Vesting Opportunity if the holder would have already become vested as of the Closing in respect of at least 25% or 12.5%, as applicable, of the combined total dollar value of his or her then-outstanding unvested Company Awards (other than any Company Awards granted after the execution of the Merger Agreement) and then-outstanding unvested Management Incentive Units of OpCo LLC pursuant to the terms thereof or the terms of the Merger Agreement.

The Merger Agreement contemplates that McAfee may request Parent’s consent (which consent may not be unreasonably withheld, conditioned or delayed) to the vesting of Company Awards held by current or former employees and service providers prior to the Effective Time that would otherwise not vest in accordance with their terms or the Special Vesting Opportunity described above.

Treatment of Vested Management Incentive Units and Class A Units

Immediately prior to the Effective Time, the Board of Directors shall take all actions so that all Management Incentive Units of OpCo LLC shall be vested in full and (i) McAfee will require each holder of vested Management Incentive Units, each holder of Class A Units of OpCo LLC and each holder of Class B Common Stock to effect the Exchange and Redemption and (ii) each share of Class B Common Stock, if any, will automatically be canceled immediately upon the consummation of the Exchange and Redemption, such that no shares of Class B Common Stock remain outstanding immediately prior to the Effective Time.

Exchange and Payment Procedures

Prior to the Effective Time, Parent will appoint a U.S. bank or trust company, reasonably acceptable to McAfee (the “Paying Agent”), and enter into a paying agent agreement with the Paying Agent for the purpose of acting as agent in exchanging for the applicable portion of the Merger Consideration (A) certificates representing shares of Company Stock (the “Certificates”) or (B) uncertificated shares of Company Stock (the “Uncertificated Shares”). At or prior to the Effective Time, Parent will deposit (or cause to be deposited) with the Paying Agent cash in an amount sufficient to pay the Merger Consideration in respect of each share of Company Stock (other than Excluded Shares and certain Company Restricted Shares that will be converted into Cash Awards) outstanding immediately prior to the Effective Time.

Promptly following the Effective Time (and in no event later than two (2) business days after the Effective Time), McAfee will send, or will cause the Paying Agent to send, to each holder of record of shares of Company Stock (other than certain Company Restricted Shares that will be converted into Cash Awards and Excluded Shares, which include, for example, shares of Company Stock owned by McAfee Stockholders who have

 

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properly and validly exercised and not withdrawn their statutory rights of appraisal under Section 262 of the DGCL) (as of immediately following the Exchange and Redemption and immediately prior to the Effective Time) a letter of transmittal in a form that was reasonably acceptable to McAfee and instructions (which will specify that the delivery will be effected, and risk of loss and title will pass, only upon proper delivery of the Certificates or receipt of an “agent’s message”, as applicable) for use in the exchange of such shares of Company Stock for such holder’s applicable portion of the Merger Consideration; provided, that if any holder of record of shares of (x) Company Stock or (y) Class A Units and Management Incentive Units of OpCo LLC (together, the “OpCo Units”) requests in writing to McAfee (at least five (5) business days prior to the Closing) to receive such letter of transmittal and instructions in advance of the Effective Time, McAfee will send, or will cause the Paying Agent to send, to each such requesting holder such letter of transmittal and instructions. The amount of any Per Share Consideration paid to McAfee Stockholders may be reduced by any applicable withholding taxes.

Upon receipt of the letter of transmittal properly completed by the applicable holder and the surrender of the certificate representing shares of Company Stock to the Paying Agent or receipt of an ‘agent’s message’ by the Paying Agent or other evidence of transfer in the case of a book-entry transfer of Uncertificated Shares, in accordance with the terms of such letter of transmittal, the holder of such certificate or book-entry shares will be entitled to receive the Per Share Consideration for each such share.

In the event that any certificate representing shares of Company Stock has been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such certificate to be lost, stolen or destroyed and, if required by the Surviving Corporation or the Paying Agent, the posting by such person of a bond in such reasonable amount as the Surviving Corporation or the Paying Agent may direct, as indemnity against any claim that may be made with respect to such certificate, the Paying Agent will issue, in exchange for the lost, stolen or destroyed certificate, the applicable portion of the Merger Consideration to be paid in respect of the shares of Company Stock represented by such certificate.

If any portion of the Merger Consideration is to be paid to a person other than the person in whose name the surrendered Certificate is registered, it shall be a condition to such payment that (i) either such Certificate is properly endorsed or otherwise in proper form for transfer and (ii) the person requesting such payment shall pay to the Paying Agent any transfer or other taxes or fees required as a result of such payment to a person other than the registered holder of such Certificate or establish to the satisfaction of the Paying Agent that such tax has been paid or is not payable. Payment of the applicable portion of the Merger Consideration in respect of Uncertificated Shares will only be made to the person in whose name such Uncertificated Shares are registered as of immediately following the Exchange and Redemption and immediately prior to the Effective Time.

No interest will be paid or accrued for the benefits of any holders of Company Stock entitled to a portion of the Merger Consideration. Any portion of the funds deposited with the Paying Agent for payment to the holders of shares of Company Stock that remains unclaimed by the holders of Company Stock immediately prior to such time when such amounts would otherwise escheat to or become property of any governmental authority shall become, to the extent permitted by applicable law, the property of Parent free and clear of any claims or interest of any person previously entitled thereto.

Parent and the Surviving Corporation will not be liable to any holder of shares of Company Stock for any amounts properly paid to a public official pursuant to applicable abandoned property, escheat or similar laws.

Withholding

Each of the Paying Agent, Merger Subsidiary, the Surviving Corporation and Parent are entitled to deduct and withhold from the consideration and any other payments otherwise payable pursuant to the Merger Agreement to any person such amounts as they are required to deduct and withhold with respect to the making of such payment under any provision of federal, state, local or foreign tax law. To the extent that any amounts are withheld and properly paid to the appropriate taxing authority, such amounts will be treated as having been paid to the person in respect of which such deduction and withholding was made.

 

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Representations and Warranties

The Merger Agreement contains representations and warranties of McAfee, Parent and Merger Subsidiary.

Some of the representations and warranties in the Merger Agreement made by McAfee are qualified as to “materiality,” “Material Adverse Effect” or “Material Adverse Effect on the Company.” For purposes of the Merger Agreement, “Material Adverse Effect” or “Material Adverse Effect on the Company” means, with respect to McAfee, any event, change, fact, condition, circumstance or occurrence that, when considered either individually or in the aggregate together with all other adverse events, changes, facts, conditions, circumstances or occurrences, has had, or would reasonably be expected to have, a material adverse effect on (i) the financial condition, business or results of operations of the McAfee Group, taken as a whole, or (ii) the ability of McAfee to consummate the Merger, provided that with respect to clause (ii), that the taking of any action specifically required to be taken, or the failure to take any action specifically prohibited, by the Merger Agreement will not be taken into account in determining whether or not there has been a Material Adverse Effect; and provided further that, for purposes of clause (i) above, no effects, events, changes, facts, conditions, circumstances or occurrences with respect to the following matters (either alone or in combination) will be deemed to be or constitute a Material Adverse Effect on the Company or will be taken into account when determining whether a Material Adverse Effect on the Company has occurred or would reasonably be expected to occur:

 

   

the execution and delivery of the Merger Agreement or the other Transaction Documents, the consummation of the transactions contemplated thereby, or the announcement of any of the foregoing, the identity of Parent and any of its affiliates, or the taking of any action specifically required to be taken (other than the requirement that McAfee and its subsidiaries use reasonable best efforts to operate in the ordinary course), or the failure to take any action specifically prohibited by the Merger Agreement, including, in each case, their impact on relationships with customers (including governmental customers), suppliers, distributors, resellers, distribution partners (including retailers and e-commerce retailers and mobile or ISP network providers), ecosystem partners, channel partners (including OEMs) or employees or others having relationships with McAfee or its subsidiaries;

 

   

any communication by Parent or its affiliates regarding plans or intentions with respect to McAfee or any of its subsidiaries;

 

   

changes in global, foreign, national or regional economic, financial, regulatory or geopolitical conditions or events in general, in each case, in the United States or elsewhere in the world, or any escalation or worsening of any of the foregoing, or any action taken by any governmental authority in response to any of the foregoing;

 

   

changes in the equity, credit, debt, financial, currency or capital markets or changes in interest or exchange rates, in each case, in the United States or elsewhere in the world;

 

   

anti-dumping actions, international tariffs, trade policies or disputes or any “trade war” or similar actions;

 

   

changes in (i) applicable law, (ii) regulations affecting McAfee or any of its subsidiaries or any of its customers, suppliers, vendors, distribution partners (including retailers or e-commerce retailers and mobile or ISP network providers), ecosystem partners or channel partners (including OEMs), (iii) GAAP, or (iv) any authoritative interpretation of any of the foregoing;

 

   

any hurricane, tornado, tsunami, flood, volcanic eruption, earthquake, nuclear incident, foreign or domestic social protest or social unrest (whether or not violent), weather conditions, power outages or electrical black-outs, wild fires or other natural or man-made disaster or similar force majeure events;

 

   

changes in general in any industry or any market in which McAfee or any of its subsidiaries operate or changes in the general business or economic conditions affecting any such industry or market;

 

   

any (a) geopolitical conditions, military conflict or actions, outbreak of hostilities, acts of war (whether or not declared), acts of foreign or domestic terrorism, rebellion or insurrection (such rebellion or

 

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insurrection being against any governmental authority), acts of espionage, or escalation or general worsening of any of the foregoing or (b) acts of cyberterrorism or internet- or cyber-attacks (including by means of the use of mal-ware, malicious code or computer, network or system hacking) by or sponsored by a governmental authority or group of cyber criminals or hackers, or cyber espionage, or escalation or general worsening of any of the foregoing (but excluding for purposes of this clause (b) the performance of any of McAfee’s or any of its subsidiaries’ products in connection with any of the foregoing);

 

   

epidemics, pandemics, other outbreaks of infectious disease (including in each of the foregoing, COVID-19), including in each case any quarantine restrictions (including any shelter in place, stay at home or similar orders or guidelines of any governmental authority or the World Health Organization), or any escalation or worsening of any of the foregoing or any action, applicable law, pronouncement or guideline taken or promulgated by any governmental authority or the World Health Organization in response to any of the foregoing (including certain measures related to COVID-19);

 

   

any computer hacking, data breaches, ransom-ware affecting or impacting, or outage of or termination by a web hosting platform providing services to, McAfee or any of its subsidiaries or their respective businesses (but excluding in all circumstances the performance of any of McAfee’s or any of its subsidiaries’ products in connection with any of the foregoing);

 

   

taking of any action specifically required to be taken, at the written request or with the written consent of, Parent or any of its affiliates in compliance with the Merger Agreement (other than the requirement that McAfee and its subsidiaries use reasonable best efforts to operate in the ordinary course);

 

   

any failure by McAfee or any of its subsidiaries to meet internal or published projections, forecasts or estimates of McAfee or any of its subsidiaries (provided, however, that the underlying causes of such failure may, to the extent applicable and not otherwise excluded by the other exceptions in this definition, be considered in determining whether there has been a Material Adverse Effect);

 

   

any change in the price or trading volume of shares of Class A Common Stock or any other publicly traded securities of McAfee (provided, however, that the underlying causes of such change may, to the extent applicable and not otherwise excluded by the other exceptions in this definition, be considered in determining whether there has been a Material Adverse Effect);

 

   

any reduction in the credit rating of the United States; or

 

   

any litigation brought by current or former McAfee Stockholders (on their own behalf or on behalf of McAfee), whether under Delaware law or any applicable law, or other litigation, in the case of each of the foregoing in this bullet to the extent in respect of the Merger Agreement or the transactions contemplated thereby;

except, with respect to bullets 3-11 and 15 above, to the extent that such change, event, effect, fact, condition, occurrence or circumstance has had a disproportionately adverse effect on the McAfee Group relative to other persons or entities engaged in the same industry, in which case only the incremental disproportionate adverse effect may be taken into account in determining whether there has occurred a Material Adverse Effect on the Company (and then only to the extent such incremental disproportionate adverse effect is not excluded by the other exceptions in this definition).

In the Merger Agreement, McAfee has made customary representations and warranties to Parent and Merger Subsidiary that are subject, in some cases, to specified exceptions and qualifications contained in the Merger Agreement. These representations and warranties relate to, among other things:

 

   

due organization, valid existence, good standing and authority and qualification to conduct business with respect to McAfee;

 

   

the organizational documents of McAfee;

 

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McAfee’s corporate power and authority to enter into and perform the Merger Agreement, the enforceability of the Merger Agreement;

 

   

the necessary vote of McAfee Stockholders in connection with the Merger Agreement;

 

   

the necessary approval of the Board of Directors;

 

   

the absence of any actions or filings necessary to execute, deliver and perform the Merger Agreement and consummate the transactions contemplated thereby (other than the filing of the certificate of merger, compliance with requirements under the HSR Act, compliance with applicable securities and exchange laws, the filing of the CFIUS Notice, any required filings or notifications to the DDTC required under Section 122.4 of ITAR and any actions or filings the absence of which would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on McAfee);

 

   

the absence of any conflict, violation or material alteration of any organizational documents, material contracts, applicable laws to McAfee or the resulting creation of any lien upon McAfee’s assets due to the performance of the Merger Agreement;

 

   

the capital structure of McAfee;

 

   

the absence of any undisclosed exchangeable security, option, warrant or other right convertible into Company Stock;

 

   

the absence of any voting agreement, voting trusts, stockholders agreements, proxies or other contracts with respect to any securities of McAfee;

 

   

the subsidiaries of McAfee;

 

   

the accuracy and required filings of McAfee’s SEC filings and consolidated financial statements;

 

   

the consolidated financial statements of McAfee;

 

   

the truth and accuracy of the information included in this proxy statement;

 

   

the absence of certain changes or events;

 

   

the absence of certain liabilities;

 

   

compliance with certain laws, orders and permits by McAfee and its subsidiaries;

 

   

litigation and regulatory matters;

 

   

certain real property owned or leased by McAfee or its subsidiaries;

 

   

trademarks, patents, copyrights and other intellectual property matters;

 

   

tax matters;

 

   

employee benefit plans;

 

   

labor and employment matters;

 

   

insurance matters;

 

   

environmental matters;

 

   

the existence and enforceability of specified categories of McAfee’s material contracts, and any notices with respect to termination or intent not to renew those material contracts therefrom;

 

   

major channel partners and major suppliers;

 

   

McAfee’s compliance with certain anti-corruption laws;

 

   

brokers’ and finders’ fees and other expenses payable in connection with the Merger Agreement;

 

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the rendering of Goldman Sachs & Co. LLC’s opinion to McAfee;

 

   

the inapplicability of anti-takeover statutes to the Merger; and

 

   

information systems, privacy and data security.

In the Merger Agreement, Parent and Merger Subsidiary have made customary representations and warranties to McAfee that are subject, in some cases, to specified exceptions and qualifications contained in the Merger Agreement. These representations and warranties relate to, among other things:

 

   

the incorporation, good standing and qualification of Parent and Merger Subsidiary;

 

   

the corporate power and authority to execute, deliver and perform the Merger Agreement and to consummate the transactions contemplated by the Merger Agreement;

 

   

required consents and regulatory filings in connection with the Merger Agreement;

 

   

no breach of organizational documents, law or other agreements as a result of the Merger;

 

   

the truth and accuracy of information included in this proxy statement;

 

   

litigation and regulatory matters;

 

   

matters related to the Financing and the availability of funds for Parent and Merger Subsidiary to satisfy all of their obligations under the Merger Agreement;

 

   

the absence of any contracts or commitments with any directors, officers and employees of McAfee or that relate to voting for the Merger or any Superior Proposal or that provide for different consideration to be paid to any McAfee Stockholder;

 

   

lack of ownership of Company Stock by Parent or its subsidiaries or affiliates, subject to certain exceptions;

 

   

the solvency of Parent and its subsidiaries following the consummation of the Merger and the transactions contemplated by the Merger Agreement;

 

   

no vote of the stockholders of Parent being required to consummate the Merger and the other transactions contemplated by the Merger Agreement;

 

   

brokers’ and finders’ fees and other expenses payable in connection with the Merger Agreement;

 

   

delivery and enforceability of the Fee Funding Agreements;

 

   

no ownership by Parent or Merger Subsidiary of a competing business;

 

   

certain national security matters related to “foreign persons;” and

 

   

non-reliance on certain estimates and forecasts of McAfee provided to Parent and Merger Subsidiary.

The representations and warranties contained in the Merger Agreement will not survive the consummation of the Merger.

Conduct of Business Pending the Merger

The Merger Agreement provides that, except: (i) as contemplated by the Merger Agreement; (ii) as required by applicable law; (iii) as approved in writing in advance by Parent (which approval will not be unreasonably withheld, conditioned or delayed); (iv) as disclosed in the confidential disclosure letter to the Merger Agreement; (v) for any actions taken in good faith to respond to the actual or anticipated effects of COVID-19, (vi) in connection with the issuance of shares of Class A Common Stock in exchange for, or redemption of, OpCo Units and Class B Common Stock pursuant to the terms of the OpCo LLC Agreement, or (vii) for actions taken or omissions made to implement the terms of the Business Sale Agreement and applicable Local Transfer Agreements (as defined in the Merger Agreement), during the period of time between the date of the signing of

 

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the Merger Agreement and the Effective Time (the “Interim Period”), McAfee will, and will cause each of its subsidiaries to, use reasonable best efforts to conduct its business in the ordinary course.

In addition, McAfee has also agreed that, subject to the exceptions in the immediately preceding paragraph, during the Interim Period, McAfee will not, and will cause each of its subsidiaries not to, among other things (and subject to certain exceptions):

 

   

amend the organizational documents of any member of the McAfee Group;

 

   

split, combine, subdivide or reclassify any securities of McAfee or its subsidiaries;

 

   

declare, set aside or pay any dividend or other distribution in respect of any securities of McAfee or its subsidiaries, subject to certain specified exceptions;

 

   

acquire, repurchase, or redeem any securities of McAfee or its subsidiaries;

 

   

issue, deliver, sell, grant, pledge, transfer, subject to any lien or otherwise encumber any securities of McAfee or its subsidiaries, except for certain specified exceptions;

 

   

incur or commit to incur capital expenditures in excess of $3 million individually or $10 million in the aggregate, in each case, for each fiscal quarterly period, other than to the extent that such capital expenditures are otherwise reflected in McAfee’s capital expenditure budget set forth on the confidential disclosure letter to the Merger Agreement;

 

   

liquidate, dissolve, reorganize, restructure, recapitalize or consolidate by merger;

 

   

make any acquisitions by merger, amalgamation, plan of arrangement, consolidation, acquisition of stock or assets or otherwise, directly or indirectly, if the aggregate amount of consideration paid would exceed $20 million for each fiscal quarterly period;

 

   

sell, lease, encumber, transfer or otherwise dispose of any assets, securities, properties, interests or businesses of McAfee or its subsidiaries if the aggregate amount of consideration paid would exceed $20 million for each fiscal quarterly period, subject to certain specified exceptions;

 

   

incur, assume or suffer any indebtedness or issue any debt securities;

 

   

issue, sell, deliver or grant any shares of capital stock or any options, warrants, calls or other rights to acquire any similar debt securities of McAfee;

 

   

make any loans, advances or capital contribution to, or investments in, any other person or entity;

 

   

hire or terminate (other than for cause) any employee with total target annual cash compensation in excess of $300,000;

 

   

materially increase the compensation, bonus or benefits of any current or former employee or service provider with total annual target annual cash compensation in excess of $300,000 (including any employee or service provider whose compensation would exceed $300,000 as a result of such increase);

 

   

grant to any current or former director, officer, employee entitled to earn over $300,000 in total target annual cash compensation, or any current or former consultant or service provider entitled to earn over $300,000 in total target annual cash fees, any material increase in compensation, bonus or benefits;

 

   

other than as required by the terms of any benefit plan, make any person a participant in any benefit plan providing for severance pay or benefits, grant any material increase in severance compensation, or grant any retention, change in control, or transaction bonuses or benefits to any current or former director, employee, or service provider;

 

   

loan or advance any money or other property (or forgive or waive any such loan or advance) to any current or former director, officer, or employee (other than advances of expenses to employees in the ordinary course of business);

 

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grant any equity or equity-based awards other than to a limited extent to newly hired employees or in connection with promotions and periodic performance reviews in the ordinary course of business that are consistent with McAfee’s ordinary course of business;

 

   

establish, adopt, enter into or materially amend any benefit plan (other than entering into offer letters that contemplate “at will” employment without any rights to severance or termination pay or more than 30 days’ advance notice of termination or, with respect to employees with total target annual cash compensation (prospective, in the case of new hires) of not more than $300,000, pursuant to a form of employment agreement made available to Parent, consistent in all material respects with McAfee’s practices in the applicable jurisdiction);

 

   

adopt, enter into, engage in negotiations for, terminate or materially amend any collective bargaining agreement;

 

   

make any changes in financial accounting principles, methods or practices, except for changes required by GAAP or applicable law;

 

   

discharge, compromise, settle or satisfy any litigation or other suits or proceedings that would involve the payment of more than $6 million individually or $20 million in the aggregate (net of any insurance coverage or any balance sheet reserves);

 

   

waive, relinquish, release, grant, transfer or assign any right with a value of more than $20 million in any individual case;

 

   

undertake certain tax-related actions;

 

   

enter into any contract between McAfee or any of its subsidiaries, on the one hand, and any current director or officer of McAfee or any person (or any of their affiliates) beneficially owning 5% or more of the Company Stock or OpCo Units, on the other hand, except for commercial contracts entered into on arm’s length terms in the ordinary course of business;

 

   

take any action to (i) amend or modify in any material respect, (ii) waive any material rights under or (iii) terminate, any contract with a major channel partner or major supplier;

 

   

enter into or adopt any “poison pill” or similar stockholder rights plan that would prevent or preclude the Merger;

 

   

enter into a contract or other arrangement or understanding that would be required to be disclosed under Item 404(a) of Regulation S-K; or

 

   

agree, authorize or commit to do any of the foregoing.

In addition, Parent has agreed to (i) take all action necessary to cause Merger Subsidiary to perform its obligations under the Merger Agreement and to consummate the Merger on the terms and subject to the conditions set forth in the Merger Agreement and (ii) vote or cause to be voted all shares of Company Stock beneficially owned by it or any of its affiliates in favor of approval of the Merger Agreement at the Special Meeting. Parent and Merger Subsidiary have also agreed to use reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, advisable or proper to obtain the proceeds of the Financing contemplated by the Commitment Letters on or prior to the Closing Date on the terms and conditions and in the amounts described in the Commitment Letters (including any “flex” provisions) or such other terms and conditions that are more favorable to Parent and Merger Subsidiary. Additionally, Parent has agreed to use reasonable best efforts to arrange and obtain, as promptly as practicable, alternative financing sufficient to pay the Required Amounts on the Closing Date, if any portion of the Debt Financing or Preferred Equity Financing, as applicable, becomes unavailable, subject to the conditions set forth in the Merger Agreement.

The “Go Shop” Period—Solicitation of Other Offers

Under the Merger Agreement, from the date of the Merger Agreement and continuing until (a) the No Shop Period Start Date or (b) in respect of any Excluded Party, the Cut-Off Date, as applicable, McAfee, its

 

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subsidiaries and their respective directors, officers, employees and other representatives have the right to, directly or indirectly:

 

   

solicit, initiate, propose, facilitate, induce or encourage any Acquisition Proposal or the making, submission or announcement of one or more Acquisition Proposals from any person or its representatives, or encourage, facilitate or assist, any proposal, inquiry or offer that could reasonably be expected to lead to, result in or constitute an Acquisition Proposal, including by furnishing to any such person (and its representatives), any non-public information relating to the McAfee Group or affording to any such person (and its representatives) access to the business, properties, assets, books, records or other non-public information, or to any personnel, of the McAfee Group, in each case subject to the entry into, and solely in accordance with, an Acceptable Confidentiality Agreement;

 

   

continue, enter into, participate or otherwise engage in any discussions or negotiations with any person (and its representatives) with respect to one or more Acquisition Proposals (or any other proposals that could reasonably be expected to lead to, result in or constitute an Acquisition Proposal or other effort or attempt to make an Acquisition Proposal or other proposal that could reasonably be expected to lead to, result in or constitute an Acquisition Proposal); and

 

   

otherwise cooperate with, assist, participate in or take any action to facilitate any Acquisition Proposal or any other proposals that could reasonably be expected to lead to, result in or constitute any Acquisition Proposal.

In addition, McAfee must, within one (1) business day, make available to Parent or its representatives any non-public information concerning McAfee and its subsidiaries that was provided by McAfee to any person or its representatives pursuant to the foregoing that was not previously made available to Parent. The Board of Directors or any committee thereof may grant a waiver of any standstill provisions in any agreement with any person to permit such person to make an Acquisition Proposal privately and confidentially to the Board of Directors.

If McAfee has complied in all material respects with Section 6.03(b) and (c) of the Merger Agreement and terminates the Merger Agreement for the purpose of entering into a definitive agreement with any Excluded Party or its affiliates in respect of a Superior Proposal prior to the Cut-Off Date, McAfee would be required to pay a termination fee of $145,632,500 to Parent. For more information, please see the section of this proxy statement captioned “—The Board of Directors’ Recommendation; Adverse Recommendation Change.”

For purposes of this proxy statement and the Merger Agreement (unless otherwise set forth in the Merger Agreement):

“Acceptable Confidentiality Agreement” means a confidentiality agreement to which McAfee is a party that contains provisions that are no less favorable in the aggregate to McAfee than those contained in the Confidentiality Agreement (except that such agreement may contain a less restrictive or no standstill restriction).

“Acquisition Proposal” means other than the transactions contemplated by the Merger Agreement, any offer or proposal of any third party relating to:

 

   

any acquisition, exclusive license, issuance or purchase, direct or indirect, of assets equal to 20% or more of the consolidated assets of McAfee or to which 20% or more of the consolidated revenues, EBITDA or earnings (i.e. net income) of McAfee are attributable or securities equal to 20% or more of the total outstanding shares or voting power of Company Stock or 20% or more of the total outstanding OpCo Units or voting power of OpCo LLC;

 

   

any tender offer or exchange offer that, if consummated, would result in such third party beneficially owning 20% or more of the total outstanding shares or voting power of Company Stock or 20% or more of the total outstanding OpCo Units or voting power of OpCo LLC; or

 

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a merger, consolidation, statutory share exchange, business combination, sale, liquidation, dissolution, recapitalization, reorganization or other similar extraordinary transaction involving McAfee or any of its subsidiaries whose assets, individually or in the aggregate, constitute 20% or more of the consolidated assets of McAfee or to which 20% or more of the consolidated revenues, EBITDA or earnings (i.e. net income) of McAfee are attributable or as a result of which the McAfee Stockholders immediately prior to such transaction would cease to own more than 80% of the total voting power of McAfee or any surviving entity (or any direct or indirect parent company thereof) or the equityholders of OpCo LLC immediately prior to such transaction would cease to own more than 80% of the voting power of OpCo LLC immediately following such transaction; provided, that in each of the preceding three bullets, with respect to the definition of Company Termination Fee, all references to “20%” and “80%” will be deemed to be references to “50%”.

“Excluded Party” means any third party (i) from whom McAfee or any of its representatives receives an Acquisition Proposal after the date of the Merger Agreement and prior to the No Shop Period Start Date and (ii) whose Acquisition Proposal the Board of Directors determines in good faith (after consultation with its outside legal counsel and financial advisors) is, or would reasonably be expected to lead to or result in, a Superior Proposal; provided, however, that a third party shall cease to be an Excluded Party if (1) such Acquisition Proposal made by such third party is withdrawn, cancelled, terminated or otherwise expires or (2) such Acquisition Proposal, in the good faith determination of the Board of Directors (after consultation with its outside counsel and its financial advisor), no longer is or would no longer be reasonably expected to lead to or result in a Superior Proposal.

“Superior Proposal” means a bona fide, written Acquisition Proposal for at least a majority of the outstanding shares of Company Stock (assuming the prior exchange of all OpCo Units for shares of Company Stock) or at least a majority of the consolidated assets of McAfee and its subsidiaries that (i) is not solicited in breach in any material respect of Section 6.03(b) or (c) of the Merger Agreement and (ii) is on terms that the Board of Directors has determined in good faith (after consultation with its financial advisor and outside legal counsel) is more favorable from a financial perspective to the holders of the Company Stock than the Merger (taking into account (A) any revisions to the Merger Agreement made or proposed in writing by Parent prior to the time of such determination in accordance with Section 6.03(h) of the Merger Agreement and (B) all terms and conditions of such Acquisition Proposal (including legal, regulatory, financing and closing conditions)).

The “No Shop” Period—No Solicitation of Other Offers

With respect to any Excluded Party, from the Cut-Off Date, and with respect to any person or “group” who is not an Excluded Party, from the No Shop Period Start Date until the earlier to occur of the termination of the Merger Agreement and the Effective Time, McAfee and its subsidiaries have agreed not to, and to not authorize or knowingly permit the representatives of McAfee or its subsidiaries to, directly or indirectly:

 

   

solicit, initiate, propose, knowingly induce, facilitate or knowingly encourage the making, submission or announcement of any Acquisition Proposal or any inquiries that could reasonably be expected to lead to, result in or constitute an Acquisition Proposal (including by way of furnishing non-public information);

 

   

enter into or participate in any discussions or negotiations with, or furnish any non-public information relating to the McAfee Group to, any third party for the purpose of knowingly facilitating, inducing or encouraging an Acquisition Proposal; or

 

   

enter into any letter of intent, agreement in principle definitive written merger agreement, acquisition agreement or other agreement relating to an Acquisition Proposal, other than an Acceptable Confidentiality Agreement.

In addition, McAfee has agreed, and will cause its subsidiaries and instruct its and its subsidiaries’ representatives, to (i) with respect to any Excluded Party, on the Cut-Off Date, or (ii) with respect to a person or

 

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“group” who is not an Excluded Party, on the No Shop Period Start Date, cease and cause to be terminated any solicitation, discussions or negotiations with any third party and its representatives that could reasonably be expected to lead to or relating to an Acquisition Proposal, promptly terminate all physical and electronic data room access previously granted to any such third party or its representatives, cease providing any further non-public information concerning the McAfee Group furnished to any such third party or its representatives and request the return or destruction of any copies of, studies based upon and/or any extracts or summaries from, any non-public information concerning the McAfee Group in such third party’s possession or control.

Additionally, under certain specified circumstances, at any time prior to the adoption of the Merger Agreement by McAfee Stockholders, McAfee may, among other things, provide non-public information relating to the McAfee Group to, and engage or participate in negotiations or discussions with, a person in respect of an Acquisition Proposal, and such Acquisition Proposal did not result from a breach in any material respect of Section 6.03 of the Merger Agreement (provided that McAfee and its representatives may contact any third party to clarify the terms and conditions of an Acquisition Proposal or inform such person of the existence of the applicable provisions in the Merger Agreement) if (and only if), subject to complying with certain procedures described in the subsequent paragraph, the Board of Directors determines in good faith (after consultation with its financial advisor and its outside legal counsel) that such Acquisition Proposal either constitutes a Superior Proposal or would reasonably be expected to lead to or result in, a Superior Proposal.

Both during the Go Shop Period and after the No Shop Period Start Date but prior to the adoption of the Merger Agreement by McAfee Stockholders, McAfee is not entitled to terminate the Merger Agreement for the purpose of entering into an agreement in respect of a Superior Proposal unless it complies with certain procedures in the Merger Agreement, including, but not limited to, negotiating with Parent in good faith over a three (3) business-day period in an effort to amend the terms and conditions of the Merger Agreement, so that such Superior Proposal no longer constitutes a “Superior Proposal” relative to the transactions contemplated by the Merger Agreement, as amended pursuant to such negotiations.

If McAfee has complied in all material respects with Section 6.03(b) and (c) of the Merger Agreement and terminates the Merger Agreement prior to the adoption of the Merger Agreement by McAfee Stockholders for the purpose of entering into an agreement in respect of a Superior Proposal, other than entering into an agreement in respect of a Superior Proposal with an Excluded Party prior to the Cut-Off Date, McAfee must pay a $291,265,000 termination fee to Parent.

The Board of Directors’ Recommendation; Adverse Recommendation Change

As described above, and subject to the provisions described below, the Board of Directors has made the recommendation that the holders of shares of Company Stock vote “FOR” the proposal to adopt the Merger Agreement. The Merger Agreement provides that the Board of Directors will not effect an Adverse Recommendation Change except as described below.

Prior to the adoption of the Merger Agreement by McAfee Stockholders, the Board of Directors may not take any action described in the following (any such action, an “Adverse Recommendation Change”):

 

   

fail to make, withdraw, amend, qualify or modify, or publicly propose to fail to make, withdraw, amend, qualify or modify, in a manner adverse to Parent, the recommendation of the Board of Directors to the McAfee Stockholders to approve the Merger Agreement;

 

   

adopt, approve, endorse or recommend (or propose publicly to adopt, approve, endorse or recommend) an Acquisition Proposal;

 

   

fail to issue a press release publicly reaffirming the recommendation of the Board of Directors to approve the Merger within ten (10) business days after Parent so requests or, if earlier, at least two (2) business days prior to the Special Meeting (which request may be made once per Acquisition Proposal);

 

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fail to include the recommendation of the Board of Directors to approve the Merger Agreement in this proxy statement; or

 

   

submit to McAfee Stockholders for approval or adoption any Acquisition Proposal.

For the avoidance of doubt, none of the following, in and of itself, will constitute an Adverse Recommendation Change: (i) the determination by the Board of Directors that an Acquisition Proposal constitutes a Superior Proposal, (ii) a public press release as to the determination described in prior clause (i) so long as such press release also states that no Adverse Recommendation Change or termination of the Merger Agreement will occur until the expiration of the three (3) business day (or, if applicable, the two (2) business day) period discussed below, subject to McAfee’s compliance with certain other terms set forth in the Merger Agreement, or (iii) delivery by McAfee to Parent of any notice related to an Intervening Event (as defined in this section of this proxy statement below) or Superior Proposal as set forth below.

Notwithstanding the restrictions described above, prior to the adoption of the Merger Agreement by McAfee Stockholders, the Board of Directors may effect an Adverse Recommendation Change if (i) there has been an Intervening Event; or (ii) McAfee has received a written Acquisition Proposal that did not result from a breach in any material respect of Sections 6.03(b) or (c) of the Merger Agreement, whether before or after the No Shop Period Start Date, that the Board of Directors has concluded in good faith (after consultation with its financial advisor and outside legal counsel) is a Superior Proposal and, in each case of clause (i) and (ii), the failure to effect an Adverse Recommendation Change would reasonably be expected to be inconsistent with the Board of Directors’ fiduciary obligations under Delaware law.

The Board of Directors may only effect an Adverse Recommendation Change for an Intervening Event if:

 

   

McAfee has provided prior written notice to Parent at least three (3) business days in advance to the effect that the Board of Directors intends to effect an Adverse Recommendation Change pursuant to the Merger Agreement, which notice must specify in reasonable detail the facts of the underlying Intervening Event;

 

   

prior to effecting such Adverse Recommendation Change, McAfee and its representatives, during such three (3)-business-day period, must, if requested by Parent, have (i) engaged in good faith negotiations with Parent to amend the Merger Agreement in such manner that obviates the need for such Adverse Recommendation Change and (ii) considered in good faith any revisions to the Merger Agreement or any other Transaction Document irrevocably proposed in writing by Parent; and

 

   

the Board of Directors (after consultation with its financial advisor and outside legal counsel) shall have determined in good faith that the failure to make an Adverse Recommendation Change in response to the Intervening Event would reasonably be expected to be inconsistent with its fiduciary duties under Delaware law.

In addition, the Board of Directors may only effect an Adverse Recommendation Change or authorize McAfee to terminate the Merger Agreement to substantially concurrently enter into an agreement with respect to a Superior Proposal, in each case if and only if:

 

   

the McAfee Group and its representatives have complied in all material respects with its obligations under Sections 6.03(b) or (c) of the Merger Agreement with respect to such Superior Proposal;

 

   

McAfee has provided prior written notice to Parent at least three (3) business days in advance to the effect that the Board of Directors has (i) concluded in good faith (after consultation with its financial advisor and outside legal counsel) that the applicable Acquisition Proposal constitutes a Superior Proposal; and (ii) resolved to effect an Adverse Recommendation Change or to terminate the Merger Agreement absent any revision to the terms and conditions of the Merger Agreement, which notice will attach the most current version of the proposed agreement under which the Superior Proposal is proposed to be consummated and include the identity of the third party making such Acquisition Proposal;

 

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prior to effecting such Adverse Recommendation Change or termination, the Board of Directors, during the three (3) business day notice period described above, has: (i) negotiated with Parent in good faith (to the extent that Parent requests to so negotiate) to amend the terms and conditions of the Merger Agreement so that such Acquisition Proposal would cease to constitute a Superior Proposal; (ii) considered in good faith any revisions to the Merger Agreement or any other Transaction Document irrevocably proposed in writing by Parent, provided, however, that in the event of any material amendment to the financial terms or other material terms of such Superior Proposal, McAfee will be required to deliver a new written notice to Parent and to comply with the requirements of this clause (it being understood that the “notice period” in respect of such new written notice will be two (2) business days);

 

   

following the three (3) business day notice period described above including any subsequent notice period as provided above, the Board of Directors shall have determined that such Acquisition Proposal would continue to constitute a Superior Proposal and the failure to make an Adverse Recommendation Change or to terminate the Merger Agreement would reasonably be expected to be inconsistent with its fiduciary duties pursuant to Delaware law, even if Parent’s proposed revisions were to be given effect; and

 

   

in the event of any termination of the Merger Agreement pursuant to the foregoing in order to cause or permit the McAfee Group to enter into an acquisition agreement with respect to such Superior Proposal, McAfee will be required to pay Parent a termination fee of either (i) $145,632,500 if the Merger Agreement is terminated before the Cut-Off Date for the purposes of entering into a definitive agreement in respect of a Superior Proposal with any Excluded Party or its affiliates or (ii) $291,265,000, in the case of any other such termination.

For purposes of this proxy statement and the Merger Agreement, an “Intervening Event” means any material fact, event, change, development or set of circumstances that was not known to, or reasonably foreseeable to, the Board of Directors as of the date of the Merger Agreement (or if known to the Board of Directors as of the Merger Agreement, the consequences of which were not known or reasonably foreseeable to the Board of Directors as of the date of the Merger Agreement) and becomes known to the Board of Directors prior to the time that the McAfee Stockholders adopt the Merger Agreement; provided, however, that none of the following will constitute an Intervening Event: (A) the receipt, existence of or terms of an Acquisition Proposal or any matter relating thereto or consequence thereof and (B) changes in the market price or trading volume of the shares of Company Stock or the fact that McAfee meets or exceeds internal or published projections, budgets, forecasts or estimates of revenues, earnings or other financial results for any period (provided, however, that the underlying causes of such change or fact shall not be excluded by this clause (B)).

Employee Benefits

The Merger Agreement provides that, from and after the Effective Time, Parent will, or will cause the Surviving Corporation to, assume, honor and continue (i) during the 12-month period following the Effective Time (or until all obligations thereunder have been satisfied, if sooner) all of McAfee’s employment, severance, bonus, incentive compensation, commission, change in control, retention and termination plans and agreements in effect at the Effective Time and (ii) all obligations under the Cash Awards and each Company Cash Right. With respect to each employee of McAfee or its subsidiaries who is employed as of immediately prior to the Effective Time (“Company Employees”), for a period of 12 months following the closing of the Merger (or, if sooner, until the applicable Company Employee terminates employment), Parent will provide, or cause to be provided, to each Company Employee, (i) base salary or wage rates, severance and target annual and quarterly cash bonus opportunities that, in each case, is not less favorable than that in effect immediately prior to the Effective Time (or, if more favorable to such Company Employee, the compensation and benefits provided to similarly situated employees of Parent and its affiliates), and (ii) other employee benefits that are no less favorable in the aggregate to the employee benefits that the Company Employee was entitled to receive immediately prior to the closing (in each case without regard to any retention, change in control, stay, transaction, or similar non-routine compensation or compensation opportunities, or equity-equity-based

 

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compensation), provided that in all events the compensation, benefits and other terms and conditions of employment provided by Parent or the Surviving Corporation shall be no less than those required under applicable law and will comply with the terms of the Business Sale Agreement and applicable local transfer agreements.

With respect to any employee benefit plan maintained by Parent, the Surviving Corporation or any of their affiliates (“Parent Plans”), for all purpose, each Company Employee’s service with McAfee or any of its subsidiaries prior to the Effective Time (as well as service with any predecessor employer, to the extent recognized under the comparable employee plans of McAfee and its subsidiaries) where length of service is relevant (but not benefit accruals under any defined benefit pension plans) shall be treated as service with Parent, the Surviving Corporation or their affiliates, provided that such service need not be recognized to the extent it would result in any duplication of benefits or was not credited for the same purpose with respect to such Company Employee under the analogous employee plan immediately prior to the Effective Time. Parent will waive, and will cause the Surviving Corporation and any of its affiliates to waive, any pre-existing condition limitations, exclusions, actively-at-work requirements, waiting periods, evidence of insurability or similar limitations under any Parent Plans in which any Company Employee (or the dependent of any eligible employee) will be eligible to participate from and after the Effective Time and will recognize or credit, or cause the Surviving Corporation or any of its affiliates to recognize or credit, any deductible, co-insurance, maximum out of pocket expenses or other payments incurred by any Company Employee (and his or her dependents) under any applicable employee plan during the plan year in which the Effective Time occurs for the purposes of satisfying such year’s deductible or co-payment limitations.

With respect to McAfee’s employee stock purchase plan (the “ESPP”), McAfee has taken all actions necessary to (i) cancel all outstanding participant elections under McAfee’s ESPP with respect to the planned first offering period, which was scheduled to begin on November 16, 2021, and (ii) cause the offering period not to commence, and to cause no other offering period to commence. In addition, with respect to the ESPP, McAfee intends to take all action necessary to terminate the ESPP prior to the Effective Time.

Efforts to Close the Merger

Under the Merger Agreement, Parent and McAfee agreed to cooperate with each other and use reasonable best efforts to take all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable law to consummate the Merger and the other transactions contemplated by the Merger Agreement as promptly as practicable, including (i) preparing and filing as promptly as practicable after the date of the Merger Agreement with any governmental authority all documentation to effect all necessary filings, notices, petitions, statements, registrations, submissions of information, consolidated financial statements, records, applications and other documents required by Section 8.01 of the Merger Agreement, (ii) obtaining and maintaining as required by Section 8.01 of the Merger Agreement all approvals, consents, registrations, permits, authorizations, licenses, waivers and other confirmations required to be obtained from any governmental authority that are necessary to consummate the transactions contemplated by the Merger Agreement, and (iii) executing and delivering any additional instruments necessary to consummate the transactions contemplated by the Merger Agreement; provided, however, that in no event will Parent, Merger Subsidiary, McAfee or any of their subsidiaries be required to waive any right or condition set forth in the Merger Agreement or any Transaction Document.

Parent has further agreed to, as soon as possible and in any event prior to the End Date take any and all action necessary solely to ensure (x) that certain regulatory authorities do not enter any order, decision, judgment, decree, ruling, injunction (preliminary or permanent), or establishes any law, rule, regulation or other action preliminarily or permanently restraining, enjoining or prohibiting the consummation of the Merger and (y) that certain regulatory authorities with the authority to clear, authorize or otherwise approve the consummation of the Merger, do so by the End Date, including but not limited to:

 

   

selling or otherwise disposing of, or holding separate and agreeing to sell or otherwise dispose of, assets, categories of assets or businesses of McAfee or its subsidiaries;

 

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terminating existing relationships, contractual rights or obligations of McAfee or its subsidiaries;

 

   

terminating any venture or other arrangement of McAfee or its subsidiaries;

 

   

creating any relationship, contractual rights or obligations of McAfee or its subsidiaries; or

 

   

effectuating any other change or restructuring of McAfee or its subsidiaries;

and in each case, to enter into agreements or stipulate to the entry of an order or decree or file appropriate applications with: (x) the FTC, the DOJ, any attorney general of any state of the United States, the European Commission or any other competition authority of any jurisdiction, CFIUS or any other governmental authority (collectively, “Regulatory Authority”) in connection with certain regulatory laws and in the case of actions by or with respect to McAfee or its subsidiaries or its or their businesses or assets, by consenting to such action by McAfee; provided, however, that any of the actions set forth above may, at the discretion of McAfee, be conditioned upon consummation of the Merger (each, a “Divestiture Action”).

In the event that any action is threatened or instituted by a Regulatory Authority challenging the Merger as violative of any regulatory law, Parent has agreed to take all action necessary, including but not limited to any Divestiture Action, to avoid or resolve such action. In the event that any permanent or preliminary injunction or other order is entered or becomes reasonably foreseeable to be entered in any proceeding that would make consummation of the transactions contemplated by the Merger Agreement unlawful or that would restrain, enjoin or otherwise prevent or materially delay the consummation of the transactions contemplated by the Merger Agreement, Parent has agreed to use reasonable best efforts to vacate, modify or suspend such injunction or order so as to permit such consummation prior to the End Date.

In furtherance and not in limitation of the covenants described above, Parent and McAfee have agreed to, as necessary:

 

   

as promptly as practicable, and in any event within ten (10) business days of the date of the Merger Agreement, make an appropriate filing of a notification and report form pursuant to the HSR Act;

 

   

within 15 calendar days of the date of the Merger Agreement, submit to DDTC any notifications regarding the transactions contemplated by the Merger Agreement pursuant to Section 122.4 of ITAR;

 

   

as soon as practicable following the date of the Merger Agreement, submit a draft joint voluntary notice to CFIUS and submit a final joint voluntary notice to CFIUS, each with regard to the Merger Agreement and other related information;

 

   

make each other appropriate filing required pursuant to certain foreign regulatory laws;

 

   

comply at the earliest practicable date with any request under certain regulatory laws for additional information, documents, or other materials received by each of them or any of their respective subsidiaries or affiliates from any Regulatory Authority in respect of such filings or such transactions;

 

   

cooperate with each other in connection with any such filing (including, to the extent permitted by applicable law, providing copies of all such documents to the non-filing parties prior to filing and considering all reasonable additions, deletions or changes suggested in connection therewith) and in connection with resolving any investigation or other inquiry of any regulatory authority under any of the regulatory laws with respect to any such filing or any such transaction; and

 

   

use its reasonable best efforts to furnish to each other all information required for any application or other filing to be made pursuant to certain regulatory laws in connection with the transactions contemplated by the Merger Agreement.

Cooperation with Debt/Preferred Equity Financing

Pursuant to the Merger Agreement, each of Parent and Merger Subsidiary has agreed to use reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, advisable or

 

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proper to obtain the proceeds of the Financing contemplated by the Commitment Letters on or prior to the Closing Date on the terms and conditions and in the amounts described in the Commitment Letters (including any “flex” provisions) or such other terms and conditions that are more favorable to Parent and Merger Subsidiary.

If any portion of the Debt Financing or the Preferred Equity Financing, as applicable, becomes unavailable, or the Debt Commitment Letter or any of the definitive documentation with respect to the Debt Financing shall be withdrawn, repudiated, terminated or rescinded, regardless of the reason therefor, Parent shall promptly notify McAfee of such unavailability and the reason thereof and Parent shall use reasonable best efforts to arrange and obtain, as promptly as practicable, from the same and/or alternative debt or preferred equity financing sources, as applicable, alternative financing in an amount, together with the amount of Financing remaining available and cash and cash equivalents on hand at McAfee and its subsidiaries, sufficient to pay the Required Amount on the Closing Date, in each case, upon terms and conditions not materially less favorable, taken as a whole, than those set forth in the Debt Commitment Letter or the Preferred Equity Commitment Letter, as applicable (including, for the avoidance of doubt, any related “market flex” provisions).

In connection with the efforts of Parent and Merger Subsidiary to arrange the financing, prior to the Closing Date, McAfee has agreed to use its reasonable best efforts to, and to cause its subsidiaries to use reasonable best efforts to, and to use reasonable best efforts to cause its and their respective representatives to, provide such cooperation as is reasonably requested by Parent and as is necessary in connection with the Debt/Preferred Equity Financing and customarily provided for borrowers or issuers in financings of the type contemplated by the Debt Commitment Letter (or permanent take-out financing incurred in lieu of the bridge facility contemplated under the Debt Commitment Letter) or the Preferred Equity Commitment Letter, as applicable, including reasonable best efforts in: (i) furnishing to Parent (A) the financial statements attached to McAfee’s 8-K filing on Form 8-K, dated August 2, 2021, (B) McAfee’s unaudited balance sheets and related consolidated statements of operations, and equity and cash flows for each of the first three fiscal quarters of each fiscal year ending after December 26, 2020 to the extent such fiscal quarter ends at least 45 days prior to the Closing Date and the audited balance sheets and related consolidated statements of operations, and equity and cash flows for each fiscal year ending after December 26, 2020 to the extent such fiscal year ends at least 90 days prior to the Closing Date, (C) information, financial statements and financial data of McAfee and its subsidiaries that is reasonably requested by Parent in writing and of the type customarily included in an offering memorandum with respect to a private placement of high yield debt securities pursuant to Rule 144A under the 1933 Act (the information described in clauses (A), (B) and (C), the “Debt Required Information”) and (D) such other pertinent and customary financial and other information regarding McAfee and its subsidiaries as may be reasonably requested by Parent; (ii) prior to and during the Debt Commitment Letter Marketing Period, upon reasonable prior written notice and at reasonable times, cause members of management to participate in a reasonable number of meetings, drafting sessions, rating agency presentations and due diligence presentations, presentations, “road shows” and sessions with prospective financing sources and investors; (iii) in advance of and prior to the closing of the Debt Commitment Letter Marketing Period, providing reasonable assistance to Parent and its Debt/Preferred Equity Financing Sources in the preparation of customary bank information memoranda, lender or investor presentations, rating agency presentations, offering memoranda or private placement memoranda and other customary marketing materials in connection with the Debt/Preferred Equity Financing; (iv) causing McAfee’s auditors to provide customary comfort letters with respect to historical financial information of McAfee included in any offering memoranda with respect to any non-convertible high yield debt securities included in the Debt Financing issued on a “Rule 144A for life” basis; (v) assisting in the preparations for the pledging of collateral, facilitating the obtaining of guarantees, and assistance in the preparation of any definitive financing documents and other matters ancillary to the Debt Financing as may be reasonably requested by Parent; (vi) at least four (4) business days prior to the Closing Date, to the extent requested by Parent on behalf of the Debt/Preferred Equity Financing Sources no later than ten (10) business days prior to the Closing Date, timely furnishing such documentation and other information required by governmental authorities under applicable “know your customer” and anti-money laundering rules and regulations; (vii) providing reasonable assistance to facilitate, at (but not prior to) the closing of the Merger, the release of liens on assets of McAfee (other than permitted liens)

 

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that are collateral for the Debt Financing, (viii) assisting Parent in obtaining any corporate or facility ratings from any ratings agencies contemplated by the Debt/Preferred Equity Financing and (ix) executing and delivering prepayment notices within the time periods contemplated by the Credit Agreement.

Notwithstanding the foregoing, subject to certain exceptions set forth in the Merger Agreement, neither McAfee nor any of its affiliates will be required to take or permit the taking of any action: (A) that would require McAfee or any of its affiliates or any other persons who are directors or officers of such entities to pass resolutions or consents to approve or authorize the execution of the Debt/Preferred Equity Financing that are not conditioned upon the effectiveness of the closing of the Merger; provided that any director or officer whose resignation becomes effective immediately after the closing of the Merger occurs shall not be required to pass resolutions or consents, (B) that would require McAfee or any of its affiliates or any other persons who are directors or officers of such entities to execute or deliver any certificate, document, instrument or agreement, or agree to any change or modification of any existing certificate, opinion, document, instrument or agreement, in each case, prior to the closing of the Merger, (C) that would cause any representation or warranty in the Merger Agreement to be breached by McAfee or any of its affiliates or would cause any condition to the closing of the Merger to fail to be satisfied, (D) that would require McAfee or any of its subsidiaries to pay (x) any commitment or other similar fee or (y) incur any other expense, liability or obligation in connection with the Debt/Preferred Equity Financing that, in the case of this clause (y), would not be subject to reimbursement by Parent, (E) that could cause any director, officer or employee or McAfee Stockholder or any of its affiliates to incur any personal liability, (F) that could reasonably be expected to conflict with, result in any violation or breach of, or default (with or without notice, lapse of time, or both) under, any of their respective organizational documents, or any applicable law or material contracts not entered into in contemplation of the cooperation obligations of McAfee described in the preceding paragraph, (G) that provides access to or discloses information that McAfee or any of its affiliates determines could reasonably be expected to jeopardize any attorney-client privilege of, or conflict with any confidentiality obligations contained in any material contracts not entered into in contemplation of the cooperation obligations of McAfee described in the preceding paragraph binding on, McAfee or any of its subsidiaries, (H) that would, in the opinion of McAfee in good faith, unreasonably interfere with the ongoing operations of its or its affiliates’ businesses or would require an action that is not within the control of McAfee or its affiliates using reasonable best efforts or (I) that would cause significant competitive harm to McAfee or its subsidiaries if the transactions contemplated by the Merger Agreement are not consummated. Nothing contained in the Merger Agreement shall require McAfee or any of its affiliates to encumber any of its assets or be an issuer or other obligor with respect to the Debt/Preferred Equity Financing or require McAfee or any of its affiliates to be an issuer or other obligor with respect to the Debt/Preferred Equity Financing, in each case, prior to the closing of the Merger.

Parent will, promptly upon request by McAfee, reimburse McAfee and its affiliates for all fees, costs, expenses and liabilities incurred by any of them or their respective representatives in connection with fulfilling their respective cooperation obligations described in the second preceding paragraph above (including reasonable attorneys’ fees) but excluding the fees, costs or expenses for financial statements included in the Required Information or any other materials that, in each case, would be prepared by McAfee or its affiliates in the ordinary course of business whether or not request would be made by Parent. Parent will indemnify, defend and hold harmless McAfee, its affiliates and their respective representatives from and against any and all losses, damages, claims, costs or expenses actually suffered or incurred by them in connection with the provision of assistance described in the second preceding paragraph above in connection with the Debt/Preferred Equity Financing or any other financing by Parent or any of its affiliates (including the arrangement thereof) and any information used in connection therewith except any such losses, damages, claims costs or expenses arising out of any willful misconduct, gross negligence, or bad faith, fraud or intentional misrepresentation by any of McAfee or its subsidiaries and its or their respective representatives.

Treatment of Certain Indebtedness

Prior to the Effective Time, McAfee shall (a) use reasonable best efforts to execute and deliver prepayment notices within the time periods contemplated by the Credit Agreement; (b) use reasonable best efforts to provide

 

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reasonable assistance to facilitate at (but not prior to) the closing of the Merger the release of liens on assets of McAfee (other than permitted liens) that are collateral for the Debt Financing; (c) use commercially reasonable efforts to deliver to Parent copies (or drafts) of customary payoff letters in form and substance reasonably satisfactory to Parent from the administrative agent under the Credit Agreement at least three (3) business days prior to the Closing Date; and (d) deliver to Parent, on or prior to the Closing Date, copies of such payoff letters duly executed by the administrative agent under the Credit Agreement.

Indemnification and Insurance

Parent and the Surviving Corporation have agreed that all rights to exculpation and indemnification from liabilities for acts or omissions occurring at or prior to the Effective Time, all rights to indemnification and exculpation under employment agreements or indemnification agreements and rights to advancement of expenses relating thereto now existing in favor of any person who is or has been at any time prior to the Effective Time, a present or former director, manager, officer or fiduciary with respect to an employee benefit plan of McAfee, any of its subsidiaries or any of their respective predecessors (each, an “Indemnified Person”) as provided in the certificate of incorporation or bylaws of McAfee, the organizational documents of any subsidiary of McAfee or any indemnification agreement, employment agreement or other agreement containing any indemnification provisions, in each case which agreement had been delivered to Parent prior to the date of the Merger Agreement, between such Indemnified Person and McAfee or any of its subsidiaries will survive the Merger and will not be amended, repealed or otherwise modified in any manner that would adversely affect any right to indemnification, exculpation or advancement of expenses thereunder of any such Indemnified Person.

For six (6) years after the Effective Time, Parent and the Surviving Corporation (jointly and severally) will indemnify and hold harmless all Indemnified Persons to the fullest extent permitted by Delaware law in the event of any threatened or actual claim, suit, action, proceeding or investigation (a “Claim”), whether civil, criminal or administrative, based in whole or in part on, or arising in whole or in part out of, or pertaining to (i) the fact that the Indemnified Person is or was a director (including in a capacity as a member of any board committee), manager, officer or fiduciary with respect to an employee benefit plan of McAfee, any of its subsidiaries or any of their respective predecessors or (ii) the Merger Agreement or any of the transactions contemplated thereby, whether in any case asserted or arising before, on or after the Effective Time, against any losses, claims, damages, liabilities, costs, expenses (including reasonable attorney’s fees and expenses in advance of the final disposition of any Claim to the fullest extent permitted by applicable law upon receipt of an undertaking to repay such expenses if such Indemnified Person was not entitled to indemnification under applicable law), judgments, fines and amounts paid in settlement of or in connection with any such threatened or actual Claim. Neither Parent nor the Surviving Corporation will settle, compromise or consent to the entry of any judgment in any threatened or actual Claim for which indemnification could be sought by an Indemnified Person thereunder, unless such settlement, compromise or consent includes an unconditional release of such Indemnified Person from all liability arising out of such Claim, does not include any admission of wrongdoing on the part of such Indemnified Person, or such Indemnified Person otherwise consents in writing to such settlement, compromise or consent. Parent and the Surviving Corporation agree to use commercially reasonable efforts to cooperate with an Indemnified Person in the defense of any matter for which such Indemnified Person seeks indemnification under the Merger Agreement.

Prior to the Effective Time, McAfee has agreed to, or if McAfee is unable to, Parent will cause the Surviving Corporation as of the Effective Time to, obtain and fully pay the premium for the non-cancellable extension of the directors’ and officers’ liability coverage of McAfee’s existing directors’ and officers’ insurance policies and McAfee’s existing fiduciary liability insurance policies, in each case for a claims reporting or discovery period of at least six (6) years from and after the Effective Time with respect to any claim related to any period of time at or prior to the Effective Time (including claims with respect to the adoption of the Merger Agreement and the consummation of the transactions contemplated thereby) with terms, conditions, retentions and limits of liability that are no less favorable than the coverage provided under McAfee’s existing policies; provided that McAfee will give Parent a reasonable opportunity to participate in the selection of such “tail” insurance policy and must consider, in good faith, any comments made by Parent with respect thereto; and

 

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provided that the premium payable for such “tail” insurance policy does not exceed 300% of the amount per annum that McAfee paid in its last full fiscal year and if the cost for such “tail” insurance policy exceeds such maximum amount, then McAfee or the Surviving Corporation will obtain a policy with the greatest coverage available for a cost not exceeding such maximum amount.

Parent must pay all reasonable expenses, including reasonable attorneys’ fees and expenses, that may be incurred by an Indemnified Person in enforcing the indemnity and other obligations provided in the foregoing three paragraphs.

Other Covenants

The Merger Agreement contains other covenants relating to access to information, publicity, and notices of certain events.

Stockholders Meeting

McAfee has agreed to take all necessary or desirable actions to cause the Special Meeting to be duly called and held as soon as reasonably practicable (but not sooner than 20 business days) following clearance of this proxy statement by the SEC, for the purpose of obtaining the affirmative vote of the holders of a majority of the outstanding shares of Company Stock that is required to approve and adopt the Merger Agreement. In certain circumstances specified in the Merger Agreement, McAfee may adjourn or postpone the Special Meeting.

Stockholder Litigation

Prior to the earlier of the Effective Time or the valid termination of the Merger Agreement, McAfee will control the defense of any action, investigation, litigation or other proceeding brought by McAfee Stockholders against McAfee and/or its directors relating to the transactions contemplated by the Merger Agreement, including the Merger. However, McAfee will: (i) provide Parent with prompt notice of all threatened or filed stockholder litigation relating to the Merger Agreement, promptly advise Parent of any material developments with respect thereto, and promptly provide Parent with copies of all proceedings and correspondence with respect thereto; (ii) keep Parent reasonably informed with respect to the status thereof; (iii) give Parent and its counsel the opportunity to participate in the defense, release, compromise, waiver or settlement of any such litigation or proceeding and consider in good faith Parent’s advice with respect thereto; and (iv) not settle or agree to settle any such litigation or proceeding (other than any settlement solely for monetary damages and without any admissions of liability or responsibility paid entirely from the proceeds of a third party insurance policy, except for any applicable deductible or retention) without Parent’s prior written consent (not to be unreasonably withheld, conditioned or delayed).

Conditions to the Closing of the Merger

The obligations of Parent and Merger Subsidiary, on the one hand, and McAfee, on the other hand, to consummate the Merger are subject to the satisfaction or waiver (where permitted by applicable law) at or prior to the Effective Time of each of the following conditions:

 

   

the approval and adoption of the Merger Agreement by the requisite affirmative vote of McAfee Stockholders entitled to vote at the Special Meeting;

 

   

the absence of any applicable law, temporary restraining order, or preliminary or permanent injunction issued by any court or governmental authority in certain jurisdictions that enjoins or otherwise prohibits the consummation of the Merger;

 

   

(i) the expiration or termination of the applicable waiting period (and any extensions thereof) under the HSR Act and (ii) the waiting periods (and any extensions thereof), clearances, approvals, waivers and/or consents (as applicable) under certain other antitrust or regulatory laws having expired, been terminated or been obtained (as applicable);

 

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at least 60 days having elapsed since McAfee submitted the notification to DDTC pursuant to Section 122.4(b) of the ITAR; and

 

   

the receipt of CFIUS Approval, which means (i) a written determination from CFIUS to the effect that the transactions contemplated by the Merger Agreement do not constitute a “covered transaction” pursuant to 31 C.F.R. § 800.213, (ii) a written determination from CFIUS to the effect that review or investigation of the transactions contemplated by the Merger Agreement has been concluded and that a determination has been made that there are no unresolved national security concerns, or (iii) following an investigation conducted by CFIUS pursuant to 31 C.F.R. § 800.507, CFIUS reports the transaction to the President of the United States and either (A) the President of the United States makes a decision not to suspend or prohibit such transaction pursuant to his authorities under Section 721 of the Defense Production Act of 1950, as amended, or (B) the President of the United States has not taken any action within 15 days from the date he received the report from CFIUS.

In addition, the obligations of Parent and Merger Subsidiary to consummate the Merger are subject to the satisfaction or waiver (where permitted by applicable law) at or prior to the Effective Time of each of the following additional conditions:

 

   

McAfee having performed and complied in all material respects with all of its obligations under the Merger Agreement required to be performed at or prior to the Effective Time;

 

   

the representations and warranties of McAfee relating to the absence of any Material Adverse Effect on the Company since December 26, 2020 to the date of the Merger Agreement being true in all respects at and as of the date of the Merger Agreement;

 

   

the representations and warranties of McAfee relating to corporate existence, authorization, finders’ fees and anti-takeover statutes being true in all material respects at and as of the date of the Merger Agreement and as of the Effective Time as if made at and as of such time (other than representations and warranties as of a specified time, which must be true in all material respects only as of such time);

 

   

certain representations and warranties of McAfee relating to the capitalization of McAfee being true in all respects at and as of the date of the Merger Agreement and as of the Effective Time as if made at and as of such time (other than representations and warranties as of a specified time, which must be true only as of such time), except for inaccuracies that are de minimis relative to the total fully-diluted equity capitalization of McAfee;

 

   

the other representations and warranties of McAfee set forth elsewhere in the Merger Agreement (disregarding all materiality and Material Adverse Effect qualifications contained therein) being true and correct at and as of the date of the Merger Agreement and as of the Effective Time as if made at and as of such time (other than representations and warranties as of a specified time, which must be true only as of such time), with only such exceptions as have not had and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Company;

 

   

since the date of the Merger Agreement, no Material Adverse Effect having occurred that is continuing;

 

   

the Exchange and Redemption having occurred, such that 100% of the equity interests in OpCo LLC are owned of record and held directly or indirectly by McAfee and no shares of Class B Common Stock remain outstanding; and

 

   

Parent having received a certificate signed by an executive officer of McAfee to the effect that the conditions in the preceding seven (7) bullets have been satisfied.

In addition, the obligation of McAfee to consummate the Merger is subject to the satisfaction or waiver (where permitted by applicable law) at or prior to the Effective Time of each of the following additional conditions:

 

   

each of Parent and Merger Subsidiary having performed and complied in all material respects with its obligations under the Merger Agreement required to be performed at or prior to the Effective Time;

 

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the representations and warranties of Parent relating to corporate authorization being true in all material respects at and as of the date of the Merger Agreement and as of the Effective Time as if made at and as of such time (other than representations and warranties as of a specified time, which must be true only as of such time);

 

   

the other representations and warranties of Parent contained elsewhere in the Merger Agreement (disregarding all materiality and Parent Material Adverse Effect qualifications contained therein) being true at and as of the date of this Agreement and as of the Effective Time as if made at and as of such time (other than representations and warranties that by their terms address matters only as of another specified time, which shall be true only as of such time), with only such exceptions as have not had and would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect; and

 

   

McAfee having received a certificate signed by an executive officer of Parent to the effect that the conditions in the preceding three (3) bullets have been satisfied.

The Merger Agreement defines “Parent Material Adverse Effect” as any change, effect, event or occurrence that prevents or materially impedes, interferes with, hinders or delays or would reasonably be expected to prevent or materially impede, interfere with, hinder or delay the consummation by Parent or Merger Subsidiary of the Merger or any of the other transactions contemplated by the Merger Agreement (except that the taking of any action specifically required to be taken, or the failure to take any action specifically prohibited, by the Merger Agreement will not be taken into account in determining whether or not there has been a Parent Material Adverse Effect).

Termination of the Merger Agreement

The Merger Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time only as follows:

 

   

by mutual written agreement of McAfee and Parent; or

 

   

by either McAfee or Parent, subject to certain limitations, if:

 

   

the Merger has not been consummated on or before August 2, 2022 (the “End Date”), provided that if on August 2, 2022, all of the mutual closing conditions other than the mutual conditions set forth in bullets 2 through 5 in the section labeled “Conditions to the Closing of the Merger” immediately above this section that have been satisfied or waived, then the End Date will be automatically extended one time by an additional 90 days (and in such event such 90th day, or October 31, 2022, will be the “End Date”); or

 

   

any applicable law, temporary restraining order, preliminary or permanent injunction issued by any court or governmental authority in certain jurisdictions is in effect permanently enjoining or otherwise permanently prohibiting the consummation of the Merger, and such restraint has become final and nonappealable; or

 

   

at the Special Meeting, the McAfee Stockholders fail to adopt the Merger Agreement; or

 

   

by Parent, if:

 

   

prior to the adoption of the Merger Agreement by the McAfee Stockholders, an Adverse Recommendation Change has occurred; or

 

   

subject to certain limitations, a breach of any representation or warranty or failure to perform any covenant on the part of McAfee has occurred that would cause certain of the conditions to Parent’s obligation to consummate the Merger not be satisfied, and (A) such breach is incapable of being cured by the End Date or (B) if capable of being cured, has not been cured before the earlier of (1) 20 business days following written notice from Parent or (2) one (1) day prior to the End Date; or

 

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by McAfee, if:

 

   

prior to the adoption of the Merger Agreement by the McAfee Stockholders, McAfee has received a Superior Proposal, the Board of Directors has complied in all material respects with its obligations under Sections 6.03(b) and (c) of the Merger Agreement, the Board of Directors authorizes McAfee to enter into a definitive agreement providing for the consummation of such Superior Proposal in accordance with the requirements described in the section of this proxy statement captioned “—The Board of Directors’ Recommendation; Adverse Recommendation Change”, and substantially concurrently with such termination, McAfee pays the applicable Company Termination Fee;

 

   

a breach of any representation or warranty or failure to perform any covenant on the part of Parent or Merger Subsidiary has occurred that would cause any of the conditions to McAfee’s obligation to consummate the Merger not be satisfied, and (A) such breach is incapable of being cured by the End Date or (B) if capable of being cured, has not been cured before the earlier of (1) 20 business days following written notice from McAfee or (2) one (1) day prior to the End Date; or

 

   

(A) all of the mutual closing conditions and also those closing conditions to Parent’s obligation to consummate the Merger have been satisfied, (B) Parent and Merger Subsidiary fail to consummate the Merger at the time required by the Merger Agreement, (C) McAfee has irrevocably notified Parent in writing that McAfee stands ready, willing and able to close the Merger, (D) McAfee gives Parent two (2) business days’ written notice stating McAfee’s intention to terminate the Merger Agreement and (E) the Merger does not close by the end of such two (2) business day period.

In the event that the Merger Agreement is terminated pursuant to the termination rights above, the Merger Agreement will be of no further force or effect without liability of any party (or any stockholder, director, officer, employee, agent, consultant or representative of such party) to the other parties; provided that

 

   

certain provisions of the Merger Agreement (including but not limited to those relating to the reimbursement obligations of Parent, the Confidentiality Agreement and the Fee Funding Agreements) will survive any termination of the Merger Agreement; and

 

   

neither McAfee nor Parent nor Merger Subsidiary will be relieved or released from any liabilities or damages arising out of its fraud or willful and material breach of any provision of the Merger Agreement; provided that under no circumstances will (a) the amount payable by Parent, Merger Subsidiary or any of their affiliates (taking into account the payment of the Parent Termination Fee), whether pursuant to the Merger Agreement or the Fee Funding Agreements, in connection with or following any termination of the Merger Agreement (including arising out of any willful and material breach (but excluding, for the avoidance of doubt, for fraud)) exceed an amount equal to $582,530,000 plus reasonable and documented out-of-pocket costs and expenses, with interest, incurred by McAfee or Parent to enforce its rights under the Merger Agreement (such enforcement expenses not to exceed $12,500,000) (the “Enforcement Expenses”) (if any) and the reimbursement obligations of Parent (if any) in the aggregate or (b) the amount payable by McAfee (taking into account the payment of the Company Termination Fee) in connection with or following any termination of the Merger Agreement (including arising out of any willful and material breach (but excluding, for the avoidance of doubt, for fraud)) exceed an amount equal to $291,265,000 plus the Enforcement Expenses (if any).

Termination Fee

If McAfee terminates the Merger Agreement for the purposes of entering into a definitive agreement with any Excluded Party or its affiliates prior to the Cut-Off Date in respect of a Superior Proposal, McAfee would be required to pay a $145,632,500 termination fee to Parent.

 

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Alternatively, Parent will be entitled to receive a termination fee of $291,265,000 from McAfee if the Merger Agreement is terminated:

 

   

by McAfee, in circumstances where prior to obtaining the approval of the Merger Agreement by the McAfee Stockholders, McAfee has received a Superior Proposal, the Board of Directors has complied in all material respects with its obligations under Sections 6.03(b) and (c) of the Merger Agreement, and the Board of Directors authorizes McAfee to enter into a definitive agreement providing for the consummation of such Superior Proposal in accordance with the requirements described in the section of this proxy statement captioned “—The Board of Directors’ Recommendation; Adverse Recommendation Change”; or

 

   

by Parent, in circumstances where prior to obtaining the approval of the Merger by the McAfee Stockholders, an Adverse Recommendation Change occurs; or

 

   

in circumstances where (i) after the date of the Merger Agreement, a bona fide Acquisition Proposal has been publicly made to McAfee or directly to McAfee Stockholders or has otherwise become publicly disclosed (and not publicly withdrawn at least two (2) business days prior the Special Meeting), (ii) thereafter, the Merger Agreement is terminated by Parent or Company because either the Merger has not been consummated by the End Date or the adoption of the Merger Agreement by the McAfee Stockholders has not been obtained, and (iii) within 12 months after such termination, McAfee consummates or enters into a definitive agreement providing for the consummation of, an Acquisition Proposal that is subsequently consummated.

McAfee will be entitled to receive a termination fee of $582,530,000 from Parent (the “Parent Termination Fee”) if the Merger Agreement is terminated:

 

   

by McAfee, if Parent or Merger Subsidiary has breached or failed to perform any of its respective representations, warranties, covenants or other agreements set forth in the Merger Agreement such that certain conditions set forth in the Merger Agreement are not satisfied, and such breach is not capable of being cured, or is not cured, before the earlier of one (1) day prior to the End Date or the date that is 20 business days following McAfee’s delivery of written notice of such breach;

 

   

by Parent, if the Merger has not been consummated on or before the End Date (as further described in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Termination of the Merger Agreement”) at a time when McAfee would have been entitled to terminate the Merger Agreement pursuant to the immediately preceding bullet; or

 

   

by McAfee, if (A) all of the mutual closing conditions and also those closing conditions to Parent’s obligation to consummate the Merger have been satisfied, (B) Parent and Merger Subsidiary fail to consummate the Merger at the time required by the Merger Agreement, (C) McAfee has irrevocably notified Parent in writing that McAfee stands ready, willing and able to close the Merger, (D) McAfee gives Parent two (2) business days’ written notice stating McAfee’s intention to terminate the Merger Agreement and (E) the Merger does not close by the end of such two (2) business day period.

Specific Performance

Parent, Merger Subsidiary and McAfee have agreed that irreparable damage for which money damages, even if available, would not be an adequate remedy would occur in the event that the parties do not timely perform the provisions of the Merger Agreement. Parent, Merger Subsidiary and McAfee have acknowledge and agreed that the parties will be entitled, in addition to any other right or remedy to which they are entitled at law or in equity, to an injunction and specific performance to prevent breaches (or threatened breaches) of the Merger Agreement and to enforce specifically the terms and provisions thereof. McAfee will have the right to specific performance in connection with enforcing Parent’s obligations to draw down the full proceeds of the Equity Financing and to cause Parent to consummate the transactions contemplated by the Merger Agreement, subject to the terms and conditions set forth in the Equity Commitment Letters and in the Merger Agreement, if and only if (i) all of the (x) mutual conditions to Parent, Merger Subsidiary and McAfee’s obligations to consummate the

 

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Merger and (y) conditions to Parent and Merger Subsidiary’s obligations to consummate the Merger, in each case, have been satisfied (other than those conditions that by their terms are to be satisfied at the closing of the Merger, but subject to the satisfaction of such conditions), (ii) the Debt/Preferred Equity Financing has been funded or will be funded at the closing of the Merger if the Equity Financing is funded, (iii) Parent has failed to consummate the closing of the Merger at the time required by the Merger Agreement, and (iv) McAfee has irrevocably confirmed in writing to Parent that if specific performance were granted and the Financing were funded, then the closing of the Merger would occur.

Parent, Merger Subsidiary and McAfee have agreed not to raise any objections to the availability of the equitable remedy of specific performance to specifically enforce the terms and provisions of the Merger Agreement, or to enforce compliance with, the covenants and obligations of McAfee or Parent, as applicable, under the Merger Agreement. Any party seeking an injunction or injunctions to prevent breaches of the Merger Agreement and to enforce specifically the terms and provisions of the Merger Agreement will not be required to provide any bond or other security in connection with such injunction or enforcement.

Limitations of Liability; Costs and Expenses

If McAfee or Parent, as the case may be, fails to timely pay the Company Termination Fee or the Parent Termination Fee, as applicable, and, in order to obtain such payment, either Parent or McAfee, as the case may be, commences a suit that results in a judgment against the other party for the payment of the Company Termination Fee or Parent Termination Fee, such paying party must pay the other party its reasonable and documented out-of-pocket costs and expenses in connection with such suit, together with interest on such amount at the annual rate of the prime rate as published in The Wall Street Journal in effect on the date such payment was required to be made through the date such payment was actually received, or such lesser rate as is the maximum permitted by applicable law; provided that in no event will either party be obligated to pay more than $12,500,000 in such expenses. Except as provided otherwise in the Merger Agreement, all costs and expenses incurred in connection with the Merger Agreement will be paid by the party incurring such cost or expense.

Parent and Merger Subsidiary have agreed that, upon any termination of the Merger Agreement under circumstances where the Company Termination Fee is payable by McAfee and such Company Termination Fee is paid in full, except for the Enforcement Expenses, (i) Parent, Merger Subsidiary, the Sponsors, or any of their respective former, current or future directors, officers, employees, partners, managers, members, equityholders or affiliates or any of their respective representatives (collectively, the “Parent Related Parties”) shall be precluded from any other remedy against McAfee, at law or in equity or otherwise relating to, arising out of or in connection with the Merger Agreement or the transactions contemplated thereby, (ii) none of Parent or Merger Subsidiary shall seek to obtain any recovery, judgment, or damages of any kind, including consequential, indirect, or punitive damages, against McAfee or any of McAfee’s subsidiaries or any of their respective former, current or future directors, officers, employees, partners, managers, members, stockholders or affiliates or their respective representatives (collectively, the “Company Related Parties”) relating to, arising out of or in connection with the Merger Agreement or the transactions contemplated thereby, (iii) Parent’s right to receive payment of the Company Termination Fee pursuant to the terms of the Merger Agreement will constitute the sole and exclusive remedy of the Parent Related Parties for all losses and damages suffered as a result of the failure of the transactions contemplated by the Merger Agreement to be consummated or for a breach or failure to perform thereunder or otherwise, and (iv) upon payment of such amount, none of the Company Related Parties will have any further liability or obligation relating to, arising out of or in connection with the Merger Agreement or the transactions contemplated thereby. Additionally, in no event will McAfee be required to pay the Company Termination Fee on more than one occasion.

McAfee has agreed that, upon any termination of the Merger Agreement under circumstances where the Parent Termination Fee is payable by Parent and such Parent Termination Fee is paid in full, except for the Enforcement Expenses and the reimbursement obligations of Parent, (i) the Company Related Parties shall be precluded from any other remedy against the Parent, at law or in equity or otherwise relating to, arising out of or

 

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in connection with the Merger Agreement or the transactions contemplated thereby, (ii) McAfee shall not seek to obtain any recovery, judgement or damages of any kind, including consequential, indirect, or punitive damages, against the Parent Related Parties or any of the Debt/Preferred Equity Financing Sources relating to, arising out of or in connection with the Merger Agreement, the Debt/Preferred Equity Financing or the transactions contemplated by the Merger Agreement or the Debt/Preferred Equity Financing, (iii) McAfee’s right to receive payment of the Parent Termination Fee pursuant to the Merger Agreement shall constitute the sole and exclusive remedy of the Company Related Parties against the Parent Related Parties or any of the Debt/Preferred Equity Financing Sources for all losses and damages suffered as a result of the failure of the transactions contemplated by the Merger Agreement to be consummated or for a breach or failure to perform thereunder or otherwise, and (iv) upon payment of the Parent Termination Fee, none of the Parent Related Parties or any of the Debt/Preferred Equity Financing Sources shall have any further liability or obligation to any of the Company Related Parties relating to, arising out of or in connection with the Merger Agreement, the Debt/Preferred Equity Financing or the transactions contemplated by the Merger Agreement or the Debt/Preferred Equity Financing; provided, that (a) nothing in this paragraph will impair McAfee’s or Parent’s right to seek specific performance prior to the valid termination of the Merger Agreement solely to the extent permitted under Section 11.13 thereof, (b) the parties to the Confidentiality Agreement will remain obligated for, and McAfee will be entitled to remedies with respect to, breaches of the Confidentiality Agreement, (c) nothing in this paragraph will limit or otherwise affect the Sponsors’ obligations under the Fee Funding Agreements or prior to the valid termination of the Merger Agreement, the Equity Commitment Letters, (d) following a termination of the Merger Agreement, Parent and Merger Subsidiary will remain liable thereunder, and each Sponsor will remain liable under the applicable Fee Funding Agreement to which it is a party, for the Parent Termination Fee, any Enforcement Expenses or certain reimbursement obligations of Parent that become due and payable until paid, and (e) following a termination of the Merger Agreement, McAfee will remain liable thereunder for the Company Termination Fee and any Enforcement Expenses that become due and payable until paid.

Amendment and Waiver

The Merger Agreement may be amended or waived by the parties in writing and, in the case of an amendment, signed by each party to the Merger Agreement, at any time prior to the adoption of the Merger Agreement by the McAfee Stockholders. However, after adoption of the Merger Agreement by the McAfee Stockholders, no amendment or waiver that requires further approval by such McAfee Stockholders pursuant to the DGCL may be made without such approval. Additionally, any amendment, supplement, waiver or other modification to certain provisions of the Merger Agreement in any manner that is adverse to the interest of the Debt/Preferred Equity Financing Sources (or their affiliates or their and their affiliates’ current or future officers, directors, employees, agents, representatives, stockholders, equityholders, controlling persons, limited partners, managers, members or partners and their successors and assigns) will not be effective without the consent of the Debt/Preferred Equity Financing Sources party to the Debt Commitment Letter or Preferred Equity Commitment Letter, as applicable.

Governing Law and Venue, Waiver of Jury Trial

The parties agreed that the Merger Agreement will be governed by Delaware law, without regard to the conflicts of law rules of the State of Delaware. Each party agreed to irrevocably submit to the exclusive jurisdiction of the Court of Chancery of the State of Delaware, the United States District Court in Wilmington, Delaware and the Superior Court of the State of Delaware, New Castle County, for purposes of any suit, action or other proceeding arising out of the Merger Agreement, the other agreements contemplated by the Merger Agreement, the transactions contemplated thereby or the negotiation or performance of any of the foregoing. Each party agreed to commence any action, suit or proceeding relating to the Merger Agreement either in the Court of Chancery for the State of Delaware, New Castle County and, if such suit, action or other proceeding may not be brought in such court for jurisdictional reasons, in the United States District Court in Wilmington, Delaware, and, if such suit, action or other proceeding may not be brought in such court for jurisdictional reasons, in the Superior Court of the State of Delaware, New Castle County. Each party further irrevocably

 

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waived any right such party may have to a trial by jury with respect to any legal proceeding arising out of or relating to the Merger Agreement or the transactions contemplated thereby.

The Voting Agreement

The Supporting Stockholders, which collectively own 65,591,599 shares of Class A Common Stock and 227,349,460 shares of Class B Common Stock representing approximately 35.86% of the total outstanding Class A Common Stock and 89.40% of the total outstanding Class B Common Stock, respectively, or approximately 67.91% of the total voting power of the Company Stock as of December 14, 2021, have entered into the Voting Agreement with Parent. Pursuant to the Voting Agreement, the Supporting Stockholders have agreed, among other things, to (i) vote in favor of the proposal to approve and adopt the Merger Agreement and any related action reasonably required in furtherance thereof, and (ii) vote against (x) any action that would reasonably be expected to prevent, materially delay or materially impair the consummation of the Merger or the other transactions contemplated by the Merger Agreement, including any amendment of McAfee’s or any of its subsidiaries’ organizational documents that would reasonably be expected to prevent, materially delay or materially impair the ability of Parent or Merger Subsidiary to complete the Merger, or that would or would reasonably be expected to prevent, materially delay or materially impair the consummation of the Merger and (y) any Acquisition Proposal (other than the Merger Agreement and the Merger), in each case so long as the Merger Agreement has not been terminated and the Board of Directors has not made an Adverse Recommendation Change. The Voting Agreement shall terminate upon the earlier to occur of (a) the Effective Time and (b) the termination of the Merger Agreement.

Subject to certain exceptions, the Supporting Stockholders may not transfer their shares of Company Stock other than to affiliates in the event that certain conditions are met. This description is qualified in its entirety by reference to the copy of the Voting Agreement, which is attached as Annex B to this proxy statement.

Amendment to Tax Receivable Agreement and OpCo LLC Agreement

The following summary describes certain relevant provisions of the TRA, the OpCo LLC Agreement and the material provisions of the Amendment. The descriptions of the TRA, the OpCo LLC Agreement and the Amendment in this summary and elsewhere in this proxy statement are not complete and are qualified in their entirety by reference to the TRA, the OpCo LLC Agreement and the Amendment, each of which is incorporated into this proxy statement by reference. We encourage you to read the TRA, the OpCo LLC Agreement and the Amendment carefully and in their entirety because this summary may not contain all the information about the TRA, the OpCo LLC Agreement and the Amendment that is important to you. The rights and obligations of the parties are governed by the express terms of the TRA, the OpCo LLC Agreement and the Amendment and not by this summary or any other information contained in this proxy statement.

Concurrent with the initial public offering of shares of the Class A Common Stock and related reorganization transactions undertaken in connection with the initial public offering of McAfee, McAfee entered into a tax receivable agreement with the TRA beneficiaries. McAfee acquired favorable tax attributes as a result of the reorganization transactions. In addition, exchanges or redemptions of OpCo LLC units for cash or shares of Class A Common Stock are expected to produce favorable tax attributes for McAfee. When McAfee acquires OpCo LLC units in connection with these exchanges or redemptions, anticipated tax basis adjustments are likely to increase (for tax purposes) McAfee’s depreciation and amortization deductions, thereby reducing the amount of income tax that McAfee would be required to pay in the future in the absence of this increased basis. This increased tax basis may also decrease the gain (or increase the loss) on future dispositions of certain assets to the extent that the tax basis is allocated to those assets. Under the terms of the TRA, absent a change of control of McAfee, McAfee would generally be required to pay to the TRA beneficiaries 85% of the benefits, if any, that McAfee is deemed to realize (calculated using certain assumptions) as a result of (i) all or a portion of McAfee’s allocable share of existing tax basis in the assets of OpCo LLC (and its subsidiaries) acquired in connection with the reorganization transactions undertaken in connection with McAfee’s initial public offering, (ii) increases in McAfee’s allocable share of existing tax basis in the assets of OpCo LLC (and its subsidiaries) and tax basis

 

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adjustments in the assets of OpCo LLC (and its subsidiaries) as a result of sales or exchanges of OpCo LLC units after McAfee’s initial public offering, (iii) certain tax attributes of the corporations McAfee acquired in connection with such reorganization transactions (including their allocable share of existing tax basis in the assets of OpCo LLC (and its subsidiaries)), and (iv) certain other tax benefits related to entering into the TRA, including tax benefits attributable to payments under the TRA. The increases in McAfee’s allocable share of existing tax basis in OpCo LLC assets and tax basis adjustments generated over time may increase (for tax purposes) depreciation and amortization deductions available to members of OpCo LLC and, therefore, may reduce the amount of tax that McAfee would otherwise be required to pay in the future in respect of taxable income and gain allocated to McAfee with respect to OpCo LLC units.

In addition, the TRA provides that if certain mergers, asset sales, other forms of business combination or other changes of control with respect to McAfee were to occur, then the TRA would terminate and McAfee’s obligations, or McAfee’s successor’s obligations, under the TRA would accelerate and become due and payable. Absent the Amendment, the amount of such accelerated change of control payment obligations would have been calculated as aggregate payment obligations under the TRA absent a change of control based on certain assumptions set forth in the TRA, including (among others) the assumption that McAfee would have sufficient taxable income in each taxable year ending on or after the change of control to fully utilize all potential future tax benefits that are subject to the TRA. The Merger, upon closing, constitutes a change of control under the TRA that would cause the payment obligations to accelerate and become due and payable.

On November 5, 2021, in connection with the execution of the Merger Agreement, McAfee, OpCo LLC and certain of their respective affiliates entered into the Amendment with certain other parties, in accordance with the terms of the TRA and the OpCo LLC Agreement. The Amendment (i) amends the TRA and the OpCo LLC Agreement (as further described below) and (ii) provides for certain covenants regarding tax reporting and tax-related actions after the closing of the Merger.

The Amendment provides for (i) the payment of amounts due under the TRA with respect to McAfee’s 2020 U.S. federal income tax year in accordance with the terms of the TRA up to an aggregate amount of $2,000,000, which payments shall be paid no later than 10 business days prior to the Closing Date, (ii) the suspension of all other payments under the TRA from and after November 5, 2021 and (iii) the amendment of the TRA by inserting a new Section 7.19 into the TRA effective as of immediately prior to and contingent upon the occurrence of the Effective Time which will result in the TRA (and all of McAfee’s payment obligations thereunder, including the obligation to make any of the foregoing suspended payments) terminating immediately prior to the Effective Time. The Amendment also includes agreements among the parties thereto regarding the preparation of tax returns for tax periods that end on, before or include the Closing Date and limits actions that may be taken by McAfee, OpCo LLC and certain of their controlled affiliates after the closing of the Merger to the extent such actions may have an effect on items reflected on such tax returns.

The Amendment also (i) suspends all tax distributions under the OpCo LLC Agreement from and after November 5, 2021 for so long as the Amendment is in effect, and (ii) provides that from and after the Effective Time, no person or entity shall have any obligation to make or pay tax distributions under the OpCo LLC Agreement.

In the event the Merger Agreement is terminated in accordance with its terms, the Amendment shall become null and void ab initio and all payments that were suspended under the TRA pursuant to the Amendment, and all tax distributions that were suspended under the OpCo LLC Agreement pursuant to the Amendment, shall be made by McAfee and OpCo LLC as if the Amendment had never been executed.

The Amendment will result in (i) the suspension of certain payments under the TRA with respect to McAfee’s 2021 U.S. federal income tax year in aggregate and (ii) contingent upon the occurrence of the Effective Time under the Merger Agreement, a permanent elimination of certain payments under the TRA that

 

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would have otherwise been payable to the TRA beneficiaries under the TRA with respect to McAfee’s 2021 U.S. federal income tax year. The Amendment will also eliminate any obligation of McAfee to make a payment under the TRA as a result of a change of control of McAfee, which would be substantial. The Amendment also will result in (i) the suspension of certain tax distributions by OpCo LLC under the OpCo LLC Agreement with respect to McAfee’s 2021 and 2022 U.S. federal income tax years and (ii) contingent upon the occurrence of the Effective Time under the Merger Agreement, a permanent elimination of an obligation to make such tax distributions under the OpCo LLC Agreement. Tax distributions under the OpCo LLC Agreement are intended to be sufficient to cover OpCo LLC members’ respective U.S. federal, state and local income tax liability (as determined in accordance with the OpCo LLC Agreement). Such tax liability relates to the net amount of taxable income and gain allocated to such members for the relevant taxable period (or as a result of any capital shifts or guaranteed payments for the use of capital) with respect to OpCo LLC units held by such members. The suspension and/or elimination of tax distributions under the Amendment will reduce the outflow of cash from OpCo LLC to members of the OpCo LLC each quarter during the period that the Amendment is in effect.

For more information with respect to the Amendment, please see our other filings with the SEC, including the section in our 2021 Proxy Statement captioned “Amendment to Tax Receivable Agreement and OpCo LLC Agreement” above and a copy of the Amendment which is included as Exhibit 99.2 to McAfee’s Current Report on Form 8-K, filed on November 8, 2021. A copy of the TRA is included as Exhibit 10.2 to McAfee’s Current Report on Form 8-K, filed on October 26, 2020, and a copy of the OpCo LLC Agreement is included as Exhibit 10.1 to McAfee’s Current Report on Form 8-K, filed on October 26, 2020. This description is qualified in its entirety by reference to the copy of the Amendment, which is attached as Annex C to this proxy statement.

The Board of Directors recommends that you vote “FOR” this proposal.

 

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PROPOSAL 2: THE MCAFEE COMPENSATION PROPOSAL

Under Section 14A of the Exchange Act and the applicable SEC rules issued thereunder, McAfee is required to submit a proposal to McAfee Stockholders to approve, on a non-binding advisory basis, the compensation that may be paid or become payable to McAfee’s named executive officers that is based on or otherwise relates to the Merger Agreement and the transactions contemplated by the Merger Agreement. This compensation is summarized in the section captioned “The Merger—Interests of Executive Officers and Directors of McAfee in the Merger.” The Board of Directors encourages you to review carefully the named executive officer merger-related compensation information disclosed in this proxy statement. Accordingly, McAfee is asking you to approve the following resolution:

“RESOLVED, that the McAfee Stockholders approve, on a non-binding advisory basis the compensation that will or may become payable to McAfee’s named executive officers that is based on or otherwise relates to the Merger as disclosed pursuant to Item 402(t) of Regulation S-K in the section captioned ‘The Merger—Interests of Executive Officers and Directors of McAfee in the Merger.’”

The vote on this Compensation Proposal is a vote separate and apart from the vote on the proposal to adopt the Merger Agreement. Accordingly, you may vote to approve the proposal to adopt the Merger Agreement and vote not to approve this Compensation Proposal and vice versa. Because the vote on the Compensation Proposal is advisory only, it will not be binding on McAfee. Accordingly, if the Merger Agreement is adopted and the Merger is completed, the compensation will be payable, subject only to the conditions applicable thereto, regardless of the outcome of the vote on this Compensation Proposal.

Vote Required and Board of Directors Recommendation

Approval, on a non-binding advisory basis, of the Compensation Proposal requires the affirmative vote of the outstanding shares of Company Stock representing a majority of the outstanding shares present at the Special Meeting in person or by proxy, provided a quorum is present. Assuming a quorum is present, (i) a failure to vote in person or by proxy at the Special Meeting will have no effect on the outcome of the Compensation Proposal, (ii) abstentions will be treated as votes cast and, therefore, will have the same effect as a vote against the Compensation Proposal and (iii) broker “non-votes” (if any) will have no effect on the outcome of the Compensation Proposal. Shares of Company Stock represented by properly executed, timely received and unrevoked proxies will be voted in accordance with the instructions indicated thereon. If a McAfee Stockholder returns a signed proxy card without indicating voting preferences on such proxy card, the shares of Company Stock represented by that proxy will be counted as present for purposes of determining the presence of a quorum for the Special Meeting and all of such shares will be voted as recommended by the Board of Directors.

The Board of Directors recommends that you vote “FOR” this proposal.

 

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PROPOSAL 3: ADJOURNMENT OF THE SPECIAL MEETING

We are asking you to approve a proposal to adjourn the Special Meeting to a later date or dates if necessary or appropriate to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting. If McAfee Stockholders approve the adjournment proposal, we could adjourn the Special Meeting and any adjourned session of the Special Meeting and use the additional time to solicit additional proxies, including soliciting proxies from McAfee Stockholders that have previously returned properly executed proxies voting against adoption of the Merger Agreement. Among other things, approval of the adjournment proposal could mean that, even if we had received proxies representing a sufficient number of votes against adoption of the Merger Agreement such that the proposal to adopt the Merger Agreement would be defeated, we could adjourn the Special Meeting without a vote on the adoption of the Merger Agreement and seek to convince the holders of those shares to change their votes to votes in favor of adoption of the Merger Agreement. Additionally, we may seek to adjourn the Special Meeting if a quorum is not present or otherwise at the discretion of the chairman of the Special Meeting.

The Board of Directors recommends that you vote “FOR” this proposal.

 

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information, as of the December 25, 2021, regarding ownership of our common stock by:

 

   

each person or group of affiliated persons known by us to be the beneficial owner of more than 5% of our outstanding common stock;

 

   

each of our directors;

 

   

each of our named executive officers (each, an “NEO”); and

 

   

all directors and executive officers as a group.

The amounts for our NEOs and executive officers and directors as a group and our significant stockholders are as of the December 25, 2021 unless otherwise indicated in a footnote below (and in that case are based upon SEC filings made on behalf of such owners). Beneficial ownership in this table is determined in accordance with the rules of the SEC, and does not necessarily indicate beneficial ownership for any other purpose. Under these rules, the number of shares of Company Stock deemed outstanding includes those shares issuable upon exercise of options held by the respective person or group that may be exercised within 60 days after the December 25, 2021. For purposes of calculating each person’s or group’s percentage ownership, unvested stock options exercisable within 60 days and all shares of restricted stock are included for that person or group, but not for any other person or group. Percentage of beneficial ownership is based on the shares of common stock outstanding as of the December 25, 2021. Beneficial ownership representing less than 1% is denoted with an asterisk (*).

Pursuant to the terms of the stockholders agreement entered into by the Company and certain of our stockholders in connection with our IPO (the “Stockholders Agreement”), the TPG Funds (as defined below) have the right to appoint a majority of the directors serving on the Board. As a result, the TPG Funds may be deemed to control the Company’s exercise of its option to settle exchanges of OpCo LLC Units into shares of Class A Common Stock or cash with respect to any such exchange by the TPG Funds. As a result of this control, the TPG Funds beneficially own all shares of Class A common stock underlying its OpCo LLC Units. Other than with respect to the TPG Funds, the beneficial ownership of Class A Common Stock in the table below does not take into account the potential redemption and exchange of a stockholder’s OpCo LLC Units for Class A Common Stock and the corresponding cancellation of an equivalent number of shares of Class B Common Stock. The TPG Funds’ beneficial ownership of Class A Common Stock in the table below aggregates both its direct ownership of Class A Common Stock and the number of shares of Class A Common Stock into which its OpCo LLC Units could be converted. If this were to actually occur, all of the TPG Funds’ Class B Common Stock would be cancelled and its beneficial ownership percentage of the Class B Common Stock would be 0%.

 

    Class A common stock
beneficially owned(1)
    Class B common stock
beneficially owned(2)
 
Name of beneficial owner   Number     Percentage     Number     Percentage  

5% Stockholders

       

Intel Americas, Inc.(3)

    5,969,831       3.1     169,742,322       67.0

TPG Funds(4)

    117,501,906       48.2     57,607,138       22.8

Thoma Bravo Funds(5)

    16,611,135       8.9     24,075,115       9.5

Snowlake Investment Pte Ltd.(6)

    24,411,754       13.1     —         *  

Directors and Named Executive Officers

       

Peter Leav(7)

    923,525       *       252,464       *  

Venkat Bhamidipati(8)

    456,999       *       37,444       *  

Ashish Agarwal(9)

    297,084       *       66,192       *  

Gagandeep Singh

    —         *       —         *  

Sohaib Abbasi

    78,947       *       —         *  

Mary Cranston

    59,356       *       —         *  

Tim Millikin(10)

    —         *       —         *  

 

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    Class A common stock
beneficially owned(1)
    Class B common stock
beneficially owned(2)
 
Name of beneficial owner   Number     Percentage     Number     Percentage  

Kathy Willard

    35,892       *       —         *  

Jon Winkelried

    —         *       —         *  

Jeff Woolard

    —         *       —         *  

Gunther Bright

    —         *       —         *  

Emily Rollins

    —         *       —         *  

All directors and executive officers as a group (13 people)(11)

    1,940,651       *       356,100       *  

 

*

Represents beneficial ownership of less than 1%.

(1)

The OpCo LLC Units are exchangeable for cash or, at our option, shares of our Class A Common Stock on a one-for-one basis. In these tables, other than with respect to the TPG Funds, beneficial ownership of OpCo LLC Units has not been reflected as beneficial ownership of shares of our Class A Common Stock for which such LLC Units may be exchanged. When an OpCo LLC Unit is exchanged for cash or, at our option, Class A Common Stock by a stockholder who holds shares of Class B Common Stock, a corresponding share of Class B Common Stock will be cancelled. Accordingly, in the first table above, the beneficial ownership percentage of Class A Common Stock provided with respect to the TPG Funds reflects the combined voting power of the TPG Funds’ Class A Common Stock and Class B Common Stock.

(2)

The holders of shares of Class B Common Stock reflected in this table also reflect an equal number of OpCo LLC Units beneficially owned by such holder.

(3)

Intel Corporation may also be deemed to beneficially own these shares due to its ownership of Intel Americas, Inc. Intel Corporation’s and Intel Americas, Inc.’s address is c/o Intel Corporation, 2200 Mission College Boulevard, Santa Clara, California 95054.

(4)

Shares of Class A common stock shown as beneficially owned by the TPG Funds (as defined below) include: (a) 26,093,703 shares of Class A common stock held by TPG VII Manta Blocker Co-Invest I, L.P., a Delaware limited partnership (“TPG Co-Invest I”); (b) 28,768,752 shares of Class A common stock held by TPG VII Manta AIV I, L.P., a Delaware limited partnership (“TPG AIV I”); (c) 5,032,313 shares of Class A common stock held by TPG VII Side-by-Side Separate Account I, L.P. (“TPG Side-by-Side”); (d) 3,946,567 shares of Class A common stock underlying an identical number of OpCo LLC Units and shares of Class B common stock held by TPG VII Manta AIV Co-Invest, L.P., a Delaware limited partnership (“TPG Manta AIV Co-Invest”); and (e) 53,660,571 shares of Class A common stock underlying an identical number of OpCo LLC Units and shares of Class B common stock held by TPG VII Manta Holdings II, L.P., a Delaware limited partnership (“TPG Manta Holdings II”, and, together with TPG Co-Invest I, TPG AIV I, TPG Side-by-Side, and TPG Manta AIV Co-Invest, the “TPG Funds”). Shares of Class B common stock shown as beneficially owned by the TPG Funds include: (a) 3,946,567 shares of Class B common stock held by TPG Manta AIV Co-Invest; and (b) 53,660,571 shares of Class B common stock by TPG Manta Holdings II. The general partner of each of (i) TPG Co-Invest I, (ii) TPG AIV I, (iii) TPG VII Manta AIV Co-Invest, and (iv) TPG Manta Holdings II is TPG VII Manta GenPar, L.P., a Delaware limited partnership, whose general partner is TPG VII Manta GenPar Advisors, LLC, a Delaware limited liability company, whose sole member is TPG Holdings II, L.P., a Delaware limited partnership, whose general partner is TPG Holdings II-A, LLC, a Delaware limited liability company, whose sole member is TPG Group Holdings (SBS), L.P., a Delaware limited partnership (“TPG Group Holdings”), whose general partner is TPG Group Holdings (SBS) Advisors, LLC, a Delaware limited liability company, whose sole member is TPG Group Holdings (SBS) Advisors, Inc., a Delaware corporation. The general partner of TPG Side-by-Side is TPG GenPar VII SBS SA I, L.P., a Delaware limited partnership, whose general partner is TPG GenPar VII SBS SA I Advisors, LLC, a Delaware limited liability company, whose sole member is TPG Holdings III, L.P., a Delaware limited partnership, whose general partner is TPG Holdings III-A, L.P., a Cayman Islands limited partnership, whose general partner is TPG Holdings III-A, Inc., a Cayman Islands exempted company, whose sole shareholder is TPG Group Holdings. David Bonderman and James G. Coulter are the sole shareholders of TPG Group Holdings (SBS) Advisors, Inc. and may therefore be deemed to beneficially own the securities held by the TPG Funds. Messrs. Bonderman and Coulter disclaim

 

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  beneficial ownership of the securities held by the TPG Funds except to the extent of their pecuniary interest therein. The address of each of the TPG Funds and Messrs. Bonderman and Coulter is c/o TPG Global, LLC, 301 Commerce Street, Suite 3300, Fort Worth, TX 76102.
(5)

Shares of Class A common stock shown as beneficially owned by the Thoma Bravo Funds (as defined below) include: 16,611,135 shares of Class A common stock held by Thoma Bravo Fund XII-A AIV, L.P. (“TB XII-A”). Shares of Class B common stock shown as beneficially owned by the Thoma Bravo Funds include: (a) 2,298,248 shares of Class B common stock held by Thoma Bravo Partners XII AIV, L.