LIST OF SCHEDULES AND EXHIBITS
Schedule A
|
Specified Tax Matters
|
Schedule B
|
Specified Bonus Matters
|
Exhibit 1.1(a)
|
Non-Compete Agreements
|
Exhibit 1.1(b)
|
Non-Solicit Agreement
|
Exhibit 1.1(c)
|
Form of Escrow Agreement
|
Exhibit 1.1(d)
|
Net Working Capital Calculation
|
Exhibit 7.11(g)
|
Purchase Price Allocation Methodology
|
Exhibit 9.2(b)
|
Form of Membership Interest Assignment Agreement
|
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT, dated as of January 27, 2018 (this “
Agreement
”), is made and entered into by and among Internap Corporation, a Delaware corporation (the “
Purchaser
”), SINGLEHOP LLC, a Delaware limited liability company (the “
Company
”), the members of the Company set forth on the signature pages hereto (the “
Members
”) and SHAREHOLDER REPRESENTATIVE SERVICES LLC, a Colorado limited liability company, acting solely in its capacity as the representative of the Members and for the limited purposes described herein (the “
Member Representative
”). The Purchaser, the Company, the Members and the Member Representative are sometimes individually referred to herein as a “
Party
” and collectively as the “
Parties
.”
W I T N E S S E T H:
WHEREAS
, the Members collectively own all of the issued and outstanding membership interests and other equity interests of the Company (the “
Membership Interests
”);
WHEREAS
, the Company is in the business of providing bare metal server hosting services, cloud infrastructure solutions, colocation services and related managed hosting services and high-speed internet access (the “
Business
”);
WHEREAS
, the Parties desire to enter into this Agreement pursuant to which the Members propose to sell to the Purchaser, and the Purchaser proposes to purchase from the Members, all of the Membership Interests on the terms and subject to the conditions set forth herein (the “
Acquisition
”);
WHEREAS
, the Purchaser has entered into non-competition and non-solicitation agreements with certain of the Members or their Affiliates, which agreements are attached to this Agreement as
Exhibit
1.1(a)
(the “
Non-Compete Agreements
”) and become effective upon the Closing;
WHEREAS
, the Purchaser has entered into a non-solicitation and nondisclosure agreement with certain of the Members, which agreement is attached to this Agreement as
Exhibit
1.1(b)
(the “
Non-Solicit Agreement
”) and becomes effective upon the Closing; and
WHEREAS
, the Parties desire to make certain representations, warranties and agreements in connection with the Acquisition.
NOW, THEREFORE
, in consideration of the foregoing and the respective representations, warranties, covenants, agreements and conditions hereinafter set forth, and intending to be legally bound hereby, each Party hereby agrees:
ARTICLE I
CONSTRUCTION; DEFINITIONS
Section 1.1
Definitions
.
The following terms, as used herein, have the following meanings:
“
Active Government Contract
” means a Government Contract that has not been closed-out under the procedures of the Governmental Entity responsible for administering the Government Contract.
“
Actual Fraud
” means an inaccurate representation or warranty contained in this Agreement if, at the time such representation or warranty was made, the Party making such representation or warranty (a) had actual knowledge, without inquiry, of the inaccuracy of such representation or warranty and failed to notify the other Party or otherwise correct the same; and (b) failed to notify the other Party of such inaccuracy with the specific intention to induce the other Party to enter into (or not to dissuade the other Party from entering into) this Agreement and consummate the transactions contemplated by this Agreement.”
“
Adjustment Amount
” means the amount, which may be positive or negative, equal to (a) the Net Working Capital Adjustment Amount, plus (b) Closing Date Cash (as finally determined pursuant to
Section 3.6
),
minus
Estimated Closing Date Cash (as determined pursuant to
Section 3.3(c)
),
minus
(c) Closing Date Indebtedness (as finally determined pursuant to
Section 3.6
),
plus
Estimated Closing Date Indebtedness (as determined pursuant to
Section 3.3(a)
),
minus
(d) Transaction Expenses (as finally determined pursuant to
Section 3.6
),
plus
Estimated Transaction Expenses (as determined pursuant to
Section 3.3(b)
).
“
Affiliate
” of any specified Person means any other Person directly or indirectly Controlling or Controlled by or under direct or indirect common Control with such specified Person.
“
Balance Sheet
” means the unaudited consolidated balance sheet of the Company and its Subsidiaries as of November 30, 2017 included in the Financial Statements.
“
Business Day
” means any day except Saturday, Sunday or any day on which banks are generally not open for business in the City of Chicago, Illinois.
“
Capital Members
” means those Members set forth on
Schedule 1.1(a)
.
“
Cash
” means all cash and cash equivalents of the Company and its Subsidiaries, on a consolidated basis, determined in accordance with GAAP. For the avoidance of doubt, Cash: (a) will be calculated net of (i) issued but uncleared checks and drafts, (ii) security deposits of third parties that are held by the Company and its Subsidiaries and (iii) the Tax costs of repatriating any cash held in any non-United States Subsidiary to the United States (taking into account any applicable foreign Tax credits or other similar Tax benefits), and (b) will include (i) checks, other wire transfers and drafts, deposited or available for deposit for the account of the Company or any of its Subsidiaries and (ii) security deposits of the Company and its Subsidiaries that are held by third parties.
“Change of Control Escrow”
means the escrow account established pursuant to this Agreement for purposes of funding the Change of Control Payments.
“Change of Control Agreements”
means the agreements between the Company and certain employees of the Company, as listed on
Schedule 4.17(f)
hereto.
“
Change of Control Payments
” means the aggregate amount payable (including, change of control payments, “success fees” or bonuses, commissions or severance payments, or other similar payments, and any amounts payable to offset any excise Taxes imposed under Section 4999 of the Code and any related income Taxes) by the Company pursuant to the Change of Control Agreements listed on
Section 4.17(c)
, including the employer portion of any employment, payroll or other Tax thereon.
“
Closing
” means the consummation of the transactions contemplated by this Agreement as set forth in
Section 9.1
of this Agreement.
“
Closing Date
” means the date on which the Closing occurs.
“
Closing Date Cash
” means 100% of the Cash of the Company and its Subsidiaries outstanding as of immediately prior to the Closing.
“
Closing Date Indebtedness
” means the Indebtedness of the Company and its Subsidiaries outstanding as of immediately prior to the Closing, on a consolidated basis, determined in accordance with GAAP.
“
Code
” means the U.S. Internal Revenue Code of 1986, as amended.
“
Company Benefit Plan
” means each Employee Benefit Plan currently sponsored or maintained or required to be sponsored or maintained by the Company or any Subsidiary or to which the Company or any Subsidiary makes, or has any obligation to make, directly or indirectly, any contributions or with respect to which the Company or any Subsidiary has, or might have, any liabilities.
“
Company Intellectual Property
” means any Intellectual Property that is owned by or licensed to the Company or any Subsidiary, and includes the Company Software and Company Registered Intellectual Property.
“
Company Licensed Software
” means all material Software (other than Company Proprietary Software) with respect to which the Company or any Subsidiary has been granted a license and for which the Company’s (and any Subsidiary’s) aggregate expenditures in 2017 exceed $10,000.
“
Company Operating Agreement
” means the First Amended and Restated Operating Agreement of SingleHop LLC, dated as of April 16, 2012, by and among the individuals and entities named on Schedule A attached thereto, as amended through the date hereof.
“
Company Proprietary Software
” means all Software owned by the Company or any Subsidiary.
“
Company Registered Intellectual Property
” means all of the Registered Intellectual Property owned by or filed in the name of the Company or any Subsidiary.
“
Company Software
” means the Company Licensed Software and the Company Proprietary Software.
“
Confidential Information
” means any data or information of the Company or any Subsidiary (including trade secrets) that is valuable to the operation of the Company’s or any Subsidiary’s business or otherwise proprietary or confidential and not generally known to the public or competitors;
provided
,
however
, “
Confidential Information
” shall not include any information which (A) is or becomes generally available to the public other than as a result of a disclosure by a Member in breach of
Section 7.10
of this Agreement or in breach of any other obligation to the Company or its Subsidiaries, or (B) following the Closing Date, first becomes available to a Member on a non-confidential basis from a source other than another Member or the Company or its Subsidiaries or their respective Affiliates, provided that such source is not bound by a confidentiality agreement with, or other contractual, legal or fiduciary obligation of confidentiality to, the Company or its Subsidiaries or any other Person with respect to such information.
“
Control
” means, when used with respect to any specified Person, the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise.
“
Customer
” means each of the top twenty-five (25) customers of the Company and its Subsidiaries (based on the dollar amount of monthly recurring revenue recognized by the Company and its Subsidiaries) during the month of December, 2017.
“
Debt Financing Sources
” means the Debt Financing Source, together with any other Persons that have committed to provide or arrange or otherwise entered into agreements (including the Debt Letters, any other commitment letters or financing agreements), in each case, in connection with the Debt Financing, and parties to any joinder agreements or credit agreements entered pursuant thereto or relating thereto together with their respective Affiliates or their or their respective Affiliates’ officers, directors, employees, agents and representatives and their respective successors and assignees.
“
Dollar
”, “
Dollars
” and the symbol “
$
” means lawful money of the U.S.
“
Employee Benefit Plan
” means, with respect to any Person, (a) each material plan, fund, program, agreement, arrangement or scheme, in each case, that is or was at any time sponsored or maintained or required to be sponsored or maintained by such Person or to which such Person makes or has made, or has or has had an obligation to make, contributions providing for employee benefits or for the remuneration, direct or indirect, of the employees, former employees, directors, managers, officers, consultants, independent contractors, contingent workers or leased employees of such Person or the dependents of any of them (whether written or oral), but excluding regular wages and salary, including each deferred compensation, bonus, incentive compensation, pension, retirement, stock purchase, stock option and other equity compensation plan, and “welfare” plan (within the meaning of Section 3(1) of ERISA, determined without regard to whether such plan is subject to ERISA), (b) each “pension” plan (within the meaning of Section 3(2) of ERISA, determined without regard to whether such plan is subject to ERISA), (c) each severance, retention or change in control plan or agreement, each plan or agreement providing health, vacation, summer hours, supplemental unemployment benefit, hospitalization insurance, medical, dental or legal benefit and (d) each other material employee benefit plan, fund, program, agreement, arrangement or scheme, other than a Non-U.S. Plan.
“
Employment Agreement
” means any employment contract, termination or severance agreement, salary continuation agreement, change of control agreement, non-compete agreement or any other agreement respecting the terms and conditions of employment or payment of compensation, other than regular wages and salary or offer letters entered into in the Ordinary Course in respect of any current officer or employee which do not provide for employment on an other than at-will basis or for compensation or benefits other than regular wages and salary and eligibility to participate in Company Benefit Plans and/or Non-U.S. Plans.
“
Environment
” means any surface waters (including navigable and nonnavigable waters), ground water, drinking water supplies, streams, sediments, soil, land surface, subsurface strata or medium, ambient air, plant and animal life and any other environmental medium or natural resource.
“
Environmental Laws
” means all Laws relating in any way to the Environment, preservation or reclamation of natural resources, the presence, management or Release of, or exposure to, or product registration of Hazardous Materials or to human health and safety.
“
ERISA
” means the U.S. Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder.
“
ERISA Affiliate
” means any Person (whether incorporated or unincorporated) that together with the Company or any Subsidiary would be deemed a “single employer” within the meaning of Section 414 of the Code.
“
Escrow Agent
” means SunTrust Bank, in its capacity as escrow agent.
“
Escrow Agreement
” means the Escrow Agreement in the form attached hereto as
Exhibit
1.1(c)
and relating to the Indemnity Escrow, the Change of Control Escrow and the Net Working Capital Escrow.
“
Estimated Net Working Capital Deficit
” means the amount, if any, by which the Net Working Capital Target exceeds the Estimated Net Working Capital.
“
Estimated Net Working Capital Surplus
” means the amount, if any, by which the Estimated Net Working Capital exceeds the Net Working Capital Target.
“
Exhibit
” means any exhibit attached to this Agreement.
“
Final Adjustment Schedule
” means the “
Final Adjustment Schedule
” as finally determined pursuant to
Section 3.6
hereof.
“
Financial Statements
” means (a) the audited consolidated balance sheets of the Company and its Subsidiaries as of December 31, 2015 and December 31, 2016, and the audited consolidated statements of income, members’ equity and cash flows of the Company and its Subsidiaries for the
12
-month periods then ended and (b) the unaudited consolidated balance sheet of the Company and its Subsidiaries as of November 30, 2017
and the unaudited consolidated statements of income, members’ equity and cash flows of the Company and its Subsidiaries for the eleven-month period then ended (the financial statements set forth in clause (b) are referred to herein as the “
Interim Financial Statements
”).
“
GAAP
” means generally accepted accounting principles in the U.S. as applied consistently with the past practices of the Company and its Subsidiaries in the preparation of the year-end audited Financial Statements.
“
Government Contract
” means any contract, agreement or other legally binding arrangement entered into between the Company or any of its Subsidiaries, on the one hand, and any Governmental Entity, on the other hand. The term “Government Contract” also includes any subcontract (at any tier) of the Company or any of its Subsidiaries (a) with any other Person under a prime contract held by the Company or any of its Subsidiaries and (b) with another Person that holds either a prime contract with a Governmental Entity or a subcontract (at any tier) under such a prime contract, in each case, including any task orders or delivery orders issued under, or any modifications to, any such prime contract or subcontract, whether currently active or subject to an open audit period.
“
Governmental Entity
” means any federal, state, local or foreign government, any political subdivision thereof, or any court, arbitrator or arbitration panel, administrative or regulatory agency, department, instrumentality, body or commission or other governmental authority or agency.
“
Hazardous Materials
” means any waste, pollutant, contaminant, hazardous substance, toxic, ignitable, reactive or corrosive substance, hazardous waste, special waste, industrial substance, by-product, process-intermediate product or waste, asbestos or asbestos-containing materials, lead-based paint, petroleum or petroleum-derived substance or waste, chemical liquids or solids, liquid or gaseous products, or any constituent of any such substance or waste, the management, use, handling or disposal of which is in any way governed by or subject to any applicable Environmental Law.
“
HSR Act
” means the U.S. Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the rules and regulations promulgated thereunder.
“
Indebtedness
” means, without duplication, (a) all indebtedness of the Company and its Subsidiaries with respect to borrowed money, including loans, debts, indebtedness evidenced by notes payable or bonds (or similar agreements or instruments), letters of credit or bankers’ acceptances (to the extent drawn or funded), amounts outstanding under capitalized leases as determined in accordance with GAAP (but excluding operating leases) or otherwise for obligations secured by a Lien, or for the deferred purchase price of property or services (including any “earn-outs”, holdbacks or similar obligations in respect of the acquisition of a business) for which the Company or any of its Subsidiaries is liable, contingently or otherwise as obligor, guarantor, or otherwise, including but not limited to bank debt, bank fees, shareholder debt and vendor debt, including, in each case above, any interest accrued thereon and prepayment or similar penalties and expenses which would be payable if such liability were paid in full as of the Closing, and (b) all unfunded obligations of the Company and its Subsidiaries prior to the Closing under any pension or retirement plan, to the extent not paid prior to the Closing Date. For the avoidance of doubt, “Indebtedness” shall not include undrawn letters of credit or items included as current liabilities in Net Working Capital.
“
Indemnified Party
” means a Purchaser Indemnified Party or a Member Indemnified Party, as applicable.
“Indemnity Escrow”
means the escrow account established pursuant to this Agreement for purposes of funding obligations of the Members pursuant to
Section 3.6
and
ARTICLE XI
below.
“
Intellectual Property
” means any or all of the following and all rights, arising out of or associated therewith: (a) all U.S. and foreign patents and applications therefor and all reissues, reexaminations, inter partes reviews, post-grant reviews, covered business method reviews, divisions, renewals, extensions, provisionals, continuations and continuations-in-part thereof; (b) all inventions (whether patentable or not), invention disclosures, improvements, mask works, trade secrets, proprietary information, know-how, technology, technical data, standard operating procedures and customer lists, and all documentation relating to any of the foregoing throughout the world; (c) all works of authorship (whether copyrightable or not), all copyrights, renewals, copyright registrations and applications therefor, and all other rights corresponding thereto throughout the world; (d) all industrial designs and any registrations and applications therefor throughout the world; (e) all internet uniform resource locators, domain names, social media accounts, identifiers and profiles, trade names, logos, slogans, designs, trade dress, trademarks, service marks and trademark and service mark and trade dress registrations and applications therefor throughout the world and goodwill related thereto; (f) all Software, databases and data collections and all rights therein throughout the world; (g) all moral and economic rights of authors and inventors, however denominated, throughout the world; and (h) any similar or equivalent rights to any of the foregoing anywhere in the world.
“
Knowledge
” with respect to the Company means the knowledge of Zak Boca, Dan Ushman, Rob Mueller or Andy Pace after due inquiry.
“
Laws
” means all statutes, rules, codes, regulations, restrictions, ordinances, orders, decrees, approvals, directives, judgments, injunctions, writs, awards and decrees of, or issued by, any Governmental Entity.
“
Leased Real Property
” means the parcels, buildings, structures, improvements or other interest of real property of which the Company or any Subsidiary holds a leasehold or subleasehold estate in, or is granted the right to use or occupy, whether pursuant to a written or oral agreement.
“
Legal Dispute
” means any action, suit, arbitration or proceeding between or among the Parties and their respective Affiliates arising in connection with any disagreement, dispute, controversy or claim arising out of or relating to this Agreement or any Member Ancillary Document or Purchaser Ancillary Document.
“
Licenses
” means all notifications, licenses, permits (including environmental, construction and operation permits), qualifications, franchises, certificates, approvals, exemptions, classifications, registrations, clearances, consents and other similar documents and authorizations issued by any Governmental Entity, and applications therefor.
“
Liens
” mean all mortgages, liens, pledges, security interests, charges, claims, restrictions and encumbrances of any nature whatsoever, other than (in the case of the Membership Interests) Liens running in favor of the Company or its applicable Subsidiary.
“
Management Member
” means the Member set forth on
Schedule 1.1(b)
.
“
Material Adverse Effect
” means any change, effect, event, occurrence, state of facts or development that, individually or in the aggregate, has had or would reasonably be expected to have a material adverse effect upon (a) the financial condition, business, assets, properties or results of operations of the Company and its Subsidiaries, taken as a whole or (b) the ability of any Member or the Company or any of its Subsidiaries to consummate the transactions contemplated hereby or by any Member Ancillary Document;
provided
,
however
, that any change, effect, event, occurrence, state of facts or development arising from or related to the following shall not be taken into account in determining whether a Material Adverse Effect has occurred: (i) conditions affecting the U.S. economy generally, (ii) any national or international political or social conditions, including the engagement by the U.S. in hostilities, whether or not pursuant to the declaration of a national emergency or war, or the occurrence of any military or terrorist attack upon the U.S., or any of its territories, possessions, or diplomatic or consular offices or upon any military installation, equipment or personnel of the U.S., (iii) changes in GAAP, (iv) changes in any Law, (v) the public announcement of the transactions contemplated by this Agreement, (vi) any failure by the Company to meet any internal or published projections, forecasts or revenue or earnings predictions for any period ending on or after the date of this Agreement (with it being understood that, subject to the other clauses of this proviso, the facts, circumstances and changes underlying any such failure will be taken into account), and (vii) the taking of any action contemplated by this Agreement and/or any of the Member Ancillary Documents, including the completion of the transactions contemplated hereby and thereby, except, in the case of clauses (i), (ii), (iii) or (iv) above, to the extent such change, effect, event, occurrence, state of facts or development has a material disproportionate effect on the Company and its Subsidiaries (taken as a whole) as compared to other Persons operating in a similar industry as that of the Company and its Subsidiaries.
“
Member Ancillary Documents
” means any certificate, agreement, document or other instrument, other than this Agreement, to be executed and delivered by the Company, any Member or any Affiliate of any Member in connection with the transactions contemplated hereby.
“
Member Indemnified Parties
” means the Members and their Affiliates, each of their respective officers, directors, managers, stockholders, members, employees, agents and representatives and each of the heirs, executors, successors and assigns of any of the foregoing.
“
Net Working Capital
” means the current assets (other than Cash) of the Company and its Subsidiaries on a consolidated basis (including undeposited funds) less the current liabilities of the Company and its Subsidiaries on a consolidated basis (excluding the short-term portion any items of Indebtedness), as of immediately prior to the Closing, determined in accordance with: (1) the sample calculation of Net Working Capital attached hereto as
Exhibit 1.1(d)
and (2) in accordance with GAAP (in that order of precedence);
provided
that, current liabilities shall include current Tax liabilities of the Company and its Subsidiaries with respect to any unpaid amounts due in respect of any Tax Returns described in
Section 7.11(a)
that are initially due after the Closing Date, but for the avoidance of doubt, excluding any amounts for Taxes related to the matters set forth on
Schedule A
.
“
Net Working Capital Adjustment Amount
” means the amount, which may be positive or negative, equal to (a) the Net Working Capital Surplus, if any,
minus
(b) the Net Working Capital Deficit, if any,
minus
(c) the Estimated Net Working Capital Surplus, if any,
plus
(d) the Estimated Net Working Capital Deficit, if any.
“
Net Working Capital Deficit
” means the amount, if any, by which the Net Working Capital Target exceeds the Net Working Capital, as finally determined pursuant to
Section 3.6
.
“Net Working Capital Escrow”
means the escrow account established pursuant to this Agreement for purposes of funding the Net Working Capital Adjustment Amount pursuant to
Section 3.6
(to the extent such amount is positive due to the existence of a Net Working Capital Deficit).
“
Net Working Capital Surplus
” means the amount, if any, by which the Net Working Capital, as finally determined pursuant to
Section 3.6
, exceeds the Net Working Capital Target.
“
Net Working Capital Target
” means $(6,620,000.00).
“
Non-U.S. Plan
” mean each employee benefit plan, employment, bonus, incentive, change in control, stock purchase, stock option, restricted stock, stock appreciation right, phantom stock or phantom equity plan, program, agreement or arrangement; and each severance, termination, termination pay or indemnity, salary continuation, retention, perquisite, accrued leave, vacation, sick pay, sick leave, time-off, medical, life insurance, disability, accident, welfare benefit, retiree medical, dental or life insurance, profit-sharing, fringe benefit, compensation, pension, deferred compensation, early retirement, savings, other retirement or superannuation or other similar plan, fund, program, agreement, commitment or arrangement sponsored, established, maintained or contributed to, or required to be contributed to, or with respect to which any actual or contingent liability is borne, outside the U.S. by the Company or any Subsidiary.
“
Ordinary Course
” means the ordinary course of business of the Company and its Subsidiaries consistent with past practice.
“
Permitted Liens
” means (a) Liens for Taxes not yet due and payable, (b) statutory Liens of landlords, (c) Liens of carriers, warehousemen, mechanics, materialmen and repairmen incurred in the Ordinary Course and not yet due and payable, (d) in the case of Leased Real Property, zoning, building, or other restrictions, variances, covenants, rights of way, encumbrances, easements and other minor irregularities in title that are not violated by the current use or occupancy of such Leased Real Property or the operation of the Business conducted thereon, (e) the title of a lessor under an operating lease or capitalized lease or of any licensor under a license, (f) Liens created under any Company Contract identified on
Schedule 4.14(a)
and (g) imperfections of title and Liens that do not, individually or in the aggregate, (i) interfere in any material respect with the present use of or occupancy of the affected Leased Real Property by the Company or any Subsidiary, (ii) have more than a
de
minimis
effect on the value thereof or its use, or (iii) impair the ability of such parcel to be sold, leased or subleased for its present use.
“
Person
” means any individual, corporation, partnership, joint venture, limited liability company, trust, unincorporated organization or other entity or Governmental Entity.
“Personal Information”
means, in addition to any information encompassed within a definition provided by the Company or any of its Subsidiaries for any similar term (e.g., “personally identifiable information”) in the Company’s or any of its Subsidiaries’ privacy policies or other public-facing statements, all information identifying or capable of being associated with an identifiable individual person, including: (i) information that identifies or is otherwise identifiable with an individual, (ii) information that could be used to identify, contact or precisely locate an individual (e.g., geolocation data); (iii) any data regarding an individual’s activities online or on a mobile device or other application (e.g., searches conducted, web pages or content visited or viewed); and (iv) Internet Protocol addresses, unique device identifiers or other persistent identifiers associated with individuals.
“Privacy Laws”
means any Laws, legal requirements, and self-regulatory guidelines and principles that, with respect to any of the foregoing, are binding upon Company or any of its Subsidiaries with respect to the receipt, collection, storage, use, processing, transmission, safeguarding, security, disposal, destruction, disclosure or transfer (including cross-border transfers) of Personal Information.
“
Purchase Price Allocation Methodology
” means the methodology for determining the purchase price allocation attached to this Agreement as
Exhibit
7.11(g)
.
“
Purchaser Ancillary Documents
” means any certificate, agreement, document or other instrument, other than this Agreement, to be executed and delivered by the Purchaser in connection with the transactions contemplated hereby.
“
Purchaser Indemnified Parties
” means the Purchaser and its Affiliates, each of their respective officers, directors, managers, stockholders, members, employees, agents and representatives and each of the heirs, executors, successors and assigns of any of the foregoing.
“
Registered Intellectual Property
” means all U.S. and foreign: (a) patents and patent applications (including reissues, reexaminations, divisions, renewals, extensions, provisionals, continuations and continuations-in-part); (b) registered trademarks, service marks and trade dress, and applications to register trademarks, service marks, and trade dress (including intent-to-use applications); (c) registered copyrights and applications for copyright registration (including renewals); (d) domain name registrations and registered social media accounts, identifiers and profiles; (e) registered mask works and applications for mask work registration; (f) registered industrial designs and applications for industrial design registration; and (g) any other Intellectual Property that is the subject of an application, certificate, filing, registration or other document issued, filed with, or recorded with any federal, state, local or foreign Governmental Entity or other public body or registry.
“
Release”
means release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge or dispersal into the Environment.
“
Sales Tax Escrow
” means the escrow account established pursuant to this Agreement for purposes of funding the payment of certain sales and use Taxes described in
Section 7.11(l)
hereof.
“
Schedule
” means any schedule attached to this Agreement.
“
Software
” means all computer software programs, together with any error corrections, updates, modifications or enhancements thereto, in both machine readable form and source code or other human readable form, including all related documentation, comments and any procedural code.
“
Subsidiary
” or “
Subsidiaries
” means any or all Persons of which the Company (or other specified Person) owns, directly or indirectly through another Person, a nominee arrangement or otherwise at least a majority of the outstanding capital stock (or other shares of beneficial interest) entitled to vote generally or otherwise have the power to elect a majority of the board of directors or similar governing body or the power to Control such Person.
“
Supplier
” means each of the top twenty-five (25) suppliers of the Company and its Subsidiaries (based on the dollar amount of payments made by the Company and its Subsidiaries) during the 12-month period ended December 31, 2017.
“Tax”
or “
Taxes
” means all (a) taxes, assessments, duties, levies and other similar governmental charges, including income, franchise, capital stock, real property, personal property, tangible, withholding, employment, production, ad valorem, recording, profits, lease, severance, bank shares, deed, prohibited transaction, net worth, real property gains, windfall profits, capital, payroll, social security, social contribution, unemployment, workers’ compensation, disability, transfer, sales, use, excise, license, occupation, registration, stamp, premium, customs duties, alternative or add-on minimum, estimated, gross receipts, value-added and all other taxes or similar charges imposed by any Governmental Entity together with any interest, penalties or additions to tax with respect thereto; (b) any liability for any amount described in clause (a) above whether as a result of transferee liability, of being a member of an affiliated, consolidated, combined or unitary group for any period, or otherwise through operation of applicable Law; and (c) any liability for any amount described in clauses (a) or (b) as a result of any tax sharing, tax indemnity or tax allocation agreement.
“
Tax Benefit
” means any refund, credit or reduction in Tax actually realized by any Person.
“
Tax Return
” means any report, return, claim for refund, declaration or other information return or statement required to be supplied to a Governmental Entity relating to Taxes, including any schedule or attachment thereto and any estimated returns and any amendment thereof.
“
Termination Date
” means the date prior to the Closing when this Agreement is terminated in accordance with
ARTICLE X
.
“
Transaction Expenses
” means (i) the legal, accounting, financial advisory and other third party advisory or consulting fees and expenses or other fees or payments incurred by the Company or any of its Subsidiaries and/or the Members in connection with the transactions contemplated by this Agreement and the Member Ancillary Documents prior to the Closing, (ii) the premium for the D&O Tail, (iii) fifty percent (50%) of the Escrow Agent’s fees under the Escrow Agreement, (iv) the amount set forth on
Schedule B
together with the employer portion of any employment, payroll or other Tax applicable thereto (to the extent not already deducted in the calculation of Closing Date Cash or Estimated Closing Date Cash, as applicable), (v) any amounts payable pursuant to the Termination of Executive Employment Agreement and General Release entered into by and between the Company and Christopher J. Locke (to the extent not already deducted in the calculation of Closing Date Cash or Estimated Closing Date Cash, as applicable) and (vi) the Expense Fund (to the extent not already deducted in the calculation of Closing Date Cash or Estimated Closing Date Cash, as applicable). Transaction Expenses shall not include amounts included as Change of Control Payments or any premiums or costs related to the Purchaser R&W Insurance Policy.
“
Treasury Regulations
” means the federal Tax regulations promulgated under the Code.
“
U.S.
” means the United States of America.
“
WARN
” means the U.S. Worker Adjustment and Retraining Notification Act and the rules and regulations promulgated thereunder.
Section 1.2
Other Definitions
.
Each of the following terms is defined in the Section set forth opposite such term:
Term
|
Page
|
|
|
401(k) Plan
|
56
|
Acquisition
|
6
|
Aggregate Escrow Amounts
|
20
|
Agreement
|
6
|
Allocation Schedule
|
61
|
Alternate Financing
|
65
|
Arbitrator
|
23
|
Business
|
6
|
Change of Control Escrow Amount
|
20
|
Closing Date Expense Statement
|
21
|
Closing Date Financial Statement
|
21
|
Closing Date Indebtedness Statement
|
20
|
Closing Date Payment Statement
|
21
|
Closing Payment
|
20
|
Closing Statements
|
21
|
Commitment Letter
|
48
|
Company
|
6
|
Company Contracts
|
31
|
Company Fundamental Representations
|
67
|
Covered Matter
|
79
|
D&O Tail
|
63
|
Debt Financing
|
48
|
Debt Financing Source
|
48
|
Debt Letters
|
48
|
Deductible
|
77
|
Escrow Funds
|
20
|
Estimated Closing Date Cash
|
21
|
Estimated Closing Date Indebtedness
|
20
|
Estimated Net Working Capital
|
21
|
Estimated Transaction Expenses
|
21
|
Expense Fund
|
90
|
Expiration Date
|
72
|
Extended Indemnity Escrow Amount
|
78
|
Fundamental Representations
|
67
|
Hinshaw/Goodwin
|
86
|
Indemnifying Party
|
75
|
Indemnity Escrow Amount
|
20
|
Insurance Contracts
|
39
|
IRS
|
36
|
Lease
|
27
|
Legal Proceeding
|
31
|
Litigation Conditions
|
75
|
Losses
|
74
|
Member Fundamental Representations
|
67
|
Member Losses
|
74
|
Member Releasers
|
64
|
Member Representative
|
6
|
Members
|
6
|
Membership Interests
|
6
|
Net Working Capital Escrow Amount
|
20
|
New Commitment Letter
|
65
|
Non-Compete Agreements
|
6
|
Non-Solicit Agreement
|
6
|
Parties
|
6
|
Party
|
6
|
Payoff Letters
|
68
|
Pre-Closing Period
|
49
|
Preliminary Adjustment Schedule
|
22
|
Privileged Communications
|
86
|
Purchase Price
|
20
|
Purchaser
|
6
|
Purchaser Filed Tax Returns
|
57
|
Purchaser Losses
|
74
|
Purchaser R&W Insurance Policy
|
63
|
Purchaser’s Related Parties
|
73
|
Redacted Fee Letter
|
48
|
Representative Losses
|
89
|
Reverse Termination Fee
|
72
|
Schedule Supplement
|
56
|
Seller Filed Tax Returns
|
57
|
Seller Parties
|
86
|
Straddle Period
|
58
|
Tax Compliance Matters
|
62
|
Tax Matter
|
59
|
Third Party Claim
|
75
|
Transfer Taxes
|
61
|
Section 1.3
Construction
.
Unless the context of this Agreement otherwise clearly requires, (a) references to the plural include the singular, and references to the singular include the plural, (b) references to one gender include the other gender, (c) the words “include,” “includes” and “including” do not limit the preceding terms or words and shall be deemed to be followed by the words “without limitation”, (d) the terms “hereof”, “herein”, “hereunder”, “hereto” and similar terms in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement, (e) the terms “day” and “days” mean and refer to calendar day(s), (f) the terms “year” and “years” mean and refer to calendar year(s), (g) unless set forth specifically otherwise or otherwise required by Law or by a third party, the settlement of all payments hereunder shall be made in Dollars, (h) the word “extent” in the phrase “to the extent” shall mean the degree to which a subject or other thing extends, and such phrase shall not mean simply “if”. Unless otherwise set forth herein, references in this Agreement to (i) any document, instrument or agreement (including this Agreement) (A) includes and incorporates all exhibits, schedules and other attachments thereto, (B) includes all documents, instruments or agreements issued or executed in replacement thereof and (C) means such document, instrument or agreement, or replacement or predecessor thereto, as amended, modified or supplemented from time to time in accordance with its terms and in effect at any given time, and (ii) a particular Law means such Law as amended, modified, supplemented or succeeded, from time to time and in effect at any given time. Any amount denominated in a foreign currency that must be converted into U.S. dollars for purposes of this Agreement shall be converted using an exchange rate published by the Wall Street Journal on a date that is five (5) days prior to the date hereof or the Closing Date, as applicable. All Article, Section, Exhibit and Schedule references herein are to Articles, Sections, Exhibits and Schedules of this Agreement, unless otherwise specified. This Agreement shall not be construed as if prepared by one of the Parties, but rather according to its fair meaning as a whole, as if all Parties had prepared it. Where the term “made available” is used in this Agreement, it means, with respect to any document or information, that the same has been made available to the Purchaser by means of the virtual data room established by the Company not less than twenty-four (24) hours prior to the time this Agreement is executed.
Section 1.4
Accounting Terms
.
All accounting terms not specifically defined herein shall be construed in accordance with GAAP.
ARTICLE II
PURCHASE AND SALE
Section 2.1
Agreement to Purchase and Sell
.
Subject to the terms and conditions of this Agreement, at the Closing, the Members will sell, transfer and deliver to the Purchaser, and the Purchaser will purchase and acquire from the Members, all of the Membership Interests, free and clear of all Liens.
ARTICLE III
PURCHASE PRICE; ADJUSTMENTS
Section 3.1
Purchase Price
.
The aggregate cash amount to be paid for the Membership Interests by the Purchaser at Closing (the “
Closing Payment
”) shall be an amount equal to (a) $132,000,000.00, (the “
Purchase Price
”) plus (b) the Estimated Net Working Capital Surplus, if any, minus (c) the Estimated Net Working Capital Deficit, if any, plus (d) the Estimated Closing Date Cash, minus (e) the Sales Tax Escrow Amount, minus (f) the Indemnity Escrow Amount, minus (g) the Change of Control Escrow Amount, minus (h) the Net Working Capital Escrow Amount, minus (i) the Estimated Closing Date Indebtedness, minus (j) the Estimated Transaction Expenses.
Section 3.2
Escrows
.
On the Closing Date, the Purchaser shall deposit: (a) one and one half percent (1.5%) of the Purchase Price in cash (the
“Indemnity Escrow Amount
”) with the Escrow Agent to be distributed in accordance with the terms of this Agreement and the Escrow Agreement; (b) the estimated amount of the Change of Control Payments as set forth on the Closing Date Expense Statement (the “
Change of Control Escrow Amount
”) with the Escrow Agent to be distributed in accordance with the terms of this Agreement and the Escrow Agreement; (c) $750,000.00 (the “
Sales Tax Escrow Amount
”) with the Escrow Agent to be distributed in accordance with the terms of this Agreement and the Escrow Agreement; and (d) $250,000.00 (the
“Net Working Capital Escrow Amount”
) with the Escrow Agent to be distributed in accordance with the terms of this Agreement and the Escrow Agreement (the Indemnity Escrow Amount plus the Change of Control Escrow Amount plus the Net Working Capital Escrow Amount plus the Sales Tax Escrow Amount, collectively, the “
Aggregate Escrow Amounts
”) with the Escrow Agent to be distributed in accordance with the terms of this Agreement and the Escrow Agreement. The Aggregate Escrow Amounts, as adjusted from time to time, together with any interest earned thereon, shall be referred to as the “
Escrow Funds
.”
Section 3.3
Closing Date Statements
.
(a)
Not less than three (3) Business Days prior to the Closing Date, the Company shall deliver to the Purchaser a statement (the “
Closing Date Indebtedness Statement
”), signed by the Chief Executive Officer of the Company (on behalf and in the name of the Company), which sets forth, by lender, the Company’s good faith estimate of the aggregate amount of the Closing Date Indebtedness (the “
Estimated Closing Date Indebtedness
”). Attached to the Closing Date Indebtedness Statement will be copies of the Payoff Letters delivered in accordance with
Section 8.2(g)
hereof.
(b)
Not less than three (3) Business Days prior to the Closing Date, the Company shall deliver to the Purchaser a statement (the “
Closing Date Expense Statement
”), signed by the Chief Executive Officer of the Company (on behalf and in the name of the Company), which sets forth, by payee, the Company’s good faith estimate of the aggregate amount of (i) the Change of Control Payments, and (ii) the Transaction Expenses (the “
Estimated Transaction Expenses
”). Attached to the Closing Date Expense Statement will be documents, in form and substance reasonably acceptable to the Purchaser, which confirm that upon payment of the respective amounts specified in such Closing Date Expense Statement, each Person that is to be paid in accordance with such Closing Date Expense Statement shall have been paid in full for all Change of Control Payments and Estimated Transaction Expenses, as applicable.
(c)
Not less than three (3) Business Days prior to the Closing Date, the Company shall deliver to the Purchaser a statement (the “
Closing Date Financial Statement
”), signed by the Chief Executive Officer of the Company (on behalf and in the name of the Company), which sets forth the Company’s good faith estimate of (i) the Net Working Capital (the “
Estimated Net Working Capital
”), (ii) the Estimated Net Working Capital Surplus, if any, or the Estimated Net Working Capital Deficit, if any, and (iii) Closing Date Cash (the “
Estimated Closing Date Cash
”).
(d)
Not less than three (3) Business Days prior to the Closing Date, the Company shall deliver to the Purchaser a statement (the “
Closing Date Payment Statement
,” and together with the Closing Date Indebtedness Statement, the Closing Date Expense Statement and the Closing Date Financial Statement, the “
Closing Statements
”), signed by the Chief Executive Officer of the Company (on behalf and in the name of the Company), which sets forth the following information relating to each Member, as applicable: (i) name, address (as listed in the record books of the Company) and social security number or tax identification number (if known by the Company), (ii) the number and type of Membership Interests held by such Person and the respective unit certificate numbers (if any), (iii) the percentage and amount of the Closing Payment payable to such Person, (iv) the percentage of the Escrow Funds allocable to such Member upon any disbursements thereof to the Members and (v) the percentage of the Adjustment Amount, if any, allocable to such member in the event any Adjustment Amount is owed to the Members pursuant to
Section 3.6(f)(i)
. The Members acknowledge and agree that the Member Representative, and after the Closing, the Company and its Subsidiaries, and the Purchaser shall be entitled to rely on the Closing Date Payment Statement for the purposes of making any payments hereunder.
(e)
To the extent reasonably requested by the Purchaser, the Company will make available to the Purchaser and its auditors and advisors all records and work papers used in preparing the Closing Statements. The Members and the Company will review any comments proposed by the Purchaser with respect to the Closing Statements and will consider, in good faith, any appropriate changes.
Section 3.4
Payment of Closing Payment
.
On the Closing Date, the Purchaser shall pay to the Members, to such accounts specified to the Purchaser by the Company at least three (3) Business Days prior to the Closing Date, the Closing Payment.
Section 3.5
Payment of Other Amounts Payable at Closing
.
On the Closing Date, the Purchaser shall:
(a)
on behalf of the Company or its applicable Subsidiary, pay to such account or accounts as the Company specifies to the Purchaser pursuant to the Closing Date Indebtedness Statement, the aggregate amount of the Estimated Closing Date Indebtedness;
(b)
on behalf of the Company, pay to the Escrow Agent the Change of Control Escrow Amount;
(c)
on behalf of the Members, pay to the Escrow Agent the Indemnity Escrow Amount;
(d)
on behalf of the Members, pay to the Escrow Agent the Net Working Capital Escrow Amount;
(e)
on behalf of the Company or its applicable Subsidiary, pay to such account or accounts as the Company specifies to the Purchaser pursuant to the Closing Date Expense Statement, the aggregate amount of the Estimated Transaction Expenses; and
(f)
on behalf of the Company, pay the Escrow Agent the Sales Tax Escrow Amount.
Section 3.6
Adjustment of Purchase Price
.
(a)
No later than forty-five (45) days following the Closing Date, the Purchaser shall prepare and deliver to the Member Representative a statement (the “
Preliminary Adjustment Schedule
”), which sets forth the Purchaser’s calculation of (i) the Net Working Capital, (ii) the Net Working Capital Surplus, if any, or the Net Working Capital Deficit, if any, (iii) Closing Date Cash, (iv) Closing Date Indebtedness, (v) Transaction Expenses and (vi) the Adjustment Amount;
provided
, that if the Purchaser does not deliver the Preliminary Adjustment Schedule within such forty-five (45) day period, the Adjustment Amount shall be deemed to be the Net Working Capital Escrow Amount. During the period of the preparation of the Preliminary Adjustment Schedule, upon reasonable prior notice, the Members and the Member Representative shall cooperate with the Purchaser and its authorized representatives, including by providing on a timely basis information reasonably requested in connection with the preparation of the Preliminary Adjustment Schedule.
(b)
The Member Representative shall have thirty (30) days following receipt of the Preliminary Adjustment Schedule during which to notify the Purchaser of any dispute of any item contained in the Preliminary Adjustment Schedule, which notice shall set forth in reasonable detail the basis for such dispute, including the line items in dispute and the amount so disputed for each such line item. During the period of the preparation of such notice of dispute, upon reasonable prior notice, the Purchaser shall provide the Member Representative and its authorized representatives with reasonable access, during normal business hours, to the relevant books, records, facilities, employees and accountants of the Purchaser and its Subsidiaries (including the Company and its Subsidiaries) and otherwise cooperate with the Member Representative and its authorized representatives, including by providing on a timely basis information reasonably requested in connection with the preparation of such notice.
(c)
If the Member Representative does not notify the Purchaser of any such dispute within such thirty (30) day period, the Preliminary Adjustment Schedule shall be deemed to be the Final Adjustment Schedule.
(d)
If the Member Representative notifies the Purchaser of any such dispute within such thirty (30) day period, the Purchaser and the Member Representative shall cooperate in good faith to resolve any such dispute as promptly as possible, and upon such resolution, the Final Adjustment Schedule shall be prepared in accordance with the agreement of the Purchaser and the Member Representative.
(e)
If the Purchaser and the Member Representative are unable to resolve any dispute regarding the Preliminary Adjustment Schedule within fifteen (15) days (or such longer period as the Purchaser and the Member Representative shall mutually agree in writing), following notice of such dispute, such dispute shall be submitted to, and all items disputed by the Members in the Member Representative’s dispute notice shall be resolved by, an independent nationally recognized accounting firm mutually agreed upon by the Purchaser and the Member Representative (such accounting firm so selected, the “
Arbitrator
”). Such resolution shall be final and binding on the Parties. The Purchaser and the Member Representative shall instruct the Arbitrator to make a final determination of Closing Date Cash, Closing Date Indebtedness, Transaction Expenses, Net Working Capital, the Net Working Capital Deficit, if any, or the Net Working Capital Surplus, if any, and the Adjustment Amount based solely on the items that are in dispute and not on the basis of an independent review and that, in resolving such items in dispute and in determining Closing Date Cash, Closing Date Indebtedness, Transaction Expenses, Net Working Capital, the Net Working Capital Deficit, if any, or the Net Working Capital Surplus, if any, and the Adjustment Amount, the Arbitrator shall not assign to any item in dispute a value that is (A) greater than the greatest value for such item assigned by the Purchaser, on the one hand, or the Member Representative, on the other hand, or (B) less than the smallest value for such item assigned by the Purchaser, on the one hand, or the Member Representative, on the other hand. The Parties shall cooperate with the Arbitrator to facilitate its resolution of the disputed items, including by providing such information, data, work papers and access to books and records, personnel and accountants as the Arbitrator may request. The Parties shall instruct the Arbitrator to use commercially reasonable efforts to complete its work within thirty (30) days following its engagement. The fees, costs and expenses of the Arbitrator (1) shall be borne by the Member Representative in the proportion that the aggregate dollar amount of all such disputed items so submitted that are unsuccessfully disputed by the Member Representative (as finally determined by the Arbitrator) bears to the aggregate dollar amount of such items so submitted and (2) shall be borne by the Purchaser in the proportion that the aggregate dollar amount of such disputed items so submitted that are successfully disputed by the Member Representative (as finally determined by the Arbitrator) bears to the aggregate dollar amount of all such items so submitted. If any disputes are submitted to the Arbitrator pursuant to this
Section 3.6(e)
, the Final Adjustment Schedule shall be prepared in accordance with the decision of the Arbitrator and, to the extent applicable, the agreement of the Purchaser and the Member Representative.
(f)
Within five (5) Business Days following the determination of the Final Adjustment Schedule in accordance with this
Section 3.6
:
(i)
If the Adjustment Amount is positive, the Purchaser shall pay to the Members the Adjustment Amount, net of applicable withholding taxes, if any, by wire transfer or delivery of immediately available funds and in accordance with the Closing Date Payment Statement. Upon payment of such Adjustment Amount by the Purchaser to the Members, the Purchaser shall be fully released and discharged of any obligation to the Members with respect to payment of the Adjustment Amount, and the Purchaser and the Member Representative shall deliver a joint written instruction to the Escrow Agent to release the balance of the Net Working Capital Escrow to the Members.
(ii)
To the extent the Adjustment Amount is negative, (A) the Purchaser shall be entitled to payment of the Adjustment Amount, first out of the Net Working Capital Escrow Amount and, if such Net Working Capital Escrow Amount is unavailable, exhausted or insufficient to pay in full the Adjustment Amount, then out of the Indemnity Escrow Amount, and (B) the Purchaser and the Member Representative shall deliver a joint written instruction to the Escrow Agent to pay to the Purchaser such Adjustment Amount and to pay to the Members any remaining portion of the Net Working Capital Escrow Amount.
(iii)
Any payments made pursuant to this
Section 3.6(f)
will be deemed to be adjustments for Tax purposes to the Purchase Price. In addition, any payment made pursuant to this
Section 3.6(f)
shall include an additional amount of simple interest equal to the amount of interest that such payment would have earned had it earned interest at the rate per annum of the WSJ Prime Rate as reported in the Wall Street Journal on the Closing Date, from the Closing Date through the date of such payment.
Section 3.7
Withholding
.
Notwithstanding anything in this Agreement to the contrary, each of the Company, the Member Representative, Escrow Agent, and the Purchaser shall be entitled to deduct and withhold, or cause to be deducted or withheld, from any amounts otherwise payable pursuant to this Agreement to any Person such amounts as it is required to deduct and withhold with respect to the making of such payment under the Code and the rules and regulations promulgated thereunder, or any provision of state, local or foreign Tax Law. To the extent that amounts are so withheld and paid over to the appropriate Governmental Entity, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which such deduction and withholding was made. The Purchaser shall notify the Member Representative prior to making any such withholdings, except with respect to payments in the nature of compensation to be made to employees or former employees. The Purchaser, Company and Member Representative shall use commercially reasonable efforts to minimize any such withholdings.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND MANAGEMENT MEMBER
The Company and Management Member hereby represent and warrant, except as set forth on the Disclosure Schedule, to the Purchaser as follows as of the date hereof and as of the Closing Date:
Section 4.1
Organization
.
The Company and each Subsidiary is a corporation, limited liability company or other entity, as applicable, duly formed and validly existing under the Laws of the jurisdiction of formation set forth on
Schedule 4.1
and each has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted. The Company and each Subsidiary is duly qualified or registered as a foreign corporation, limited liability company or other entity, as applicable, to transact business under the Laws of each jurisdiction where the character of its activities or the location of the properties owned or leased by it requires such qualification or registration, except where the failure to so qualify or register would not reasonably be expected to have a Material Adverse Effect. The Company has heretofore made available to the Purchaser complete copies of the organizational documents of the Company and each Subsidiary as currently in effect and the corporate or limited liability company or other record books with respect to actions taken by its shareholders, board of directors, members, partners and managers, as applicable.
Schedule 4.1
contains a correct and complete list of the jurisdictions in which the Company and each Subsidiary is qualified or registered to do business as a foreign corporation, limited liability company or other entity, as applicable.
Section 4.2
Authorization
.
The Company has the right, power, authority and capacity to execute and deliver this Agreement and each Member Ancillary Document to which it is a party, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance of this Agreement and the Member Ancillary Documents by the Company and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all required action on the part of the Company. This Agreement has been, and the Member Ancillary Documents to which the Company is a party shall be as of the Closing Date, duly executed and delivered by the Company, and do or shall, as the case may be, constitute the valid and binding agreements of the Company, enforceable against the Company in accordance with their respective terms, subject to applicable bankruptcy, insolvency and other similar Laws affecting the enforceability of creditors’ rights generally, general equitable principles and the discretion of courts in granting equitable remedies.
Section 4.3
Capital Structure
.
(a)
Schedule 4.3(a)
accurately and completely sets forth the capital structure of the Company including the number of membership interests or other equity interests which are authorized and which are issued and outstanding. All of the issued and outstanding membership interests or other equity interests of the Company (i) are duly authorized and validly issued, (ii) are held of record by the Persons and in the amounts set forth on
Schedule 4.3(a)
, and (iii) were not issued or acquired by the holders thereof in violation of any Law, agreement or the preemptive rights of any Person. Other than the Members, no other Person is the record holder of any membership interests, units or other equity interests in the Company.
(b)
Except as set forth on
Schedule 4.3(b)
, no membership interests or other equity interests of the Company are reserved for issuance or are held as treasury shares, and (i) there are no outstanding options, warrants, rights, calls, commitments, conversion rights, rights of exchange, subscriptions, claims of any character, agreements, obligations, convertible or exchangeable securities or other plans or commitments, contingent or otherwise, relating to the equity of the Company; (ii) there are no outstanding contracts or other agreements of the Company, the Members or any other Person to purchase, redeem or otherwise acquire any outstanding membership interests or other equity interests of the Company, or securities or obligations of any kind convertible into any membership interests or other equity interests of the Company; (iii) there are no dividends which have accrued or been declared but are unpaid on the membership interests or other equity interests of the Company; (iv) there are no outstanding or authorized equity appreciation, phantom stock, equity plans or similar rights with respect to the Company; and (v) there are no voting agreements or other membership agreements relating to the management or equity of the Company.
(c)
Except as set forth on
Schedule 4.3(c)
, the Company has never purchased, redeemed or otherwise acquired any membership interests, units or other equity interests of the Company.
Section 4.4
Subsidiaries
.
(a)
Except as set forth on
Schedule 4.4(a)
, neither the Company nor any Subsidiary currently owns or has owned, directly or indirectly, any capital stock or other equities, securities or interests in any other Person, nor any options, warrants, rights, calls, commitments, conversion rights, rights of exchange, subscriptions, claims of any character, agreements, obligations, convertible or exchangeable securities or other plans or commitments, contingent or otherwise, relating thereto.
(b)
Schedule 4.4(b)
accurately and completely sets forth the capital structure of each Subsidiary including the number of membership interests or other equity interests which are authorized and which are issued and outstanding. All of the issued and outstanding membership interests or other equity interests of each Subsidiary (i) are duly authorized and validly issued, (ii) are held of record by the Persons and in the amounts set forth on
Schedule 4.4(b)
, and (iii) were not issued or acquired by the holders thereof in violation of any Law, agreement or the preemptive rights of any Person.
(c)
Except as set forth on
Schedule 4.4(c)
, no membership interests or other equity interests of any Subsidiary are reserved for issuance or are held as treasury shares, and (i) there are no outstanding options, warrants, rights, calls, commitments, conversion rights, rights of exchange, subscriptions, claims of any character, agreements, obligations, convertible or exchangeable securities or other plans or commitments, contingent or otherwise, relating to the equity of any Subsidiary; (ii) there are no outstanding contracts or other agreements of the Subsidiaries, their equity holders, or any other Person to purchase, redeem or otherwise acquire any outstanding membership interests or other equity interests of the Subsidiaries, or securities or obligations of any kind convertible into any membership interests or other equity interests of the Subsidiaries; (iii) there are no dividends which have accrued or been declared but are unpaid on the membership interests or other equity interests of the Subsidiaries; (iv) there are no outstanding or authorized equity appreciation, phantom stock, equity plans or similar rights with respect to the Subsidiaries; and (v) there are no voting agreements or other membership agreements relating to the management or equity of the Subsidiaries.
(d)
Except as set forth on
Schedule 4.4(d)
, the Subsidiaries have never purchased, redeemed or otherwise acquired any membership interests, units or other equity interests of any Subsidiary.
Section 4.5
Absence of Restrictions and Conflicts
.
Except as set forth on
Schedule 4.5
, the execution, delivery and performance of this Agreement and the Member Ancillary Documents, the consummation of the transactions contemplated hereby and thereby, and the fulfillment of and compliance with the terms and conditions hereof and thereof, do not or will not (as the case may be), with the passing of time or the giving of notice or both, violate or conflict with, constitute a breach of or default under, result in the loss of any benefit under, permit the acceleration of any obligation under or create in any party the right to terminate, modify or cancel, (a) any term or provision of the organizational documents of the Company or any Subsidiary, (b) except as indicated with an asterisk on
Schedule 4.14(a)
, any Company Contract or any License applicable to the Company or its Subsidiaries, which, individually or in the aggregate, would not be material to the Company and its Subsidiaries, taken as a whole, (c) any judgment, decree or order of any court or Governmental Entity or agency to which the Company, any Subsidiary or any Member is a party or by which the Company, any Subsidiary or any Member or any of their respective properties are bound, or (d) any Law or arbitration award applicable to the Company, any Subsidiary or any Member. Except for filings pursuant to the HSR Act, no consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Entity is required with respect to the Company, any Subsidiary or any Member in connection with the execution, delivery or performance of this Agreement or the Member Ancillary Documents, or the consummation of the transactions contemplated hereby or thereby.
Section 4.6
Real Property
.
(a)
None of the Company or its Subsidiaries is the owner of any real property.
(b)
Schedule 4.6(b)
sets forth a correct and complete description of the Leased Real Property, including the address and a description of each agreement granting the Company or its Subsidiaries any interest in the Leased Real Property (each, including all amendments and modifications thereto, a “
Lease
”). The Company has made available to the Purchaser true, correct, and complete copies of each Lease.
(c)
The Company or one of its Subsidiaries, as listed on
Schedule 4.6(b)
, has a valid leasehold interest in the Leased Real Property, and the Leases granting such interests are in full force and effect.
(d)
No security deposit or portion thereof deposited with respect to any Lease has been applied in respect of a breach or default under any Lease which has not been redeposited in full.
(e)
Neither the Company or its Subsidiaries, as applicable, nor to the Knowledge of the Company any other party to any Lease, is in breach of or default under any Lease, and, to the Knowledge of the Company, no event has occurred or circumstances exist that, with the delivery of notice, the passage of time, or both, would constitute a breach or default under any Lease. Possession of the Company or its Subsidiary, as applicable, of any Leased Real Property has not been disturbed, and to the Knowledge of the Company, there are no disputes with respect to any Lease.
(f)
Except with respect to data center customers in the Ordinary Course or as set forth on
Schedule 4.6(f)
, neither the Company nor any Subsidiary has subleased, licensed or otherwise granted any Person the right to use or occupy all or any portion of the Leased Real Property.
(g)
Neither the Company nor any Subsidiary has collaterally assigned, mortgaged or otherwise encumbered its interest in any Leased Real Property.
(h)
The Leased Real Property has received approvals of all Governmental Entities required in connection with the leasing thereof and the facilities, improvements and operations thereon and the Leased Real Property has been operated and maintained in compliance in all material respects with all applicable Laws.
(i)
To the Knowledge of the Company, no portion of the Leased Real Property, or any building or improvement located thereon, violates any Law, including those Laws relating to zoning, building, land use, environmental, health and safety, fire, air, sanitation and noise control. Except for any of the same that constitute a Permitted Lien, no Leased Real Property is subject to (i) any decree or order of any Governmental Entity (or, to the Knowledge of the Company, threatened or proposed order) or (ii) any rights of way, building use restrictions, exceptions, variances, reservations or limitations of any nature whatsoever.
(j)
The improvements and fixtures on the Leased Real Property are in good operating condition and in a state of good maintenance and repair, ordinary wear and tear excepted, and are adequate and suitable for the purposes for which they are presently being used, the Leased Real Property is supplied with utilities and other services necessary for the conduct of the Business undertaken at such Leased Real Property (as currently conducted). To the Knowledge of the Company, there is no, and the Company has not received written notice that there is any, condemnation, expropriation or similar proceeding pending or threatened against any of the Leased Real Property or any improvement thereon. Except as set forth on
Schedule 4.6(j)
, the Leased Real Property constitutes all of the real property reasonably required by the Company and its Subsidiaries in the operation of the Business.
Section 4.7
Title to Assets; Related Matters
.
(a)
Except as set forth on
Schedule 4.7(a)
, the Company and its Subsidiaries have good and marketable title to or a valid leasehold interest in all of their respective property and assets, all property and assets used or held for use in their conduct of the Business and all property and assets reflected on the Balance Sheet or acquired since the date thereof (except for inventory sold in the Ordinary Course since the date thereof), in each case, free and clear of all Liens except Permitted Liens.
(b)
All equipment and other items of tangible personal property and assets owned by the Company and its Subsidiaries or used or held for use in the conduct of the Business (i) are in good operating condition and in a state of good maintenance and repair, except for ordinary wear and tear and customary turnover in equipment, (ii) were acquired and are usable in the regular and Ordinary Course and (iii) conform in all material respects to all applicable Laws. Except as set forth on
Schedule 4.7(b)
, no Person other than the Company or its Subsidiaries owns any equipment or other tangible personal property or assets situated on the premises of the Company or any Subsidiary, except for the leased items that are subject to personal property leases. Except as set forth on
Schedule 4.7(b)
, neither the Company nor any Subsidiary has sold, transferred or disposed of any assets, other than sales of inventory in the Ordinary Course. The property and assets of the Company and its Subsidiaries immediately following the Closing will constitute all the assets used by the Company and its Subsidiaries to conduct the operations of the Business.
Section 4.8
Inventory; Products and Services
.
Except as set forth on
Schedule 4.8
, the Company’s and its Subsidiaries’ inventory is sufficient for the operation of the Company’s and its Subsidiaries’ business in the Ordinary Course, and, to the Knowledge of the Company, all items of inventory are of a quality and quantity usable and salable in the Ordinary Course in all material respects. Except as set forth on
Schedule 4.22
, other than (a) immaterial events affecting the products, services and inventory of the Company and its Subsidiaries occurring in the Ordinary Course, (b) customer complaints that have been addressed by service-related credits, (c) industry-wide events affecting all providers in the Company’s industry, and (d) equipment failures occurring in the Ordinary Course, to the Knowledge of the Company, (i) all products owned, developed, manufactured, marketed, distributed, licensed, sold or otherwise made available to any Person, and services performed for any Person, by the Company or its Subsidiaries have, for the past one (1) year, been fit for the ordinary purposes for which they were intended to be used, conformed in all material respects to any promises or affirmations of fact made by the Company with respect to such products and services and complied with all applicable Laws and any other standards set by any Governmental Entity or other recognized standard setting organization; and (ii) for the past three (3) years, the Company and its Subsidiaries have complied with the warranty and service level obligations that the Company and its Subsidiaries have made (excluding, for the avoidance of doubt, any manufacturer’s warranties) with respect to such products and services, and there are no material pending or, to the Company’s Knowledge, threatened, claims, relating to any warranty or service level obligations, failure to meet warranties or service levels in all material respects or product returns. No notices of recall have been served on the Company and its Subsidiaries by any Governmental Entity, and to the Company’s Knowledge, there are no facts in existence that would reasonably be expected to result in any duty to recall any products or to warn customers of any latent or overt defect in design, manufacturing or otherwise.
Section 4.9
Financial Statements
.
The Financial Statements are attached as
Schedule 4.9
hereto. Except as expressly noted on
Schedule 4.9
, the Financial Statements have been prepared in accordance with GAAP from the books and records of the Company and its Subsidiaries, and such books and records have been maintained on a basis consistent with GAAP. Each balance sheet included in the Financial Statements (including the related notes and schedules) fairly presents in all material respects the financial position of the Company and its Subsidiaries, as applicable, as of the date of such balance sheet, and each statement of income and cash flows included in the Financial Statements (including the related notes and schedules) fairly presents in all material respects the results of operations and changes in cash flows of the Company and its Subsidiaries for the periods set forth therein, in each case in accordance with GAAP (except as expressly noted therein or as disclosed on
Schedule 4.9
). Since the date of the Balance Sheet, there has been no change in any accounting (or tax accounting) policy, practice or procedure of the Company or any Subsidiary. The Company and its Subsidiaries maintain accurate books and records reflecting each of their assets and liabilities and maintain proper and adequate internal accounting controls sufficient to provide reasonable assurances regarding the reliability of financial reporting, to ensure that transactions, receipts and expenditures are being executed and made only in accordance with appropriate authorizations, to prevent or timely detect any unauthorized acquisition, use or disposition of funds or assets and to enable the preparation of periodic financial statements for external purposes in accordance with GAAP. All of the Company’s and its Subsidiaries’ accounts receivable arose from bona fide sales of goods or services and represent arm’s-length sales made in the Ordinary Course to Persons that are not Members or their Affiliates, and to the Knowledge of the Company, such accounts receivable are fully collectible in the Ordinary Course (subject to any reserve recorded on the face of the Financial Statements) and not subject to any valid counterclaims or set-offs.
Schedule 4.9
sets forth all amounts of Indebtedness as of the date hereof.
Section 4.10
No Undisclosed Liabilities
.
Except as disclosed on
Schedule 4.10
, neither the Company nor any Subsidiary has any material liability or obligation of any nature whatsoever (whether absolute, accrued, contingent, matured or otherwise and regardless of whether and when asserted), other than liabilities or obligations which (a) are adequately reflected or reserved against in the balance sheet included in the Interim Financial Statements, (b) have been incurred in the Ordinary Course or (c) have been incurred in connection with the transactions contemplated hereby and are included in the Transaction Expenses.
Section 4.11
Absence of Certain Changes
.
Since the date of the Interim Financial Statements and except as set forth on
Schedule 4.11
, there has not been:
(i)
any Material Adverse Effect,
(ii)
any damage, destruction, loss or casualty to property or assets of the Company or any Subsidiary with a value in excess of $50,000 in the aggregate, whether or not covered by insurance, or
(iii)
any action taken of the type described in
Section 7.1(f)
through
Section 7.1(p)
,
Section 7.1(s)
or
Section 7.1(w)
hereof, that, had such action occurred following the date hereof without the Purchaser’s prior approval, would be in violation of
Section 7.1
hereof.
Section 4.12
Legal Proceedings
.
Except as set forth on
Schedule 4.12
, there is, and in the past three (3) years has been, no suit, litigation, action, claim, arbitration, proceeding or investigation instituted by, or pending or, to the Knowledge of the Company, threatened, against, relating to or involving the Company, any Subsidiary or their respective property and assets by or before any Governmental Entity or arbitrator (a “
Legal Proceeding
”). None of the Legal Proceedings set forth on
Schedule 4.12
, if finally determined adversely, is reasonably likely, individually or in the aggregate, to have a Material Adverse Effect. Neither the Company nor any Subsidiary is or in the past three (3) years has been subject to any judgment, decree, injunction, rule or order of any court or arbitrator.
Section 4.13
Compliance with Laws
.
The Company and each Subsidiary is (and has been at all times in past three (3) years) in compliance in all material respects with all applicable Laws. Except as set forth on
Schedule 4.13
, (i) neither the Company nor any Subsidiary has been charged with, nor received any written, or to the Knowledge of the Company, oral, notice that it is under investigation with respect to, and, to the Knowledge of the Company, neither the Company nor any Subsidiary is otherwise now under investigation with respect to, any violation of any applicable Law or other requirement of a Governmental Entity, and (ii) neither the Company nor any Subsidiary is or in the past three (3) years has been a party to, or bound by, any order, judgment, decree, injunction, rule or award of any Governmental Entity or arbitrator. The Company and each Subsidiary has filed all reports required to be filed with any Governmental Entity, and all such reports were accurate and complete in all material respects when filed.
Section 4.14
Company Contracts
.
(a)
Schedule 4.14(a)
sets forth a correct and complete list of the following contracts to which the Company or any Subsidiary is a party, to which the Company, any Subsidiary or any property of any thereof is subject or by which the Company or any Subsidiary is otherwise bound, whether oral or written (the “
Company Contracts
”) (other than the Leases set forth on
Schedule 4.6(b)
, the Employment Agreements set forth on
Schedule 4.16(a)
, the Company Benefit Plans set forth on
Schedule 4.17(a)
and the Insurance Contracts set forth on
Schedule 4.19
):
(i)
all bonds, debentures, notes, loans, credit or loan agreements or loan commitments, mortgages, indentures, guarantees or other contracts relating to Indebtedness or binding upon any properties or assets (real, personal or mixed, tangible or intangible) of the Company or any Subsidiary, including any guarantees of the foregoing;
(ii)
all leases or licenses involving any properties or personal assets requiring the payment by the Company or any Subsidiary of an amount in excess of $50,000;
(iii)
all contracts and agreements that (A) limit or restrict the Company, its Subsidiaries or any of their respective officers, directors, managers, employees, members or other equity holders, agents or representatives (in their capacity as such) from engaging in any business or other activity in any jurisdiction or from soliciting or hiring any Person; (B) otherwise materially restrict or limit the ability of the Company or its Subsidiaries to operate or expand the Business; or (C) contain a “most favored nation” or exclusive purchase or supply provision;
(iv)
all contracts and agreements entered into by the Company or its Subsidiaries for capital expenditures or the acquisition or construction of fixed assets requiring the payment by the Company or any Subsidiary of an amount in excess of $50,000 after the date hereof;
(v)
all contracts and agreements that provide for an increased payment or benefit, or accelerated vesting, upon the execution hereof, or the Closing, or in connection with the transactions contemplated hereby;
(vi)
all contracts and agreements granting any Person a security interest or other Lien on all or any part of any asset;
(vii)
all contracts and agreements granting to any Person an option or a first refusal, first-offer or similar preferential right to purchase or acquire any assets;
(viii)
all contracts, licenses and agreements to which the Company or any Subsidiary is a party (A) with respect to Company Intellectual Property licensed or transferred to any third party (other than non-exclusive end user licenses for Software in object code format granted in the Ordinary Course and having annual fees for such licenses or transfers of less than $200,000 in the aggregate); (B) pursuant to which a third party has licensed or transferred any Company Intellectual Property to the Company or any Subsidiary (excluding shrink-wrap or click-wrap non-exclusive licenses for Software that is generally available from a commercial source for annual license or royalty fees of less than $200,000 in the aggregate); or (C) pursuant to which any Company Intellectual Property was or is being developed or created by a third party expressly for the Company or any Subsidiary, or any joint development of Intellectual Property was or is being undertaken;
(ix)
all contracts and agreements providing for the indemnification or holding harmless of any officer, director, manager, employee or member, other than as contained in the organizational documents of the Company and its Subsidiaries;
(x)
any Active Government Contract or other Government Contract;
(xi)
all joint venture or partnership contracts and all other contracts providing for the sharing of any revenue or profits;
(xii)
all contracts or agreements entered into involving the sale or purchase of assets (other than in the Ordinary Course), or capital stock or other equity interest of any Person, or a merger, consolidation, business combination or similar transaction;
(xiii)
contract for the purchase or sale of goods or for the furnishing or receipt of services, in each case, which provides for (or would reasonably be expected to involve) annual payments to or by the Company or its Subsidiaries in excess of $150,000 in any one year or that were entered into outside of the Ordinary Course;
(xiv)
all supply contracts and agreements (excluding work orders and purchase orders individually requiring the Company or any Subsidiary to spend an amount less than $150,000 in any one year) for the provision of goods or services for the Company or any Subsidiary;
(xv)
all contracts with the Customers and Suppliers;
(xvi)
all outstanding powers of attorney empowering any Person to act on behalf of the Company or any Subsidiary;
(xvii)
any settlement contract; and
(xviii)
all existing contracts and agreements (other than those described in subsections
(i)
through
(xvii)
of this
Section 4.14(a)
) (i) involving an annual commitment or annual payment to or from the Company or any Subsidiary of more than $250,000 individually or (ii) that is material to the Company and its Subsidiaries, individually or in the aggregate.
(b)
Complete copies of all Company Contracts, including any amendments or supplements thereto and waivers thereof, have been made available to the Purchaser. The Company Contracts are legal, valid, binding and enforceable in accordance with their respective terms with respect to the Company or any Subsidiary, as applicable, and, to the Knowledge of the Company, each other party to such Company Contracts. There is no existing material default or breach by the Company or any Subsidiary, as applicable, under any Company Contract (or event or condition that, with notice or lapse of time or both could constitute a default or breach) and, to the Knowledge of the Company, there is no such default or breach (or event or condition that, with notice or lapse of time or both, could constitute a default or breach) with respect to any other party to any Company Contract. To the Knowledge of the Company, neither the Company nor any Subsidiary is participating in any discussions or negotiations regarding modification of or amendment to any Company Contract or entry in any new material contract applicable to the Company, any Subsidiary or the real or personal property of the Company or any Subsidiary other than in the Ordinary Course.
Schedule 4.14(a)
identifies with an asterisk each Company Contract set forth therein that requires the consent of or notice to the other party thereto to avoid any breach, default or violation of such contract, agreement or other instrument in connection with the transactions contemplated hereby.
(c)
With respect to each Active Government Contract, (i) no termination for default, cure notice or show cause notice has been received by the Company and remains unresolved, and, to the Knowledge of the Company, no event, condition or omission has occurred or exists that would constitute grounds for such action; (ii) neither the Company nor any of its Subsidiaries has recognized collectively on any such Active Government Contract any amount of revenue in excess of the Governmental Entity’s current contractual obligation; and (iii) no money due to the Company or any of its Subsidiaries pertaining to any such Active Government Contract has been withheld or set off other than in accordance with the withholding provisions of any such Active Government Contract.
Section 4.15
Tax Returns; Taxes
.
(a)
Except as otherwise disclosed on
Schedule 4.15(a)
: (i) all income and other material Tax Returns of the Company and each Subsidiary required to have been filed in accordance with any applicable Law have been duly filed and are correct and complete in all material respects; (ii) all Taxes, deposits of Taxes or other payments relating to Taxes due and owing by the Company and each Subsidiary (whether or not shown on any Tax Return) have been paid in full; (iii) there are not now any extensions of time in effect with respect to the dates on which any Tax Returns of the Company or any Subsidiary were or are due to be filed other than customary extensions for which no approval is required; (iv) all deficiencies asserted as a result of any examination of any Tax Returns of the Company or any Subsidiary have been paid in full, accrued on the books of the Company or a Subsidiary, as applicable, or finally settled, and no issue has been raised in any such examination which, by application of the same or similar principles, reasonably could be expected to result in a proposed deficiency for any other period not so examined; (v) no claims have been asserted in writing and no proposals or deficiencies for any Taxes of the Company or any Subsidiary are being asserted, proposed or, to the Knowledge of the Company, threatened, in each case, in writing, and no audit or investigation of any Tax Return of the Company or any Subsidiary is currently underway, pending or, to the Knowledge of the Company, threatened; (vi) no claim has ever been made by a Taxing authority in a jurisdiction in which the Company or any Subsidiary does not file Tax Returns that it is or may be subject to taxation by that jurisdiction; (vii) the Company and each Subsidiary has timely withheld, paid over, and reported all Taxes required to have been withheld, paid over, and reported by them in connection with amounts paid or owing to any employee, independent contractor, creditor, equity holder or other third party; (viii) there are no outstanding waivers or agreements by or on behalf of the Company or any Subsidiary for the extension of time for the assessment of any Taxes or deficiency thereof, nor are there any requests for rulings between the Company or any Subsidiary and any Taxing authority; (ix) there are no Liens against any property of the Company or any Subsidiary for Taxes (other than Liens for Taxes that are not yet due and payable); (x) neither the Company nor any Subsidiary is a party to any Tax allocation, sharing or indemnification agreement under which the Company or any Subsidiary will have any liability after the Closing, other than a Contract, such as a lease, the principal purpose of which does not relate to Taxes; (xi) neither the Company nor any Subsidiary has been a member of an affiliated group filing a consolidated U.S. federal income Tax Return; and (xii) neither the Company nor any Subsidiary has any liability for the Taxes of any Person (other than the Company or any Subsidiary) under U.S. Treasury Regulations Section 1.1502-6 (or any similar provision of Law), as a transferee or successor, by contract, or otherwise.
(b)
Neither the Company nor any of its Subsidiaries will be required to include any item of income in, or exclude any item of deduction from, Taxable income for any Taxable period (or portion thereof) beginning on or after the Closing Date as a result of any: (i) “closing agreement” as described in Section 7121 of the Code (or any corresponding or similar provision of state, local, or non-U.S. Tax Law) executed on or before the Closing Date; (ii) installment sale or open transaction disposition made on or prior to the Closing Date; (iii) improper method of accounting used or change in method of accounting; (iv) deferred intercompany transaction; (v) excess loss account under Section 1502 of the Code and the Treasury Regulations promulgated thereunder (or any similar provision of state, local, or non-U.S. Law; or (vi) election made (or contemplated to be made) under Section 108(i) of the Code.
(c)
All intercompany transactions have been conducted in accordance with an arm’s-length result within the meaning of Treasury Regulation Section 1.482-1(b)(1) or similar non-United States Law.
(d)
Neither the Company nor any of its Subsidiaries has been a party to any “listed transaction” as defined in Treasury Regulations Section 1.6011-4(b)(2).
(e)
The Company has at all times since the date it was organized been classified as a partnership or disregarded entity (and not as a publicly traded partnership taxable as a corporation) for U.S. federal and applicable state and local income Tax purposes.
(f)
For U.S. federal income tax purposes and applicable state and local income Tax purposes, each Subsidiary of the Company has at all times since the date it was organized been treated as a partnership or disregarded entity from the Company within the meaning of Section 7701 of the Code and the Treasury Regulations promulgated thereunder.
(g)
The representations and warranties contained in this
Section 4.15
(and
Section 4.16
and
Section 4.17
insofar as such sections are related to Taxes) constitute the sole and exclusive representations and warranties of the Company and its Subsidiaries related to Taxes.
Section 4.16
Officers and Employees
.
(a)
Schedule 4.16(a)
contains a correct and complete list of (a) all of the officers, managers and directors of the Company and each Subsidiary, specifying their position, annual rate of compensation, work location, and length of service, respectively and (b) all of the employees (whether full-time, part-time or otherwise) and independent contractors of the Company and each Subsidiary as of the date hereof with an annual base salary or consulting fees of $100,000 or more, specifying their position, status as full-time, part-time or otherwise, work location, and length of service, respectively, consulting or other independent contractor fees, together with an appropriate notation next to the name of any officer or other employee on such list who is subject to any written Employment Agreement or any other written term sheet or other document describing the terms or conditions of employment of such employee or independent contractor or of the rendering of services by such independent contractor. Except as set forth on
Schedule 4.16(a)
, neither the Company nor any Subsidiary is a party to or bound by any Employment Agreement. The Company has provided to the Purchaser complete copies of each Employment Agreement (or standard form thereof) to which the Company or any Subsidiary is a party, or by which any of them is otherwise bound. There is no existing material default or breach by the Company or any Subsidiary, as applicable, under any Employment Agreement (or event or condition that, with notice or lapse of time or both could constitute such a default or breach) and, to the Knowledge of the Company, there is no such default or breach (or event or condition that, with notice or lapse of time or both, could constitute a default or breach) with respect to any other party to any Employment Agreement. The Company has not misclassified any individual as (i) an independent contractor or an employee leased from another employer, rather than as an employee, or (ii) an employee exempt from state, federal, provincial or other applicable overtime regulations. Except as set forth on
Schedule 4.16(a)
, neither the Company, any Subsidiary nor any Member has made any verbal commitments to any officer, employee, former employee, consultant or independent contractor of the Company or any Subsidiary with respect to compensation, promotion, retention, termination, severance or similar matters in connection with the transactions contemplated hereby or otherwise. As of the date hereof, to the Knowledge of the Company, no employee with an annual base salary of $100,000 or more has notified the Company or any of its Subsidiaries that he or she intends to resign or retire as a result of the transactions contemplated by this Agreement.
(b)
(A) there are no complaints, charges, proceedings, suits, actions or claims against the Company or any of its Subsidiaries pending or, to the Knowledge of the Company, threatened that could be brought or filed with any Governmental Entity or arbitrator based on, arising out of, in connection with, or otherwise relating to the employment or termination of employment or failure to employ by the Company or any of its Subsidiaries, of any individual and (B) the Company and its Subsidiaries are in substantial compliance with all applicable Laws relating to the employment of labor, including all such Laws relating to labor relations, terms and conditions of employment, hiring, termination, wages, hours, WARN and any similar state or local “mass layoff” or “plant closing” law, classification of employees (exempt/non-exempt and employee/independent contractor), collective bargaining, discrimination, civil rights, safety and health, workers’ compensation, immigration, work status, leaves of absence, background check, privacy and the collection and payment of withholding and/or social security taxes and any similar Tax.
(c)
The Company (A) has withheld and reported all amounts required by applicable Law to be withheld and reported with respect to wages, salaries and other payments to employees, (B) is not liable for any arrears of wages or any Taxes or any penalty for failure to comply with any of the foregoing and (C) is not liable for any payment to any trust or other fund governed by or maintained by or on behalf of any Governmental Entity, with respect to unemployment compensation benefits, social security or other benefits or obligations for employees (other than routine payments to be made in the normal course of business and in accordance with past practice).
Section 4.17
Company Benefit Plans
.
(a)
Set forth on
Schedule 4.17(a)
is a list of each Company Benefit Plan and Non-U.S. Plan. With respect to each Company Benefit Plan and Non-U.S. Plan, the Company has made available to the Purchaser true and complete copies of each of the following, to the extent currently effective: (i) the plan document, together with all amendments, or if unwritten, a written summary of all material plan terms; (ii) where applicable, any trust agreements, insurance policies and other documents establishing other funding arrangements; (iii) any summary plan descriptions and employee handbooks; (iv) in the case of any Company Benefit Plan that is intended to be qualified under Section 401(a) of the Code, a copy of the most recent determination letter (or opinion letter or advisory letter), if any, from the Internal Revenue Service (the “
IRS
”); (v) all filings required to be made with any Governmental Entity during the two (2) calendar years preceding the date of this Agreement; (vi) the two (2) most recent financial statements and actuarial valuation reports thereof; and (vii) any correspondence or filings with or from any Government Entity relating to any government investigation or audit or any submission under any voluntary compliance procedures.
(b)
Neither the Company, any Subsidiary nor any ERISA Affiliate has ever maintained or been required to contribute to any benefit plan subject to Title IV of ERISA, or subject to Section 412 of the Code or Section 302 of ERISA. Neither the Company, any Subsidiary nor any ERISA Affiliate has been required to contribute to any “multiemployer plan” as defined in Section 4001(a)(3) of ERISA. No liability under Title IV of ERISA has been or is expected to be incurred by the Company or any of its Subsidiaries.
(c)
Except as otherwise disclosed on
Schedule 4.17(c)
, each Company Benefit Plan, including any associated trust or fund, has been administered in compliance in all material respects with its terms and the applicable requirements of ERISA, the Code and any other applicable Laws. Each Company Benefit Plan that is intended to be qualified under Section 401(a) of the Code has received a favorable determination letter or is the subject of a favorable opinion letter or advisory letter from the IRS on the form of such Company Benefit Plan, and, to the Knowledge of the Company, no event has occurred and no facts or circumstances exist that would cause the IRS to revoke or fail to issue such letter. Neither the Company nor any Subsidiary has filed, and is not considering filing, an application under the IRS Employee Plans Compliance Resolution System or the Department of Labor’s Voluntary Fiduciary Correction Program with respect to any Company Benefit Plan.
(d)
None of the Company, any of its Subsidiaries, nor, to the Knowledge of the Company, any other “disqualified person” or “party in interest” (as defined in Section 4975(e)(2) of the Code and Section 3(14) of ERISA, respectively) has engaged in any transaction with respect to any Company Benefit Plan that would be reasonably likely to subject the Company to any Taxes or penalty (civil or otherwise) imposed by ERISA, the Code or other applicable Law.
(e)
Except as set forth on
Schedule 4.17(e)
, all contributions, assessments and premium payments required to be made on account of each Company Benefit Plan have either been made or accrued on the financial statements of the Company (or the applicable Subsidiary), and the Company (or the applicable Subsidiary) has timely deposited all amounts withheld from employees into appropriate trusts or accounts, and no event has occurred or condition exists that would reasonably be expected to result in a material increase in the level of such amounts paid or accrued for the most recently ended fiscal year. There are no existing or, to the Knowledge of the Company, threatened Legal Proceedings relating to a Company Benefit Plan, other than routine claims for information or benefits in the Ordinary Course and, to the Knowledge of the Company, there is no reasonable basis for any such Legal Proceeding (other than such routine claims).
(f)
Except as set forth on
Schedule 4.17(f)
, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby could (either alone or in connection with other events) (i) result in, or cause the accelerated vesting, payment, funding or delivery of, or increase the amount or value of, any payment or benefit to any employee, officer, director, manager or other service provider of the Company or any Subsidiary under any Company Benefit Plan or Non-U.S. Plan; (ii) result in any severance, termination or similar types of payments or benefits; or (iii) result in a requirement to pay any tax “gross-up” or similar “make-whole” payments to any employee, director or consultant of the Company or any Subsidiary. The agreements listed on
Schedule 4.17(f)
constitute all of the obligations of the Company and any Subsidiary to make payments (including, “success fees” or bonuses, or severance payments, and any amounts payable to offset any excise Taxes imposed under Section 4999 of the Code and any related income Taxes) to or for the benefit of current or former officers, directors, managers or employees of the Company or any Subsidiary exclusively as a result of the transactions contemplated by this Agreement, other than those relating to amounts paid by the Company prior to the Closing Date and statutory payments to officers, directors, managers or employees of the Company or any Subsidiary outside of the United States and ordinary course accrued bonuses and wages and other payments that are not triggered exclusively by the transactions contemplated by this Agreement.
(g)
Each Company Benefit Plan that constitutes in any part a nonqualified deferred compensation plan within the meaning of Section 409A of the Code has been operated and maintained in all material respects in operational and documentary compliance with Section 409A of the Code and applicable guidance thereunder.
(h)
Each Non-U.S. Plan has been administered in compliance with its terms and complies in all material respects with all applicable Laws.
(i)
No Company Benefit Plan provides for, as a result of any of the transactions contemplated by this Agreement (whether alone or in connection with other events), any payment of any amount of money or other property to, or the acceleration of or provision of any other rights or benefits to, any current or former officer, employee, independent contractor, manager or director of the Company or any of its Subsidiaries that could reasonably be expected, individually or in the aggregate, to result in the payment of any “excess parachute payments” within the meaning of Section 280G of the Code. No current or former officer, employee, independent contractor, manager or director of the Company or any of its Subsidiaries is entitled to any gross-up or any other payment from the Company or any of its Subsidiaries in respect of any Tax (including Taxes imposed under Section 409A or Section 4999 of the Code) or any interest or penalty related thereto.
(j)
None of the Company Benefit Plans promises retiree medical, disability or life insurance benefits to any current or former employee, consultant or director, except as required by Section 4980B of the Code, Part 6 of Title I of ERISA or similar applicable state or local Law.
(k)
The representations and warranties contained in this
Section 4.17
constitute the sole representations and warranties of the Company relating to Company Benefit Plans and Non-U.S. Plans.
Section 4.18
Labor Relations
.
Except as set forth in
Schedule 4.18
, (a) neither the Company nor any of its Subsidiaries is a party to any collective bargaining agreement, contract or legally binding commitment to any trade union or employee organization or group in respect of or affecting employees; (b) neither the Company nor any of its Subsidiaries is currently engaged in any negotiation with any trade union or employee organization; (c) there is no strike, labor dispute, work slowdown or stoppage pending or, to the Knowledge of the Company, threatened against the Company or any of its Subsidiaries; (d) there is no grievance or arbitration proceeding arising out of or under any collective bargaining agreement which is pending or, to the Knowledge of the Company, threatened against the Company or any of its Subsidiaries; (e) neither the Company nor any of its Subsidiaries is the subject of any union organization effort; (f) there are no claims pending or, to the Knowledge of the Company, threatened against the Company or any of its Subsidiaries related to the status of any individual as an independent contractor or employee; and (g) the Company and each of its Subsidiaries have complied in all respects with WARN.
Section 4.19
Insurance Policies
.
Schedule 4.19
sets forth a list of all policies of insurance maintained, owned or held by the Company and its Subsidiaries (collectively, the “
Insurance Contracts
”). Except as otherwise disclosed on
Schedule 4.19
, all such Insurance Contracts are in full force and effect, all premiums with respect thereto covering all periods up to and including the Closing Date will have been paid, and no written notice of cancellation or termination has been received by the Company or any of its Subsidiaries with respect to any such policy (nor has any policy of insurance been cancelled or terminated in the past three (3) years except in the Ordinary Course). Except as set forth on
Schedule 4.19
, there is no claim under any Insurance Contract as to which coverage has been denied or provided with a reservation of rights or, to the Company’s Knowledge, disputed by the underwriter, nor is any other material claim pending. To the Company’s Knowledge, there is no threatened termination of, premium increase with respect to or material alteration of coverage under, any of the Insurance Contracts.
Section 4.20
Environmental Matters
.
Except as set forth on
Schedule 4.20
:
(a)
the Company and each Subsidiary possess all material permits and approvals required under, and each is and has been in compliance in all material respects with, all Environmental Laws, and the Company and each Subsidiary is and has been in compliance in all material respects with all applicable limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in all Environmental Laws or contained in any other Law, or any notice or demand letter issued thereunder;
(b)
neither the Company nor any Subsidiary has entered into or agreed to enter into, and neither the Company nor any Subsidiary has contemplated entering into, any consent decree or order, and neither the Company nor any Subsidiary is subject to any judgment, decree or judicial or administrative order relating to compliance with, or the cleanup of Hazardous Materials under, any applicable Environmental Law;
(c)
neither the Company nor any Subsidiary has treated, stored, disposed of, arranged for or permitted the disposal of, transported, handled, manufactured, distributed, released, or exposed any Person to any Hazardous Materials, or owned or operated any property or facility that is or has been contaminated by any Hazardous Materials, such as would give rise, individually or in the aggregate, to a Material Adverse Effect;
(d)
neither the Company nor any Subsidiary has received written notice of any pending or threatened actions from any Governmental Entity regarding any matter relating to Environmental Laws;
(e)
the Company has made available to the Purchaser complete copies of all reports, correspondence, memoranda, computer data and the complete files relating to environmental matters of the Company and its Subsidiaries; and
(f)
the representations and warranties contained in this
Section 4.20
constitute the sole representations and warranties of the Company relating to Environmental matters.
Section 4.21
Intellectual Property
.
(a)
Schedule 4.21(a)
contains a list of all Company Registered Intellectual Property, which identifies all Company Registered Intellectual Property (including, as applicable, registration number, application number, patent number, filing date, issue date, mark or title, and jurisdiction).
(b)
The Company Intellectual Property includes all of the Intellectual Property used or held for use by the Company or its Subsidiaries in the conduct of their businesses as they are now being conducted. The Company has received no written notice of, and to the Knowledge of the Company there has not been, an event or claim which remains unresolved that indicates that any Company Intellectual Property owned by the Company or any of its Subsidiaries or product or service marketed, sold or otherwise provided by the Company or any Subsidiary is subject to any Legal Proceeding or outstanding decree, order, judgment, agreement or stipulation (i) restricting in any manner the use, transfer or licensing thereof by the Company or any Subsidiary or (ii) that may affect the validity, use or enforceability of such Company Intellectual Property or any such product or service. Each item of Company Registered Intellectual Property owned by the Company or any of its Subsidiaries is subsisting and, to the Knowledge of the Company, in all material respects, valid and enforceable. All necessary application, registration, maintenance and renewal fees currently due in connection with Company Registered Intellectual Property have been made and all necessary documents, recordations and certifications in connection with the application, maintenance, renewal and recordation of ownership of such Company Registered Intellectual Property have been filed with the relevant patent, copyright, trademark or other authorities in the U.S. or foreign jurisdictions, except to the extent that any failure to pay such fees or file with the jurisdictions would not, individually or in the aggregate have a Material Adverse Effect.
(c)
The Company and/or one of its Subsidiaries is the sole and exclusive owner of all right, title and interest in and to each item of Company Registered Intellectual Property and other Company Intellectual Property purported to be owned by the Company or any of its Subsidiaries and to the Knowledge of the Company, the Company has a valid license to use all other Company Intellectual Property as the same is presently used in the Company’s and its Subsidiaries’ respective businesses. Each item of Company Intellectual Property owned by the Company or any of its Subsidiaries is free and clear of any Lien (other than Permitted Liens and non-exclusive licenses in such Intellectual Property granted by the Company in the Ordinary Course). The Company or the applicable Subsidiary of the Company is the exclusive owner or exclusive licensee of all trademarks and service marks, trade dress, trade names and domain names used by the Company or any Subsidiary in connection with the advertisement, marketing or sale of any products or the provision of any services of the Company or any Subsidiary, free and clear of all Liens (other than Permitted Liens and non-exclusive licenses in such Intellectual Property granted by the Company in the Ordinary Course). Except as set forth on
Schedule 4.21(c)
, neither the Company nor any Subsidiary has granted any licenses, rights or interest in the Company Intellectual Property to a third party except for non-exclusive licenses granted to end users or customers for Company Intellectual Property in the Ordinary Course. There is no pending Legal Proceeding challenging the ownership, use, validity or enforceability of any Company Intellectual Property owned by the Company or any of its Subsidiaries or contesting the right of the Company or any of its Subsidiaries to use, license, transfer or dispose of any Company Intellectual Property. Immediately after the Closing, all Company Intellectual Property will be owned or licensed, and available for use, by the Company and its Subsidiaries on the same terms and to the same extent they were owned or licensed, and available for use, immediately prior to the Closing.
(d)
Except as set forth on
Schedule 4.21(d)
, each Person who is an employee of the Company or any of its Subsidiaries and who is or has been materially involved in the creation or development of any Company Intellectual Property has signed a valid, enforceable agreement containing an assignment of Intellectual Property rights pertaining to such created Intellectual Property to the Company. Except as set forth on
Schedule 4.21(d)
, to the extent that the Company Intellectual Property has been developed or created by a third party expressly for the Company or any Subsidiary, the Company or Subsidiary, as applicable, has a written agreement with such third party with respect thereto and the Company or Subsidiary, as applicable, thereby either (i) has ownership of and is the exclusive owner of, or (ii) has a license (sufficient for the operations of the Company and each Subsidiary as currently conducted and as proposed to be conducted) to, all of such third party’s Intellectual Property in such work, material or invention by operation of law or by valid agreement.
(e)
Except as set forth on
Schedule 4.21(e)
, the Company has no Knowledge of, and neither the Company nor any of its Subsidiaries has received written notice of or any other overt threat from any third party, or is a party to or the subject of any Legal Proceeding in which it is alleged, that the operation of the business of the Company or any of its Subsidiaries as it is currently conducted and as proposed to be conducted, or any act, product or service of the Company or any Subsidiary, infringes or misappropriates the Intellectual Property of any third party.
(f)
To the Knowledge of the Company, no Person has been or is infringing or misappropriating any Company Intellectual Property.
(g)
The Company and its Subsidiaries have taken reasonable steps to protect the rights of the Company and its Subsidiaries in the Confidential Information and any trade secret or confidential information of third parties used by the Company or any Subsidiary. Except as would not reasonably be expected to have a Material Adverse Effect, no such Confidential Information, trade secret or confidential information has been authorized to be disclosed or has been actually disclosed by the Company or its Subsidiaries to any former or current employee or any third party other than pursuant to a non-disclosure agreement restricting the disclosure and use of the same.
(h)
(i) the Company and its Subsidiaries have publicly posted privacy policies on their respective websites in a manner readily available to individuals whose data is being collected, used, or processed, and such policies provide accurate and complete disclosure regarding the collection, use, disclosure, transfer, retention, destruction, disposal and other handling of their Personal Information; (ii) the Company and its Subsidiaries, and to the Knowledge of the Company all third parties acting on behalf of the Company or any of its Subsidiaries, are in compliance with all publicly posted privacy policies and any applicable Privacy Laws and contractual obligations that the Company or any of its Subsidiaries have entered into with respect to Personal Information; (iii) the Company and its Subsidiaries have complied at all times with any privacy policies and privacy obligations of any third party under the terms of any agreements or understandings to which the Company or any of its Subsidiaries is a party or which otherwise bind the Company or its Subsidiaries; (iv) the Company and its Subsidiaries have taken reasonable steps to ensure that any third party with access to Personal Information collected by or on behalf of, or in the possession of, the Company or any of its Subsidiaries, has implemented and maintained commercially reasonable safeguards to protect Personal Information and other confidential data in its possession or control against loss and against unauthorized access, use, modification, disclosure or other misuse, including implementing and monitoring compliance with reasonable measures with respect to technical and physical security of such Personal Information; (v) neither the Company nor any of its Subsidiaries has received any notice of any claims of, or been charged with, the violation of any Privacy Laws or applicable privacy policies, and to the Knowledge of the Company there is no basis for any such claim; and (vi) the execution, delivery and performance of this Agreement comply with the Company’s and its Subsidiaries’ privacy policies.
Section 4.22
Software
.
(a)
Schedule 4.22(a)
sets forth a correct and complete list of the Company Licensed Software.
(b)
The use of the Company Software does not breach in any material respect any term of any license or other contract between the Company or any Subsidiary, on the one hand, and any third party, on the other hand. The Company and its Subsidiaries are in compliance in all material respects with the terms and conditions of all license agreements in favor of the Company or any Subsidiary relating to the Company Licensed Software.
(c)
To the Knowledge of the Company, the Company Proprietary Software does not infringe or misappropriate any Intellectual Property right of any third party.
(d)
To the Knowledge of the Company, none of the Company Proprietary Software contains or uses any “open source software” (e.g., Software distributed pursuant to a license approved by the Open Source Initiative (as currently set forth at https://opensource.org/licenses/alphabetical), in a manner that would require the source code for the Company Proprietary Software to be disclosed to any Person upon the occurrence of any condition (including the distribution by the Company and its Subsidiaries of their respective products and services in the Ordinary Course).
(e)
Except as set forth on
Schedule 4.22(e)
, the Software, computers, routers, networks and other information technology equipment and infrastructure used by the Company or its Subsidiaries (excluding any public networks) (i) operate and perform in all material respects in a manner that permits the Company and its Subsidiaries to conduct their respective businesses as currently conducted; and (ii) have not suffered any errors or failures in the past one (1) year that caused any material disruption to the conduct of the business of the Company and its Subsidiaries, taken as a whole. The Company and its Subsidiaries have in place commercially reasonable security, disaster recovery and business continuity plans with respect to such information technology equipment and infrastructure, and have taken commercially reasonable actions to protect the security and integrity of the same. Except as set forth on Schedule 4.22(e), to the Knowledge of the Company, there has not been, in the last three (3) years, any material incident unauthorized access to such information technology equipment or infrastructure or the data processed or transmitted therewith.
Section 4.23
Transactions with Affiliates
.
Except as set forth on
Schedule 4.23
, no Member and no officer, manager or director of the Company, any Subsidiary, any Member or any Affiliate of the foregoing, nor any Person with whom any such officer, manager or director has any direct or indirect relation by blood, marriage or adoption, no entity in which any such officer, manager or director or Person owns any beneficial interest (other than a publicly held corporation whose stock is traded on a national securities exchange or in the over-the-counter market and less than five percent of the stock of which is beneficially owned by all such officers, directors and Persons in the aggregate), no Affiliate of any of the foregoing and no current or former Affiliate of the Company or any Subsidiary has any interest in: (a) any contract, transaction, arrangement or understanding with, or relating to, the Company or any Subsidiary or the properties or assets of the Company or any Subsidiary; (b) any loan, arrangement, understanding, agreement or contract for or relating to the Company or any Subsidiary or the properties or assets of the Company or any Subsidiary; or (c) any property (real, personal or mixed), tangible or intangible, used or currently intended to be used by the Company or any Subsidiary.
Section 4.24
Customer and Supplier Relations
.
(a)
Schedule 4.24(a)-1
contains a correct and complete list of the names of the Customers and the aggregate amount the Company and its Subsidiaries invoiced each such Customer during the twelve month period ended on December 31, 2017. Except as set forth on
Schedule 4.24(a)-2
, the Company and its Subsidiaries have not received any written or, to the Company’s Knowledge, oral, notice, nor does the Company have Knowledge, that any Customer will reduce materially its business with the Company and its Subsidiaries from the level achieved during such period. Except as set forth on
Schedule 4.24(a)-2
, no customer representing revenue of more than $60,000 during the twelve (12) month period ending on December 31, 201
7
has terminated its relationship with the Company and its Subsidiaries or threatened or notified the Company and its Subsidiaries of its intention to do so. No customer representing revenue of more than $60,000 during the twelve (12) month period ending on December 31, 2017 has modified or, to the Company’s Knowledge, indicated that it intends to modify, its relationship with the Company and its Subsidiaries in a manner which is materially less favorable to the Company and its Subsidiaries than the terms and conditions in effect preceding such actual or intended modification. Except as set forth on
Schedule 4.24(a)-2
, the Company and its Subsidiaries are not involved in any claim, dispute or controversy with any Customer. Except as set forth on Schedule 4.24(a)-3, to the Knowledge of the Company, Since December 31, 2017, no event has occurred that could materially and adversely affect the Company’s or any of its Subsidiaries’ relations with any Customer.
(b)
Schedule 4.24(b)
contains a correct and complete list of the names of the Suppliers and the aggregate amount the Company and its Subsidiaries paid to each of them during the twelve month period ended on December 31, 2017. The Company and its Subsidiaries have not received any written, or to the Company’s Knowledge, oral, notice, nor does the Company have Knowledge, that any Supplier will reduce materially its business with the Company and its Subsidiaries from the level during such period. No Supplier has, within the past twelve (12) months, terminated its relationship with the Company and its Subsidiaries or threatened or notified the Company and its Subsidiaries of its intention to do so. No Supplier has, within the past twelve (12) months, modified or, to the Company’s Knowledge, indicated that it intends to modify, its relationship with the Company and its Subsidiaries in a manner that is materially less favorable to the Company and its Subsidiaries than the terms and conditions in effect preceding such actual or intended modification. The Company and its Subsidiaries are not involved in any claim, dispute or controversy with any Supplier. To the Knowledge of the Company, no event has occurred that could materially and adversely affect the Company’s or any of its Subsidiaries’ relations with any Supplier.
Section 4.25
Licenses
.
Schedule 4.25
is a correct and complete list of all Licenses held by the Company and each Subsidiary. All such Licenses are valid, binding and in full force and effect. The execution, delivery and performance hereof and the consummation of the transactions contemplated hereby shall not adversely affect any such License, or require consent from, or notice to, any Governmental Entity. Except as set forth on Schedule 4.25, the Company has taken all necessary action to maintain, and is and has for the past two (2) years been in material compliance with, each such License. No loss or expiration of any such License is pending or, to the Knowledge of the Company, threatened (other than expiration upon the end of any term in the Ordinary Course). The Company and its Subsidiaries own or possess all Licenses that are required by Law or reasonably necessary to enable them to carry on their operations as presently conducted.
Section 4.26
Brokers, Finders and Investment Bankers
.
Except as set forth on
Schedule 4.26
, neither the Company, any Subsidiary, nor any Member, nor any officer, member, manager, director or employee of the Company or any Subsidiary nor any Affiliate of the Company or any Subsidiary, has employed any broker, finder or investment banker or incurred any liability for any investment banking fees, financial advisory fees, brokerage fees or finders’ fees in connection with the transactions contemplated hereby. The Members are solely responsible for the fees and expenses of any broker set forth on
Schedule 4.26
.
Section 4.27
Bank Accounts
.
Schedule 4.27
sets forth a correct and complete list of any bank account, safety deposit box and lock box used by the Company and each Subsidiary, including a list of the authorized signatories.
Section 4.28
Member Guarantees
.
Except as otherwise disclosed on
Schedule 4.28
, no Member has guaranteed any obligations of the Company or any Subsidiary under any guarantee, letter of credit, bid bond or performance bond.
Section 4.29
Improper Payments
.
None of the Company and its Subsidiaries, nor, to the Knowledge of the Company, any director, manager, officer, agent, representative or employee of any of the foregoing, or any other Person acting at their direction, on their behalf or otherwise in relation to the Business, has directly or indirectly, made any contribution, gift, bribe, rebate, payoff, influence payment, kickback, or other payment to any Person, regardless of form, whether in money, property, or services to or for the benefit of any “foreign official” (as such term is defined in the Foreign Corrupt Practices Act of 1977 (as amended)): (a) to obtain any improper advantage in securing business; (b) to pay for improper advantage to business secured; or (c) to obtain special concessions or for special concessions already obtained, in each case, that was illegal or improper (taking into account any applicable Laws, including the Foreign Corrupt Practices Act of 1977 (as amended) and the UK Bribery Act of 2010 (as amended), contract terms and any procurement policies of customers, suppliers and other business relations).
Section 4.30
Escheat
.
The Company and each of its Subsidiaries have timely paid over to the appropriate Governmental Entity all amounts required to be paid over under all escheat and unclaimed property Laws, have fully complied with all material escheat and unclaimed property Laws, and have filed all statements, returns and reports within the time and in the manner prescribed by such Laws.
Section 4.31
Disclaimer of Other Representations and Warranties
.
Neither the Company nor any Subsidiary or any of their respective members, stockholders, owners, officers, directors, managers or representatives has made, and none of them shall be deemed to have made, any representations or warranties, express or implied, of any nature whatsoever relating to the Company or its Subsidiaries or otherwise in connection with the transactions contemplated by this Agreement, other than those representations and warranties expressly set forth in this
ARTICLE IV
,
ARTICLE V
or in the Member Ancillary Documents or Purchaser Ancillary Documents to which such Persons are parties. The Company makes no representation or warranty to Purchaser with respect to (i) any projections, estimates or budgets heretofore delivered to or made available to Purchaser or their respective counsel, accountants or advisors of future revenues, expenses or expenditures or future results of operations of the Company, and (ii) except as expressly covered by a representation and warranty contained in this
ARTICLE IV
, any presentations or due diligence information made available to Purchaser or its respective counsel, accountants or advisors with respect to the Company.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF EACH OF THE MEMBERS
Each of the Members, severally and not jointly, represents and warrants to the Purchaser as follows as of the date hereof and as of the Closing Date:
Section 5.1
Authorization
.
Such Member has the right, power, authority and capacity to execute and deliver this Agreement and each Member Ancillary Document to which it is a party, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance of this Agreement and the Member Ancillary Documents by such Member and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all required action on the part of such Member. This Agreement has been, and the Member Ancillary Documents to which it is a party shall be as of the Closing Date, duly executed and delivered by such Member, and do or shall, as the case may be, constitute the valid and binding agreement of such Member enforceable against such Member in accordance with their respective terms, subject to applicable bankruptcy, insolvency and other similar Laws affecting the enforceability of creditors’ rights generally, general equitable principles and the discretion of courts in granting equitable remedies.
Section 5.2
Absence of Restrictions and Conflicts
.
The execution, delivery and performance by such Member of this Agreement and the Member Ancillary Documents to which it is a party, the consummation of the transactions contemplated hereby and thereby, and the fulfillment of and compliance with the terms and conditions hereof and thereof, do not or will not (as the case may be) with the passing of time or the giving of notice or both, violate or conflict with, constitute a breach of or default under, result in the loss of any benefit under, permit the acceleration of any obligation under or create in any party the right to terminate, modify or cancel (a) any term or provision of the organizational documents of such Member, (b) any contract, agreement, permit, franchise, license or other instrument applicable to such Member, (c) any judgment, decree or order of any Governmental Entity to which such Member is a party or by which such Member or any of its properties are bound, or (d) any Law or arbitration award applicable to such Member.
Section 5.3
Ownership of Equity
.
(a)
Such Member has good and valid title to and beneficial ownership of the number and type of Membership Interests set forth next to such Member’s name on
Schedule 4.3(a)
, and such Membership Interests are (i) validly issued, fully paid, and non-assessable, and (ii) free and clear of all Liens.
(b)
Other than the Membership Interests listed on
Schedule 4.3(a)
, such Member owns no membership interests, units or other equity security of the Company or any Subsidiary, or any option, warrant, right, call, commitment or right of any kind to have any such equity security issued.
Section 5.4
Legal Proceedings
.
There are no suits, litigations, actions, claims, arbitrations, proceedings or investigations pending or, to the knowledge of such Member, threatened against, relating to or involving such Member which would reasonably be expected to adversely affect such Member’s ability to consummate the transactions contemplated by this Agreement or the Member Ancillary Documents to which it is a party.
Section 5.5
Amounts Owed to Members
.
Neither the Company nor any Subsidiary owes or is obligated to pay such Member any amount, except for salary, employee benefits and bonuses, accrued prior to the Closing in the Ordinary Course.
Section 5.6
Disclaimer of Other Representations and Warranties
.
No Member or any of his or its respective partners, members, stockholders, owners, officers, directors or representatives has made, and none of them shall be deemed to have made, any representations or warranties, express or implied, of any nature whatsoever relating to such Member or the Company or its Subsidiaries or otherwise in connection with the transactions contemplated by this Agreement, other than those representations and warranties expressly set forth in
ARTICLE IV
, this
ARTICLE V
or in the Member Ancillary Documents or Purchaser Ancillary Documents to which such Persons are parties.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Members as follows as of the date hereof and as of the Closing Date:
Section 6.1
Organization
.
The Purchaser is a corporation duly organized, validly existing and in good standing under the Laws of the State of Delaware and has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted.
Section 6.2
Authorization
.
The Purchaser has the rights, power, authority and capacity to execute and deliver this Agreement and the Purchaser Ancillary Documents, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance of this Agreement and the Purchaser Ancillary Documents by the Purchaser, and the consummation of the transactions contemplated hereby and thereby, have been duly authorized by all required action on the part of the Purchaser. This Agreement has been, and the Purchaser Ancillary Documents shall be, as of the Closing Date, duly executed and delivered by the Purchaser and do or shall, as the case may be, constitute the valid and binding agreements of the Purchaser, enforceable against the Purchaser in accordance with their respective terms, subject to applicable bankruptcy, insolvency and other similar Laws affecting the enforceability of creditors’ rights generally, general equitable principles and the discretion of courts in granting equitable remedies.
Section 6.3
Absence of Restrictions and Conflicts
.
The execution, delivery and performance of this Agreement and the Purchaser Ancillary Documents, the consummation of the transactions contemplated hereby and thereby, and the fulfillment of and compliance with the terms and conditions hereof and thereof, do not or will not (as the case may be), with the passing of time or the giving of notice or both, violate or conflict with, constitute a breach of or default under, result in the loss of any benefit under, or permit the acceleration of any obligation under, (a) any term or provision of the organizational documents of the Purchaser, (b) any contract to which the Purchaser is a party, (c) any judgment, decree or order of any Governmental Entity to which the Purchaser is a party or by which the Purchaser or any of its properties is bound or (d) any Law applicable to the Purchaser unless, in each case, such violation, conflict, breach, default, loss of benefit or accelerated obligation would not, either individually or in the aggregate, have a material adverse impact on the ability of the Purchaser to consummate the transactions contemplated hereby, or by the Purchaser Ancillary Documents, except for compliance with the applicable requirements of the HSR Act.
Section 6.4
Debt Financing
.
Purchaser has delivered to the Company a duly executed copy of (i) the Commitment Letter of Jefferies Finance LLC (the “
Debt Financing Source
”) dated as of the date of this Agreement
(the “
Commitment Letter
”) and (ii) the Fee Letter of the Debt Financing Source dated as of even date with the Commitment Letter (as redacted to remove the fee amounts, alternative transaction fee provisions, pricing caps, the rates and amounts included in the “market flex” and other economic terms that could not adversely affect the conditionality, enforceability or termination of the Debt Financing, the “
Redacted Fee Letter
”), in each case, including all exhibits, schedules, annexes and amendments to such letters in effect as of the date of this Agreement (collectively, the “
Debt Letters
”), to provide Purchaser with debt financing in the amount set forth therein for the purpose of financing the transactions contemplated by this Agreement and related fees and expenses (being collectively referred to as the “
Debt Financing
”
)
. The Debt Letters are in full force and effect and have not been amended or modified (provided, that the existence or exercise of “market flex” provisions contained in the Redacted Fee Letter shall not be deemed to constitute a modification or amendment of the Commitment Letter), and the commitments set forth therein have not been withdrawn or rescinded in any way. The Debt Letters are a valid and binding obligation of Purchaser and, to the knowledge of the Purchaser, the other parties thereto, subject to applicable bankruptcy, insolvency and other similar Laws affecting the enforceability of creditors’ rights generally, general equitable principles and the discretion of courts in granting equitable remedies. Purchaser has fully paid any and all commitment fees or other fees required to be paid under the Debt Letters to the extent required to be paid on or prior to the date hereof or in connection with the execution of this Agreement. There are no other agreements, side letters or arrangements related to the Debt Financing that would reasonably be expected to affect the availability of such financing, other than as expressly provided in the Debt Letters. No event has occurred which, with or without notice, lapse of time or both, would constitute a breach or default on the part of the Purchaser under the Debt Letters. The aggregate proceeds from the Debt Financing, together with cash on hand, will provide Purchaser with sufficient funds required to consummate the transactions contemplated by this Agreement on the Closing Date. The Debt Letters contain all of the conditions precedent to the obligations of the Debt Financing Sources thereunder to make the Debt Financing available to Purchaser on the terms therein. Purchaser does not know of any facts or circumstances that would reasonably be expected to result in the Purchaser not being able to satisfy on the Closing Date any of the conditions to the funding of the Debt Financing required to be satisfied by Purchaser as set forth in the Commitment Letter.
Section 6.5
Inspection
;
No Other Representations
.
The Purchaser is an informed and sophisticated Person, and has engaged expert advisors experienced in the evaluation and acquisition of companies such as the Company and its Subsidiaries as contemplated hereunder. Purchaser has undertaken such investigation and has been provided with and has evaluated such documents and information as it has deemed necessary to enable it to make an informed and intelligent decision with respect to the execution, delivery and performance of this Agreement and the transactions contemplated hereby. Purchaser has been afforded the opportunity to evaluate the merits of the transactions contemplated hereby. Purchaser acknowledges that the Company has given complete and open access to the key employees, documents and facilities of the Company and its Subsidiaries that Purchaser has requested. The Company and its representatives have answered to Purchaser’s satisfaction all inquiries that Purchaser or its representatives have made concerning the business of the Company and its Subsidiaries or otherwise relating to the transactions contemplated by this Agreement. Without limiting the generality of the foregoing, Purchaser acknowledges that (a) the Company does not make any representation or warranty with respect to (i) any projections, estimates or budgets delivered to or made available to Purchaser of future revenues, future results of operations (or any component thereof), future cash flows or future financial condition (or any component thereof) of the Company and its Subsidiaries or the future business and operations of the Company and its Subsidiaries or (ii) any other information or documents made available to Purchaser or its counsel, accountants or advisors with respect to the Company, any of its Subsidiaries or any of their respective businesses, assets, liabilities or operations, except as expressly set forth in
ARTICLE IV
or
ARTICLE V
hereof and (b) Purchaser has not relied nor will it rely upon any other information, representation or warranty, except those representations or warranties set forth in
ARTICLE IV
and
ARTICLE V
hereof or in the Member Ancillary Documents, in negotiating, executing and delivering this Agreement and consummating the transactions contemplated by this Agreement. Purchaser understands and agrees that it is acquiring the Membership Interests based upon Purchaser’s own inspection, examination and determination of all matters related thereto, and without reliance upon any express or implied representations or warranties of any nature, whether in writing, orally or otherwise, made by or on behalf of or imputed to the Company, any of its Subsidiaries, the Member Representative or any Member, except for the representations and warranties made by the Company and the Members which are expressly set forth in
ARTICLE IV
hereof or in the Member Ancillary Documents and by each Member which are expressly set forth in
ARTICLE V
hereof or in the Member Ancillary Documents. Purchaser acknowledges and agrees that the representations and warranties set forth in this Agreement (as qualified by the Schedules) supersede, replace and nullify in every respect the data set forth in any other document, material or statement, whether written or oral, made available to Purchaser.
ARTICLE VII
CERTAIN COVENANTS AND AGREEMENTS
Section 7.1
Conduct of Business by the Company
.
For the period commencing on the date hereof and ending on the earlier of the Closing Date or the date on which this Agreement is terminated pursuant to
Section 10.1
(the “
Pre-Closing Period
”), the Company will and will cause each of its Subsidiaries to, except as set forth on
Schedule 7.1
, as expressly required hereby or except as otherwise consented to in advance in writing (which consent will not be unreasonably withheld, conditioned or delayed) by the Purchaser:
(a)
conduct its businesses in the Ordinary Course and not engage in any new line of business or shut down any line of business;
(b)
preserve intact the goodwill and business organization of the Company and each Subsidiary;
(c)
maintain its existence and good standing in its jurisdiction of organization and in each jurisdiction in which the ownership or leasing of its property or the conduct of its business requires such qualification;
(d)
duly and timely file or cause to be filed all Tax Returns required to be filed with any Governmental Entity and promptly pay or cause to be paid when due all Taxes, assessments and governmental charges, including interest and penalties levied or assessed, unless diligently contested in good faith by appropriate proceedings;
(e)
maintain in existing condition and repair (ordinary wear and tear excepted), consistent with past practices, all buildings and other structures located on Leased Real Property, and all equipment, fixtures and other tangible personal property used or held for use in its conduct of its business;
(f)
not authorize for issuance, issue or deliver, or authorize the transfer or incurrence of a Lien upon, any membership interests, units or other equity interests or securities convertible into or exchangeable for its membership interests or other equity interests, or issue or grant any right, option or other commitment for the issuance of its membership interests or other equity interests, or split, combine or reclassify any of its membership interests or other equity interests;
(g)
not amend or modify its organizational documents;
(h)
maintain all material Licenses in full force and effect;
(i)
use commercially reasonable efforts to preserve in all material respects the commercial relationships of the Company and its Subsidiaries with the Customers and Suppliers;
(j)
not declare any dividend, pay or set aside for payment any dividend or other distribution or make any payment to any related parties other than: (i) the payment of salaries in the Ordinary Course, (ii) distributions to Members of amounts representing the Members’ federal, state and local tax liability attributable to the income of the Company in accordance with the Company’s operating agreement and (iii) distributions to Members of non-operating reserves and profits of the Company in accordance with the Company’s operating agreement and consistent with past practice;
(k)
not create any Subsidiary, acquire any capital stock or other equity securities of any corporation or other Person (nor any options, warrants, rights, calls, commitments, conversion rights, rights of exchange, subscriptions, claims of any character, agreements, obligations, convertible or exchangeable securities or other plans or commitments, contingent or otherwise, relating thereto) or make any other investment in any business or entity;
(l)
not dispose of or permit to lapse any right to the use of any Company Intellectual Property (including any patent, trademark, trade name, service mark, license or copyright of the Company or any Subsidiary), or dispose of or disclose to any Person, any trade secret, formula, process, technology or know-how of the Company or any Subsidiary not heretofore a matter of public knowledge without a properly-executed non-disclosure agreement;