Box Inc DEFA14A, filed Jun 4, 2021
Box Inc (BOX)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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-2 | |
Box, Inc.
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
| ☒ | No fee required. | ||
| ☐ | Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. | ||
| (1) | Title of each class of securities to which transaction applies: | ||
| (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) (4) |
Filing Party: Date Filed: | ||
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
June 3, 2021
Box, Inc.
(Exact name of registrant as specified in its charter)
| Delaware | 001-36805 | 20-2714444 | ||
|
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
900 Jefferson Ave.
Redwood City, California 94063
(Address of principal executive offices, including zip code)
(877) 729-4269
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ☒ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered | ||
| Class A Common Stock, $0.0001 par value per share | BOX | New York Stock Exchange, Inc. |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
| ☐ | Emerging growth company |
| ☐ | If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. |
| Item 8.01 | Other Events. |
On June 3, 2021, Box, Inc. (“Box” or the “company”) delivered a response letter (the “Demand Response Letter”) to Starboard Value LP’s outside counsel in response to Starboard Value’s demand for inspection of the books and records of the company pursuant to Section 220 of the Delaware General Corporation Law. A copy of the Demand Response Letter is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
Forward-Looking Statements
Certain statements contained herein contain forward-looking statements that involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, our results may differ materially from those expressed or implied by such forward-looking statements. All statements other than statements of historical fact could be deemed forward-looking, including, but not limited to, statements about the KKR-led investment and achievement of its potential benefits; the announced tender offer, whether, when, and in what amount such tender offer would be consummated, the per share price of such tender offer and the price and time at which we may make any additional share repurchases following completion of the tender offer; our future financial and operating results, including expectations regarding revenues, deferred revenue, billings, remaining performance obligations, gross margins and operating income; our market opportunity, business plan and ability to effectively manage our growth; our ability to maintain an adequate rate of revenue and billings growth and our expectations regarding such growth; our ability to achieve profitability and expand or maintain positive cash flow; our ability to achieve our long-term margin objectives; our ability to grow our unrecognized revenue and remaining performance obligations; our expectations regarding our revenue mix; costs associated with defending intellectual property infringement and other claims and the frequency of such claims; our ability to attract and retain end-customers; our ability to further penetrate our existing customer base; our expectations regarding our retention rate; our ability to displace existing products in established markets; our ability to expand our leadership position as a cloud content management platform; our ability to timely and effectively scale and adapt our existing technology; our investment strategy, including our plans to further invest in our business, including investment in research and development, sales and marketing, our data center infrastructure and our professional services organization, and our ability to effectively manage such investments; our ability to expand internationally; expectations about competition and its effect in our market and our ability to compete; the effects of seasonal trends on our operating results; use of non-GAAP financial measures; our belief regarding the sufficiency of our cash, cash equivalents and our credit facilities to meet our working capital and capital expenditure needs for at least the next 12 months; our expectations concerning relationships with third parties; our ability to attract and retain qualified employees and key personnel; our ability to realize the anticipated benefits of our partnerships with third parties; the effects of new laws, policies, taxes and regulations on our business; management’s plans, beliefs and objectives, including the importance of our brand and culture on our business; our ability to maintain, protect and enhance our brand and intellectual property; and future acquisitions of or investments in complementary companies, products, services or technologies and our ability to successfully integrate such companies or assets. These statements are based on estimates and information available to us at the time of this presentation and are no guarantees of future performance. We assume no obligation and do not intend to update these forward-looking statements or to conform these statements to actual results or to changes in our expectations.
Important Additional Information and Where to Find It
Box intends to file a proxy statement on Schedule 14A, an accompanying proxy card and other relevant documents with the SEC in connection with such solicitation of proxies from Box stockholders for Box’s 2021 annual meeting of stockholders. BOX STOCKHOLDERS ARE STRONGLY ENCOURAGED TO READ BOX’S DEFINITIVE PROXY STATEMENT (INCLUDING ANY AMENDMENTS OR SUPPLEMENTS THERETO) AND ALL OTHER DOCUMENTS FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. Investors and stockholders may obtain a copy of the definitive proxy statement, an accompanying proxy card, any amendments or supplements to the definitive proxy statement and other documents filed by Box with the SEC at no charge at the SEC’s website at www.sec.gov. Copies will also be available at no charge in the “SEC Filings” subsection of the “Financial Information” section of Box’s Investor Relations website at www.boxinvestorrelations.com or by contacting Box’s Investor Relations department at ir@box.com, as soon as reasonably practicable after such materials are electronically filed with, or furnished to, the SEC.
Certain Information Regarding Participants to the Solicitation
Box, its directors and certain of its executive officers are participants in the solicitation of proxies from Box stockholders in connection with matters to be considered at Box’s 2021 annual meeting of stockholders. Information regarding the direct and indirect interests, by security holdings or otherwise, of Box’s directors and executive officers, in Box is included in Box’s Proxy Statement on Schedule 14A for its 2020 annual meeting of stockholders, filed with the SEC on May 28, 2020, Box’s Annual Report on Form 10-K for the year ended January 31, 2021, filed with the SEC on March 19, 2021, as amended by Amendment No. 1 on Form 10-K/A, filed with the SEC on May 28, 2021, and in Box’s Current Reports on Form 8-K filed with the SEC from time to time. Changes to the direct or indirect interests of Box’s directors and executive officers are set forth in SEC filings on Initial Statements of Beneficial Ownership on Form 3, Statements of Change in Ownership on Form 4 and Annual Statements of Changes in Beneficial Ownership on Form 5. These documents are available free of charge as described above. Updated information regarding the identities of potential participants and their direct or indirect interests, by security holdings or otherwise, in Box will be set forth in the Proxy Statement for Box’s 2021 annual meeting of stockholders and other relevant documents to be filed with the SEC, if and when they become available.
| Item 9.01. | Financial Statements and Exhibits. |
(d) Exhibits
|
Exhibit No. |
Description | |
| 99.1 | Demand Response Letter, dated June 3, 2021. | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| BOX, INC. | |||
| Date: June 4, 2021 | |||
| By: |
/s/ David Leeb |
| |
|
David Leeb Chief Legal Officer and Corporate Secretary | |||
|
|
Exhibit 99.1
Wilson Sonsini Goodrich & Rosati 650 Page Mill Road o: 650.493.9300 |
david j. berger
dberger@wsgr.com
Direct dial: 650.320.4901
June 3, 2021
By Email
Steve Wolosky, Esq.
Andrew Freedman, Esq.
Olshan Frome Wolosky LLP
1325 Avenue of the Americas
New York, NY 10019
swolosky@olshanlaw.com
afreedman@olshanlaw.com
| Re: | Demand for Inspection of Books and Records of Box, Inc. Pursuant to 8 Del. C. § 220 on behalf of Starboard Value LP, dated May 20, 2021 (“Demand”) |
Dear Messers. Wolosky and Freedman:
We are counsel to Box, Inc. (“Box” or the “Company”) and write in response to the above referenced Demand sent on behalf of Starboard Value LP (“Starboard”). Capitalized terms not defined in this letter are defined in the Demand.
While the Company appreciates Starboard’s continued engagement, the Company rejects in full the speculative and unfounded allegations made against the Company’s board of directors (the “Board”). Further, and as discussed below, the Demand is deficient for several reasons, including that it fails to establish the required credible basis from which any wrongdoing can be reasonably inferred, and it is impermissibly overbroad. Notwithstanding these deficiencies and subject to and preserving all its objections, the Company is prepared to provide certain books and records (subject to the execution of a mutually acceptable confidentiality agreement) to demonstrate that Starboard’s concerns are misguided and put an end to the improper allegations Starboard has made against the Company and its Board. Further, we note that the Company privately offered to provide information about the KKR Transaction to Starboard weeks ago, which Starboard rejected. Starboard’s acceptance of the Company’s prior offer would have obviated the need for the Demand.
The Demand principally seeks documents for the purported purpose of “gather[ing] information regarding potential mismanagement and/or malfeasance” involving the Board and “potential breaches of fiduciary duties by certain members of the Board” in connection with the Company’s Strategic Review, which culminated in (i) the Investment Agreement with the KKR Investors relating to the issuance and sale of 500,000 shares of the Company’s Series A Preferred Stock (the “KKR Transaction”), and (ii) the Company’s intent to use the proceeds from the KKR
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san diego san francisco seattle shanghai washington, dc wilmington, de
Steve Wolosky, Esq.
Andrew Freedman, Esq.
June 3, 2021
Page 2
Transaction to repurchase up to $500 million of its common stock through a Dutch Self-Tender.1 The Demand also identifies an “additional purpose of assisting Starboard in determining the degree of change that it believes is necessary on the Board, including the number of director candidates to ultimately seek election for at the upcoming 2021 Annual Meeting.”2
| 1. | The Demand Fails to Establish a Credible Basis to Infer Any Alleged Wrongdoing. |
The substance of the Demand is deficient because it does not establish a credible basis to infer any corporate wrongdoing. A stockholder seeking inspection of books and records for the purpose of investigating misconduct must establish “by the preponderance of the evidence, that there exists a credible basis to find probable corporate wrongdoing.”3 This showing is “a burden the plaintiff seeking inspection must bear; it is not a formality.”4 Indeed, the Delaware Supreme Court has recently reiterated that the credible basis standard is “not an insubstantial threshold.”5 “Mere suspicion,” “subjective belief of wrongdoing,” or “mere disagreement with a business decision” is not sufficient to establish a credible basis warranting Section 220 inspections based on investigative purposes.6
As we understand the Demand, Starboard challenges the Strategic Review process, the KKR Transaction, and the Company’s intended use of the proceeds from the KKR Transaction to repurchase certain of its common stock through a Dutch Self-Tender as having “no bona fide business purpose” and solely intended to “entrench the Board.”7 But Starboard reaches that conclusion based on a flawed recitation of events and criticisms of the underlying transactions that amount to nothing more than a “mere disagreement with a business decision” made by the Board. That is insufficient to state a proper purpose under Delaware law. To the contrary, the Board’s unanimous approval of the KKR Transaction and the Dutch Self-Tender resulted from a thorough and competitive strategic review process to evaluate a wide range of strategic alternatives, a process which was consistent with Starboard’s demands.
1 Demand at 1.
2 Id. at 1-2; see id. at 6 (identifying several related purposes).
3 Sec. First Corp. v. U.S. Die Casting & Dev. Co., 687 A.2d 563, 565 (Del. 1997).
4 Hague v. Tesla Motors, Inc., 2017 WL 448594, at *4 (Del. Ch. Feb. 2, 2017).
5 AmerisourceBergen Corp. v. Lebanon Cnty. Emps.’ Ret. Fund, 243 A.3d 417, 426 (Del. 2020).
6 City of Westland Police & Fire Ret. Sys. v. Axcelis Techs., Inc., 1 A.3d 281, 288, 290 (Del. 2010); High River Ltd. P’ship v. Occidental Petroleum Corp., 2019 WL 6040285, at *5 (Del. Ch. Nov. 14, 2019).
7 Demand at 2.
Steve Wolosky, Esq.
Andrew Freedman, Esq.
June 3, 2021
Page 3
As you know, the Company has a long history of constructive engagement with Starboard, including entering into the Settlement Agreement with Starboard last year, as well as multiple discussions this year. The Settlement Agreement provided, among other things, that:
| · | Two directors approved by Starboard, and a third new independent director, would be appointed to the Board to replace three incumbent directors who would step down or not stand for re-election at the next annual meeting; and |
| · | An Operating Committee, which would include two Starboard-approved directors, would be formed to work with management to identify and recommend opportunities for growth and margin enhancement. |
Since that time, the Operating Committee and management have worked diligently to improve the performance of the business, making substantial progress across all facets: strategic, operational and financial. These efforts have successfully improved Company performance, a fact explicitly recognized by Starboard in the past. Unfortunately, following the Company’s announcement of its third quarter results in December 2020, Starboard abruptly reversed course and immediately demanded the Company explore a sale of the entire business. On December 3, 2020, the day after the company released earnings, Box’s closing stock price was $16.85 per share.
Between January 2021 and the announcement of the KKR Transaction, various Board members, including those who had been approved by Starboard, had multiple conversations with Mr. Feld. Mr. Feld continued to demand that the Board sell the Company. The Board, led by a committee of four directors--including two whose appointment was specifically approved by Starboard--undertook a comprehensive review of a wide range of strategic options, a step which Starboard had demanded. Following this extensive process, the Board unanimously decided that the KKR Transaction and the Dutch Self-Tender was in the best interest of all its stockholders.
The Board determined that the KKR Transaction will advance the Company’s strategy to deliver the Box Content Cloud and enable customers to modernize how they work and drive digital transformation throughout their organizations. The transaction also represents a unique opportunity to leverage KKR’s proven track record of successfully partnering with companies to drive stockholder value, especially as Box continues to build on its leadership position in cloud content management. The investment from KKR is a strong vote of confidence in Box’s vision, strategy, and continued efforts to accelerate growth and profitability. With KKR’s support, Box will be even better positioned to deliver for its customers around the world. Further, the addition of John Park, KKR’s Head of Americas Technology Private Equity, to the Board allows the Company and stockholders to benefit from his substantial experience in advising and supporting software and other technology companies with a focus on the cloud. The Dutch Self-Tender provides the ability for stockholders to elect to either monetize their investment or participate in any upside potential with KKR as a committed partner who believes in the growth strategy that Box is executing.
Steve Wolosky, Esq.
Andrew Freedman, Esq.
June 3, 2021
Page 4
As you know, the level of Board change over the last three years has been extensive. Excluding current and former employees, seven of the eight directors have a tenure of three years or less. All Box directors have extensive experience as executives or directors of SaaS and Enterprise software companies, including C-Suite experience at multi-billion dollar companies. And this does not even include the extensive experience of John Park. Additionally, at the time the Company announced the KKR Transaction, it also announced that it would separate the positions of Board Chair and CEO and that Bethany Mayer would become Chair of the Board. As a result, directors approved by Starboard and added to the Board in conjunction with the Settlement Agreement hold positions as (1) Chair of the Board, (2) Chair of the Compensation Committee, (3) Chair of the Audit Committee, (4) two of the four seats on Box’s Operating Committee, and (5) two of the four seats on Box’s Strategy Committee. Further, the Company has engaged extensively and in good faith with Starboard and has continued to do so since the announcement of the KKR Transaction.
Unfortunately, it appears these actions are not sufficient for Starboard. Starboard’s assertion that “the status quo largely remains”8 is simply untrue and its rhetorical attacks on the Board’s composition, experience and motivations are both false and insulting. Instead, Box’s independent Board acted as it should: it was highly responsive both to Starboard’s demands and to feedback received by other stockholders, and then it made decisions – independently and unanimously – in the best interests of the Company and all of its stockholders, rather than any single one.
Because nothing in the Demand suggests a credible basis to infer corporate mismanagement or wrongdoing, the Demand fails to state a proper purpose under Section 220.
| 2. | The Demand Is Impermissibly Overbroad and Is Not Limited to Those Documents That Are Necessary and Essential. |
Even if the Demand established a credible basis to infer alleged wrongdoing (and it does not), it is still defective for the independent reason that it is impermissibly overbroad. Section 220 demands are “limited only to the inspection of books and records that are necessary and essential to the satisfaction of the stated purpose.”9 “Documents are necessary and essential to a [books and records] demand if they address the ‘crux of the shareholder’s purpose’ and if that information ‘is unavailable from another source.’”10 Delaware law is clear that a Section 220
8 Id. at 3.
9 Kaufman v. CA, Inc., 905 A.2d 749, 753-54 (Del. Ch. 2006) (citations omitted) (finding that Section 220 inspection rights are not akin to the broad discovery permitted under Chancery Court Rule 34). See also Sec. First, 687 A.2d at 569 (a stockholder demanding inspection bears the burden of showing that each of the requested books and records is “essential to the accomplishment of the stockholder’s articulated purpose.”).
10 Wal-Mart Stores, Inc. v. Indiana Electrical Workers Pension Trust Fund IBEW, 95 A.2d 1264, 1272 (Del. 2014) (quoting Espinoza v. Hewlett-Packard Co., 32 A.3d 365, 271-72 (Del. 2011)).
Steve Wolosky, Esq.
Andrew Freedman, Esq.
June 3, 2021
Page 5
demand is “not a way to circumvent discovery proceedings, and is certainly not meant to be a forum for the kinds of wide-ranging document requests permissible under Rule 34.”11 Instead, demands must be tailored “with rifled precision” to the stated purpose.12 “The starting point—and often the ending point—for a sufficient inspection will be board level documents,”13 and to obtain records beyond the board level requires a factual showing why board level documents would be insufficient.14
The Demand is overly broad and goes well beyond the narrow permissible scope of inspection. Indeed, the “Appendix” of books and records sought is more akin to Rule 34 discovery requests than a narrowly tailored demand for specific categories of books and records contemplated by Delaware case law. Nor does the Demand set forth a factual basis for why many of the broad requests for books and records demanded are “essential” to its stated purpose, particularly with respect to email or “senior management material.”
Additionally, many of the requests in the Demand contain confidential information or seek documents that are subject to the attorney client privilege and/or work product doctrine and are therefore not subject to inspection.15
* * *
Despite the Demand’s deficiencies and without conceding that the Demand is proper or otherwise waiving any of its rights or defenses under 8 Del. C. § 220, the Company is prepared to produce copies of the following books and records, which are sufficient to enable Starboard to carry out its purported purposes:
| · | Minutes of any meeting of the Board or Strategic Committee referring or relating to the KKR Transaction, including but not limited to negotiations over the terms of the KKR Transaction and the Dutch-Self-Tender and the Strategic Review Process; and |
11 Highland Select Equity Fund, L.P. v. Motient Corp., 906 A.2d 156, 165 (Del. Ch. 2006), aff’d, 922 A.2d 415 (Del. 2007).
12 Sec. First, 687 A.2d at 570.
13 Amalgamated Bank v. Yahoo! Inc., 132 A.3d 752, 790 (Del. Ch. 2016) (emphasis added), abrogated on other grounds by Tiger v. Boast Apparel, Inc., 214 A.3d 933 (Del. 2019).
14 In re UnitedHealth Group, Inc. Sec. 220 Litig., 2018 WL 1110849, at *9 (Del. Ch. Feb. 28, 2018).
15 See, e.g., Sutherland v. Sutherland, 2007 WL 1954444, at *4 (Del. Ch. 2007).
Steve Wolosky, Esq.
Andrew Freedman, Esq.
June 3, 2021
Page 6
| · | Presentations or materials prepared by Morgan Stanley & Co. LLC in connection with the final approval of the Investment Agreement. |
The Company’s offer to produce copies of the foregoing books and records is conditioned on Starboard entering into a standard confidentiality agreement with the Company governing the use and dissemination of the information produced. If the Company’s offer is acceptable, we will prepare a proposed confidentiality agreement for your consideration, as well as to further meet and confer with you if you think it is necessary over the scope of any particular request. Please contact me if you have any questions.
| Sincerely, | ||
| WILSON SONSINI GOODRICH & ROSATI | ||
| Professional Corporation | ||
| /s/ David J. Berger | ||
| David J. Berger, Esq. | ||
| cc: | Brad D. Sorrels, Esq. |