VSI Vitamin Shoppe Inc

Merger Agreement

On August 7, 2019, Vitamin Shoppe, Inc. (the “ Company ”) entered into an Agreement and Plan of Merger (the “ Merger Agreement ”) with Liberty Tax, Inc., a Delaware corporation (“ Parent ”), and, Valor Acquisition, LLC, a Delaware limited liability company, a wholly owned subsidiary of Parent (“ Merger Sub ”), providing for the merger of Merger Sub with and into the Company (the “ Merger ”), with the Company continuing as the surviving corporation of the Merger and a wholly owned subsidiary of Parent. Capitalized terms used herein but not otherwise defined have the meaning ascribed to such terms in the Merger Agreement.

As a result of the Merger, each share of Company Common Stock outstanding as of immediately prior to the Effective Time (other than (1) Owned Company Shares, (2) Converted Company Shares or (3) Dissenting Company Shares) will automatically be cancelled, extinguished and converted into the right to receive cash in an amount equal to $6.50, without interest thereon (the “ Per Share Price ”).

The Merger Agreement provides that, at the Effective Time, (1) each Company RSU outstanding as of immediately prior to the Effective Time, whether vested or unvested, will be cancelled and converted into and will become a right to receive an amount in cash, without interest, equal to (a) the amount of the Per Share Price multiplied by (b) the total number of shares of Company Common Stock subject to such Company RSU, (2) each Company PSU outstanding as of immediately prior to the Effective Time, whether vested or unvested, will be cancelled and converted into and will become a right to receive an amount in cash, without interest, equal to (a) the amount of the Per Share Price multiplied by (b) the number of shares of Company Common Stock subject to such Company PSU, as determined in accordance with the applicable Company PSU award agreement, (3) each Company Option outstanding as of immediately prior to the Effective Time, whether vested or unvested, will be cancelled and converted into and will become a right to receive an amount in cash, without interest, equal to (a) the amount of the Per Share Price (less the exercise price per share attributable to such Company Option) multiplied by (b) the total number of shares of Company Common Stock issuable upon exercise in full of such Company Option (with Company Options whose exercise price is equal to or less than the Per Share Price being cancelled for no consideration), and (4) each share of Company Restricted Stock outstanding as of immediately prior to the Effective Time, whether vested or unvested, will be cancelled and converted into an amount in cash, without interest, equal to (a) the amount of the Per Share Price multiplied by (b) the total number of shares of Company Restricted Stock.

The Merger Agreement also provides for a “go-shop” period beginning on the date of the Merger Agreement and continuing until 12:01 a.m. (New York time) on September 6, 2019 (such date, the “ No-Shop Period Start Date ”), giving the Company the right to actively solicit alternative acquisition proposals from third parties and to provide information to, and participate in discussions and engage in negotiations with, third parties regarding any alternative acquisition proposals. However, from the No-Shop Period Start Date until the earlier of the termination of the Merger Agreement and the Effective Time, the Company will be subject to “no-shop” restrictions on its ability to engage in such actions, subject to a customary “fiduciary out” provision that allows the Company, under certain specified circumstances, to provide information to, and participate in discussions and engage in negotiations with, third parties with respect to an alternative acquisition proposal if the Company Board (or the Company Special Committee) determines in good faith (after consultation with its financial advisor and outside legal counsel) that such alternative acquisition proposal either (1) constitutes a Superior Proposal or (2) is reasonably likely to lead to a Superior Proposal.

The consummation of the Merger is subject to certain customary conditions, including, but not limited to, the (1) the adoption of the Merger Agreement by the affirmative vote of the holders of at least a majority of the outstanding shares of Company Common Stock entitled to vote on the Merger; (2) expiration or termination of any waiting periods applicable to the Merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended; (3) absence of any Law or injunction (whether temporary, preliminary or permanent) enacted or issued by any Governmental Authority of competent jurisdiction prohibiting or otherwise making illegal the consummation of the Merger; (4) accuracy of representations and warranties, subject to specified materiality thresholds; (5) compliance with covenants, obligations and conditions in the Merger Agreement in all material respects; and (6) the absence of a material adverse effect on the Company.

The Merger Agreement contains certain termination rights, including the right of the Company to terminate the Merger Agreement to accept a Superior Proposal, subject to specified conditions and limitations, and provides that, upon termination of the Merger Agreement by the Company or Parent upon specified conditions, the Company will be required to pay Parent a termination fee of (i) $3,240,000 if the Merger Agreement is terminated in connection with an alternative acquisition proposal made by an Excluded Party or (ii) $5,670,000 if the Merger Agreement is terminated in certain other circumstances. Upon termination of the Merger Agreement by the Company or Parent under specified conditions, Parent will be required to pay the Company a termination fee of $11,340,000. In addition, subject to certain exceptions and limitations, either party may terminate the Merger Agreement if the Merger is not consummated by 11:59 p.m. (New York time) on May 7, 2020.

Parent has obtained debt financing commitments from two financial institutions and an equity financing commitment from Tributum, L.P., an affiliate of Vintage Capital Management, LLC (“Vintage”), for the purpose of funding the aggregate purchase price at the Effective Time and paying related fees and expenses with respect to the Merger, each subject to certain terms and conditions.

The foregoing description of the Merger and the Merger Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Merger Agreement, a copy of which is attached hereto as Exhibit 2.1 and is incorporated herein by reference in its entirety. The Merger Agreement has been attached to provide investors with information regarding its terms. It is not intended to provide any other factual information about the Company. In particular, the assertions embodied in the representations and warranties contained in the Merger Agreement are qualified by information in the confidential Company Disclosure Letter provided by the Company to Parent in connection with the signing of the Merger Agreement. The confidential Company Disclosure Letter contains information that modifies, qualifies and creates exceptions to the representations and warranties and certain covenants set forth in the Merger Agreement. Moreover, certain representations and warranties in the Merger Agreement were used for the purpose of allocating risk between the Company and Parent rather than establishing matters as facts. In addition, investors are not third party beneficiaries under the Merger Agreement. Accordingly, the representations and warranties in the Merger Agreement should not be relied on as characterizations of the actual state of facts about the Company.

Voting Agreement

In connection with the Company entering into the Merger Agreement, Vintage Fourteen, L.P., an affiliate of Vintage (which holds approximately 14.8% of the total issued and outstanding shares of Company Common Stock as of August 7, 2019), entered into a voting agreement (the “ Voting Agreement ”) pursuant to which it has committed to vote its shares of Company Common Stock in favor of, and to take certain other actions in furtherance of, the transactions contemplated by the Merger Agreement, including the Merger. The Voting Agreement will terminate upon the earliest to occur of (1) the Effective Time, (2) the valid termination of the Merger Agreement, (3) the occurrence of a Company Board Recommendation Change, (4) the conclusion of the Company Stockholder Meeting, and (5) certain other circumstances related to the amendment, waiver or modification of the Merger Agreement.

The foregoing description of the Voting Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Voting Agreement, a copy of which is attached hereto as Exhibit 10.1 and is incorporated herein by reference in its entirety.