Item 1.01. Entry into a Material Definitive Agreement.
Merger Agreement
On June 12, 2022, Steel Partners Holdings L.P.,
a Delaware limited partnership (the “Company” or “Steel Partners”), entered into an Agreement and Plan of Merger
(the “Merger Agreement”), with Steel Connect, Inc., a Delaware corporation (“Steel Connect”), and SP Merger Sub,
Inc., a Delaware corporation and wholly owned subsidiary of Company (“Merger Sub” and, together with the Company and Steel
Connect, each a “Party” and collectively the “Parties”) providing for the merger of Merger Sub with and into Steel
Connect (the “Merger”), with Steel Connect surviving the Merger (the “Surviving Corporation”) and becoming a wholly
owned subsidiary of the Company. The Company, directly and indirectly, exercises voting power over shares of the common stock, par value
$0.01 per share, of Steel Connect (the “Steel Connect Common Stock”) and Series C Preferred Stock, par value $0.01 per share,
of Steel Connect (the “Steel Connect Series C Preferred Stock”) collectively representing approximately 46.1% of the outstanding
voting power of Steel Connect.
At the effective time of the Merger, (i) each issued
and outstanding share of the Steel Connect Common Stock owned by Steel Connect or any of its wholly owned subsidiaries or by the Company
or any of its wholly owned subsidiaries (collectively, “Excluded Shares”) will automatically be canceled and shall cease to
exist, and no consideration shall be paid in respect thereof; and (ii) each issued and outstanding share of Steel Connect Common Stock
(other than the Excluded Shares and any shares held by dissenting holders) will be converted into the right to (a) receive $1.35 in cash
per share, without interest and subject to any withholding taxes (the “Per Share Cash Merger Consideration”) and (b) one contingent
value right to receive, subject to the terms of the ModusLink CVR Agreement (described below), the ModusLink CVR Payment Amount as provided
in the Merger Agreement (such right, a “ModusLink CVR” and, together with the Per Share Cash Merger Consideration, the “Per
Share Merger Consideration”); and (iii) each issued and outstanding share of Steel Connect Common Stock converted into a right to
receive the Per Share Merger Consideration (each, a “Converted Share” and collectively, the “Converted Shares”)
shall automatically be canceled and shall cease to exist and the holders of certificates which immediately prior to the effective time
of the Merger represented the Converted Shares (“Steel Connect Certificates”) shall cease to have any rights with respect
to those shares, other than the right to receive the Per Share Merger Consideration with respect to each such share upon surrender of
Steel Connect Certificates in accordance with the Merger Agreement.
Steel Connect’s Board of Directors, acting
on the unanimous recommendation of the special committee of the Board of Directors (the “Special Committee”), and the Board
of Directors of Steel Partner Holdings GP Inc., a Delaware corporation, and the general partner of the Company (“Steel Partners’
General Partner”) approved the Merger Agreement and the transactions contemplated by the Merger Agreement (such transactions, collectively,
the “Transactions”) and resolved to recommend the stockholders adopt the Merger Agreement and approve the Transactions The
Special Committee, which is comprised solely of independent and disinterested directors of Steel Connect who are unaffiliated with Steel Partners, exclusively negotiated the terms of the Merger Agreement with Steel Partners, with the assistance of its independent
financial and legal advisors.
The board of directors of Steel Connect (the “Steel
Connect Board”) has adopted resolutions (i) determining that the terms of the Merger Agreement and the Merger and the Transactions
are advisable, fair to and in the best interest of Steel Connect and the holders of capital stock of Steel Connect (other than holders
of Excluded Shares), and (ii) authorizing, approving and declaring advisable, the Merger Agreement, the form and terms of the Merger Agreement
and the Transactions.
Steel Partners’ General Partner adopted resolutions
(i) determining, in its sole discretion, that the ownership and acquisition of Steel Connect Common Stock, the Merger Agreement, the ModusLink
CVR Agreement and the Transactions are business activities approved pursuant to Section 2.4 of the Ninth Amended and Restated Agreement
of Limited Partnership of Steel Partners dated as of June 1, 2022 (the “LP Agreement”) and necessary and appropriate to the
conduct of the business of Steel Partners pursuant to Section 7.1(a) of the LP Agreement, and (ii) authorizing, approving and adopting
the foregoing determinations, the Merger Agreement, the ModusLink CVR Agreement and the Transactions.
The Merger Agreement contains representations,
warranties and covenants of the Parties that are customary for transactions of this type. Until the closing of the Merger, the Company
and Steel Connect have agreed, subject to certain exceptions, to use its commercially reasonable efforts to conduct their respective businesses
in the ordinary course consistent with past practice. The Parties are required to use their respective commercially reasonable efforts
to take, or cause to be taken, all actions necessary, proper or advisable under applicable laws to consummate the Transaction.
The Merger Agreement includes a
“go-shop” period that expires at 11:59 p.m. Eastern time on July 12, 2022, during which Steel Connect may actively
solicit and consider alternative acquisition proposals. There can be no assurances that the “go-shop” process will
result in a superior proposal, and Steel Connect does not intend to communicate developments regarding the process unless and until
Steel Connect determines that additional disclosure is required or desirable.
The closing of the Merger is subject to certain
customary conditions, including the accuracy of the representations and warranties of, and compliance with covenants by, each of the Parties
to the Merger Agreement, as well as adopting of the Merger Agreement by holders of a majority of the outstanding shares of Steel Connect
Common Stock not owned by affiliates of Steel Connect or the Company. There can be no assurance that these closing conditions will be
satisfied and that the Parties will be able to consummate the Merger or the Transactions. In addition, the Merger Agreement contains certain
termination rights that are customary for a transaction of this type, including, for example, if the Merger has not been consummated by
December 9, 2022 (the “Outside Date”), subject to certain limitations. The Merger Agreement further provides that upon the
termination of the Merger Agreement under certain circumstances, Steel Connect shall pay, or cause to be paid, to the Company a termination
fee equal to $1,500,000 and to reimburse the expenses of the Company up to $1,000,000. The closing of the merger is not subject to a financing
condition, and is expected to occur in the second half of 2022.
Voting and Support Agreement
In connection with the Merger Agreement, the Company,
Steel Connect, Handy & Harman Ltd., a Delaware corporation (“Handy”), WHX CS Corp., a Delaware corporation (“WHX”),
Steel Partners, Ltd., a Delaware corporation (“SPL”), SPH Group LLC, a Delaware limited liability company (“SPH”),
SPH Group Holdings LLC, a Delaware limited liability company (“SPH Holdings”), Steel Partners Holdings GP Inc., a Delaware
corporation (“GP”), Steel Excel Inc., a Delaware corporation (“SXL”), Warren G. Lichtenstein, an individual (“Lichtenstein”),
and Jack L. Howard, an individual (“Howard”, and together with Handy, WHX, SPL, SPH, SPH Holdings, GP, SXL and Lichtenstein,
the “Stockholders” and each a “Stockholder”) entered into a Voting and Support Agreement, dated as of June 12,
2022 (the “Support Agreement”). Per the terms and conditions set forth in the Support Agreement, each Stockholder has agreed
to vote, or cause to be voted, all shares of Steel Connect Common Stock and Steel Connect Series C Preferred Stock beneficially owned
by each such Stockholder (representing an aggregate of approximately 49.8%of Steel Connect’s total outstanding voting power as of
June 12, 2022) for the adoption of the Merger Agreement and any alternative acquisition agreement approved by the Company Board (acting
on the recommendation of the Special Committee).
Contingent Value Rights Agreement
In connection with the closing of the Merger, the
Company, Steel Connect, and a rights agent to be determined thereunder (“Rights Agent”) and a shareholder representative to
be determined thereunder, in its capacity as the Shareholder Representative, will enter into a Contingent Value Rights Agreement (the
“ModusLink CVR Agreement”), substantially in the form attached to the Merger Agreement. In accordance with the ModusLink CVR
Agreement, holders of Steel Connect Common Stock issued and outstanding immediately prior to the effective time of the Merger (other than
Excluded Shares and shares held by dissenting holders) will receive in respect of each such share one ModusLink CVR with the right to
receive the a pro rata share of net proceeds, to the extent such net proceeds exceed $80 million plus certain related costs and expenses,
if Steel Connect’s ModusLink subsidiary is sold during the two-year period following completion of the Merger.
The ModusLink CVRs represent a contractual right
only and will not be transferable except in the limited circumstances specified in the ModusLink CVR Agreement. The ModusLink CVRs will
not be evidenced by certificates or any other instruments and will not be registered with the Securities and Exchange Commission (the
“SEC”). The ModusLink CVRs do not have any voting or dividend rights, and interest shall not accrue on any amounts payable
on the ModusLink CVRs to any holder. In addition, the ModusLink CVRs shall not represent any equity or ownership interest in Steel Connect,
the Company or any of their affiliates, or in any constituent company to the Merger.
The foregoing descriptions of the Merger Agreement,
the Support Agreement and the ModusLink CVR Agreement do not purport to be complete and are qualified in their entirety by reference to
the full text of the Merger Agreement, which is attached to this Current Report on Form 8-K (this “Form 8-K”) as Exhibit 2.1,
the Support Agreement, which is attached to this Form 8-K as Exhibit 10.1, and the ModusLink CVR Agreement, which is attached to this
Form 8-K as Exhibit 10.2, respectively, and are incorporated herein by reference. The Merger Agreement and the Support Agreement have
been attached to provide investors with information regarding its terms. The terms and information therein should not be relied on as
disclosure about the Company without consideration of the reports that the Company files with the SEC. The terms of the Merger Agreement,
the Support Agreement and the ModusLink CVR Agreement (which will be executed at the time of the Merger) govern the contractual rights
and relationships, and allocate risks, among the parties thereto in relation to the Merger. In particular, the representations and warranties
made by the Parties to each other in the Merger Agreement have been negotiated among the Parties with the principal purpose of setting
forth their respective rights with respect to their obligation to close the Merger should events or circumstances change or be different
from those stated in the representations and warranties. Matters may change from the state of affairs contemplated by the representations
and warranties. The Company does not undertake any obligation to release publicly any revisions to these representations and warranties,
except as required under U.S. federal or other applicable securities laws.