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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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SCHEDULE TO

(RULE 14D-100)

Tender Offer Statement Under Section 14(d)(1) or 13(e)(1)

of the Securities Exchange Act of 1934

(Amendment No. 2)

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KATE SPADE & COMPANY

(Name of Subject Company)

CHELSEA MERGER SUB INC.

(Offeror)

COACH, INC.

(Names of Filing Persons)

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COMMON STOCK, PAR VALUE $1.00 PER SHARE

(Title of Class of Securities)

485865109

(CUSIP Number of Class of Securities)

Todd Kahn

President, Chief Administrative Officer & Secretary

Coach, Inc.

10 Hudson Yards

New York, New York 10001

(212) 594-1850

(Name, address and telephone number of person authorized to receive notices and communications on behalf of filing persons)

with copies to:

Brian Mangino, Esq.

Fried, Frank, Harris, Shriver & Jacobson LLP

801 17^th Street NW

Washington, District of Columbia 20006

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CALCULATION OF FILING FEE

 

 

	☒	third-party tender offer subject to Rule 14d-1.
	☐	issuer tender offer subject to Rule 13e-4.
	☐	going-private transaction subject to Rule 13e-3.
	☐	amendment to Schedule 13D under Rule 13d-2.

 

 

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This Amendment No. 2 (this “Amendment”) amends and supplements the Tender Offer Statement on Schedule TO filed by Coach, Inc., a Maryland corporation (“Parent”), and Chelsea Merger Sub Inc., a Delaware corporation (“Merger Sub”) and a wholly owned direct subsidiary of Parent, with the Securities and Exchange Commission on May 26, 2017 (together with any subsequent amendments and supplements thereto, the “Schedule TO”).  The Schedule TO relates to the tender offer by Merger Sub for all of the outstanding shares of common stock, par value $1.00 per share (“Shares”), of Kate Spade & Company, a Delaware corporation (“Kate Spade”), at a price of $18.50 per share, net to the seller in cash, without interest thereon and less any applicable withholding taxes, upon the terms and conditions set forth in the offer to purchase dated May 26, 2017 (the “Offer to Purchase”), a copy of which is attached as Exhibit (a)(1)(A), and in the related letter of transmittal (the “Letter of Transmittal”), a copy of which is attached as Exhibit (a)(1)(B), which, as each may be amended or supplemented from time to time, collectively constitute the “Offer.”

All the information set forth in the Offer to Purchase, including Schedule I thereto, is incorporated by reference herein in response to Items 1 through 9 and Item 11 of this Schedule TO, and is supplemented by the information specifically provided in this Amendment. This Amendment is being filed to reflect certain updates as reflected below.

Capitalized terms used but not defined in this Amendment shall have the meanings assigned to such terms in the Schedule TO.

 

Regulation M-A Item 1001

The Offer to Purchase and Item 1 of the Schedule TO (and Items 1 through 9 and Item 11 of the Schedule TO, to the extent such items incorporate by reference the information contained in the Offer to Purchase under the following captions and Sections) are hereby amended as follows:

1.	The information set forth in the Summary Term Sheet under the caption– “Is there an agreement governing the Offer?” –of the Offer to Purchase is hereby amended and supplemented by deleting the last sentence of the first paragraph of such section and replacing such sentence with the following:

“If the Minimum Condition (as defined below) and the other conditions to the Offer are satisfied or waived (to the extent permitted by applicable law) on or before the Expiration Date and we consummate the Offer, we intend to effect the Merger as soon as practicable pursuant to Section 251(h) of the General Corporation Law of the State of Delaware (the “DGCL”) without a vote on the adoption of the Merger Agreement by the Kate Spade stockholders.”

2.	The information set forth in the Summary Term Sheet under the caption– “Will you have the financial resources to pay for the Shares?” –of the Offer to Purchase is hereby amended and supplemented by deleting the first paragraph and replacing such paragraph with the following:

“Yes. Neither the consummation of the Offer nor the Merger is subject to any financing condition. Parent and Merger Sub estimate that the total amount of funds required to consummate the Offer and purchase all outstanding Shares in the Offer, to provide funding for the Merger, and to provide funding for the payment in respect of certain outstanding Kate Spade equity awards that will be cashed out at the Effective Time (as defined below) is approximately $2.46 billion, including related fees and expenses. Parent plans to provide Merger Sub with the necessary funds to pay for the Offer with Parent’s cash on hand and cash on hand at Kate Spade, the proceeds of senior notes and new term loans that Parent expects to borrow by the time the acquisition is completed. Parent has also entered into a $2.1 billion bridge loan facility commitment letter pursuant to which Bank of America, N.A. (“Bank of America”) and Merrill Lynch, Pierce, Fenner & Smith Incorporated (together with Bank of America, “BofA Merrill Lynch”) committed to provide financing for the Offer and the Merger; however, as discussed below, Parent intends to use the proceeds of the senior notes and term loan borrowings in lieu of drawing on the bridge loan facility.

Credit Facility

On May 30, 2017, Parent entered into a definitive credit agreement (the “Credit Agreement”) whereby Bank of America, as administrative agent, the other agents party thereto, and a syndicate of banks and financial institutions have (i) committed to lend to Parent, subject to the satisfaction or waiver of the conditions set forth in the credit agreement, an $800 million unsecured term loan facility maturing six months after the term loans thereunder are borrowed (the “Six-Month Term Loan Facility”), which Parent expects to repay with cash on its balance sheet at maturity, and a $300 million unsecured term loan facility maturing three years after the term loans thereunder are borrowed (collectively with the Six-Month Term Loan Facility, the “Term Loan Facilities”) and (ii) made available to Parent a $900 million unsecured revolving credit facility, including sub-facilities for letters of credit, with a maturity date of May 30, 2022 (the “Revolving Credit Facility”).  The Revolving Credit Facility will replace Parent’s previously existing revolving credit facility under the Amendment and Restatement Agreement, dated as of March 18, 2015, by and between Parent, certain lenders and JPMorgan Chase Bank, N.A., as administrative agent.  Parent plans to use borrowings under the Term Loan Facilities to fund, in part, the purchase price of Parent’s previously announced acquisition of Kate Spade, subject to the terms and conditions of the Merger Agreement.  The Revolving Credit Facility may be used to finance the working capital needs, capital expenditures, permitted investments, share purchases, dividends and other general corporate purposes of Parent and its subsidiaries (which may include commercial paper back-up).

The Credit Agreement is annexed hereto and incorporated by reference as Exhibit (b)(1) to this Amendment.  Kate Spade stockholders and other interested parties should read the Credit Agreement in its entirety.

Notes

On June 6, 2017, Parent entered into an underwriting agreement  (the “Underwriting Agreement”) with Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities LLC, as representatives of the several underwriters named therein, providing for its underwritten public offering of $400,000,000 aggregate principal amount of 3.000% senior unsecured notes due 2022 (the “2022 Notes”) and $600,000,000 aggregate principal amount of 4.125% senior unsecured notes due 2027 (the “2027 Notes,” and together with the 2022 Notes, the “Notes”).  The offer and sale of the Notes is registered under the Securities Act of 1933, as amended, pursuant to an automatic shelf registration statement on Form S-3 (File No. 333-200642) filed with the SEC on December 1, 2014.  Parent plans to use the proceeds of the Notes to finance, in part, the Offer and the Merger, subject to the terms and conditions of the Merger Agreement.

The Underwriting Agreement is annexed hereto and incorporated by reference as Exhibit (b)(2) to this Amendment.  Kate Spade stockholders and other interested parties should read the Underwriting Agreement in its entirety.”

3.	The information set forth in the Summary Term Sheet under the caption– “What are the conditions to the Offer?” –of the Offer to Purchase is hereby amended and supplemented by adding the following sentence to the end of the last paragraph of such section:

“For the avoidance of doubt, (i) all of the foregoing conditions to the Offer must be satisfied or waived (to the extent waiver is permitted by applicable law) on or before the Expiration Date and (ii) the Regulatory Condition may not be waived.”

4.	The information set forth in the Summary Term Sheet under the caption– “If I tender my Shares, when and how will I get paid?” –of the Offer to Purchase is hereby amended and supplemented by deleting the first paragraph of such Section and replacing such paragraph with the following:

“If the conditions to the Offer as set forth in Section 15—“Conditions of the Offer” are satisfied or waived (to the extent permitted by applicable law) on or before the Expiration Date and we consummate the Offer and accept your Shares for purchase and payment, we will deposit the Offer Price for such Shares with the Depositary, which will act as paying agent for tendering stockholders for the purpose of receiving payments from us and transmitting such payments to tendering stockholders whose Shares have been accepted for payment.”

5.

The information set forth in the Summary Term Sheet under the caption– “If I tender my Shares, when and how will I get paid?” –of the Offer to Purchase is hereby amended and supplemented by deleting the first sentence of the second paragraph of such Section and replacing such sentence with the following:

“The Depository will pay an amount equal to the number of Shares you tendered multiplied by $18.50 in cash without interest, less any applicable withholding taxes, promptly after the Expiration Date, subject to timely receipt of the items described in Section 2 — “Acceptance for Payment and Payment of Shares.”

Regulation M-A Item 1004

The Offer to Purchase and Item 4 of the Schedule TO (and Items 1 through 9 and Item 11 of the Schedule TO, to the extent such items incorporate by reference the information contained in the Offer to Purchase under the following captions and Sections) are hereby amended as follows:

1.	The information set forth in Section 1 – “Terms of the Offer” –of the Offer to Purchase is hereby amended and supplemented by deleting the third sentence of the second paragraph of such Section and replacing such sentence with the following:

“Promptly following the Acceptance Time, Merger Sub shall cause Broadridge Corporate Issuer Solutions, Inc. (the “Depository”) to pay for all Shares validly tendered and not properly withdrawn pursuant to the Offer.”

2.	The information set forth in Section 1 – “Terms of the Offer” –of the Offer to Purchase is hereby amended and supplemented by deleting the last sentence of the seventh paragraph of such Section and replacing such sentence with the following:

“In addition, in the Merger Agreement, we have agreed that, on the terms and subject to the conditions of the Offer and the Merger Agreement, Merger Sub will cause the Depository to pay for all Shares validly tendered (and not properly withdrawn) in the Offer promptly after the Acceptance Time.”

3.	The information set forth in Section 2 – “Acceptance for Payment and Payment for Shares” –of the Offer to Purchase is hereby amended and supplemented by deleting the first sentence of the first paragraph of such Section and replacing such sentence with the following:

“Subject to the satisfaction or waiver (to the extent permitted by applicable law) of all the conditions to the Offer set forth in Section 15 — “Conditions of the Offer” on or before the Expiration Date, we will accept for purchase and payment all Shares validly tendered and not properly withdrawn pursuant to the Offer prior to 9:00 a.m., New York City time, on the business day immediately following the Expiration Date.”

4.	The information set forth in Section 2 – “Acceptance for Payment and Payment for Shares” –of the Offer to Purchase is hereby amended and supplemented by deleting the last sentence of the fourth paragraph of such Section and replacing such sentence with the following:

“Upon the deposit of such funds with the Depositary, Purchaser’s obligation to make such payment will be satisfied in full, and tendering stockholders must thereafter look solely to the Depositary for payment of amounts owed to them by reason of the acceptance for payment of Shares pursuant to the Offer; provided that we have agreed that Merger Sub will cause the Depository to pay for all Shares validly tendered (and not properly withdrawn) in the Offer promptly after the Acceptance Time.”

5.	The information set forth in Section 7 — “Certain Information Concerning Kate Spade” –of the Offer to Purchase is hereby amended and supplemented by deleting the last sentence of the first paragraph of such Section.

6.	The information set forth in Section 15 – “Conditions of the Offer” –of the Offer to Purchase is hereby amended and supplemented by adding the following sentence to the end of the last paragraph of such Section:

“For the avoidance of doubt, (i) all of the foregoing conditions to the Offer must be satisfied or waived (to the extent waiver is permitted by applicable law) on or before the Expiration Date and (ii) the Regulatory Condition may not be waived by the parties.”

Regulation M-A Item 1005

The Offer to Purchase and Item 5 of the Schedule TO (and Items 1 through 9 and Item 11 of the Schedule TO, to the extent such items incorporate by reference the information contained in the Offer to Purchase under the following captions and Sections) are hereby amended as follows:

1.	The information set forth in Section 10 — “Background of the Offer; Past Contacts or Negotiations with Kate Spade” –of the Offer to Purchase is hereby amended and supplemented by deleting the first paragraph of such Section.

Regulation M-A Item 1007

The Offer to Purchase and Item 7 of the Schedule TO (and Items 1 through 9 and Item 11 of the Schedule TO, to the extent such items incorporate by reference the information contained in the Offer to Purchase under the following captions and Sections) are hereby amended as follows:

1.	The information set forth in Section 9 — “Source and Amount of Funds” –of the Offer to Purchase is hereby amended and supplemented by deleting the first paragraph and second paragraph of such Section and replacing such paragraphs with the following:

“The Offer and the Merger are not conditioned upon obtaining financing. Because (i) the only consideration to be paid in the Offer and the Merger is cash, (ii) the Offer is being made to purchase all issued and outstanding Shares solely for cash, (iii) Parent has entered into a $2.1 billion bridge loan facility commitment letter pursuant to which BofA Merrill Lynch committed to provide financing for the Offer and the Merger (although, as discussed below, Parent intends to use the proceeds of senior notes and term loan borrowings in lieu of drawing on the bridge loan facility), (iv) there is no financing condition to the completion of the Offer or the Merger and (v) if we consummate the Offer, we will acquire all remaining Shares (subject to limited exceptions for Shares held by Kate Spade stockholders who validly exercise appraisal rights under Delaware law with respect to such Shares) for the same cash consideration in the Merger as was paid in the Offer (i.e., the Offer Price), we believe the financial condition of Parent and Merger Sub is not material to a decision by a holder of Shares whether to sell, hold or tender Shares in the Offer.

Parent and Merger Sub estimate that the total amount of funds required to consummate the Offer and purchase all outstanding Shares in the Offer, to provide funding for the Merger, and to provide funding for the payment in respect of outstanding Kate Spade equity awards that will be cashed out at the Effective Time pursuant to the Merger Agreement and other individual agreements is approximately $2.46 billion, including related fees and expenses. Parent and Merger Sub anticipate funding such cash requirements with Parent’s cash on hand, cash on hand at Kate Spade and the proceeds of senior notes and new term loans that Parent expects to borrow by the time the acquisition is completed. Parent has also entered into a $2.1 billion bridge loan facility commitment letter pursuant to which BofA Merrill Lynch committed to provide financing for the Offer and the Merger; however, as discussed below, Parent intends to use the proceeds of the senior notes and term loan borrowings in lieu of drawing on the bridge loan facility.

Credit Facility

On May 30, 2017, Parent entered into a definitive credit agreement (the “Credit Agreement”) whereby Bank of America, N.A., as administrative agent (the “Administrative Agent”), the other agents party thereto, and a syndicate of banks and financial institutions (the “Lenders”) have (i) committed to lend to Parent, subject to the satisfaction or waiver of the conditions set forth in the credit agreement, an $800 million unsecured term loan facility maturing six months after the term loans thereunder are borrowed (the “Six-Month Term Loan Facility”), which Parent expects to repay with cash on its balance sheet at maturity, and a $300 million unsecured term loan facility maturing three years after the term loans thereunder are borrowed (collectively with the Six-Month Term Loan Facility, the “Term Loan Facilities”) and (ii) made available to Parent a $900 million unsecured revolving credit facility, including sub-facilities for letters of credit, with a maturity date of May 30, 2022 (the “Revolving Credit Facility” and collectively with the Term Loan Facilities, the “Facility”).  The Revolving Credit Facility will replace Parent’s previously existing revolving credit facility under the Amendment and Restatement Agreement, dated as of March 18, 2015, by and between Parent, certain lenders and JPMorgan Chase Bank, N.A., as administrative agent (the “Previous Credit Facility”).  Parent plans to use borrowings under the Term Loan Facilities to fund, in part, the purchase price of Parent’s previously announced acquisition of Kate Spade, subject to the terms and conditions of the Merger Agreement.  The Revolving Credit Facility may be used to finance the working capital needs, capital expenditures, permitted investments, share purchases, dividends and other general corporate purposes of Parent and its subsidiaries (which may include commercial paper back-up).  Letters of credit and swing line loans (the “Swing Line Loans”) may be issued under the Revolving Credit Facility as described below.  Certain terms and conditions of the Facility are as follows:

Structure.  Initially, only Parent will be a borrower under the Facility, but foreign subsidiaries may become borrowers under the Revolving Credit Facility (collectively with Parent, the “Borrowers”) subject to approval by the Administrative Agent and the Lenders.  In addition, the Credit Agreement provides that the revolving commitments under the Revolving Credit Facility may be increased by an amount not to exceed $300 million, subject to certain terms and conditions.  Loans may be made under the Revolving Credit Facility, at the Borrowers’ election, in Euros, Pounds Sterling, Japanese Yen or U.S. Dollars.

Letters of Credit.  The Revolving Credit Facility will be available for the issuance of letters of credit by the Administrative Agent or one or more other Lenders.  Standby letters of credit may be issued in respect of obligations of Parent or any of its subsidiaries incurred pursuant to contracts made or performances undertaken, or to be undertaken, or like matters relating to contracts to which Parent or any of its subsidiaries is, or proposes to become, a party in the ordinary course of business, including, but not limited to, for insurance purposes and in connection with lease transactions.  Commercial letters of credit may be issued to finance purchases of goods by Parent and its subsidiaries in the ordinary course of business.  The aggregate amount outstanding at any time with respect to standby letters of credit may not exceed $125 million and the Revolving Credit Facility shall be available in its entirety for the issuance of commercial letters of credit.

Swing Line Loans.  The Revolving Credit Facility will be available for the issuance of Swing Line Loans by the Administrative Agent in an aggregate amount outstanding at any time not to exceed $20 million.

Interest Rates and Fees.  Pursuant to the Credit Agreement, borrowings under the Facility bear interest at a rate per annum equal to, at the Borrowers’ option, either (a) an alternate base rate or (b) a rate based on the rates applicable for deposits in the interbank market for U.S. Dollars or the applicable currency in which the loans are made (the “Adjusted LIBO Rate”) plus, in each case, an applicable margin.  The applicable margin will be adjusted by reference to a grid (the “Pricing Grid”) based on the ratio of (a) consolidated debt plus 600% of consolidated lease expense to (b) consolidated EBITDAR (“Leverage Ratio”).  Additionally, Parent will pay commitment fees, calculated at a rate per annum determined in accordance with the Pricing Grid, on the average daily undrawn portion of the Term Loan Facility and the full amount of the Revolving Credit Facility, payable quarterly in arrears, and certain fees with respect to letters of credit that are issued.

Optional Prepayments and Commitment Reductions.  Loans under the Credit Agreement may be prepaid and commitments may be terminated or reduced by the Borrowers without premium or penalty (other than customary breakage costs).

Restrictive Covenants and Other Matters.  The Credit Agreement contains negative covenants that, subject to significant exceptions, limit the ability of Parent and its subsidiaries to, among other things, incur debt, engage in new lines of business, incur liens, engage in mergers, consolidations, liquidations and dissolutions, dispose of substantially all of the assets of Parent and its subsidiaries, make investments, loans, advances, guarantees and acquisitions, make restricted payments and enter into transactions with affiliates.  Parent and its subsidiaries must also comply on a quarterly basis with a maximum Leverage Ratio of 4.0 to 1.0.

Events of Default.  The Credit Agreement contains events of default that are customary for a facility of this nature, including (subject in certain cases to grace periods and thresholds) nonpayment of principal, nonpayment of interest, fees or other amounts, material inaccuracy of representations and warranties, violation of covenants, cross-default to other material indebtedness, bankruptcy or insolvency events, certain events arising under the Employee Income Retirement Security Act of 1974, as amended, material judgments and a change of control as specified in the Credit Agreement.  If an event of default occurs, the commitments of the Lenders to lend under the Facility may be terminated and the maturity of the amounts owed may be accelerated.

The Credit Agreement is annexed hereto and incorporated by reference as Exhibit (b)(1) to this Amendment.  Kate Spade stockholders and other interested parties should read the Credit Agreement in its entirety.

Notes

On June 6, 2017, Parent entered into an underwriting agreement  (the “Underwriting Agreement”) with Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities LLC, as representatives of the several underwriters named therein (collectively, the “Underwriters”), providing for its underwritten public offering of $400,000,000 aggregate principal amount of 3.000% senior unsecured notes due 2022 (the “2022 Notes”) and $600,000,000 aggregate principal amount of 4.125% senior unsecured notes due 2027 (the “2027 Notes,” and together with the 2022 Notes, the “Notes”).  The offer and sale of the Notes is registered under the Securities Act of 1933, as amended, pursuant to an automatic shelf registration statement on Form S-3 (File No. 333-200642) filed with the SEC on December 1, 2014.  Parent plans to use the proceeds of the Notes to finance, in part, the Offer and the Merger, subject to the terms and conditions of the Merger Agreement.

The Underwriting Agreement contains customary representations, warranties and agreements of Parent and customary conditions to closing, indemnification rights and obligations of the parties. Parent expects the sale of the Notes to close on or about June 20, 2017 (the “Notes Closing Date”).

The Notes will be issued under an Indenture (the “Base Indenture”), as supplemented by a supplemental indenture with respect to the 2022 Notes and a supplemental indenture with respect to the 2027 Notes, each to be dated as of the Notes Closing Date (collectively, the “Supplemental Indentures” and, together with the Base Indenture, the “Indenture”), between Parent and U.S. Bank National Association, as trustee. The Indenture will contain covenants limiting Parent’s ability to: (1) create certain liens, (2) enter into certain sale and leaseback transactions and (3) merge, or consolidate or transfer, sell or lease all or substantially all of Parent’s assets. These covenants will be subject to important limitations and exceptions that will be described in the Indenture.

The 2022 Notes will bear interest at a rate of 3.000% per year and the 2027 Notes will bear interest at a rate of 4.125% per year, subject to adjustments from time to time if either Moody’s or S&P (or a substitute rating agency) downgrades (or downgrades and subsequently upgrades) the credit rating assigned to the 2022 Notes or the 2027 Notes, as applicable, as set forth in more detail in the prospectus supplement filed by Parent with the SEC on June 6, 2017. Interest on the 2022 Notes and the 2027 Notes is payable semi-annually on January 15 and July 15 of each year, beginning on January 15, 2018. The Notes will be unsecured, senior obligations and rank equal in right of payment to any of Parent’s existing and future senior unsecured indebtedness, senior in right of payment to any of Parent’s future subordinated indebtedness, effectively subordinated in right of payment to any of Parent’s subsidiaries’ obligations (including secured and unsecured obligations) and effectively subordinated in right of payment to any of Parent’s secured obligations, to the extent of the assets securing such obligations.

The Underwriting Agreement is annexed hereto and incorporated by reference as Exhibit (b)(2) to this Amendment.  Kate Spade stockholders and other interested parties should read the Underwriting Agreement in its entirety.”

Regulation M-A Item 1011

The Offer to Purchase and Item 11 of the Schedule TO (and Items 1 through 9 and Item 11 of the Schedule TO, to the extent such items incorporate by reference the information contained in the Offer to Purchase under the following captions and Sections) are hereby amended as follows:

1.	The information set forth in Section 16 — “Certain Legal Matters; Regulatory Approvals” of the Offer to Purchase is hereby amended and supplemented to delete the second numerated paragraph added to such Section in Amendment No. 1 to the Schedule TO and replacing such paragraph with the following:

“Beginning on May 31, 2017, five putative class action complaints were filed by purported stockholders of Kate Spade challenging the Offer and the Merger in the United States District Court for the Southern District of New York. The cases are captioned Rosenfeld vs. Kate Spade & Company, et al., Case No. 1:17-CV-04085 (S.D.N.Y) (filed on May 31, 2017); Ali vs. Kate Spade & Co., et al., Case No. 1:17-CV-04125 (S.D.N.Y.) (filed on June 2, 2017); Steinberg vs. Kate Spade & Company, et al., Case No. 1:17-CV-04155 (S.D.N.Y.) (filed on June 2, 2017); Garcia vs. Kate Spade & Company, et al., Case No. 1:17-CV-04177 (S.D.N.Y.) (filed on June 5, 2017); and Jauregui vs. Kate Spade & Company, et al., Case No. 1:17-CV-04205 (S.D.N.Y.) (filed on June 5, 2017). The complaints name as defendants Kate Spade and members of the Kate Spade Board, and the Steinberg and Jauregui complaints additionally name Parent and Merger Sub. The complaints allege, among other things, that the defendants violated Sections 14(d), 14(e) and 20(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and certain rules promulgated thereunder by omitting or misrepresenting certain allegedly material information in the Solicitation/Recommendation Statement on Schedule 14D-9 of Kate Spade (together with any exhibits and annexes attached thereto, the “Schedule 14D-9”), which the plaintiff-stockholders argue is necessary for stockholders to make an informed decision as to whether to tender their Shares. In addition, the Jauregui complaint alleges that the Kate Spade Board breached its fiduciary duties by causing Kate Spade to enter into the Merger Agreement based on allegations that the Offer price is inadequate, the sales process was flawed, and the Merger Agreement includes preclusive deal protection provisions that would impede or prevent a potential superior proposal.  As relief, the plaintiff-stockholders seek in the complaint, among other things, an injunction against the Offer and Merger, rescissory damages should the Offer and Merger not be enjoined, unspecified money damages, and an award of the costs of the action, including attorneys’ and experts’ fees.  Copies of the complaints are annexed hereto and incorporated by reference as Exhibits (a)(5)(A), (a)(5)(B), (a)(5)(C), (a)(5)(D) and (a)(5)(E) to this Amendment.

Similar stockholder actions relating to the Offer and Merger may be filed during and after this offering.”

Regulation M-A Item 1016

Exhibit (a)(1)(H) and Item 12 of the Schedule TO are hereby amended as follows:

1.	The information set forth under the caption “Cautionary Statement Regarding Forward-Looking Statements” in Exhibit (a)(1)(H) is hereby amended and supplemented by deleting the paragraph of such section and replacing such paragraph with the following:

“This press release may contain “forward-looking statements” within the meaning of the federal securities laws. In this context, forward-looking statements often address expected future business and financial performance and financial condition, and often contain words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “see,” “will,” “would,” “target,” similar expressions, and variations or negatives of these words. Forward-looking statements by their nature address matters that are, to different degrees, uncertain, such as statements about the consummation of the proposed transaction and the anticipated benefits thereof. Such statements involve risks, uncertainties and assumptions. If such risks or uncertainties materialize or such assumptions prove incorrect, the results of Coach, Inc. and its consolidated subsidiaries could differ materially from those expressed or implied by such forward-looking statements and assumptions. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. Risks, uncertainties and assumptions include the possibility that expected benefits may not materialize as expected; that the merger may not be timely completed, if at all; that, prior to the completion of the transaction, Kate Spade & Company’s business may not perform as expected due to transaction-related uncertainty or other factors; that the parties are unable to successfully implement integration strategies; and other risks that are described in Coach, Inc.’s latest Annual Report on Form 10-K and its other filings with the SEC.”

SIGNATURES

After due inquiry and to the best of their knowledge and belief, each of the undersigned certifies that the information set forth in this statement is true, complete and correct.

Dated: June 8, 2017

EXHIBIT INDEX

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Exhibit (a)(5)(B)

 

JARED ALI, individually and on behalf of all others similarly situated,	)
	)
	)
Plaintiff,	)
	)	CIVIL ACTION NO. ___________
v.	)
	)	CLASS ACTION COMPLAINT
KATE SPADE & CO., NANCY J. KARCH,	)	FOR VIOLATION OF
LAWRENCE   S.   BENJAMIN,   RAUL   J.	)	FEDERAL SECURITIES LAWS
FERNANDEZ,     CARSTEN     FISCHER,	)
KENNETH   B.   GILMAN,   KENNETH   P.	)
KOPELMAN,    CRAIG    A.    LEAVITT,	)
DEBORAH   LLOYD,   DOUGLAS   MACK,	)
JAN SINGER, and DOREEN A. TOBEN	)
	)

Dated:  June 2, 2017	Respectfully submitted,
	By: /s/ Michael Ershowsky
	Michael Ershowsky
	LEVI & KORSINSKY LLP
	30 Broad Street, 24th Floor
	New York, NY 10004
	Tel: (212) 363-7500
	Fax: (212) 363-7171
	Email: mershowsky@zlk.com
	Attorneys for Plaintiff
OF COUNSEL:
LEVI & KORSINSKY, LLP
Donald J. Enright (to be admitted pro hac vice)
Elizabeth K. Tripodi (to be admitted pro hac vice)
1101 30th Street, N.W., Suite 115
Washington, DC 20007
Tel: (202) 524-4290
Fax: (202) 337-1567
Email:  denright@zlk.com
etripodi@zlk.com
Attorneys for Plaintiff

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Exhibit (a)(5)(C)

 

Dated:  June 2, 2017		RIGRODSKY & LONG, P.A.
	By:	/s/ Timothy J. MacFall
		Timothy J. MacFall
		825 East Gate Boulevard, Suite 300 Garden City, NY 11530
		(516) 683-3516
		Brian D. Long
		Gina M. Serra
		2 Righter Parkway, Suite 120 Wilmington, DE 19803
		(302) 295-5310
		Attorneys for Plaintiff

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Exhibit (a)(5)(D)

31

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Name of Executive Officer or Director		Number of Shares (#)				Cash Consideration for Shares (S)(2)
Lawrence S. Benjamin(l)			57,047			$	1,055,369.50
Raul J. Fernandez(l)			81,715			$	1,511,727.50
Carsten Fischer(l)			7,893			$	146,020.50
Kenneth B. Gilman(l)			128,567			$	2,378,489.50
Nancy J. Karch(l)			174,017			$	3,219,314.50
Kenneth P. Kopelman(l)			128,876			$	2,384,206.00
Douglas Mack(l)			16,386			$	303,141.00
Jan Singer(l)			17,261			$	319,328.50
Doreen A Toben(l)			89,384			$	1,653,604.00
Craig A. Leavitt			125,509			$	2,321,916.50
George Carrara			44,061			$	815,128.50
Deborah J. Lloyd			79,682			$	1,474,117.00
Thomas J. Linko			13,833			$	255,910.50
Linda S. Yanussi			10,895			$	201,557.50
Marissa Andrada			—			$	—
Timothy Michno			—			$	—
All of our current directors and executive officers as a group			975,126			$	18,039,831.00

Name of Executive Officer		Number of Shares Subject to Vested In-the-Money Company Stock Options (#)				Weighted-Average Exercise Price Per Share ($)				Cash Consideration for Vested ln-the-Money Company Stock Options ($)
Craig A. Leavitt			112,500			$	4.81			$	1,540,125
George Carrara			60,000			$	13.62			$	292,800
Deborah J. Lloyd			112,500			$	4.81			$	1,540,125

Name of Executive Officer		Number of Shares Subject to Company Restricted Stock Unit Awards (#)				Cash Consideration for Restricted Stock Unit Awards ($)				Number Shares Subject to Company Performance Share Unit Awards (#)				Cash Consideration for Performance Share Unit Awards ($)				Number Shares Subject to Company Market Share Unit Awards (#)				Cash Consideration for Market Share Unit Awards ($)
Craig A. Leavitt			242,122			$	4,479,257				395,454			$	7,315,899				156,510			$	2,895,435
George Carrara			72,638			$	1,343,803				118,637			$	2,194,785				53,804			$	995,374
Deborah J. Lloyd			158,591			$	2,933,934				259,024			$	4,791,944				150,972			$	2,792,982
Thomas J. Linko			16,950			$	313,575				27,684			$	512,154				14,923			$	276,076
Linda S. Yanussi			16,950			$	313,575				27,684			$	512,154			16,392				$	303,252
Marissa Andrada(l)			28,577			$	528,675				7,685			$	142,173				—				—
Timothy Michno			22,028			$	407,518				17,950			$	332,075				—				—

Name(l)		Cash ($)(2)				Equity ($)(3)				Perquisites/ Benefits ($)(4)				Other ($)				Total ($)
Named Executive Officers
Craig A. Leavitt		$	10,500,000			$	14,690,591			$	87,406				(5	)		$	25,277,997
George Carrara		$	3,750,000			$	4,533,962			$	9,733			$	750,000(6	)		$	9,043,695
Deborah .J.Lloyd		$	13,775,000			$	10,518,860			$	85,493				(5	)		$	24,379,353
Thomas J. Linko		$	1,196,250			$	1,101,805			$	18,800			$	500,000(6	)		$	2,816,855
Linda S. Yanussi		$	1,223,750			$	1,128,981			$	10,620				—			$	2,363,351

 

CLASS ACTION COMPLAINT

 

 

99.           Thus, while the Proposed Acquisition is not in the best interests of Kate Spade's public stockholders, it will produce lucrative benefits for the Company's officers and directors.

 

The Materially Misleading and/or Incomplete Preliminary 14D-9

100.         On May 26, 2017, Kate Spade filed with the SEC a materially misleading and incomplete 14D-9 that failed to provide the Company's stockholders with material information and/or provides them with materially misleading information critical to the total mix of information available to the Company's stockholders concerning the financial and procedural fairness of the Proposed Acquisition.

 

101.         The 14D-9 fails to provide material information concerning financial projections provided by Kate Spade's management, reviewed with Kate Spade's and relied upon by Perella Weinberg in its analyses. Courts have uniformly stated that "projections ... are probably among the most highly-prized disclosures by investors. Investors can come up with their own estimates of discount rates or [] market multiples. What they cannot hope to do is replicate management's inside view of the company's prospects." In re Netsmart Techs., Inc. S'holders Litig., 924 A.2d 171, 201-203 (Del. Ch. 2007).

102.         For example, the 14D-9 fails to disclose:

a.

The definition of cash flow from operations and the projection line items used to derive cash flow from operations;

b.

the range of terminal value multiples to 2019 EBITDA;

c.

The sensitivity cases used by Perella Weinberg; and

d.

The financial forecasts used in Perella Weinberg's "Wall Street Consensus DCF";

103.         Without accurate projection data presented in the 14D-9, Plaintiff and other stockholders of Kate Spade are unable to properly evaluate the Company's true worth, the accuracy of Perella Weinberg's financial analyses, or make an informed decision whether to tender their Company stock in the Proposed Acquisition.

 

CLASS ACTION COMPLAINT

 

Case 1:17-cv-04205 Document 1 Filed 06/05/17 Page 25 of 31

 

 

104.         Specifically, the 14D-9 fails to provide material information concerning the process conducted by the Company and the events leading up to the Proposed Acquisition. In particular, the 14D-9 fails to disclose:

 

a.

The specific nature of the NDA agreements between the Company on the one hand and Party A, or Party B on the other, and whether those NDAs contained standstill provisions or so-called "don't ask-don't waive" provisions that may have constrained that parties' ability to present a superior offer.

 

105.         Specifically, the 14D-9 fails to provide material information concerning the Director Defendants' potential conflicts of interest that infect the Proposed Acquisition. In particular, the 14D- 9 fails to disclose:

a.

Given that management negotiated their own employment agreements, it is material to disclose the timing and nature of communications regarding future employment and/or directorship of Kate Spade's officers and directors, including who participated in all such communications;

b.

The specific nature and timing of the negotiations that led to the "deal completion bonus letters" that provided Defendant Carrara and Company Chief Financial Officer Linko deal completion bonuses of $750,000 and $500,000 in cash.

 

 

 

106.          In the 14D-9, Perella Weinberg describes its fairness opinions and the various valuation analyses performed to render its opinion. However, the descriptions fail to include necessary underlying data, support for conclusions, or the existence of, or basis for, underlying assumptions. Without this information, one cannot replicate the analyses, confirm the valuations or evaluate the fairness opinions. Of particular note is the fact that Perella Weinberg's DCF shows a range of implied values per share all of which are above the deal price - $21.20-$26.90 vs $18.50. Only by use of the Trend Sensitivity DCF is Perella Weinberg able to drop the implied range below the deal price. As such, shareholders must be advised when the decision was made to sensitize the projections and the full reasoning behind the decision.

107.          The 14D-9 does not disclose material details concerning the analyses performed by Perella Weinberg in connection with the Proposed Acquisition, including (among other things):

a.            Discounted Cash Flow Analyses:

 

With respect to Perella Weinberg's Discounted Cash Flow analysis, the 14D-9 fails to disclose:

i.

The inputs used to derive the range of discount rates of 10.5% to 12.5%;

ii.

The Company's standalone unlevered free cash flows for fiscal year 2017 through fiscal year 2019 for the projection cases; and

iii.

The Company's estimated 2019 EBTIDA used to derive the terminal value.

b.            Selected Publicly Traded Companies Analysis

 

With respect to Perella Weinberg's Selected Publicly Traded Companies Analysis, the 14D-9 fails to disclose:

i.

Whether Perella Weinberg conducted a benchmarking analyses for the Company in relation to the target companies and the financial operating characteristics and other factors observed by Perella Weinberg.

 

CLASS ACTION COMPLAINT

 

 

108.         Without the omitted information identified above, Kate Spade's public stockholders are missing critical information necessary to evaluate whether the proposed consideration truly maximizes stockholder value and serves their interests. Moreover, without the key financial information and related disclosures, Kate Spade's public stockholders cannot gauge the reliability of the fairness opinion and the Board's determination that the Proposed Acquisition is in their best interests.

FIRST COUNT

 

Claim for Breach of Fiduciary Duties

 

109.         Plaintiff repeats all previous allegations as if set forth in full herein.

110.         The Individual Defendants have violated their fiduciary duties of care, loyalty and good faith owed to Plaintiffs and the Company's public stockholders.

111.         By the acts, transactions and courses of conduct alleged herein, Defendants, individually and acting as a part of a common plan, are attempting to unfairly deprive Plaintiff and other members of the Class of the true value of their investment in Kate Spade.

112.         As demonstrated by the allegations above, the Individual Defendants failed to exercise the care required, and breached their duties of loyalty and good faith owed to the stockholders of Kate Spade by entering into the Proposed Acquisition through a flawed and unfair process and failing to take steps to maximize the value of Kate Spade to its public stockholders.

 

113.         Indeed, Defendants have accepted an offer to sell Kate Spade at a price that fails to reflect the true value of the Company, thus depriving stockholders of the reasonable, fair and adequate value of their shares.

 

114.         Moreover, the Individual Defendants breached their duty of due care and candor by failing to disclose to Plaintiff and the Class all material information necessary for them to make an informed decision on whether to tender their shares in support of the Proposed Acquisition.

 

115.         The Individual Defendants dominate and control the business and corporate affairs of Kate Spade, and are in possession of private corporate information concerning Kate Spade's assets, business and future prospects. Thus, there exists an imbalance and disparity of knowledge and economic power between them and the public stockholders of Kate Spade which makes it inherently unfair for them to benefit their own interests to the exclusion of maximizing stockholder value.

 

CLASS ACTION COMPLAINT

 

 

116.         By reason of the foregoing acts, practices and course of conduct, the Individual Defendants have failed to exercise due care and diligence in the exercise of their fiduciary obligations toward Plaintiff and the other members of the Class.

117.         As a result of the actions of the Individual Defendants, Plaintiff and the Class will suffer irreparable injury in that they have not and will not receive their fair portion of the value of Kate Spade's assets and have been and will be prevented from obtaining a fair price for their common stock.

118.         Unless the Individual Defendants are enjoined by the Court, they will continue to breach their fiduciary duties owed to Plaintiff and the members of the Class, all to the irreparable harm of the Class.

119.         Plaintiff and the members of the Class have no adequate remedy at law. Only through the exercise of this Court's equitable powers can Plaintiff and the Class be fully protected from the immediate and irreparable injury which Defendants' actions threaten to inflict.

SECOND COUNT

 

Violations of Section 14(e) of the Exchange Act

 

120.         Plaintiff repeats all previous allegations as if set forth in full herein.

121.         Defendants have disseminated the 14D-9 with the intention of soliciting stockholders to tender their shares in favor of the Proposed Acquisition.

122.         Section 14(e) of the Exchange Act provides that in the solicitation of shares in a tender offer, "[i]t shall be unlawful for any person to make any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading[.]"

 

CLASS ACTION COMPLAINT

 

 

123.         The 14D-9 was prepared in violation of Section 14(e) because it is materially misleading in numerous respects and omits material facts, including those set forth above. Moreover, in the exercise of reasonable care, Defendants knew or should have known that the 14D-9 is materially misleading and omits material facts that are necessary to render them non-misleading.

124.         The Individual Defendants had actual knowledge or should have known of the misrepresentations and omissions of material facts set forth herein.

125.         The Individual Defendants were at least negligent in filing a 14D-9 that was materially misleading and/or omitted material facts necessary to make the 14D-9 not misleading

 

126.         The misrepresentations and omissions in the 14D-9 are material to Plaintiff and the Class, and Plaintiff and the Class will be deprived of his entitlement to decide whether to tender his shares on the basis of complete information if such misrepresentations and omissions are not corrected prior to the expiration of the tender offer period regarding the Proposed Acquisition.

THIRD COUNT

 

Violations of Section 20(a) of the Exchange Act

 

127.         Plaintiff repeats all previous allegations as if set forth in full herein.

128.         The Individual Defendants and Coach were privy to non-public information concerning the Company and its business and operations via access to internal corporate documents, conversations and connections with other corporate officers and employees, attendance at management and Board meetings and committees thereof and via reports and other information provided to them in connection therewith. Because of their possession of such information, the Individual Defendants and Coach knew or should have known that the 14D-9 was materially misleading to Company stockholders.

 

CLASS ACTION COMPLAINT

 

 

129.         The Individual Defendants and Coach were involved in drafting, producing, reviewing and/or disseminating the materially false and misleading statements complained of herein. The Individual Defendants and Coach were aware or should have been aware that materially false and misleading statements were being issued by the Company in the 14D-9 and nevertheless approved, ratified and/or failed to correct those statements, in violation of federal securities laws. The Individual Defendants and Coach were able to, and did, control the contents of the 14D-9. The Individual Defendants and Coach were provided with copies of, reviewed and approved, and/or signed the 14D-9 before its issuance and had the ability or opportunity to prevent its issuance or to cause it to be corrected.

130.         The Individual Defendants and Coach also were able to, and did, directly or indirectly, control the conduct of Kate Spade' business, the information contained in its filings with the SEC, and its public statements. Because of their positions and access to material non-public information available to them but not the public, the Individual Defendants and Coach knew or should have known that the misrepresentations specified herein had not been properly disclosed to and were being concealed from the Company's stockholders and that the 14D-9 was misleading. As a result, the Individual Defendants and Coach are responsible for the accuracy of the 14D-9 and are therefore responsible and liable for the misrepresentations contained herein.

131.         The Individual Defendants acted as controlling persons of Kate Spade within the meaning of Section 20(a) of the Exchange Act. By reason of their position with the Company, the Individual Defendants had the power and authority to cause Kate Spade to engage in the wrongful conduct complained of herein. The Individual Defendants controlled Kate Spade and all of its employees. Additionally, Coach also had direct supervisory control over the composition of the 14D- 9 and the information disclosed therein, as well as the information that was omitted and/or misrepresented in the 14D-9. As alleged above, Kate Spade is a primary violator of Section 14 of the Exchange Act and SEC Rule 14d-9. By reason of their conduct, the Individual Defendants are liable pursuant to Section 20(a) of the Exchange Act.

 

CLASS ACTION COMPLAINT

 

 

WHEREFORE, Plaintiff demands injunctive relief, in his favor and in favor of the Class, and against the Defendants, as follows:

A.            Ordering that this action may be maintained as a class action and certifying Plaintiff as the Class representatives and Plaintiff's counsel as Class counsel;

B.            Enjoining the Proposed Acquisition;

C.            In the event defendants consummate the Proposed Acquisition, rescinding it and setting it aside or awarding rescissory damages to Plaintiff and the Class;

D.            Declaring and decreeing that the Merger Agreement was agreed to in breach of the fiduciary duties of the Individual Defendants and is therefore unlawful and unenforceable;

E.            Directing the Individual Defendants to exercise their fiduciary duties to commence a sale process that is reasonably designed to secure the best possible consideration for Kate Spade and obtain a transaction which is in the best interests of Kate Spade and its stockholders;

F.             Directing defendants to account to Plaintiff and the Class for damages sustained because of the wrongs complained of herein;

G.            Awarding Plaintiff the costs of this action, including reasonable allowance for Plaintiff's attorneys' and experts' fees; and

H.            Granting such other and further relief as this Court may deem just and proper.

 

Plaintiff hereby demands a jury on all issues which can be heard by a jury.

 

Dated: June 5, 2017
	240 Mineola Blvd.
	Mineola, NY 11051
	Telephone: (516) 741-4799
	Facsimile: (516) 741-0626
	esmith@brodskysmith.com
	Attorneys for Plaintiff

 

 

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