SEC URITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 29, 2016
Control4 Corporation
(Exact name of registra nt as specified in its charter)
Delaware |
001-36017 |
42-1583209 |
(State or other jurisdiction of |
(Commission |
(I.R.S. Employer |
incorporation) |
File Number) |
Identification No.) |
11734 S. Election Road
Salt Lake City, Utah 84020
(Address of principal executive offices) (Zip Code)
(801) 523-3100
(Registrant’s telephone number, including area code)
Not applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 1.01 Entry into a Material Definitive Agreement.
Stock Purchase Agreement with Pakedge Devi c e & Software Inc.
On January 29, 2016, Control4 Corporation, a Delaware corporation (“Control4”) entered into a Stock Purchase Agreement (the “Purchase Agreement”) with Pakedge Device & Software Inc., a California corporation (“Pakedge”), all of the sharehold ers of Pakedge (the “Sellers”) . Pursuant to the Purchase Agreement, Control4 acquired all of the outstanding common stock of Pakedge (the “Acquisition”).
In accordance with the terms and conditions of the Purchase Agreement, Control4 agreed to acquire all of the outstanding shares of common stock of Pakedge on January 29, 2016 (the “Closing Date”) for a price of $ 32,000,000 . After customary working capital adjustment s and net of cash in Pakedge as of the Closing Date , the total purchase price is expected to be approximately $32,700,000 (the “Purchase Price”). Approximately 15% of the Purchase Price will be held in escrow for up to 18 months to cover any of the Sellers’ post-Closing obligations, including without limitation any indemnificat ion obligations that may arise. The Purchase Pr ice was funded as follows: (i) approximately $5,000,000 was financed by Control4 pursuant to its line of credit with Silicon Valley Bank and (ii) the balance of the Purchase Price was funded by Control4’s cash and cash equivalents. In addition, Control4 committed to grant retention Restricted Stock Units (“RSUs”) in an aggregate amount up $1,800,000 to certain key employees of Pakedge upon their acceptance of employment offers with Control4 . These RSUs will be granted pursuant to Control4’s 2013 Stock Option and Incentive Plan and will vest over three years.
The foregoing description of the Purchase Agreement is only a summary, does not purport to be complete and is qualified in its entirety by reference to the full text of the Purchase Agreement, which is attached hereto as Exhibit 2.1 and is incorporated herein by reference.
Amendment to the Silicon Valley Bank Loan Agreement
On January 29, 2016, Control4 entered into the Second Loan Modification Agreement (the “2016 Loan Amendment”) with Silicon Valley Bank, a California corporation (“SVB”), which amends that certain Amended and Restated Loan and Security Agreement dated as of June 17, 2013, between Control4 and SVB (the “2013 Loan Agre ement”), which was filed with the SEC as Exhibit 10.11 to Control 4’s Form S-1 on July 1, 2013.
In t he 2016 Loan Amendment, Control4 establishes a revolving credit facility of $30,000,000 under the te rms of the 2013 Loan Agreement (the “New Credit Facility”). All borrowings under the New Credit Facility are collateralized by the general assets of the Company. Amounts borrowed under the New Credit Facility are due and payable in full on the maturity da te, which is January 28, 2018. Advances made pursuant to the New Credit Facility are either: (i) Prime Rate Advances, which bear interest at the Prime Rate plus a Prime Rate Margin of either 0% or 0.25%, depending on Control4’s leverage ratio for the subject quarter, or (ii) LIBOR Rate Advances, which bear interest at the LIBOR Rate plus a LIBOR Rate Margin of either 2.50% or 2.75%, depending on Control4’s leverage ratio for the subject quarter .
Control4 paid a commitment fee of $75,000 in connection with the New Credit Facility, and will be assessed an Unused 2016 Revolving Line Facility Fee of 0.25% in any quarter where the amount of advances u nder the New Credit Facility is less than $15,000,000.
As a condition of the 2016 Loan Amendment , Control4 must satisfy certain financial covenants including: (i) a liquidity coverage test such that the ratio of (a) Control4’s unrestricted cash at SVB plus net billed accounts receivable to (b) Control4’s aggregate amount of outstanding obligations to SVB is at least 1.50:1.0, and (ii) an interest cov erage test such that the ratio, during the subject 12-month period, of (x) Control4’s A djusted EBIDA (as defined in the 2016 Loan Amendment) minus unfunded capital expenditures and cash taxes to (y) the actual interest payments due to SVB is at least at least 2.0:1.0. The liquidity coverage covenant is waived as long as its cash , cash equivalents and securities/ investments with SVB are above $30,000,000 .
The foregoing description of the 2016 Loan Amendment is only a summary, does not purport to be complete and is qualified in its entirety by reference to the full text of the 2016 Loan Amendment, which is attached hereto as Exhibit 10.1 and is incorporated herein by reference.
Item 2.01 Completion of Acquisition or Disposition of Assets.
On January 29 , 2016, Cont rol 4 completed the Acquisition of all of the outstanding shares of common stock of Pakedge. The description of the Acquisition in Item 1.01 above is incorporated herein by reference, which description is qualified in its entirety by reference to the Purchase Agreement , which is attached hereto as Exhibit 2. 1 and is incorporated herein by reference .
Item 2.02 Results of Operations and Financial Condition.
On February 4, 2016, Cont ro l4 issued a press release announcing unaudited financial results for its fourth quarter and fiscal year ended December 31, 2015. A copy of the press release is attached as Exhibit 99.1.
In accordance with General Instruction B.2 on Form 8-K, certain of the information in this Current Report on Form 8-K, including Exhibit 99.1, is being furnished under Item 2.02 and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 (“Exchange Act”) or otherwise subject to the liability of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, regardless of the general incorporation language of such filing, except as shall be expressly set forth by specific reference in such filing.
Item 2.03 Creation of a Direct Financial Obligation.
The description of the 2016 Loan Amendment and the New Credit Facility in Item 1.01 above is incorporated herein by reference , which description is qualified in its entirety by reference to the 2016 Loan Amendment, which is attached hereto as Exhibit 10.1 and is incorporated herein by reference.
Item 7.01 Regulation FD Disclosure .
On February 4, 2016, Control4 issued a press release announcing that it had entered into the Purchase Agreement and completed the Acquisition, a copy of which is attached hereto as Exhibit 99.2. The information contained in Exhibit 99.2 is being furnished pursuant to Item 7.01 of this Form 8-K and shall not be considered “filed” under the Securities Exchange Act of 1934, as amended, nor shall it be incorporated by reference into any of the registrant’s filings under the Securities Act of 1933, as amended, or under the Securities Exchange Act of 1934, as amended, unless the registrant expressly states in such filing that such information is to be considered “filed” or incorporated by reference therein.
Item 9.01 Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired.
(b) Pro Forma Financial Information.
The financial statements required by Item 9.01(a) and the pro forma financial information required by Item 9.01(b) have not been included in this filing and will be filed by amendment to this Current Report on Form 8-K no later than seventy-one (71) calendar days after the date that this Current Report on Form 8-K is required to be filed.
(d) Exhibits.
Exhibit No. |
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Description of Exhibits |
2.1+ |
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Stock Purchase Agreement, dated January 29, 2016, by and among Control4 Corporation on the one hand and Pakedge Device & Software Inc., Victor Pak, Dusan Jankov, Nickolas Phillips, The Stacy Pak 2015 Annuity Trust and the Victor Pak 2015 Annuity Trust on the other hand, with Victor Pak as the Sellers’ Representative |
10.1 |
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Second Loan Modification Agreement, dated January 29, 2016, by and between Silicon Valley Bank and Control4 Corporation |
99.1 |
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Earnings Press release dated February 4, 2016 |
99.2 |
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Acquisition Press release dated February 4, 2016 |
+ Exhibits and schedules to this exhibit have been omitted pursuant to Item 601(b)(2) of Regulation S-K. Control4 Corporation will furnish copies of the omitted exhibits and schedules to the Securities and Exchange Commission upon its request.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: February 4, 2016 |
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Control4 Corporation |
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By: |
/s/ Mark Novakovich |
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Mark Novakovich |
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Chief Financial Officer |
EXHIBIT INDEX
Exhibit No. |
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Description of Exhibits |
2.1+ |
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Stock Purchase Agreement, dated January 29, 2016, by and among Control4 Corporation on the one hand and Pakedge Device & Software Inc., Victor Pak, Dusan Jankov, Nickolas Phillips, The Stacy Pak 2015 Annuity Trust and the Victor Pak 2015 Annuity Trust on the other hand, with Victor Pak as the Sellers’ Representative |
10.1 |
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Second Loan Modification Agreement, dated January 29, 2016, by and between Silicon Valley Bank and Control4 Corporation |
99.1 |
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Earnings Press release dated February 4, 2016 |
99.2 |
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Acquisition Press release dated February 4, 2016 |
+ Exhibits and schedules to this exhibit have been omitted pursuant to Item 601(b)(2) of Regulation S-K. Control4 Corporation will furnish copies of the omitted exhibits and schedules to the Securities and Exchange Commission upon its request.
STOCK PURCHASE AGREEMENT
among
Pakedge Device & Software Inc.,
Victor Pak,
Dusan Jankov,
Nickolas Phillips,
The Stacy Pak 2015 Annuity Trust,
The Victor Pak 2015 Annuity Trust
,
Control4 Corporation
and
Victor Pak as Seller s ’ Representative
dated as of
January 29 , 2016
TABLE OF CONTENTS
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ARTICLE I DEFINITIONS |
1 |
ARTICLE II PURCHASE AND SALE |
9 |
Section 2.01 Purchase and Sale. |
9 |
Section 2.02 Purchase Price. |
9 |
Section 2.03 Purchase Price Adjustment. |
10 |
Section 2.04 Transactions to be Effected at the Closing. |
12 |
Section 2.05 Closing. |
13 |
Section 2.06 Withholding Tax. |
13 |
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND SELLERS |
13 |
Section 3.02 Organization, Authority and Qualification of the Company. |
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Section 3.03 Capitalization. |
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Section 3.04 No Subsidiaries. |
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Section 3.05 No Conflicts; Consents. |
14 |
Section 3.06 Financial Statements. |
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Section 3.07 Undisclosed Liabilities. |
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Section 3.08 Absence of Certain Changes, Events and Conditions. |
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Section 3.09 Material Contracts. |
17 |
Section 3.10 Title to Assets; Real Property. |
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Section 3.11 Condition of Assets. |
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Section 3.12 Intellectual Property. |
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Section 3.12 Product Defects and Warranties. |
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Section 3.13 Inventory. |
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Section 3.14 Accounts Receivable. |
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Section 3.15 Customers and Suppliers. |
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Section 3.16 Insurance. |
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Section 3.17 Legal Proceedings; Governmental Orders. |
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Section 3.18 Compliance With Laws; Permits. |
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Section 3.19 Environmental Matters. |
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Section 3.20 Employee Benefit Matters. |
29 |
Section 3.21 Employment Matters. |
29 |
Section 3.22 Taxes. |
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Section 3.23 Books and Records. |
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Section 3.24 Brokers. |
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Section 3.25 Full Disclosure. |
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ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER |
33 |
Section 4.02 No Conflicts; Consents. |
33 |
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Section 4.03 Investment Purpose. |
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Section 4.04 Brokers. |
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Section 4.05 Sufficiency of Funds. |
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Section 4.06 Legal Proceedings. |
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Section 4.07 Independent Investigation. |
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ARTICLE V COVENANTS |
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Section 5.01 Conduct of Business Prior to the Closing. |
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Section 5.04 Notice of Certain Events. |
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Section 5.06 Confidentiality. |
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Section 5.07 Non-competition; Non-solicitation |
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Section 5.08 Governmental Approvals and Consents |
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Section 5.09 Books and Records. |
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Section 5.10 Closing Conditions |
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Section 5.11 Public Announcements. |
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Section 5.12 Further Assurances. |
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ARTICLE VI TAX MATTERS |
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Section 6.01 Tax Covenants. |
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Section 6.02 Termination of Existing Tax Sharing Agreements. |
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Section 6.03 Tax Indemnification. |
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Section 6.04 Straddle Period. |
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Section 6.05 Section 338(h)(10) Election. |
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Section 6.06 Contests. |
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Section 6.07 Cooperation and Exchange of Information. |
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Section 6.08 Tax Treatment of Indemnification Payments. |
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Section 6.09 Survival. |
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Section 6.10 Overlap. |
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ARTICLE VII CONDITIONS TO CLOSING |
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Section 7.01 Conditions to Obligations of All Parties. |
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Section 7.02 Conditions to Obligations of Buyer. |
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Section 7.03 Conditions to Obligations of Seller. |
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ARTICLE VIII INDEMNIFICATION |
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Section 8.01 Survival. |
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Section 8.02 Indemnification By Seller. |
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Section 8.03 Indemnification By Buyer. |
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Section 8.04 Certain Limitations. |
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Section 8.05 Indemnification Procedures. |
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Section 8.06 Payments. |
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Section 8.07 Tax Treatment of Indemnification Payments. |
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Section 8.09 Exclusive Remedies. |
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ARTICLE IX TERMINATION |
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Section 9.01 Termination. |
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Section 9.02 Effect of Termination. |
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ARTICLE X MISCELLANEOUS |
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Section 10.01 Stockholder Representative |
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Section 10.01 Expenses. |
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Section 10.02 Notices. |
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Section 10.03 Interpretation. |
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Section 10.04 Headings. |
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Section 10.05 Severability. |
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Section 10.06 Entire Agreement. |
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Section 10.07 Successors and Assigns. |
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Section 10.08 No Third-party Beneficiaries. |
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Section 10.09 Amendment and Modification; Waiver. |
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Section 10.10 Governing Law; Submission to Jurisdiction; Waiver of Jury Trial. |
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Section 10.11 Specific Performance. |
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Section 10.12 Counterparts. |
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EXHIBITS
Exhibit A - Escrow Agreement
Exhibit B - Form of Employment Offer Letter
Exhibit C - Form of Inventions Assignment Agreement
SCHEDULES
Schedule 1 - Example of Closing Adjusted Working Capital Calculation
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this " Agreement "), dated as of January 29, 2016, is entered into between Pakedge Device & Software Inc. , a California corporation (the “ Company ”), Victor Pak, Dusan Jankov, Nickolas Phillips, The Stacy Pak 2015 Annuity Trust, and The Victor Pak 2015 Annuity Trust (collectively, " Sellers "), Control4 Corporation , a Delaware corporation (" Buyer "), and Victor Pak in his capacity as Sellers’ Representative (" Sellers’ Representative ").
RECITALS
WHEREAS, Sellers own all of the issued and outstanding shares of common stock, no par value (the " Shares "), of the Company; and
WHEREAS, Sellers wish to sell to Buyer, and Buyer wishes to purchase from Sellers, the Shares, subject to the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth in this Agreement and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
The following terms have the meanings specified or referred to in this Article I :
" Action " means any claim, action, cause of action, demand, lawsuit, arbitration, inquiry, audit, notice of violation, proceeding, litigation, citation, summons, subpoena or investigation of any nature, civil, criminal, administrative, regulatory or otherwise, whether at law or in equity.
" Affiliate " of a Person means any other Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such Person. The term "control" (including the terms "controlled by" and "under common control with") means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.
" Agreement " has the meaning set forth in the preamble.
" Allocation Schedule " has the meaning set forth in Section 6.06(b) .
" Audited Financial Statements " has the meaning set forth in Section 5.10
" Balance Sheet " has the meaning set forth in Section 3.05 .
" Balance Sheet Date " has the meaning set forth in Section 3.05 .
" Basket " has the meaning set forth in Section 8.04(a) .
" Benefit Plan " has the meaning set forth in Section 3.20(a) .
" Business Day " means any day except Saturday, Sunday or any other day on which commercial banks located in Salt Lake City, Utah are authorized or required by Law to be closed for business.
" Buyer " has the meaning set forth in the preamble.
" Buyer Indemnitees " has the meaning set forth in Section 8.02 .
" Buyer's Accountants " means Ernst & Young.
" Closing " has the meaning set forth in Section 2.05 .
" Closing Adjusted Working Capital " means: the sum of (a) cash-on-hand, (b) trade receivables, (c) inventory deposits, and (d) inventory; less (e) allowance for bad debt, and (f) accounts payable, determined as of the close of business on the Closing Date; and also less (g) all external auditor fees associated with the preparation of the Audited Financial Statements, regardless of when such fees are incurred. The amount of Closing Adjusted Working Capital shall be calculated in the same manner used to determine the amounts for items (a) – (f) set forth on Schedule 1 attached hereto.
" Closing Adjustment " has the meaning set forth in Section 2.03(a)(ii) .
" Closing Date " has the meaning set forth in Section 2.05 .
" Closing Working Capital Statement " has the meaning set forth in Section 2.03(b)(i) .
“ Company Cloud Services ” means Company products marketed, offered and/or sold by the Company as “cloud based” products or services, and all computer hardware and operating systems, including servers and other equipment, associated therewith.
" Code " means the Internal Revenue Code of 1986, as amended.
" Company " has the meaning set forth in the recitals.
" Company Intellectual Property " means (a) any and all Intellectual Property, Software and Technology used, licensed or leased in the conduct of the business of the Company as currently conducted; and (b) any and all Company-Owned Intellectual Property.
" Company IP Agreements " means all licenses, sublicenses, consent to use agreements, settlements, coexistence agreements, covenants not to sue, permissions and other Contracts (including any right to receive or obligation to pay royalties or any other consideration), whether written or oral, relating to Intellectual Property to which the Company is a party, beneficiary or otherwise bound.
" Company IP Registrations " means all Company-Owned Intellectual Property that is subject to any issuance registration, application or other filing by, to or with any Governmental Authority or authorized private registrar in any jurisdiction, including registered trademarks, domain names and copyrights, issued and reissued patents and pending applications for any of the foregoing.
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“ Company-Owned Intellectual Property ” means (a) any and all Intellectual Property, Software and Technology that is owned or is purportedly owned by the Company; and (b) Intellectual Property that was developed for the Company by full or part time employees, contractors, agents or consultants of the Company and that will be assigned or otherwise transferred under law to the Company and, if applicable, duly recorded.
“ Company Products ” means all products or services produced, marketed, licensed, sold, distributed or performed by or on behalf of the Company and all products or services under development by the Company, including without limitation, Company Cloud Services.
" Contracts " means all contracts, leases, deeds, mortgages, licenses, instruments, notes, commitments, undertakings, indentures, joint ventures and all other agreements, commitments and legally binding arrangements, whether written or oral.
" Continuing Accounts " has the meaning set forth in Section 5.11 .
" Direct Claim " has the meaning set forth in Section 8.05(c) .
" Disclosure Schedules " means the Disclosure Schedules delivered by Company and Buyer concurrently with the execution and delivery of this Agreement.
" Disputed Amounts " has the meaning set forth in Section 2.03(c)(iii) .
" Dollars or $ " means the lawful currency of the United States.
“ Employment Offer Letter ” means the Employment Offer Letter in substantially the form attached hereto as Exhibit B to be signed by each Key Employee.
" Encumbrance " means any charge, claim, pledge, lien (statutory or other), option, security interest, mortgage, easement, encroachment, right of first refusal, or restriction of any kind, including restriction on use, voting, transfer, receipt of income or exercise of any other attribute of ownership.
" Environmental Law " means any applicable Law, and any Governmental Order or binding agreement with any Governmental Authority: (a) relating to pollution (or the cleanup thereof) or the protection of natural resources, endangered or threatened species, human health or safety, or the environment (including ambient air, soil, surface water or groundwater, or subsurface strata); or (b) concerning the presence of, exposure to, or the management, manufacture, use, containment, storage, recycling, reclamation, reuse, treatment, generation, discharge, transportation, processing, production, disposal or remediation of any Hazardous Materials. The term "Environmental Law" includes, without limitation, the following (including their implementing regulations and any state analogs): the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. §§ 9601 et seq.; the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976, as amended by the Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. §§ 6901 et seq.; the Federal Water Pollution Control Act of 1972, as amended by the Clean Water Act of 1977,
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33 U.S.C. §§ 1251 et seq.; the Toxic Substances Control Act of 1976, as amended, 15 U.S.C. §§ 2601 et seq.; the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. §§ 11001 et seq.; the Clean Air Act of 1966, as amended by the Clean Air Act Amendments of 1990, 42 U.S.C. §§ 7401 et seq.; and the Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. §§ 651 et seq.
" ERISA " means the Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder.
" ERISA Affiliate " means all employers (whether or not incorporated) that would be treated together with the Company or any of its Affiliates as a "single employer" within the meaning of Section 414 of the Code.
“ Escrow Account ” has the meaning set forth in Section 2.02(b) .
“ Escrow Agent ” means U.S. Bank National Association.
“ Escrow Agreement ” has the meaning set forth in Section 2.02(b) .
“ Escrow Amount ” has the meaning set forth in Section 2.02(b) .
" Estimated Closing Working Capital " has the meaning set forth in Section 2.03(a)(i) .
" Estimated Closing Working Capital Statement " has the meaning set forth in Section 2.03(a)(i) .
" Financial Statements " has the meaning set forth in Section 3.05 .
" GAAP " means United States generally accepted accounting principles in effect from time to time.
" Government Contracts " has the meaning set forth in Section 3.08(a)(viii) .
" Governmental Authority " means any federal, state, local or foreign government or political subdivision thereof, or any agency or instrumentality of such government or political subdivision, or any self-regulated organization or other non-governmental regulatory authority or quasi-governmental authority (to the extent that the rules, regulations or orders of such organization or authority have the force of Law), or any arbitrator, court or tribunal of competent jurisdiction.
" Governmental Order " means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority.
" Hazardous Materials " means: (a) any material, substance, chemical, waste, product, derivative, compound, mixture, solid, liquid, mineral or gas, in each case, whether naturally occurring or manmade, that is hazardous, acutely hazardous, toxic, or words of similar import or regulatory effect under Environmental Laws; and (b) any petroleum or petroleum-derived products, radon, radioactive materials or wastes, asbestos in any form, lead or lead-containing materials, urea formaldehyde foam insulation, and polychlorinated biphenyls.
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" Indemnified Party " has the meaning set forth in Section 8.05 .
" Indemnifying Party " has the meaning set forth in Section 8.05 .
" Independent Accountant " has the meaning set forth in Section 2.03(c)(iii) .
" Insurance Policies " has the meaning set forth in Section 3.16 .
" Intellectual Property " means all intellectual and industrial property rights and assets, and all rights, interests and protections that are associated with, similar to, or required for the exercise of, any of the foregoing, however arising, pursuant to the Laws of any jurisdiction throughout the world, whether registered or unregistered, including any and all: (a) trademarks, service marks, trade names, brand names, logos, trade dress, design rights and other similar designations of source, sponsorship, association or origin, together with the goodwill connected with the use of and symbolized by, and all registrations, applications and renewals for, any of the foregoing; (b) internet domain names, whether or not trademarks, registered in any top-level domain by any authorized private registrar or Governmental Authority, web addresses, web pages, websites and related content, accounts with Twitter, Facebook and other social media companies and the content found thereon and related thereto, and URLs; (c) works of authorship, expressions, designs and design registrations, whether or not copyrightable, including copyrights, author, performer, moral and neighboring rights, and all registrations, applications for registration and renewals of such copyrights; (d) inventions, discoveries, trade secrets, business and technical information and know-how, databases, data collections and other confidential and proprietary information and all rights therein; and (e) patents (including all reissues, divisionals, provisionals, continuations and continuations-in-part, re-examinations, renewals, substitutions and extensions thereof), patent applications, and other patent rights and any other Governmental Authority-issued indicia of invention ownership (including inventor's certificates, petty patents and patent utility models).
“ Inventions Assignment Agreement ” means each Proprietary Information and Inventions Assignment Agreement to be entered into by Buyer and each Key Employee in substantially the form attached hereto as Exhibit C.
“ Key Employees ” means Victor Pak, Dusan Jankov and Nickolas Philips.
“ Key Employee Agreements ” means for each Key Employee, the Inventions Assignment Agreement and the Employment Offer Letter.
" Knowledge of Company or Company’s Knowledge " or any other similar knowledge qualification, means the actual or constructive knowledge of any director or executive officer of the Company or of any Seller, after reasonable inquiry.
" Law " means any statute, law, ordinance, regulation, rule, code, order, constitution, treaty, common law, judgment, decree, other requirement or rule of law of any Governmental Authority.
" Liabilities " has the meaning set forth in Section 3.06 .
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" Losses " means losses, damages, liabilities, deficiencies, Actions, judgments, interest, awards, penalties, fines, costs or expenses of whatever kind, including reasonable attorneys' fees and the cost of enforcing any right to indemnification hereunder and the cost of pursuing any insurance providers; provided, however, that " Losses " shall not include punitive, incidental, consequential, special or indirect damages, except in the case of fraud or to the extent actually awarded to a Governmental Authority or other third party. Losses resulting from any failure of the Section 338(h)(10) Election by reason of any breach by Sellers of any representation or covenant shall include the Section 338(h)(10) Adjustment paid by Buyer pursuant to this Agreement.
" Majority Holders " has the meaning set forth in Section 10.01(b) .
" Material Adverse Effect " means any event, occurrence, fact, condition or change that is, or could reasonably be expected to become, individually or in the aggregate, materially adverse to (a) the business, results of operations, condition (financial or otherwise) or assets of the Company, or (b) the ability of a Person to consummate the transactions contemplated hereby on a timely basis; provided, however, that "Material Adverse Effect" shall not include any event, occurrence, fact, condition or change, directly or indirectly, arising out of or attributable to: (i) general economic or political conditions; (ii) acts of war (whether or not declared), armed hostilities or terrorism, or the escalation or worsening thereof; (iii) any changes in applicable Laws or accounting rules, including GAAP; (iv) the public announcement, pendency or completion of the transactions contemplated by this Agreement; or (v) conditions generally affecting the industries in which the Company operates; provided further, however, that any event, occurrence, fact, condition or change referred to in clauses (i) through (iii) immediately above shall be taken into account in determining whether a Material Adverse Effect has occurred or could reasonably be expected to occur to the extent that such event, occurrence, fact, condition or change has a disproportionate effect on the Company compared to other participants in the industries in which the Company conducts its businesses.
" Material Contracts " has the meaning set forth in Section 3.08(a) .
" Material Customers " has the meaning set forth in Section 3.15(a) .
" Material Suppliers " has the meaning set forth in Section 3.15(b) .
" Permits " means all permits, licenses, franchises, approvals, authorizations, registrations, certificates, variances and similar rights obtained, or required to be obtained, from Governmental Authorities.
" Permitted Encumbrances " has the meaning set forth in Section 3.09(a) .
" Person " means an individual, corporation, partnership, joint venture, limited liability company, Governmental Authority, unincorporated organization, trust, association or other entity.
" Post-Closing Adjustment " has the meaning set forth in Section 2.03(b)(ii) .
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" Post-Closing Tax Period " means any taxable period beginning after the Closing Date and, with respect to any taxable period beginning before and ending after the Closing Date, the portion of such taxable period beginning after the Closing Date.
" Post-Closing Taxes " means Taxes of the Company for any Post-Closing Tax Period.
" Pre-Closing Tax Period " means any taxable period ending on or before the Closing Date and, with respect to any taxable period beginning before and ending after the Closing Date, the portion of such taxable period ending on and including the Closing Date.
" Pre-Closing Taxes " means Taxes of the Company for any Pre-Closing Tax Period.
" Purchase Price " has the meaning set forth in Section 2.02 (a).
" Qualified Benefit Plan " has the meaning set forth in Section 3.20(c) .
" Real Property " means the real property owned, leased or subleased by the Company, together with all buildings, structures and facilities located thereon.
" Release " means any actual or threatened release, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, abandonment, disposing or allowing to escape or migrate into or through the environment (including, without limitation, ambient air (indoor or outdoor), surface water, groundwater, land surface or subsurface strata or within any building, structure, facility or fixture).
" Representative " means, with respect to any Person, any and all directors, officers, employees, consultants, financial advisors, counsel, accountants and other agents of such Person.
" Representative Losses " has the meaning set forth in Section 10.01(c) .
" Resolution Period " has the meaning set forth in Section 2.03(c)(ii) .
" Restricted Business " means a business that manufactures or sells any of the following hardware: networking routers, networking switches, networking wireless access points, plug in power distribution devices, or hardware and software that remotely monitor and manage those plug in power and networking devices.
" Restricted Period " has the meaning set forth in Section 5.04 .
" Review Period " has the meaning set forth in Section 2.03(c)(i) .
" Section 338(h)(10) Adjustment " has the meaning set forth in Section 6.06(a)(ii) .
" Section 338(h)(10) Election " has the meaning set forth in Section 6.06(a)(i) .
" Section 338 Forms " has the meaning set forth in Section 6.06(a)(iii) .
" Sellers " has the meaning set forth in the preamble.
" Sellers Indemnitees " has the meaning set forth in Section 8.03 .
" Sellers’ Accountants " means Gilbert H Brown & Associates, Inc.
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" Sellers’ Representative " has the meaning set forth in the preamble.
" Shares " has the meaning set forth in the recitals.
“ Software ” means any and all of the following on a worldwide basis whether or not filed, perfected, registered or recorded: all computer software and firmware (including Source Code, executable code, data, databases, and related documentation); all copies and tangible embodiments thereof (in whatever form or medium); and all associated copyrightable works, all copyrights, and all applications, registrations, and renewals in connection therewith.
“ Source Code ” means, collectively, any source code, data files, object code, systems documentation, schematics, principles of operation, and metadata, or confidential manufacturing specifications or designs, any material portion or aspect of source code, systems documentation, schematics, principles of operation, and metadata, or confidential manufacturing specifications or designs, or any material proprietary information or algorithm contained in or relating to any source code, data files, object code, systems documentation, schematics, principles of operation, and metadata, or confidential manufacturing specifications or designs.
" Statement of Objections " has the meaning set forth in Section 2.03(c)(ii) .
" Straddle Period " has the meaning set forth in Section 6.04 .
" Target Working Capital " has the meaning set forth in Section 2.03(a)(ii) .
" Tax or Taxes " means all federal, state, local, foreign and other income, gross receipts, sales, use, production, ad valorem, transfer, franchise, registration, profits, license, lease, service, service use, withholding, payroll, employment, unemployment, estimated, excise, severance, environmental, stamp, occupation, premium, property (real or personal), real property gains, windfall profits, customs, duties or other taxes, fees, assessments or charges of any kind whatsoever, together with any interest, additions or penalties with respect thereto and any interest in respect of such additions or penalties.
" Tax Claim " has the meaning set forth in Section 6.06 .
" Tax Return " means any return, declaration, report, claim for refund, information return or statement or other document relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.
" Tax Return Procedures " has the meaning set forth in Section 6.01 .
" Technical Documentation " means all technical and descriptive materials relating to the acquisition, design, development, use, or maintenance of equipment, facilities, and online, website and cloud-based accounts (“Infrastructure”), including passwords, login credentials, user profiles, access codes and all other information related to the Infrastructure.
" Technology " means all tangible items related to, constituting, disclosing or embodying any or all of the following, including all versions thereof and all technology from which such items were derived (a) machinery, equipment, devices, and prototypes; (b) inventions (whether or not
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patentable), technology, discoveries and improvements; (c) proprietary and confidential information, designs, schematics, trade secrets and know-how; (d) databases, data compilations and collections, and customer and technical data; (e) methods and processes; (f) works of authorship including computer software, whether in Source Code or in executable code form, architecture and documentation; and (g) Technical Documentation.
" Territory " means the United States of America.
" Third Party Claim " has the meaning set forth in Section 8.05(a) .
" Transaction Documents " means this Agreement, the Escrow Agreement, and the Key Employee Agreements.
" Undisputed Amounts " has the meaning set forth in Section 2.03(c)(iii) .
" Union " has the meaning set forth in Section 3.21(b) .
“ Virus ” means any virus, malware, spyware, malicious code, trojan horse, worm, back door, known security vulnerability, trap door, time bomb, software lock, drop dead device or other program, routine, instruction, device, code, contaminant, logic, effect or other undisclosed feature designed or intended to delete, disable, deactivate, interfere with, disrupt, erase, deny access to, enable any third party to access without authorization, produce modifications of, or otherwise adversely affect the functionality or interfere with the use of, any data, Software or Technology.
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(b) As security for any Post-Closing Adjustment in favor of the Purchaser pursuant to Section 2.03(b) and Sellers’ indemnification obligations set forth in Article VIII , at the Closing, Buyer shall deposit with the Escrow Agent cash in the amount equal to $ 4,800,000 (the “ Escrow Amount ”) by wire transfer of immediately available funds to an account designated in writing by the Escrow Agent (the “ Escrow Account ”). The Escrow Amount shall be held and disbursed solely for the purposes of, and in accordance with, the terms hereof and that certain Escrow Agreement by and among Buyer, Sellers and the Escrow Agent in the form attached hereto as Exhibit A (the “ Escrow Agreement ”). The Escrow Agreement shall provide that the amount then on deposit with |
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the Escrow Agent pursuant to the Escrow Agreement, if any, less the amount subject to any pending indemnification claim made by a Buyer Indemnitee pursuant to Article VIII hereto shall be for distribution to the Sellers eighteen (18) months following the Closing Date. In the event of a conflict between the Escrow Agreement and this Agreement, the terms of this Agreement shall govern as between Buyer and Sellers. |
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(iii) There shall not be taken into account in calculating the Closing Adjustment (x) any Federal, State, local or foreign Tax attributable to the Section 338(h)(10) Election (including, without limitation, any Tax under Code Section 1374 or any similar provision of State or local law); (y) any Federal, State, local or foreign Tax attributable to any voluntary election or other action by the Buyer or by the Company after the Closing; and (z) any bonuses paid to employees in consideration of their continuing employment with the Company following the Closing. |
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(c) Examination and Review. |
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(iv) Fees of the Independent Accountant. The fees and expenses of the Independent Accountant shall be paid by Sellers, on the one hand, and by Buyer, on the other hand, based upon the percentage that the amount actually contested but not awarded to Sellers or Buyer, respectively, bears to the aggregate amount actually contested by Sellers and Buyer. |
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(v) Determination by Independent Accountant. The Independent Accountant shall make a determination as soon as practicable within 30 days (or such other time as the parties hereto shall agree in writing) after their engagement, and their resolution of the Disputed Amounts and their adjustments to the Closing Working Capital Statement and/or the Post-Closing Adjustment shall be conclusive and binding upon the parties hereto. |
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(vi) Payments of Post-Closing Adjustment. Except as otherwise provided herein or in the Escrow Agreement, any payment of the Post-Closing Adjustment, together with interest calculated as set forth below, shall (A) be due (x) within five Business Days of acceptance of the applicable Closing Working Capital Statement or (y) if there are Disputed Amounts, then within five Business Days of the resolution described in clause (v) above; and (B) be paid by wire transfer of immediately available funds to such account or accounts as is directed by Buyer or Sellers, as the case may be. The amount of any Post-Closing Adjustment shall bear simple interest from and including the Closing Date to but excluding the date of payment at a rate per annum equal to the U.S. prime rate as published in the Wall Street Journal on the business day immediately prior to the date of payment. Such interest shall be calculated daily on the basis of a 365 day year and the actual number of days elapsed. |
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(d) Adjustments for Tax Purposes. Any payments made pursuant to Section 2.03 shall be treated as an adjustment to the Purchase Price by the parties for Tax purposes, unless otherwise required by Law. |
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(a) At the Closing, Buyer shall: |
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(i) deliver to Sellers the Purchase Price less the Escrow Amount, subject to any Closing Adjustment pursuant to Section 2.03(a) , by wire transfer of immediately available funds to an account or accounts of Sellers designated in writing by Sellers in a written notice to Buyer no later than two Business Days prior to the Closing Date; |
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(ii) deliver to the Escrow Agent the Escrow Amount, by wire transfer of immediately available funds to an account designated in writing by the Escrow Agent in accordance with the terms of the Escrow Agreement; and |
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(iii) deliver to Sellers the Transaction Documents and all other agreements, documents, instruments or certificates required to be delivered by Buyer at or prior to the Closing pursuant to Section 7.03 of this Agreement. |
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(b) At the Closing, Sellers shall deliver to Buyer: |
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(i) stock certificates evidencing the Shares, free and clear of all Encumbrances, duly endorsed in blank or accompanied by stock powers or other instruments of transfer duly executed in blank, with all required stock transfer tax stamps affixed thereto; and |
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(ii) the Transaction Documents and all other agreements, documents, instruments or certificates required to be delivered by Sellers at or prior to the Closing pursuant to Section 7.02 of this Agreement. |
Except as set forth in the correspondingly numbered Section of the Disclosure Schedules, which exceptions shall be deemed to be part of the representations and warranties made hereunder, the Company and Sellers represent and warrant to Buyer that the statements contained in this Article III are true and correct as of the date hereof.
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qualified and in good standing would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. |
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(b) All of the Shares were issued in compliance with applicable Laws. None of the Shares were issued in violation of any agreement, arrangement or commitment to which Sellers or the Company is a party or is subject to or in violation of any preemptive or similar rights of any Person. |
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(c) There are no outstanding or authorized options, warrants, convertible securities or other rights, agreements, arrangements or commitments of any character relating to the capital stock of the Company or obligating Sellers or the Company to issue or sell any shares of capital stock of, or any other interest in, the Company. The Company does not have any outstanding or authorized stock appreciation, phantom stock, profit participation or similar rights. There are no voting trusts, stockholder agreements, proxies or other agreements or understandings in effect with respect to the voting or transfer of any of the Shares. |
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Section 3.03 No Subsidiarie s. The Company does not own, or have any interest in any shares or have an ownership interest in any other Person. |
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the Company. No consent, approval, Permit, Governmental Order, declaration or filing with, or notice to, any Governmental Authority is required by or with respect to Sellers or the Company in connection with the execution and delivery of this Agreement and the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby. |
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(a) event, occurrence or development that has had, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; |
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(b) amendment of the charter, by-laws or other organizational documents of the Company; |
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(c) split, combination or reclassification of any shares of its capital stock; |
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(d) issuance, sale or other disposition of any of its capital stock, or grant of any options, warrants or other rights to purchase or obtain (including upon conversion, exchange or exercise) any of its capital stock; |
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(e) declaration or payment of any dividends or distributions on or in respect of any of its capital stock or redemption, purchase or acquisition of its capital stock; |
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(f) material change in any method of accounting or accounting practice of the Company, except as required by GAAP or as disclosed in the notes to the Financial Statements; |
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(g) material change in the Company's cash management practices and its policies, practices and procedures with respect to collection of accounts receivable, establishment of reserves for uncollectible accounts, accrual of accounts receivable, inventory control, prepayment of expenses, payment of trade accounts payable, accrual of other expenses, deferral of revenue and acceptance of customer deposits; |
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(h) entry into any Contract that would constitute a Material Contract; |
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(i) incurrence, assumption or guarantee of any indebtedness for borrowed money except unsecured current obligations and Liabilities incurred in the ordinary course of business consistent with past practice; |
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(j) transfer, assignment, sale or other disposition of any of the assets shown or reflected in the Balance Sheet or cancellation of any debts or entitlements; |
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(k) transfer, assignment or grant of any license or sublicense of any material rights under or with respect to any Company Intellectual Property or Company IP Agreements; |
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(l) material damage, destruction or loss (whether or not covered by insurance) to its property; |
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(m) any capital investment in, or any loan to, any other Person; |
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(n) acceleration, termination, material modification to or cancellation of any material Contract (including, but not limited to, any Material Contract) to which the Company is a party or by which it is bound; |
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(o) any material capital expenditures; |
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(p) imposition of any Encumbrance upon any of the Company properties, capital stock or assets, tangible or intangible; |
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(q) (i) grant of any bonuses, whether monetary or otherwise, or increase in any wages, salary, severance, pension or other compensation or benefits in respect of its current or former employees, officers, directors, independent contractors or consultants, other than as provided for in any written agreements or required by applicable Law, (ii) change in the terms of employment for any employee or any termination of any employees, other than as required by the terms of this Agreement or as required by applicable Law, or (iii) action to accelerate the vesting or payment of any compensation or benefit for any current or former employee, officer, director, independent contractor or consultant; |
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(r) hiring or promoting any person as or to (as the case may be) an officer or hiring or promoting any employee below officer except to fill a vacancy in the ordinary course of business; |
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(s) adoption, modification or termination of any: (i) employment, severance, retention or other agreement with any current or former employee, officer, director, independent contractor or consultant, (ii) Benefit Plan or (iii) collective bargaining or other similar agreement, in each case whether written or oral; |
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(t) any loan to (or forgiveness of any loan to), or entry into any other transaction with, any of its stockholders or current or former directors, officers and employees; |
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(u) entry into a new line of business or abandonment or discontinuance of existing lines of business; |
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(v) adoption of any plan of merger, consolidation, reorganization, liquidation or dissolution or filing of a petition in bankruptcy under any provisions of federal or state bankruptcy Law or consent to the filing of any bankruptcy petition against it under any similar Law; |
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(w) purchase, lease or other acquisition of the right to own, use or lease any property or assets, except for purchases of inventory or supplies in the ordinary course of business consistent with past practice; |
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(x) acquisition by merger or consolidation with, or by purchase of a substantial portion of the assets or stock of, or by any other manner, any business or any Person or any division thereof; |
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(y) action by the Company to make, change or rescind any Tax election, amend any Tax Return or take any position on any Tax Return, take any action, omit to take any action or enter into any other transaction that would have the effect of increasing the Tax liability or reducing any Tax asset of Buyer in respect of any Post-Closing Tax Period; or |
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(z) any Contract to do any of the foregoing, or any action or omission that would result in any of the foregoing. |
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(a) Section 3.08(a) of the Disclosure Schedules lists each of the following Contracts of the Company (such Contracts, together with all Contracts concerning the occupancy, management or operation of any Real Property (including without limitation, brokerage contracts) listed or otherwise disclosed in Section 3.09(b) of the Disclosure Schedules and all Company IP Agreements set forth in Section 3.11(b) of the Disclosure Schedules, being " Material Contracts "): |
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(i) each Contract of the Company involving aggregate consideration in excess of $25,000 and which, in each case, cannot be cancelled by the Company without penalty or without more than 30 days' notice; |
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(ii) all Contracts that require the Company to purchase its total requirements of any product or service from a third party or that contain "take or pay" provisions; |
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(iii) all Contracts that provide for the indemnification by the Company of any Person; |
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(iv) all Contracts that relate to the acquisition or disposition of any business, a material amount of stock or assets of any other Person or any real property (whether by merger, sale of stock, sale of assets or otherwise); |
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(v) except for the standard online dealer agreements, dealer credit applications and dealer credit agreements, all broker, distributor, dealer, manufacturer's representative, franchise, agency, sales promotion, market research, marketing consulting and advertising Contracts to which the Company is a party; |
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(vi) all employment agreements and Contracts with independent contractors or consultants (or similar arrangements) to which the Company is a party and which are not cancellable without material penalty or without more than 30 days' notice; |
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(vii) except for Contracts relating to trade receivables, all Contracts relating to indebtedness (including, without limitation, guarantees) of the Company; |
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(viii) all Contracts with any Governmental Authority to which the Company is a party (" Government Contracts "); |
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(ix) all Contracts that limit or purport to limit the ability of the Company to compete in any line of business or with any Person or in any geographic area or during any period of time; |
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(x) any Contracts to which the Company is a party that provide for any joint venture, partnership or similar arrangement by the Company, in each case involving annual amounts in excess of $25,000; |
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(xi) any Contracts related to the supply, development or manufacture of the Company Products, in each case involving annual amounts in excess of $25,000; |
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(xii) all Contracts between or among the Company on the one hand and Sellers or any Affiliate of Sellers on the other hand; and |
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(xiii) any other Contract that is material to the Company and not previously disclosed pursuant to this Section 3.08 . |
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(b) Each Material Contract is valid and binding on the Company in accordance with its terms and is in full force and effect. None of the Company or, to Company’s Knowledge, any other party thereto is in material breach of or default under (or is alleged to be in material breach of or default under), or has provided or received any notice of any intention to terminate, any Material Contract. No event or circumstance has occurred that, with notice or lapse of time or both, would constitute an event of default by Company under any Material Contract or, to Company’s Knowledge, result in a termination thereof or would cause or permit the acceleration or other changes of any right or obligation or the loss of any benefit thereunder. Complete and correct copies of each Material Contract (including all modifications, amendments and supplements thereto and waivers thereunder) have been made available to Buyer. |
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(i) those items set forth in Section 3.09(a) of the Disclosure Schedules; |
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(ii) liens for Taxes not yet due and payable; |
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(iii) mechanics, carriers', workmen's, repairmen's or other like liens arising or incurred in the ordinary course of business consistent with past practice or amounts that are not delinquent and which are not, individually or in the aggregate, material to the business of the Company; |
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(iv) easements, rights of way, zoning ordinances and other similar Encumbrances affecting Real Property which are not, individually or in the aggregate, material to the business of the Company; or |
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(v) other than with respect to owned Real Property, liens arising under original purchase price conditional sales contracts and equipment leases with third parties entered into in the ordinary course of business consistent with past practice which are not, individually or in the aggregate, material to the business of the Company; |
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(b) Section 3.09(b) of the Disclosure Schedules lists (i) the street address of each parcel of Real Property; (ii) if such property is leased or subleased by the Company, the landlord under the lease, the rental amount currently being paid, and the expiration of the term of such lease or sublease for each leased or subleased property; and (iii) the current use of such property. With respect to owned Real Property, the Company has delivered or made available to Buyer true, complete and correct copies of the deeds and other instruments (as recorded) by which the Company acquired such Real Property, and copies of all title insurance policies, opinions, abstracts and surveys in the possession of the Company and relating to the Real Property. With respect to leased Real Property, the Company has delivered or made available to Buyer true, complete and correct copies of any leases affecting the Real Property. The Company is not a sublessor or grantor under any sublease or other instrument granting to any other Person any right to the possession, lease, occupancy or enjoyment of any leased Real Property. The use and operation of the Real Property in the conduct of the Company's business do not violate in any material respect any Law, covenant, condition, restriction, easement, license, permit or agreement. No material improvements constituting a part of the Real Property encroach on real property owned or leased by a Person other than the Company. There are no Actions pending nor, to Company’s Knowledge, threatened against or affecting the |
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Real Property or any portion thereof or interest therein in the nature or in lieu of condemnation or eminent domain proceedings. |
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(a) Section 3.11(a) of the Disclosure Schedules lists all (i) Company IP Registrations and (ii) Company Intellectual Property, that are not registered but that are material to the Company's business or operations. All required filings and fees related to the Company IP Registrations have been timely filed with and paid to the relevant Governmental Authorities and authorized registrars, and all Company IP Registrations are otherwise in good standing. The Company has provided Buyer, if requested, with true and complete copies of file histories, documents, certificates, office actions, correspondence and other materials related to all Company IP Registrations. Section 3.11(a) of the Disclosure Schedules lists all currently known actions that are required to be taken by the Company within one hundred and twenty (120) days of the date hereof with respect to any of the Company IP Registrations in order to maintain the validity or enforceability of such Company IP Registrations. Except as set forth in Section 3.11(a) of the Disclosure Schedule, the Company has the exclusive right to file, prosecute and maintain all applications, registrations and issuances with respect to the Company IP Registrations. The Company has not made any barring disclosure nor engaged in any other act or omission in respect of any Company-Owned Intellectual Property which have been described in or are the subject of any Company IP Registrations whereby such barring disclosure or other act or omission will individually or in combination result in the refusal of a grant of rights or issuance of any registration for such Company-Owned Intellectual Property in the United States or in any other jurisdiction in which a Company IP Registration has been filed. With respect to each item of the Company IP Registrations, the Company has made no material misrepresentation in, and has complied in all material respects with the duty of candor and disclosure to the United States Patent and Trademark Office and with all other applicable Governmental Authorities with respect to all applications for registration. |
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(b) Section 3.11(b) of the Disclosure Schedules lists all Company IP Agreements. The Company has provided Buyer with true and complete copies of all such Company IP Agreements, including all modifications, amendments and supplements thereto and waivers thereunder. Each Company IP Agreement is valid and binding on the Company in accordance with its terms and is in full force and effect. Neither the Company nor, to the Company’s Knowledge, any other party thereto is in material breach of or default under (or is alleged to be in material breach of or default |
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under) any Company IP Agreement, nor has Company been provided or received any notice of breach or default of or any intention to terminate, any Company IP Agreement. |
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(c) In the Company IP Agreements, the Company does not grant to any Person (i) exclusive rights to or under any Company Intellectual Property or (ii) the right to sublicense any Company Intellectual Property, except in the case of authorized resellers in their ordinary course of business that pass through to purchasers the Company’s end user license agreement. |
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(d) There are no royalties, honoraria, fees or other payments payable by the Company to any Person (other than salaries payable to employees, consultants and independent contractors not contingent on or related to use of their work product) as a result of the ownership, use, possession, assignment, license-out, sale, marketing, advertising or disposition of any Company Intellectual Property by the Company. |
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(e) The Company has obtained a sufficient number of copies and/or licenses of any Software to comply with the terms of the “shrink-wrap,” “off-the-shelf” or other generally available commercial end-user licenses associated therewith, given the number of users thereof. |
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(f) To the Knowledge of the Company, there is no material unauthorized use, unauthorized disclosure, infringement or misappropriation of any Company Intellectual Property by any Person, including any employee or former employee of the Company. |
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(h) The Company is the sole and exclusive legal and beneficial, and with respect to the Company IP Registrations, record, owner of all right, title and interest in and to the Company-Owned Intellectual Property, and has the valid right to use all other Intellectual Property used in or necessary for the conduct of the Company's current business or operations, in each case, free and clear of Encumbrances other than Permitted Encumbrances. Without limiting the generality of the foregoing, the Company has entered into binding, written agreements with every current and former employee of the Company, and with every current and former independent contractor, whereby such employees and independent contractors assign to the Company any and all ownership interest and right they may have in the Company Intellectual Property. The Company has provided Buyer with true and complete copies of all such agreements. |
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(i) The consummation of the transactions contemplated hereunder will not result in the loss or impairment of or payment of any additional amounts with respect to, nor require the consent of any other Person in respect of, the Company's right to own, use or hold for use any Intellectual Property as owned, used or held for use in the conduct of the Company's business or operations as currently conducted. |
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(j) Except as set forth in Section 3.11(j) of the Disclosure Schedule, the Company's rights in the Company Intellectual Property are valid, subsisting and enforceable, and the Company Intellectual Property includes all Intellectual Property, Software or Technology that is material to or necessary for the operation of the business of the Company as currently conducted. The Company has taken all reasonable steps to maintain the Company Intellectual Property and to protect and preserve the confidentiality of all trade secrets included in the Company Intellectual Property, including requiring all Persons having access thereto to execute written non-disclosure agreements. |
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(k) The conduct of the Company's business as currently and formerly conducted, and the products, processes and services of the Company, have not infringed, misappropriated, diluted or otherwise violated, and do not infringe, dilute, misappropriate or otherwise violate the Intellectual Property or other rights of any Person. To the Company’s Knowledge, no Person has infringed, misappropriated, diluted or otherwise violated, or is currently infringing, misappropriating, diluting or otherwise violating, any Company Intellectual Property. |
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(l) There are no Actions settled, pending or, to the Knowledge of the Company, threatened (including in the form of offers to obtain a license): (i) alleging any infringement, misappropriation, dilution or violation of the Intellectual Property of any Person by the Company; (ii) challenging the validity, enforceability, registrability or ownership of any Company Intellectual Property or the Company's rights with respect to any Company Intellectual Property; or (iii) by the Company alleging any infringement, misappropriation, dilution or violation by any Person of the Company Intellectual Property. The Company is not subject to any outstanding Governmental Order (including any motion or petition therefor) that does or would restrict or impair the use of any Company Intellectual Property. |
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(m) The Company has complied in all material respects with all applicable Laws and the Company’s privacy policy relating to the use, collection, storage, disclosure and transfer of any personally identifiable information collected by the Company. The consummation of the transactions contemplated by this Agreement will not violate any applicable Laws relating to the use, collection, storage, disclosure or transfer of any personally identifiable information collected by the Company or with the Company’s privacy policy. The Company has not received any claims or complaints regarding the Company’s collection, use or disclosure of personally identifiable information. |
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(n) The Technology used by the Company in connection with the Company Cloud Services operates and performs in substantial accordance with its documentation (including Technical Documentation) and functional specifications and otherwise as required in connection with, the operation of the Company’s business. Any Technology operated by or on behalf of the Company that interacts with or implements the Company Cloud Services has not materially malfunctioned or failed within two (2) years in a manner that would constitute a breach of any contract or other agreement to which the Company is a party. |
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(o) To the extent applicable, the Company-Owned Intellectual Property is free of all Viruses and to the Knowledge of the Company, the Software and Technology licensed or leased by the Company from a third party is free of all Viruses. |
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(p) The representations and warranties in this Section 3.11 constitute the only representations and warranties of the Company with respect to the Company’s ownership of the Company-Owned Intellectual Property. |
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(b) The Company Products conform in all material respects to all required material safety certifications under the laws of all jurisdictions in which the Company directly or, to Company’s Knowledge, indirectly sells Company Products. To the Company’s Knowledge, there are no material design, manufacturing or other defects, latent or otherwise, with respect to any Company Products. All Company Products contain all warnings required by applicable Law and such warnings are in accordance with reasonable industry practice. |
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(c) Company has not received and does not have Knowledge of any pending notice, demand, claim, action, suit, inquiry, hearing, proceeding, notice of violation or investigation from, by or before any Governmental Authority relating to any Company Product, including the packaging |
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and advertising related thereto. Company does not have Knowledge of any fact or of the occurrence of any event that should be reasonably expected to form the basis of any present or future claim against the Company, whether or not fully covered by insurance, for liability on account of negligence or product liability or on account of any warranties (express or implied) in connection with any Company Products. |
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(d) Adequate reserves for warranty claims and any other sales returns liability have been established in accordance with GAAP, consistently applied, subject to normal year-end adjustments and the absence of disclosures normally made in footnotes. |
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(a) Section 3.15(a) of the Disclosure Schedules sets forth (i) each customer who has paid aggregate consideration to the Company for goods or services rendered in an amount greater than or equal to $200,000 for each of the two most recent fiscal years (collectively, the " Material Customers "); and (ii) the amount of consideration paid by each Material Customer during such periods. The Company has not received any notice, and has no reason to believe, that any of its Material Customers has ceased, or intends to cease after the Closing, to use its goods or services or to otherwise terminate or materially reduce its relationship with the Company. |
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(b) Section 3.15(b) of the Disclosure Schedules sets forth (i) each supplier to whom the Company has paid consideration for goods or services rendered in an amount greater than or equal to $100,000 for each of the two most recent fiscal years (collectively, the " Material Suppliers "); and (ii) the amount of purchases from each Material Supplier during such periods. The Company has not received any notice, and has no reason to believe, that any of its Material Suppliers has ceased, or intends to cease, to supply goods or services to the Company or to otherwise terminate or materially reduce its relationship with the Company. |
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(a) Section 3.20(a) of the Disclosure Schedules contains a current true and complete list of each pension, benefit, retirement, compensation, employment, consulting, profit-sharing, deferred compensation, incentive, bonus, performance award, phantom equity, stock or stock-based, change in control, retention, severance, vacation, paid time off, welfare, fringe-benefit and other similar |
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agreement, plan, policy, program or arrangement (and any amendments thereto), in each case whether or not reduced to writing and whether funded or unfunded, including each "employee benefit plan" within the meaning of Section 3(3) of ERISA, whether or not tax-qualified and whether or not subject to ERISA, which is maintained, sponsored, directly contributed to, or required to be contributed to by the Company for the benefit of any current or former employee, officer, director, retiree, independent contractor or consultant of the Company or any spouse or dependent of such individual, or under which the Company or any of its ERISA Affiliates has or may have any liability, or with respect to which Buyer or any of its Affiliates would reasonably be expected to have any liability (as listed on Section 3.20(a) of the Disclosure Schedules, each, a " Benefit Plan "). The Company has separately identified in Section 3.20(a) of the Disclosure Schedules each Benefit Plan that contains a change in control provision. |
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(b) With respect to each Benefit Plan, the Company has made available to Buyer accurate, current and complete copies of each of the following: (i) where the Benefit Plan has been reduced to writing, the plan document together with all amendments; (ii) where the Benefit Plan has not been reduced to writing, a written summary of all material plan terms; (iii) where applicable, copies of any trust agreements or other funding arrangements, custodial agreements, insurance policies and contracts, administration agreements and similar agreements, and investment management or investment advisory agreements, now in effect or required in the future as a result of the transactions contemplated by this Agreement or otherwise; (iv) copies of any summary plan descriptions, summaries of material modifications, employee handbooks and any other written communications (or a description of any oral communications) relating to any Benefit Plan; (v) in the case of any Benefit Plan that is intended to be qualified under Section 401(a) of the Code, a copy of the most recent determination, opinion or advisory letter from the Internal Revenue Service; (vi) in the case of any Benefit Plan for which a Form 5500 is required to be filed, a copy of the two most recently filed Form 5500, with schedules and financial statements attached; (vii) to the extent available, actuarial valuations and reports related to any Benefit Plans with respect to the two most recently completed plan years; (viii) to the extent completed, the most recent nondiscrimination tests performed under the Code; and (ix) copies of material notices, letters or other correspondence from the Internal Revenue Service, Department of Labor, Pension Benefit Guaranty Corporation or other Governmental Authority relating to the Benefit Plan. |
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reasonably be expected to subject the Company or any of its ERISA Affiliates or, with respect to any period on or after the Closing Date, Buyer or any of its Affiliates, to a penalty under Section 502 of ERISA or to tax or penalty under Section 4975 of the Code. All benefits, contributions and premiums relating to each Benefit Plan have been timely paid in accordance with the terms of such Benefit Plan and all applicable Laws . |
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(d) Neither the Company nor any of its ERISA Affiliates has incurred or reasonably expects to incur, either directly or indirectly, any material liability under Title Iof ERISA or related provisions of the Code or applicable local Law relating to employee benefit plans. The Company does not have any benefit plans subject to Title IV of ERISA. |
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(f) Each Benefit Plan can be amended, terminated or otherwise discontinued after the Closing in accordance with its terms, without material liabilities to Buyer, the Company other than ordinary administrative expenses typically incurred in a termination event. The Company has no commitment or obligation and has not made any representations to any employee, officer, director, independent contractor or consultant, whether or not legally binding, to adopt, amend, modify or terminate any Benefit Plan or any collective bargaining agreement, in connection with the consummation of the transactions contemplated by this Agreement or otherwise. |
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(i) There has been no material amendment to, announcement by Sellers, the Company or any of their Affiliates relating to, or change in employee participation or coverage under, any Benefit Plan that would increase the annual expense of maintaining such plan above the level of the expense incurred for the most recently completed fiscal year with respect to any director, officer, employee, independent contractor or consultant, as applicable. None of Sellers, the Company, nor any of their Affiliates has any commitment or obligation or has made any representations to any director, officer, employee, independent contractor or consultant, whether or not legally binding, to adopt, amend, modify or terminate any Benefit Plan or any collective bargaining agreement. |
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(j) No Benefit Plan is subject to Section 409A of the Code. The Company does not have any obligation to gross up, indemnify or otherwise reimburse any individual for any excise taxes, interest or penalties incurred pursuant to Section 409A of the Code. |
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(k) Each individual who is classified by the Company as an independent contractor has been properly classified for purposes of participation and benefit accrual under each Benefit Plan. |
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(a) Section 3.21(a) of the Disclosure Schedules contains a list of all persons who are employees, independent contractors or consultants of the Company as of the date hereof, including any employee who is on a leave of absence of any nature, paid or unpaid, authorized or unauthorized, and sets forth for each such individual the following: (i) name; (ii) title or position (including whether full or part time); (iii) hire date; (iv) current annual base compensation rate; (v) commission, bonus or other incentive-based compensation; and (vi) a description of the fringe benefits provided to each such individual as of the date hereof. As of the date hereof, all compensation, including wages, commissions and bonuses, payable to all employees, independent contractors or consultants of the Company for services performed on or prior to the date hereof have been paid in full (or accrued in full on the balance sheet contained in the Closing Working Capital Statement) and, except as disclosed or required by this Agreement, there are no outstanding agreements, understandings or commitments of the Company with respect to any compensation, commissions or bonuses. |
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employees of the Company, including all Laws relating to labor relations, equal employment opportunities, fair employment practices, employment discrimination, harassment, retaliation, reasonable accommodation, disability rights or benefits, immigration, wages, hours, overtime compensation, child labor, hiring, promotion and termination of employees, working conditions, meal and break periods, privacy, health and safety, workers' compensation, leaves of absence and unemployment insurance. All individuals characterized and treated by the Company as independent contractors or consultants are properly treated as independent contractors under all applicable Laws. All employees of the Company classified as exempt under the Fair Labor Standards Act and state and local wage and hour laws are properly classified. There are no Actions against the Company pending, or to the Company’s Knowledge, threatened to be brought or filed, by or with any Governmental Authority or arbitrator in connection with the employment of any current or former applicant, employee, consultant or independent contractor of the Company, including, without limitation, any claim relating to unfair labor practices, employment discrimination, harassment, retaliation, equal pay, wage and hours or any other employment related matter arising under applicable Laws. |
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(a) All material Tax Returns required to be filed on or before the Closing Date by the Company have been, or will be, timely filed. Such material Tax Returns are, or will be, true, complete and correct in all material respects. All Taxes due and owing by the Company (whether or not shown on any Tax Return) have been, or will be, timely paid. |
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(b) The Company has withheld and paid all amounts in respect of Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, customer, shareholder or other party, and has complied with all material information reporting and backup withholding provisions of applicable Law. |
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(c) No written claim has been made by any taxing authority in any jurisdiction where the Company does not file Tax Returns that it is, or may be, subject to Tax by that jurisdiction. |
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(d) No extensions or waivers of statutes of limitations have been given or requested with respect to any Taxes of the Company. |
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(e) The amount of the Company's liability for unpaid Taxes for all periods ending on or before December 31, 2015 does not, in the aggregate, materially exceed the amount of accruals for Taxes (excluding reserves for deferred Taxes) reflected on the Financial Statements. The amount of the Company's liability for unpaid Taxes for all periods following the end of the recent period covered by the Financial Statements shall not materially, in the aggregate, exceed the amount of accruals for Taxes (excluding reserves for deferred Taxes) as adjusted for the passage of time in accordance with the past custom and practice of the Company (and which accruals shall not exceed comparable amounts incurred in similar periods in prior years). |
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(f) Section 3.22(f) of the Disclosure Schedules sets forth: |
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(i) the taxable years of the Company as to which the applicable statutes of limitations on the assessment and collection of Taxes have not expired; |
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(ii) those years for which examinations by the taxing authorities have been completed; and |
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(iii) those taxable years for which examinations by taxing authorities are presently being conducted. |
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(g) Except for those being presently contested, all deficiencies asserted, or assessments made, against the Company as a result of any examinations by any taxing authority have been fully paid. |
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(h) The Company is not a party to any Action by any taxing authority. To the Company’s Knowledge there are no pending or threatened Actions by any taxing authority. |
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(i) The Company has delivered to Buyer copies of all federal, state, local and foreign income, franchise and similar Tax Returns, examination reports, and statements of deficiencies assessed against, or agreed to by, the Company for all Tax periods ending after December 31, 2010. |
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(j) There are no Encumbrances for Taxes (other than for current Taxes not yet due and payable) upon the assets of the Company. |
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(k) The Company is not a party to, or bound by, any Tax indemnity, Tax sharing or Tax allocation agreement. |
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(l) No private letter rulings, technical advice memoranda or similar agreement or rulings have been requested, entered into or issued by any taxing authority with respect to the Company. |
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(m) The Company has not been a member of an affiliated, combined, consolidated or unitary Tax group for Tax purposes. The Company has no liability for Taxes of any Person (other than the Company) under Treasury Regulations Section 1.1502-6 (or any corresponding provision of state, local or foreign Law), as transferee or successor, by contract or otherwise. |
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(n) To the Company’s Knowledge, the Company will not be required to include any material item of income in, or exclude any material item or deduction from, taxable income for any taxable period or portion thereof ending after the Closing Date as a result of: |
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(i) any change in a method of accounting under Section 481 of the Code (or any comparable provision of state, local or foreign Tax Laws), or use of an improper method of accounting, for a taxable period ending on or prior to the Closing Date; |
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(ii) an installment sale or open transaction occurring on or prior to the Closing Date; |
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(iii) a prepaid amount received on or before the Closing Date; |
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(iv) any closing agreement under Section 7121 of the Code, or similar provision of state, local or foreign Law; or |
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(v) any election under Section 108(i) of the Code. |
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(o) Sellers are not a "foreign person" as that term is used in Treasury Regulations Section 1.1445-2. The Company is not, nor has it been, a United States real property holding corporation (as defined in Section 897(c)(2) of the Code) during the applicable period specified in Section 897(c)(1)(a) of the Code. |
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(p) The Company has not been a "distributing corporation" or a "controlled corporation" in connection with a distribution described in Section 355 of the Code. |
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(q) The Company is not, and has not been, a party to, or a promoter of, a "reportable transaction" within the meaning of Section 6707A(c)(1) of the Code and Treasury Regulations Section 1.6011 4(b). |
Except as set forth in the correspondingly numbered Section of the Disclosure Schedules, Buyer represents and warrants to Sellers that the statements contained in this Article IV are true and correct as of the date hereof.
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(a) cause the Company to preserve and maintain all of its Permits; |
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(b) cause the Company to pay its debts, Taxes and other obligations when due, except where an obligation is contested by the Company in good faith; |
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(c) cause the Company to maintain the properties and assets owned, operated or used by the Company in the same condition as they were on the date of this Agreement, subject to reasonable |
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wear and tear and any disposal in the ordinary course of business; provided that the value of such disposal does not exceed $10,000 in the aggregate; |
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(d) cause the Company to continue in full force and effect without modification all Insurance Policies, except as required by applicable Law; |
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(e) cause the Company to defend and protect its properties and assets from infringement or usurpation; |
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(f) cause the Company to perform all of its obligations under all Contracts relating to or affecting its properties, assets or business; |
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(g) cause the Company to maintain its books and records in accordance with past practice; |
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(h) cause the Company to comply in all material respects with all applicable Laws; and |
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(i) cause the Company not to take or permit any action that would cause any of the changes, events or conditions described in Section 3.07 to occur. |
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(a) From the date hereof until the Closing, the Company shall promptly notify Buyer in writing of: |
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(i) any fact, circumstance, event or action the existence, occurrence or taking of which (A) has had, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, (B) has resulted in, or could reasonably be expected to result in, any representation or warranty made by Sellers hereunder not being true and correct or (C) has resulted in, or could reasonably be expected to result in, the failure of any of the conditions set forth in Section 7.02 to be satisfied; |
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(ii) any notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with the transactions contemplated by this Agreement; |
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(iii) any notice or other communication from any Governmental Authority in connection with the transactions contemplated by this Agreement; and |
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(iv) any Actions commenced or, to Company’s Knowledge, threatened against, relating to or involving or otherwise affecting Sellers or the Company that, if pending on the date of this Agreement, would have been required to have been disclosed pursuant to Section 3.17 or that relates to the consummation of the transactions contemplated by this Agreement. |
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(b) Buyer's receipt of information pursuant to this Section 5.02 shall not operate as a waiver or otherwise affect any representation, warranty or agreement given or made by the Company or Sellers in this Agreement (including Section 8.02 and Section 9.01(b) ) and shall not be deemed to amend or supplement the Disclosure Schedules. |
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(a) For a period of two years commencing on the Closing Date (the " Restricted Period "), Sellers shall not, and shall not permit any of their Affiliates to, directly or indirectly, (i) engage in or assist others in engaging in the Restricted Business in the Territory; (ii) have an interest in any Person that engages directly or indirectly in the Restricted Business in the Territory in any capacity, including as a partner, shareholder, member, employee, principal, agent, trustee or consultant; or (iii) intentionally interfere in any material respect with the business relationships (whether formed prior to or after the date of this Agreement) between the Company and customers or suppliers of the Company. Notwithstanding the foregoing, (x) Sellers may own, directly or indirectly, solely as an investment, securities of any Person traded on any national securities exchange if a Seller is not a controlling Person of, or a member of a group which controls, such Person and does not, directly or indirectly, own 5% or more of any class of securities of such Person; or (y) Sellers may be employed by a diversified entity that has a division or subsidiary that engages in the Restricted Business provided that at no time during the Restricted Period shall Seller (A) be employed by or in a division or subsidiary related to the Restricted Business; and (B) provide services directly or indirectly to or for any Restricted Business activities, strategies or services. . |
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(c) Sellers acknowledge that a breach or threatened breach of this Section 5.04 would give rise to irreparable harm to Buyer, for which monetary damages would not be an adequate remedy, and hereby agrees that in the event of a breach or a threatened breach by Sellers of any such obligations, Buyer shall, in addition to any and all other rights and remedies that may be available to it in respect of such breach, be entitled to equitable relief, including a temporary restraining order, an injunction, specific performance and any other relief that may be available from a court of competent jurisdiction (without any requirement to post bond). |
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(a) Each party hereto shall, as promptly as possible, (i) make, or cause or be made, all filings and submissions required under any Law applicable to such party or any of its Affiliates; and (ii) use reasonable best efforts to obtain, or cause to be obtained, all consents, authorizations, orders and approvals from all Governmental Authorities that may be or become necessary for its execution and delivery of this Agreement and the performance of its obligations pursuant to this Agreement and the other Transaction Documents. Each party shall cooperate fully with the other party and its Affiliates in promptly seeking to obtain all such consents, authorizations, orders and approvals. The parties hereto shall not willfully take any action that will have the effect of delaying, impairing or impeding the receipt of any required consents, authorizations, orders and approvals. |
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(b) Sellers and Buyer shall use reasonable best efforts to give all notices to, and obtain all consents from, all third parties that are described in Section 3.04 of the Disclosure Schedules. |
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(c) If any consent, approval or authorization necessary to preserve any right or benefit under any Contract to which the Company is a party is not obtained prior to the Closing, Sellers shall, subsequent to the Closing, cooperate with Buyer and the Company in attempting to obtain such consent, approval or authorization as promptly thereafter as practicable. If such consent, approval or authorization cannot be obtained, Sellers shall use their reasonable best efforts to provide the Company with the rights and benefits of the affected Contract for the term thereof, and, |
37
if Sellers provide such rights and benefits, the Company shall assume all obligations and burdens thereunder. |
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(d) All analyses, appearances, meetings, discussions, presentations, memoranda, briefs, filings, arguments, and proposals made by or on behalf of either party before any Governmental Authority or the staff or regulators of any Governmental Authority, in connection with the transactions contemplated hereunder (but not including any interactions between Sellers or the Company with Governmental Authorities in the ordinary course of business, any disclosure which is not permitted by Law or any disclosure containing confidential information) shall be disclosed to the other party hereunder in advance of any filing, submission or attendance, it being the intent that the parties will consult and cooperate with one another, and consider in good faith the views of one another, in connection with any such analyses, appearances, meetings, discussions, presentations, memoranda, briefs, filings, arguments, and proposals. Each party shall give notice to the other party with respect to any meeting, discussion, appearance or contact with any Governmental Authority or the staff or regulators of any Governmental Authority, with such notice being sufficient to provide the other party with the opportunity to attend and participate in such meeting, discussion, appearance or contact. |
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(e) Notwithstanding the foregoing, nothing in this Section 5.05 shall require, or be construed to require, Buyer or any of its Affiliates to agree to (i) sell, hold, divest, discontinue or limit, before or after the Closing Date, any assets, businesses or interests of Buyer, the Company or any of their respective Affiliates; (ii) any conditions relating to, or changes or restrictions in, the operations of any such assets, businesses or interests which, in either case, could reasonably be expected to result in a Material Adverse Effect or materially and adversely impact the economic or business benefits to Buyer of the transactions contemplated by this Agreement; or (iii) any material modification or waiver of the terms and conditions of this Agreement. |
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(a) In order to facilitate the resolution of any claims made against or incurred by Sellers or the Company prior to the Closing, or for any other reasonable purpose, for a period of three years after the Closing, Buyer shall: |
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(i) retain the books and records (including personnel files) of the Company relating to periods prior to the Closing in a manner reasonably consistent with the prior practices of the Company; and |
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(ii) upon reasonable notice, afford the Representatives of Sellers reasonable access (including the right to make, at Sellers’ expense, photocopies), during normal business hours, to such books and records; |
provided, however , that any books and records related to Tax matters shall be retained pursuant to the periods set forth in Article VI .
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(b) In order to facilitate the resolution of any claims made by or against or incurred by Buyer or the Company after the Closing, or for any other reasonable purpose, for a period of three years following the Closing, Sellers shall: |
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(i) retain the books and records (including personnel files) of Sellers which relate to the Company and its operations for periods prior to the Closing; and |
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(ii) upon reasonable notice, afford the Representatives of Buyer or the Company reasonable access (including the right to make, at Buyer's expense, photocopies), during normal business hours, to such books and records; |
provided, however , that any books and records related to Tax matters shall be retained pursuant to the periods set forth in Article VI .
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(c) Neither Buyer nor Sellers shall be obligated to provide the other party with access to any books or records (including personnel files) pursuant to this Section 5.06 where such access would violate any Law. |
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Section 5.07 Company Indebtedne ss. Prior to Closing, the Company shall repay all outstanding indebtedness of the Company. |
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linked to a Seller’s social security number, requires a continuing obligation of a Seller or is tied in any other manner to a Seller, such Seller shall provide all reasonable assistance requested by Buyer to facilitate Buyer’s termination or transfer of such Continuing Account (or to take such other action with respect to a Continuing Account as Buyer may reasonably request). In addition, Buyer shall (a) use commercially reasonable efforts to no later than 90 days of Closing, (i) close such Continuing Accounts, or (ii) remove Seller’s link and obligation to such Continuing Account, and (b) assumes all liability and obligation with respect to such Continuing Account attributable to the period after Closing, and (c) will promptly reimburse Seller for losses actually incurred with respect to such Continuing Account attributable to the period after Closing. |
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(a) Without the prior written consent of Buyer, Sellers (and, prior to the Closing, the Company, its Affiliates and their respective Representatives) shall not, to the extent it may affect, or relate to, the Company, make, change or rescind any Tax election, amend any Tax Return or take any position on any Tax Return, take any action, omit to take any action or enter into any other transaction that would have the effect of increasing the Tax liability or reducing any Tax asset of Buyer or the Company in respect of any Post-Closing Tax Period unless it is required by law to do so. |
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(b) All transfer, documentary, sales, use, stamp, registration, value added and other such Taxes and fees (including any penalties and interest) incurred in connection with this Agreement and the other Transaction Documents (including any real property transfer Tax and any other similar Tax) shall be borne and paid 50% by Sellers and 50% by Buyer when due. Sellers shall timely file |
40
any Tax Return or other document with respect to such Taxes or fees (and Buyer shall cooperate with respect thereto as necessary), the expense of which will be borne 50% by Sellers and 50% by Buyer. |
41
attributable to any breach or violation of, or failure to fully perform, any covenant, agreement, undertaking or obligation in Article VI ; (c) all Taxes of the Company or relating to the business of the Company for all Pre-Closing Tax Periods other than (i) any Federal, State, local or foreign Tax attributable to the Section 338(h)(10) Election (including, without limitation, any Tax under Code Section 1374 or any similar provision of State or local law) , and (ii) any Federal, State, local or foreign Tax attributable to any election or other action by the Buyer or by the Company after the Closing (it be the intention of the parties that all of the Taxes excluded from the indemnification shall be borne and paid by Buyer) ; (d) all Taxes of any member of an affiliated, consolidated, combined or unitary group of which the Company (or any predecessor of the Company) is or was a member on or prior to the Closing Date by reason of a liability under Treasury Regulation Section 1.1502-6 or any comparable provisions of foreign, state or local Law; and (e) any and all Taxes of any person imposed on the Company arising under the principles of transferee or successor liability or by contract, relating to an event or transaction occurring before the Closing Date. In each of the above cases, together with any out-of-pocket fees and expenses (including attorneys' and accountants' fees) incurred in connection therewith. Sellers shall reimburse Buyer for any Taxes of the Company that are the responsibility of Sellers pursuant to this Section 6.03 within ten Business Days after payment of such Taxes by Buyer or the Company. Each Seller’s indemnity obligations under this Article VI , shall not exceed 100% of such Seller’s proportional interest in the Purchase Price. |
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(a) in the case of Taxes (i) based upon, or related to, income, receipts, profits, wages, capital or net worth, (ii) imposed in connection with the sale, transfer or assignment of property, or (iii) required to be withheld, deemed equal to the amount which would be payable if the taxable year ended with the Closing Date; |
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(b) in the case of other Taxes, deemed to be the amount of such Taxes for the entire period multiplied by a fraction the numerator of which is the number of days in the period ending on the Closing Date and the denominator of which is the number of days in the entire period; and |
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(c) Buyer shall file or cause to be filed Tax Returns with respect to a Straddle Period. Such Tax Returns shall be prepared and reviewed by Seller in accordance with the Tax Return Procedures as described in Section 6.01(c) . |
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(iv) Sellers, at their election, shall calculate the Section 338(h)(10) Adjustment. In the event that Sellers elect not to perform such calculation, Buyer shall perform the calculation. In either event, Sellers or Buyer, as applicable, shall provide to the other party a written schedule of the calculation within ninety (90) days following the determination of the allocation of the Purchase Price in accordance with Section 6.06(b). In the event that Buyer is performing the calculation, Sellers shall provide Buyer promptly upon Buyer’s request with any relevant background and supporting information and documentation necessary to establish the basis for such calculation. Where Sellers are performing the calculation, such information shall accompany the written calculation of the Section 338(h)(10) Adjustment. Sellers and Buyer shall seek in good faith to resolve in writing any differences that they may have with respect to Section 338(h)(10) Adjustment, but if they cannot resolve such differences within thirty (30) days following Buyer’s delivery of its calculation, Sellers and Buyer shall submit to the Independent Accountant for arbitration any and all matters that remain in dispute, and shall thereafter provide to the Independent Accountant any information or documentation that it may reasonably request in connection with such arbitration. The fees and expenses of the Independent Accountant shall be borne by the Buyers. Within thirty (30) days of either (a) agreement between Buyer and Sellers on the Section 338(h)(10) Adjustment or (b) determination of the Section 338(h)(10) Adjustment by the Independent Accountant, but in no event later than ten (10) days prior to the due date (without extensions) for Sellers to file their federal income returns by their taxable year that includes the Closing Date, Buyer will pay to Sellers the so agreed or determined Section 338(h)(10) Adjustment by wire transfer. All calculations hereunder shall be based on reasonable assumptions, including without limitation the assumptions that (A) all of the taxable gain the Sellers would have recognized if no Section 338(h)(10) Election were made would have been treated as long-term capital gain for federal income Tax purposes, (B) each Seller is subject to federal income Tax on long-term capital gains at the long-term capital gain rate in effect on the Closing Date, (C) each Seller is subject to federal income Tax on ordinary income at the highest marginal rate in effect on the Closing Date, and (D) no Seller has any loss, deduction, credit or similar item for any taxable year in which a payment of the Purchase Price is made that would be available to offset any portion of, or otherwise reduce the amount of, the taxable income or gain such Seller would recognize from the transaction contemplated herein |
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(v) In the event there is a final determination (within the meaning of Section 1313(a) of the Code) that the amount of Taxes due by Sellers because of the Section 338(h)(10) Election is greater than the amount of such additional Taxes upon which the Section 338(h)(10) Adjustment was calculated, the Buyer shall remit to Sellers, promptly following such final determination, an amount equal to the excess of the Section 338(h)(10) Adjustment calculated based on such increased Taxes together with any interest and penalties that may be due over the Section 338(h)(10) Adjustment originally paid. For avoidance of doubt such recalculated Section 338(h)(10) Adjustment shall be made in a manner such that Sellers shall receive and retain, on an after tax basis, the same amount that they would have received and retained had the Section 338(h)(10) Election never been made. |
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(c) Expenses . All reasonable direct and indirect expenses incurred by Sellers after Closing in connection with the Section 338(h)(10) Election shall be paid or reimbursed by the Buyers to Sellers, including, without limitation, payments to Sellers’ accountants, counsel and appraisers, in connection, without limitation, with the calculation and/or review of the Section 338(h)(10) Adjustment and the preparation of the Section 338 Forms and the Allocation Schedule, such payments or reimbursement to be paid within ten (10) days of the request for same and shall be treated as an adjustment to the Purchase Price by the parties for Tax purposes, unless otherwise required by Law . |
45
Article VI , Buyer shall control the contest or resolution of any such issues or claims. Buyer and Sellers shall cooperate reasonably and in good faith to implement the provisions of this Section 6.07 . Any amount payable by Buyer pursuant to this Section 6.07 shall be made within ten (10) days of the request for same and shall be treated as an adjustment to the Purchase Price by the parties for Tax purposes, unless otherwise required by Law. |
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(c) No Action shall have been commenced against Buyer, Sellers or the Company, which would prevent the Closing. No injunction or restraining order shall have been issued by any Governmental Authority, and be in effect, which restrains or prohibits any transaction contemplated hereby. |
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(d) From the date of this Agreement, there shall not have occurred any Material Adverse Effect, nor shall any event or events have occurred that, individually or in the aggregate, with or without the lapse of time, could reasonably be expected to result in a Material Adverse Effect. |
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(e) The Transaction Documents (other than this Agreement) shall have been executed and delivered by the parties thereto and true and complete copies thereof shall have been delivered to Buyer. |
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(f) Buyer shall have received a certificate, dated the Closing Date and signed by a duly authorized officer of the Company, that each of the conditions set forth in Section 7.02(a) and Section 7.02(b) have been satisfied. |
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(g) Buyer shall have received a certificate of the Secretary or an Assistant Secretary (or equivalent officer) of the Company certifying that attached thereto are true and complete copies of all resolutions adopted by the board of directors of Sellers authorizing the execution, delivery and performance of this Agreement and the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby, and that all such resolutions are in full force and effect and are all the resolutions adopted in connection with the transactions contemplated hereby and thereby. |
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(h) Buyer shall have received a certificate of the Secretary or an Assistant Secretary (or equivalent officer) of Sellers certifying the names and signatures of the officers of Sellers authorized to sign this Agreement, the Transaction Documents and the other documents to be delivered hereunder and thereunder. |
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(i) Buyer shall have received signed resignations of the directors of the Company. |
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(j) The Key Employees shall have accepted their employment offers with Buyer and shall have signed Buyer’s Inventions Assignment Agreement. |
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(k) Sellers shall have delivered to Buyer a good standing certificate (or its equivalent) for the Company from the secretary of state or similar Governmental Authority of the jurisdiction under the Laws in which the Company is organized. |
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(l) Sellers shall have delivered to Buyer a certificate pursuant to Treasury Regulations Section 1.1445-2(b) that Sellers is not a foreign person within the meaning of Section 1445 of the Code. |
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(m) Sellers shall have delivered, or caused to be delivered, to Buyer stock certificates evidencing the Shares, free and clear of Encumbrances, duly endorsed in blank or accompanied by stock powers or other instruments of transfer duly executed in blank and with all required stock transfer tax stamps affixed. |
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(n) Sellers shall have delivered to Buyer evidence reasonably satisfactory to Buyer that all outstanding indebtedness has been repaid in full or converted into equity of the Company. |
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(o) There shall be no outstanding options or warrants to purchase Company capital stock. |
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date (except those representations and warranties that address matters only as of a specified date, which shall be true and correct in all respects as of that specified date), except where the failure of such representations and warranties to be true and correct would not have a Material Adverse Effect. |
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(c) No injunction or restraining order shall have been issued by any Governmental Authority, and be in effect, which restrains or prohibits any material transaction contemplated hereby. |
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(d) The Transaction Documents (other than this Agreement) shall have been executed and delivered by the parties thereto and true and complete copies thereof shall have been delivered to Sellers. |
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(e) Sellers shall have received a certificate, dated the Closing Date and signed by a duly authorized officer of Buyer, that each of the conditions set forth in Section 7.03(a) and Section 7.03(b) have been satisfied. |
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(f) Sellers shall have received a certificate of the Secretary or an Assistant Secretary (or equivalent officer) of Buyer certifying that attached thereto are true and complete copies of all resolutions adopted by the board of directors of Buyer authorizing the execution, delivery and performance of this Agreement and the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby, and that all such resolutions are in full force and effect and are all the resolutions adopted in connection with the transactions contemplated hereby and thereby. |
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(g) Sellers shall have received a certificate of the Secretary or an Assistant Secretary (or equivalent officer) of Buyer certifying the names and signatures of the officers of Buyer authorized to sign this Agreement, the Transaction Documents and the other documents to be delivered hereunder and thereunder. |
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(h) Buyer shall have delivered to Sellers cash in an amount equal to the Purchase Price less the Escrow Amount by wire transfer in immediately available funds, to an account or accounts designated at least two Business Days prior to the Closing Date by Sellers in a written notice to Buyer. |
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contained in Section 3.22 which are subject to Article VI ) shall survive the Closing and shall remain in full force and effect until the date that is 18 months from the Closing Date; provided, that the representations and warranties in (a) Section 3.01 , Section 3.02 , and Section 4.01 shall survive indefinitely, and (b) Section 3.11 shall survive for a period of two years after the Closing. All covenants and agreements of the parties contained herein (other than any covenants or agreements contained in Article VI which are subject to Article VI ) shall survive the Closing indefinitely or for the period explicitly specified therein; provided, that the indemnification provisions in Section 8.02(c) and 8.02(d) shall survive for a period of two years after the Closing. FOR THE AVOIDANCE OF DOUBT, THE PARTIES AGREE AND ACKNOWLEDGE THAT THE SURVIVAL PERIODS SET FORTH IN THIS SECTION 8.01 ARE CONTRACTUAL STATUTE OF LIMITATIONS AND ANY CLAIM BROUGHT BY ANY PARTY PURSUANT TO THIS ARTICLE VIII MUST BE ASSERTED PRIOR TO THE EXPIRATION OF THE SURVIVAL PERIOD. Notwithstanding the foregoing, any claims asserted in good faith with reasonable specificity (to the extent known at such time) and in writing by notice from the non-breaching party to the breaching party prior to the expiration date of the applicable survival period shall not thereafter be barred by the expiration of the relevant representation or warranty and such claims shall survive until finally resolved. |
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(b) any breach or non-fulfillment of any covenant, agreement or obligation to be performed by Sellers pursuant to this Agreement (other than any breach or violation of, or failure to fully perform, any covenant, agreement, undertaking or obligation in Article VI , it being understood that the sole remedy for any such breach, violation or failure shall be pursuant to Article VI ); |
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Serbia, including the payment of all payroll or associated taxes or fees, (ii) violation of applicable Serbian Laws, or (iii) claims arising from or related to any agreement, understanding or relationship of the Company with an independent contractor or other third party providing services to Company in Serbia; or |
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(d) any claim that ownership of the Company-Owned Intellectual Property was transferred in whole or in part to a customer, purchaser or user of the Company Products prior to the Closing Date. |
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Section 8.04 Certain Limitations. The indemnification provided for in Section 8.02 and Section 8.03 shall be subject to the following limitations: |
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aggregate amount of Losses for which Sellers shall be liable pursuant to Section 8.02(d) shall not exceed $15,000,000. Notwithstanding the foregoing, there shall be no limit on the liability of a Seller who commits (or causes the Company to commit) or has knowledge of any fraudulent or willful breach of any representation or warranty. The parties agree that no individual Seller shall be required to indemnify Buyer Indemnitees in excess of his or her proportionate ownership of the Shares (as of Closing) . |
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(c) Other than for Third Party Claims, in no event shall any Indemnifying Party be liable to any Indemnified Party, and in no event shall any claim for indemnification under this Article VIII be made, for incidental, indirect, consequential, special, punitive, exemplary or other such damages by reason of the breach of any representation, warranty, covenant, agreement or indemnity contained herein. |
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(d) Each Indemnified Party shall take, and cause its Affiliates to take, commercially reasonable steps to mitigate any Loss upon becoming aware of any event or circumstance that would be reasonably expected to, or does, give rise thereto, provided that the Indemnified Party shall not be required to incur any out of pocket costs to remedy the breach that gives rise to such Loss. |
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(e) With respect to Third Party Claims for infringement of patent rights that occur after Closing, Indemnitees’ obligations for Losses related to the sale of Company Products by the Company or the Buyer shall be limited to Losses related to the sale of product and services by the Company prior to Closing. For the avoidance of doubt where the Company has no knowledge of third party patent rights prior to closing, any Losses or portion of Loss caused by infringement of the third party patent rights as a result of making, using, selling, offering for sale, and/or importing products or service by the Company and/or Buyer after Closing is the sole responsibility of the Buyer. Notwithstanding anything to the contrary contained in this Section 8.04(e), nothing in Section 8.04(e) shall limit or otherwise diminish Sellers obligation to pay all costs and expenses required to litigate or otherwise resolve a claim regarding infringement of patent rights whether occurring prior or after closing, including but not limited to reasonable attorneys’ fees. |
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the prior written consent of the Indemnified Party, except as provided in this Section 8.05(b) . If a firm offer is made to settle a Third Party Claim without leading to liability or the creation of a financial or other obligation on the part of the Indemnified Party and provides, in customary form, for the unconditional release of each Indemnified Party from all liabilities and obligations in connection with such Third Party Claim and the Indemnifying Party desires to accept and agree to such offer, the Indemnifying Party shall give written notice to that effect to the Indemnified Party. If the Indemnified Party fails to consent to such firm offer within ten days after its receipt of such notice, the Indemnified Party may continue to contest or defend such Third Party Claim and in such event, the maximum liability of the Indemnifying Party as to such Third Party Claim shall not exceed the amount of such settlement offer. If the Indemnified Party fails to consent to such firm offer and also fails to assume defense of such Third Party Claim, the Indemnifying Party may settle the Third Party Claim upon the terms set forth in such firm offer to settle such Third Party Claim. If the Indemnified Party has assumed the defense pursuant to Section 8.05(a) , it shall not agree to any settlement without the written consent of the Indemnifying Party (which consent shall not be unreasonably withheld or delayed). |
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(d) Tax Claims. Notwithstanding any other provision of this Agreement, the control of any claim, assertion, event or proceeding in respect of Taxes of the Company (including, but not limited to, any such claim in respect of a breach of the representations and warranties in Section 3.22 hereof or any breach or violation of or failure to fully perform any covenant, agreement, undertaking or obligation in Article VI ) shall be governed exclusively by Article VI hereof. |
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(b) All calculations of Losses suffered by Buyer Indemnitees shall be reduced by (i) any insurance proceeds actually received by Buyer Indemnitees in connection with the matter out of which such Losses arise; and (ii) any Tax benefit realized by Buyer arising from the incurrence or payment of any such Loss (in the case of both insurance recovery or Tax benefit such reduction shall be referred to as the “Credit Amount”). In computing the amount of any Credit Amount derived from any Tax benefit, the indemnified party shall be deemed to recognize all other items of income, gain, loss, deduction or credit before recognizing any item arising from the receipt of any indemnity payment hereunder or the incurrence or payment of any indemnified Loss, provided, however, that notwithstanding anything in this Agreement actually or seemingly to the contrary, any such indemnity obligation under this Article VIII shall be paid upon being established and/or when due, and the Credit Amount derived from an insurance recovery and/or Tax benefit shall be rebated or refunded by the indemnified party to the indemnifying party within ten (10) days of (a) receipt of the insurance benefit, or (b) the receipt of the tax benefit as claimed on a filed Tax Return; and, provided further, however, to the extent any such Credit Amount is required to be returned or refunded to a payor of the insurance recovery and/or, in the case of a Tax benefit, to a governmental authority, then the indemnifying party shall return such Credit Amount, or any part thereof, to the indemnified party. The Indemnified Party shall use its commercially reasonable efforts to recover under insurance policies or indemnity, contribution or other similar agreements for any Losses prior to seeking indemnification under this Agreement. |
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(a) by the mutual written consent of Sellers and Buyer; |
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(i) Buyer is not then in material breach of any provision of this Agreement and there has been a breach, inaccuracy in or failure to perform any representation, warranty, covenant or agreement made by Sellers pursuant to this Agreement that would give rise to the failure of any of the conditions specified in Article VII and such breach, inaccuracy or failure has not been cured by Sellers within ten days of Sellers's receipt of written notice of such breach from Buyer; or |
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(ii) any of the conditions set forth in Section 7.01 or Section 7.02 shall not have been, or if it becomes apparent that any of such conditions will not be, fulfilled by February 29, 2016 (the “ Drop Dead Date ”), unless such failure shall be due to the failure of Buyer to perform or comply with any of the covenants, agreements or conditions hereof to be performed or complied with by it prior to the Closing; |
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(c) by Sellers by written notice to Buyer if: |
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(i) Sellers is not then in material breach of any provision of this Agreement and there has been a breach, inaccuracy in or failure to perform any representation, warranty, covenant or agreement made by Buyer pursuant to this Agreement that would give rise to the failure of any of the |
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conditions specified in Article VII and such breach, inaccuracy or failure has not been cured by Buyer within ten days of Buyer's receipt of written notice of such breach from Sellers; or |
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(ii) any of the conditions set forth in Section 7.01 or Section 7.03 shall not have been, or if it becomes apparent that any of such conditions will not be, fulfilled by the Drop Dead Date, unless such failure shall be due to the failure of Sellers to perform or comply with any of the covenants, agreements or conditions hereof to be performed or complied with by it prior to the Closing; or |
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(d) by Buyer or Sellers if: |
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(i) any Law makes consummation of the transactions contemplated by this Agreement illegal or otherwise prohibited; or |
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(ii) any Governmental Authority has issued a Governmental Order restraining or enjoining the transactions contemplated by this Agreement, and such Governmental Order shall have become final and non-appealable. |
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(a) as set forth in this Article IX and Section 5.03 and Article X hereof; and |
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(b) that nothing herein shall relieve any party hereto from liability for any willful breach of any provision hereof. |
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(i) give and receive notices and communications; |
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(ii) authorize delivery to Buyer of cash from the Escrow Account in satisfaction of any amounts owed to Buyer pursuant to (x) Section 2.03 or (y) Sellers’ indemnification obligations under this Agreement; |
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(iii) agree to, negotiate, enter into settlements and compromises of, and comply with orders or otherwise handle any other matters described in Section 2.03 ; |
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(iv) agree to, negotiate, enter into settlements and compromises of, and comply with orders of courts with respect to claims for indemnification made by Buyer; |
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(v) litigate, arbitrate, resolve, settle or compromise any claim for indemnification under this Agreement; |
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(vi) execute and deliver all documents necessary or desirable to carry out the intent of this Agreement, including the Escrow Agreement; |
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(vii) make all elections or decisions contemplated by this Agreement and the Escrow Agreement; |
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(viii) engage, employ or appoint any agents or representatives (including attorneys, accountants and consultants) to assist Sellers’ Representative in complying with its duties and obligations; and |
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(ix) take all actions necessary or appropriate in the good faith judgment of Sellers’ Representative for the accomplishment of the foregoing. |
Buyer shall be entitled to deal exclusively with Sellers’ Representative on all matters relating to this Agreement and shall be entitled to rely conclusively (without further evidence of any kind whatsoever) on any document executed or purported to be executed on behalf of any Seller by Sellers’ Representative, and on any other action taken or purported to be taken on behalf of any Seller by Sellers’ Representative, as being fully binding upon such Person. Notices or communications to or from Sellers’ Representative shall constitute notice to or from each of the Sellers. Any decision or action by Sellers’ Representative hereunder, including any agreement between Sellers’ Representative and Parent relating to the defense, payment or settlement of any claims for indemnification hereunder, shall constitute a decision or action of all Sellers and shall be final, binding and conclusive upon each such Person. No Seller shall have the right to object to, dissent from, protest or otherwise contest the same. The provisions of this Section, including the power of attorney granted hereby, are independent and severable, are irrevocable and coupled with an interest and shall not be terminated by any act of any Person, or by operation of Law.
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rely on the decisions and actions of the prior Sellers’ Representative as described in Section 10.01(a) above. |
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addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 10.03 ): |
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Section 10.05 Headings. The headings in this Agreement are for reference only and shall not affect the interpretation of this Agreement. |
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writing and signed by the party so waiving. No waiver by any party shall operate or be construed as a waiver in respect of any failure, breach or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver. No failure to exercise, or delay in exercising, any right, remedy, power or privilege arising from this Agreement shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. |
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(a) This Agreement shall be governed by and construed in accordance with the internal laws of the State of Delaware without giving effect to any choice or conflict of law provision or rule (whether of the State of Utah or any other jurisdiction). |
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(b) ANY LEGAL SUIT, ACTION OR PROCEEDING ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE OTHER TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY MAY BE INSTITUTED IN THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA OR THE COURTS OF THE STATE OF UTAH IN EACH CASE LOCATED IN SALT LAKE CITY AND COUNTY OF SALT LAKE, AND EACH PARTY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING. SERVICE OF PROCESS, SUMMONS, NOTICE OR OTHER DOCUMENT BY MAIL TO SUCH PARTY'S ADDRESS SET FORTH HEREIN SHALL BE EFFECTIVE SERVICE OF PROCESS FOR ANY SUIT, ACTION OR OTHER PROCEEDING BROUGHT IN ANY SUCH COURT. THE PARTIES IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY OBJECTION TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR ANY PROCEEDING IN SUCH COURTS AND IRREVOCABLY WAIVE AND AGREE NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. |
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(c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE, EACH SUCH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY TO THIS AGREEMENT CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT SEEK TO ENFORCE THE FOREGOING WAIVER IN THE EVENT OF A LEGAL ACTION, (B) SUCH PARTY HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) SUCH PARTY MAKES THIS |
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WAIVER VOLUNTARILY, AND (D) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.10(c). |
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF , the parties hereto have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.
[Signature Page to Stock Purchase Agreement]
EXHIBIT A
Form of Escrow Agreement
[See attached.]
[Signature Page to Stock Purchase Agreement]
EXHIBIT B
Form of Employment Offer Letter
[See attached.]
EXHIBIT C
Form of Inventions Assignment Agreement
[See attached.]
Schedule 1
Example of Closing Adjusted Working Capital Calculation
SECOND LOAN MODIFICATION AGREEMENT
This Second Loan Modification Agreement (this “ Loan Modification Agreement ” ) is entered into as of January 29 , 20 16 , by and between SILICON VALLEY BANK, a California corporation , with its principal place of business at 3003 Tasman Drive, Santa Clara, California 95054 and with a loan production office located at 2755 East Cottonwood Parkway, Suite 540, Salt Lake City, Utah 84121 ( “ Bank ” ) and CONTROL4 CORPORATION, a Delaware corporation with its chief executive office located at 11734 S. Election Road, Suite 200, Draper, Utah 84020 ( “ Borrower ” ).
1. DESCRIPTION OF EXISTING INDEBTEDNESS AND OBLIGATIONS . Among other indebtedness and obligations which may be owing by Borrower to Bank, Borrower is indebted to Bank pursuant to a lo an arrangement dated as of June 17 , 2013 , evide nced by, among other documents , a certain Amended and Restated Loan and Securi ty Agreement dated as of June 17 , 2013, between Borrower and Bank, as amended by that certain First Loan Modification Agreement dated as of October 7, 2013 , between Borrower and Bank (as amended, the “ Loan Agreement ”) . Capitalized terms used but not otherwise defined herein shall have the same meaning s as in the Loan Agreement.
2. DESCRIPTION OF COLLATERAL . Repayment of the Obligations is secured by the Collateral as described in the Loan Agreement (together with any other collateral security granted to Bank, the “ Security Documents ”). Hereinafter, the Security Documents, together with all other documents evidencing or securing the Obligations shall be referred to as the “ Existing Loan Documents ” .
3. DESCRIPTION OF CHANGE IN TERMS .
A. Modifications to Loan Agreement.
1 The Loan Agreement shall be amended by inserting the following new Section 2.1.6 (“2016 Revolving Advances”) to appear immediately after the existing Section 2.1.5 (“Third Equipment Advance Loan”) thereof:
“ 2.1.6. 2016 Revolving Advances.
(a) Availability . Subject to the terms and conditions of this Agreement, Bank shall make 2016 Advances not exceeding the 2016 Availability Amount. Amounts borrowed under the 2016 Revolving Line may be repaid and, prior to the 2016 Revolving Line Maturity Date, reborrowed, subject to the applicable terms and conditions precedent herein.
(b) Termination; Repayment . The 2016 Revolving Line terminates on the 2016 Revolving Line Maturity Date, when the principal amount of all 2016 Advances, the unpaid interest thereon, and all other Obligations relating to the 2016 Revolving Line shall be immediately due and payable. ”
2 The Loan Agreement shall be amended by deleting the following Section 2.3(a)(i) ( “ Advances ” ) thereof, in its entirety:
“ (i) Advances . Each Advance shall bear interest on the outstanding principal amount thereof from the date when made, continued or converted until paid in full at a rate per annum equal to (i) for Prime Rate Advances, the Prime Rate, and (ii) for LIBOR Advances, the LIBOR Rate plus the LIBOR Rate Margin. On and after the expiration of any Interest Period applicable to any LIBOR Advance outstanding on the date of occurrence of an Event of Default or acceleration of the Obligations, the amount of such LIBOR Advance shall, during the continuance of such Event of Default or after acceleration, bear interest at a rate per annu m equal to the Prime Rate plus four
percent ( 4 .0%). Pursuant to the terms he reof, interest on each Advance shall be paid in arrears on each Interest Payment Date. Interest shall also be paid on the date of any prepayment of any Advance pursuant to this Agreement for the portion of any Advance so prepaid and upon payment (including prepayment) in full thereof. All accrued but unpaid interest on the Advances shall be due and payable on th e Revolving Line Maturity Date . ”
and inserting in lieu thereof the following:
“ (i) 2016 Advances . Each 2016 Advance shall bear interest on the outstanding principal amount thereof from the date when made, continued or converted until paid in full at a floating rate per annum equal to (i) for Prime Rate Advances, the Prime Rate plus the applicable Prime Rate Margin , and (ii) for LIBOR Advances, the LIBOR Rate plus the applicable LIBOR Rate Margin. On and after the expiration of any Interest Period applicable to any LIBOR Advance outstanding on the date of occurrence of an Event of Default or acceleration of the Obligations, the amount of such LIBOR Advance shall, during the continuance of such Event of Default or after acceleration, bear interest at a rate per annum equal to the Prime Rate plus four percent (4.0%). Pursuant to the terms hereof, interest on each 2016 Advance shall be paid in arrears on each Interest Payment Date. Interest shall also be paid on the date of any prepayment of any 2016 Advance pursuant to this Agreement for the portion of any 2016 Advance so prepaid and upon payment (including prepayment) in full thereof. All accrued but unpaid interest on the 2016 Advances shall be due and payable on the 2016 Revolving Line Maturity Date. ”
3 The Loan Agreement shall be amended by deleting the following Section 2.4 (d) (“ Unused Revolving Line Facility Fee ”) thereof, in its entirety:
“ (d) Unused Revolving Line Facility Fee . Payable quarterly in arrears on the first day of each calendar quarter occurring prior to the Revolving Line Maturity Date, and on the Revolving Line Maturity Date, a fee (the “ Unused Revolving Line Facility Fee ”) in an amount equal to 0.375% per annum of the average unused portion of the Revolving Line, as determined by Bank. The unused portion of the Revolving Line, for purposes of this calculation, shall be calculated on a calendar year basis and shall equal the difference between (i) the Revolving Line, and (ii) the average for the period of the daily closing balance of the Revolving Line outstanding; and ”
and inserting in lieu thereof the following:
“ (d) Unused 2016 Revolving Line Facility Fee . A fee (the “ Unused 2016 Revolving Line Facility Fee ”), payable quarterly in arrears on the first day of each calendar quarter occurring prior to the 2016 Revolving Line Maturity Date, and on the 2016 Revolving Line Maturity Date, in an amount equal t o the Unused 2016 Revolving Line Facility Fee Amount, per annum, as determined by Bank . The unused portion of the 2016 Revolving Line, for purposes of this calculation, shall be calculated on a calendar year basis and shall equal the difference between (i) the 2016 Revolving Line, and (ii) the average for the period of the daily closing balance of the 2016 Revolving Line outstanding ; and ”
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4 The Loan Agreement shall be amended by deleting the following Section 3.4(a) (Advances) there, in its entirety:
“ (a) Advances .
(i) Subject to the prior satisfaction of all other applicable conditions to the making of an Advance set forth in this Agreement, an Advance shall be made upon Borrower’s irrevocable written notice delivered to Bank by electronic mail in the form of a Notice of Borrowing executed by an Authorized Signer or without instructions if any Advances is necessary to meet Obligations which have become due. Such Notice of Borrowing must be received by Bank prior to 12:00 p.m. Pacific time, (i) at least three (3) Business Days prior to the requested Funding Date, in the case of any LIBOR Advance, and (ii) on the requested Funding Date, in the case of a Prime Rate Advance, specifying: (1) the amount of the Advance; (2) the Currency in which such Advance shall be denominated; (3) the requested Funding Date; (4) whether the Advance is to be comprised of LIBOR Advances or Prime Rate Advances; and (5) the duration of the Interest Period applicable to any such LIBOR Advances included in such notice; provided that if the Notice of Borrowing shall fail to specify the duration of the Interest Period for any Advance comprised of LIBOR Advances, such Interest Period shall be one (1) month.
(ii) On the Funding Date, Bank shall credit proceeds of an Advance to the Designated Deposit Account denominated in the same Currency as the Currency requested with respect to the Advance and, subsequently, shall transfer such proceeds by wire transfer to such other account as Borrower may instruct in the Notice of Borrowing. No Advances shall be deemed made to Borrower, and no interest shall accrue on any such Advance, until the related funds have been deposited in the applicable Designated Deposit Account.”
and inserting in lieu thereof the following:
“ (a) 2016 Advances .
(i) Subject to the prior satisfaction of all other applicable conditions to the making of a 2016 Advance set forth in this Agreement, a 2016 Advance shall be made upon Borrower’s irrevocable written notice delivered to Bank by electronic mail in the form of a Notice of Borrowing executed by an Authorized Signer or without instructions if any 2016 Advances are necessary to meet Obligations which have become due. Such Notice of Borrowing must be received by Bank prior to 12:00 p.m. Pacific time, (i) at least three (3) Business Days prior to the requested Funding Date, in the case of any LIBOR Advance, and (ii) on the requested Funding Date, in the case of a Prime Rate Advance, specifying: (1) the amount of the 2016 Advance; (2) the Currency in which such 2016 Advance shall be denominated; (3) the requested Funding Date; (4) whether the 2016 Advance is to be comprised of LIBOR Advances or Prime Rate Advances; and (5) the duration of the Interest Period applicable to any such LIBOR Advances included in such notice; provided that if the Notice of Borrowing shall fail to specify the duration of the Interest Period for any 2016 Advance comprised of LIBOR Advances, such Interest Period shall be one (1) month.
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(ii) On the Funding Date, Bank shall credit proceeds of a 2016 Advance to the Designated Deposit Account denominated in the same Currency as the Currency requested with respect to the 2016 Advance and, subsequently, shall transfer such proceeds by wire transfer to such other account as Borrower may instruct in the Notice of Borrowing. No 2016 Advances shall be deemed made to Borrower, and no interest shall accrue on any such 2016 Advance, until the related funds have been deposited in the applicable Designated Deposit Account. ”
5 The Loan Agreement shall be amended by deleting the following Section 3.5(b) thereof, in its entirety:
“ (b) Borrower shall deliver a Notice of Conversion/Continuation by electronic mail to be received by Bank prior to 12:00 p.m. Pacific time (i) at least three (3) Business Days in advance of the Conversion Date or Continuation Date, if any Advances are to be converted into or continued as LIBOR Advances; and (ii) on the Conversion Date, if any Advances are to be converted into Prime Rate Advances, in each case specifying the:
(1) proposed Conversion Date or Continuation Date;
(2) aggregate amount of the Advances to be converted or continued;
(3) nature of the proposed conversion or continuation; and
(4) if the resulting Advance is to be a LIBOR Advance, the duration of the requested Interest Period.”
and inserting in lieu thereof the following:
“ (b) Borrower shall deliver a Notice of Conversion/Continuation by electronic mail to be received by Bank prior to 12:00 p.m. Pacific time (i) at least three (3) Business Days in advance of the Conversion Date or Continuation Date, if any 2016 Advances are to be converted into or continued as LIBOR Advances; and (ii) on the Conversion Date, if any 2016 Advances are to be converted into Prime Rate Advances, in each case specifying the:
(1) proposed Conversion Date or Continuation Date;
(2) aggregate amount of the 2016 Advances to be converted or continued;
(3) nature of the proposed conversion or continuation; and
(4) if the resulting 2016 Advance is to be a LIBOR Advance, the duration of the requested Interest Period.”
6 The Loan Agreement shall be amended by deleting the following Section 3.6(b)(i) thereof, in its entirety:
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“ (i) no Advances may be made as, or converted to, LIBOR Advances until such time as Bank notifies Borrower that the circumstances giving rise to such notice no longer exist, and”
and inserting in lieu thereof the following:
“ (i) no 2016 Advances may be made as, or converted to, LIBOR Advances until such time as Bank notifies Borrower that the circumstances giving rise to such notice no longer exist, and”
7 The Loan Agreement shall be amended by deleting the following Section 3.6 (e) (“ LIBOR Advances After Default ”) thereof, in its entirety:
“ (e) LIBOR Advances After Default . After the occurrence and during the continuance of an Event of Default, (i) Borrower may not elect to have an Advance be made or continued as, or converted to, a LIBOR Advance after the expiration of any Interest Period then in effect for such Advance and (ii) subject to the provisions of Section 3.6(c), any Notice of Conversion/Continuation given by Borrower with respect to a requested conversion/continuation that has not yet occurred shall, at Bank’s option, be deemed to be rescinded by Borrower and be deemed a request to convert or continue Advances referred to therein as Prime Rate Advances. ”
and inserting in lieu thereof the following:
“ (e) LIBOR Advances After Default . After the occurrence and during the continuance of an Event of Default, (i) Borrower may not elect to have a 2016 Advance be made or continued as, or converted to, a LIBOR Advance after the expiration of any Interest Period then in effect for such 2016 Advance and (ii) subject to the provisions of Section 3.6(c), any Notice of Conversion/Continuation given by Borrower with respect to a requested conversion/continuation that has not yet occurred shall, at Bank’s option, be deemed to be rescinded by Borrower and be deemed a request to convert or continue 2016 Advances referred to therein as Prime Rate Advances. ”
8 The Loan Agreement shall be amended by deleting the last sentence of Section 3.7(b) thereof, in its entirety:
“ The obligations of the Borrower arising pursuant to this Section 3.7(b) shall survive the Revolving Line Maturity Date, the termination of this Agreement and the repayment of all Obligations.”
and inserting in lieu thereof the following:
“ The obligations of the Borrower arising pursuant to this Section 3.7(b) shall survive the 2016 Revolving Line Maturity Date, the termination of this Agreement and the repayment of all Obligations.”
9 The Loan Agreement shall be amended by deleting the following S ection 3.7 ( d )( i i) thereof, in its entirety:
“ (ii) modify such Notice of Borrowing or Notice of Conversion/Continuation to obtain a Prime Rate Advance or to have outstanding Advances converted into or continued as Prime Rate Advances by giving notice (by facsimile or by telephone confirmed in writing) to Bank of such modification on the date on which Bank gives notice of its determination as described above ”
5
and inserting in lieu thereof the following:
“ (ii) modify such Notice of Borrowing or Notice of Conversion/Continuation to obtain a Prime Rate Advance or to have outstanding 2016 Advances converted into or continued as Prime Rate Advances by giving notice (by facsimile or by telephone confirmed in writing) to Bank of such modification on the date on which Bank gives notice of its determination as described above ”
10 The Loan Agreement shall be amended by deleting the following Section 6.2( a ) (“ Borrowing Base Reports ”) thereof, in its entirety:
“ (a) Borrowing Base Reports . Within forty-five (45) days after the last day of each quarter, aged listings of accounts receivable and accounts payable (by invoice date) (the “Borrowing Base Reports”) ;”
and inserting in lieu thereof the following:
“ (a) Intentionally Omitted. ”
11 The Loan Agreement shall be amended by deleting the following Section 6.2( b ) (“Borrowing Base Certificate ”) thereof, in its entirety:
“ (b) Borrowing Base Certificate . For any quarter in which there is a Borrowing Base Trigger Event, within forty-five (45) days after the last day of each quarter and together with the Borrowing Base Reports, a duly completed Borrowing Base Certificate signed by a Responsible Officer ;”
and inserting in lieu thereof the following:
“ ( b ) Intentionally Omitted.”
12 The Loan Agreement shall be amended by deleting the following Section 6.2(d) (“Quarterly Compliance Certificate”) thereof, in its entirety:
“ (d) Quarter ly Compliance Certificate . Within forty-five (45) days after the last day of each quarter and together with the Quarterly Financial Statements, a duly completed Compliance Certificate signed by a Responsible Officer, certifying that as of the end of such quarter, Borrower was in full compliance with all of the terms and conditions of this Agreement, and setting forth calculations showing compliance with the financial covenants set forth in this Agreement and such other information as Bank may reasonably request; ”
and inserting in lieu thereof the following:
“ (d) Compliance Certificate . Within (i) thirty (30) d ays after the last day of each month during which a Testing Period was in effect at any point , and (ii) forty-five (45) days after the last day of each quarter, a duly completed Compliance Certificate signed by a Responsible Officer, certifying that as of the end of such month or quarter , as applicable , Borrower was in full compliance with all of the terms and conditions of this Agreement, and setting forth calculations showing compliance with the financial covenants set forth in this Agreement and such other information as Bank may reasonably request;”
13 The Loan Agreement shall be amended by deleting the following Section 6.3 (“Inventory; Returns”) thereof, in its entirety:
6
“ 6.3 Inventory; Returns . Keep all Inventory in good and marketable condition, free from material defects. Returns and allowances between Borrower and its Account Debtors shall follow Borrower’s customary practices as they exist at the Effective Date. Borrower must promptly notify Bank of all returns, recoveries, disputes and claims that involve more than Five Hundred Thousand Dollars ($500,000.00).”
a nd inserting in lieu thereof the following:
“ 6.3 Inventory; Returns . Keep all Inventory in good and marketable condition, free from material defects. Returns and allowances between Borrower and its Account Debtors shall follow Borrower’s customary practices as they exist at the Effective Date. Borrower must promptly notify Bank of all write-offs or warranty expenses which are not in the ordinary course of business and/or that are inconsistent with Borrower’s customary return rates as they exist as of the Second Amendment Effective Date .”
14 The Loan Agreement shall be amended by deleting the following Section 6.7 (“Financial Covenants”) thereof, in its entirety:
“ 6.7 Financial Covenants . Maintain at all times, subject to periodic reporting as of the last day of each month, commencing with the month ending April 30, 2013, and as of the last day of each month thereafter, on a consolidated basis with respect to Borrower and its Subsidiaries:
(a) Liquidity Coverage . A ratio of (i) Borrower’s unrestricted and unencumbered cash at Bank plus Eligible Accounts to (ii) the aggregate amount of outstanding Obligations of Borrower to Bank, of at least 1.50:1.00.
(b) Tangible Net Worth . A Tangible Net Worth of at least the sum of (i) Thirteen Million Five Hundred Thirty-Eight Thousand Dollars ($13,538,000.00), plus (ii) fifty percent (50.0%) of Borrower’s Net Income for the quarter ending June 30, 2013, and as of the last day of each Testing Quarter thereafter, plus (ii) twenty-five percent (25.0%) of all net cash consideration received by Borrower on or after the Effective Date from the issuance and sale by Borrower of its equity securities and/or Subordinated Debt, in each case with investors acceptable to Bank.”
and inserting in lieu thereof the following:
“ 6.7 Financial Covenants . Maintain , on a consolidated basis with respect to Borrower and its Subsidiaries:
(a) Liquidity Coverage . During any Testing Period , to be tested as of the beginning of each Testing Period and as of the last day of each month during which a Testing Period was in effect, a ratio of (i) Borrower’s unrestricted and unencumbered cash at Bank plus net billed accounts receivable to (ii) the aggregate amount of outstanding Obligations of Borrower to Bank, of at least 1.50:1.0 .
(b) Intentionally Omitted .
(c) Interest Coverage Ratio . To be tested as of the last day of each quarter, an Interest Coverage Ratio of at least 2.0: 1.0. ”
15 The Loan Agreement shall be amended by deleting the following Section 6.10 (“Access to Collateral; Books and Records”) thereof, in its entirety:
7
“ 6.10 Access to Collateral; Books and Records . Upon the occurrence of the Audit Trigger Event, allow Bank, or its agents, at reasonable times, on one (1) Business Day’s notice (provided no notice is required if an Event of Default has occurred and is continuing), to inspect the Collateral and audit and copy Borrower’s Books, provided however that such inspections or audits shall be conducted no more often than once every twelve (12) months unless an Event of Default has occurred and is continuing in which case such inspections and audits shall occur as often as Bank shall determine is necessary. The foregoing inspections and audits shall be at Borrower’s expense. Borrower confirms, acknowledges and agrees that the Audit shall be completed upon the earlier to occur of (i) ninety (90) days after the Audit Trigger Event, or (ii) after the occurrence of the Audit Trigger Event, the aggregate amount of outstanding Advances exceeds Five Million Dollars ($5,000,000.00). ”
and inserting in lieu thereof the following:
“ “ 6.10 Access to Collateral; Books and Records . A llow Bank, or its agents, at reasonable times, on one (1) Business Day’s notice (provided no notice is required if an Event of Default has occurred and is continuing), to inspect the Collateral and audit and copy Borrower’s Books, provided however that such inspections or audits shall be conducted no more often than once every twelve (12) months unless an Event of Default has occurred and is continuing in which case such inspections and audits shall occur as often as Bank shall determine is necessary. The foregoing inspections and audits s hall be at Borrower’s expense. ”
16 The Loan Agreement shall be amended by deleting the following S ection 7.1 (h) thereof, in its entirety :
“ (h) Transfers of assets (other than Accounts, Inventory, and Intellectual Property), provided, that the aggregate book value of all such Transfers by Borrower and its Subsidiaries, together, shall not exceed in any fiscal year, One Hundred Fifty Thousand Dollars ($150,000.00). ”
And inserting in li e u thereof the following:
“ (h) Transfers of assets (other than Accounts, Inventory, and Intellectual Property), provided, that the aggregate book value of all such Transfers by Borrower and its Subsidiaries, together, shall not exceed in any fiscal year, Five Hundred Thousand Dollars ($50 0,000.00). ”
17 The Loan Agreement shall be amended by inserting the following new definition s to appear alphabetically in Section 13.1 thereof:
“ “ 2016 Advance ” or “ 2016 Advances ” means a revolving credit loan (or revolving credit loans) under the 2016 Revolving Line. ”
“ “ 2016 Availability Amount ” is the 2016 Revolving Line minus the outstanding principal balance of any 2016 Advances.”
“ “ 2016 Revolving Line ” is an aggregate principal amount equal to Thirty Million Dollars ($30,000,000.00).”
“ “ 2016 Revolving Line Maturity Date ” is January 29 , 2018.”
“ “ Adjusted EBITDA ” shall mean , in each case calculated on a trailing twelve (12) month basis, Borrower’s (a) Net Income, plus (b) Interest Expense, plus (c) to the extent deducted in the calculation of Net Income, depreciation
8
expense and amortization expense, plus (d) income tax expense , plus (e) non-cash stock compensation expense .”
“ “ Interest Coverage Ratio ” is, for the subject twelve (12) month period , a ratio of (a) Borrower’s (i) Adjusted EBITDA during such period , minus (ii) unfunded capital expenditures during such period , minus (ii i ) cash taxes during such period , to (b) actual interest payments on all outstanding Obligations of Borrowe r to Bank during such period . ”
“ “ Interest Expense ” means for any fiscal period, interest expense (whether cash or non-cash) determined in accordance with GAAP for the relevant period ending on such date, including, in any event, interest expense with respect to any Credit Extension and other Indebtedness of Borrower, including, without limitation or duplication, all commissions, discounts, or related amortization and other fees and charges with respect to letters of credit and bankers’ acceptance financing and the net costs associated with interest rate swap, cap, and similar arrangements, and the interest portion of any deferred payment obligation (including leases of all types). ”
“ “ Leverage Ratio ” is , for the subject twelve (12) month period , the ratio of (i) the aggregate amount of outstanding Obligations of Borrower to Bank as of the last day of such twelve (12) month period , to (ii) Borrower’s Adjusted EBITDA during such period . ”
“ “ Performance Pricing Period ” is the period of time commencing upon the first anniversary of the Second Amendment Effective Date and continuing thereafter .”
“
“
Prime Rate Margin
” is
zero percent (0.0%); provided, however, that during the Performance Pricing Period, the Prime Rate Margin is determined based upon Borrower’s Leverage Ratio for the subject
quarter
as follows:
Performance Pricing |
|
Leverage Ratio of > 2.0: 1.0 at any time during such period |
Prime Rate plus 0.25 % |
Leverage Ratio of < 2.0: 1.0 at all times during such period |
Prime Rate plus 0.0 % |
“ “ Second Amendment Effective Date ” is January 29, 2016.”
“ “ Testing Period ” is any time that the sum of Borrower’s (i) unrestricted and unencumbered cash and Cash Equivalents at Bank , plus (i i ) without duplication of (i), amounts held in securities/ investment accounts with Bank’s Affiliates that are subject to a Control Agreement , is less than Thirty M illion Dollars ($30,000,000.00).”
“ “ Unused 2016 Revolving Line Facility Fee ” is defined in Section 2.4(d).”
“
“
Unused
2016
Revolving Line Facility Fee Amount
” is a certain amount per annum of the average unused portion of the 2016 Revolving Line, with respect to the applicable quarter of the 2016 Revolving Line, based upon the outstanding 2016 Advances for the subject quarter as follows:
Unused 2016 Revolving Line Percent Per Annum |
|
2016 Advances > $ 1 5,000,000 .00 at all times during such quarter |
0.0 % |
2016 Advances < $ 1 5,000,000 .00 at any time during such quarter |
0.2 5% |
9
18 The Loan Agreement shall be amended by deleting the following definitions appearing in Section 13.1 thereof:
“ “ Credit Extension ” is any Advance, Overadvance, Equipment Advance, the First Equipment Advance Loan , the Second Equipment Advance Loan , the Third Equipment Advance Loan , or any other extension of credit by Bank for Borrower’s benefit.”
“ “ Interest Period ” means, as to any LIBOR Advance, the period commencing on the date of such LIBOR Advance, or on the conversion/continuation date on which the LIBOR Advance is converted into or continued as a LIBOR Advance, and ending on the date that is one, two, or three months thereafter, in each case as Borrower may elect in the applicable Notice of Borrowing or Notice of Conversion/Continuation; provided, however , that (a) no Interest Period with respect to any LIBOR Advance shall end later than the Revolving Line Maturity Date, (b) the last day of an Interest Period shall be determined in accordance with the practices of the LIBOR interbank market as from time to time in effect, (c) if any Interest Period would otherwise end on a day that is not a Business Day, that Interest Period shall be extended to the following Business Day unless, in the case of a LIBOR Advance, the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the preceding Business Day, (d) any Interest Period pertaining to a LIBOR Advance that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period, and (e) interest shall accrue from and include the first Business Day of an Interest Period but exclude the last Business Day of such Interest Period.”
“ “ LIBOR ” means, for any Interest Rate Determination Date with respect to an Interest Period for any Advance to be made, continued as or converted into a LIBOR Advance, the rate of interest per annum determined by Bank to be the per annum rate of interest at which deposits in Dollars are offered to Bank in the London interbank market (rounded upward, if necessary, to the nearest 0.0001%) in which Bank customarily participates at 11:00 a.m. (local time in such interbank market) two (2) Business Days prior to the first day of such Interest Period for a period approximately equal to such Interest Period and in an amount approximately equal to the amount of such Advance.”
“ “ LIBOR Advance ” means an Advance that bears interest based at the LIBOR Rate.”
“ “ LIBOR Rate ” means, for each Interest Period in respect of LIBOR Advances comprising part of the same Advances, an interest rate per annum (rounded upward, if necessary, to the nearest 0.0001%) equal to LIBOR for such Interest Period divided by one (1) minus the Reserve Requirement for such Interest Period . ”
“ “ LIBOR Rate Margin ” is two and one half of one percent (2.50%).
10
“ “ Maturity Date ” is the Revolving Line Maturity Date, Equipment Maturity Date, First Equipment Maturity Date , Second Equipment Maturity Date , and Third Equipment Maturity Date , as applicable.”
“ “ Obligations ” are Borrower’s obligations to pay when due any debts, principal, interest, fees, Bank Expenses, the Anniversary Fee, the Unused Revolving Line Facility Fee, and other amounts Borrower owes Bank now or later, whether under this Agreement, the other Loan Documents, or otherwise, including, without limitation, any interest accruing after Insolvency Proceedings begin and debts, liabilities, or obligations of Borrower assigned to Bank, and to perform Borrower’s duties under the Loan Documents. ”
“ “ Permitted Acquisition s ” means the acquisition by Borrower of all or substantially all of the assets of another company or companies (collectively, the “ Target ”), provided that (a) Target is engaged in a similar line of business as Borrower both prior to and after giving effe ct to such acquisition, (b) such acquisition is non-hostile in nature, (c) no Event of Default has occurred and is continuing or would exist after giving effe ct to such acquisition, (d) Borrower provides evidence to Bank acceptable to Bank in its sole and absolute discretion that Borrower is and shall be in compliance with the terms of this Agreement both prior to and after giving effe ct to such acquisition, (e) such acquisition is consummated within a reasonable amount of time, as determined by Bank in its sole and absolute discretion, (f) Borrower provides evidence to Bank, acceptable to Bank in its sole and absolute discretion, that immediately before giving effe ct to such acquisition, that Borrower shall have unrestricted and unencumbered cash in accounts with Bank or Bank’s Affiliates in an amount of at least Eight Million Dollars ($8,000,000.00) and Borrower shall provide evidence to Bank, acceptable to Bank in its sole and absolute discretion, that immediately after giving effe ct to such acquisition, that Borrower shall have unrestricted and unencumbered cash in accounts with Bank or Bank’s Affiliates in an amount of at least Eight Million Dollars ($8,000,000.00), (g) within thirty (30) days after giving effe ct to such acquisition, upon request of Bank, Borrower shall (i) cause Target to become a co-borrower hereunder and provide to Bank such appropriate financing statements and/or Control Agreements, all in form and substance satisfactory to Bank (including being sufficient to grant Bank a first priority Lien (subject to Permitted Liens) in and to the assets of Target), ( ii ) provide to Bank appropriate certificates and powers and financing statements, pledging all of the direct or beneficial ownership interest in Target, in form and substance satisfactory to Bank, and ( iii ) provide to Bank all other documentation in form and substance satisfactory to Bank, including one or more opinions of counsel satisfactory to Bank, which in its opinion is appropriate with respect to the execution and delivery of the applicable documentation referred to above, (h) Borrower remains a separate legal entity following the transactions in connection with and contemplated by such acquisition, (i ) prior to the consummation of such acquisition , Borrower delivers to Bank evidence that the assets of Target a re free and clear of all Liens , and (j) no Indebtedness, other than Permitted Indebtedness, shall be assumed or incurred by Borrower in connection with such acquisition . ”
“
“
Prime Rate Advance
” means an Advance that bears interest based at the Prime Rate.”
“
“
Reserve Requirement
” means, for any Interest Period, the average maximum rate at which reserves (including any marginal, supplemental, or emergency reserves) are required to be maintained during such Interest Period under Regulation D against “Eurocurrency liabilities” (as such term is used in Regulation D) by member banks of the Federal Reserve System. Without
11
limiting the effect of the foregoing, the Reserve Requirement shall reflect any other reserves required to be maintained by Bank by reason of any Regulatory Change against (a) any category of liabilities which includes deposits by reference to which the LIBOR Rate is to be determined as provided in the definition of LIBOR or (b) any category of extensions of credit or other assets which include Advances.”
and inserting in lieu thereof the following:
“ “ Credit Extension ” is any 2016 Advance, Advance, Overadvance, Equipment Advance, the First Equipment Advance Loan , the Second Equipment Advance Loan , the Third Equipment Advance Loan , or any other extension of credit by Bank for Borrower’s benefit.
“ “ Interest Period ” means, as to any LIBOR Advance, the period commencing on the date of such LIBOR Advance, or on the conversion/continuation date on which the LIBOR Advance is converted into or continued as a LIBOR Advance, and ending on the date that is one, two, or three months thereafter, in each case as Borrower may elect in the applicable Notice of Borrowing or Notice of Conversion/Continuation; provided, however , that (a) no Interest Period with respect to any LIBOR Advance shall end later than the 2016 Revolving Line Maturity Date, (b) the last day of an Interest Period shall be determined in accordance with the practices of the LIBOR interbank market as from time to time in effect, (c) if any Interest Period would otherwise end on a day that is not a Business Day, that Interest Period shall be extended to the following Business Day unless, in the case of a LIBOR Advance, the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the preceding Business Day, (d) any Interest Period pertaining to a LIBOR Advance that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period, and (e) interest shall accrue from and include the first Business Day of an Interest Period but exclude the last Business Day of such Interest Period.”
“ “ LIBOR ” means, for any Interest Rate Determination Date with respect to an Interest Period for any 2016 Advance to be made, continued as or converted into a LIBOR Advance, the rate of interest per annum determined by Bank to be the per annum rate of interest at which deposits in Dollars are offered to Bank in the London interbank market (rounded upward, if necessary, to the nearest 0.0001%) in which Bank customarily participates at 11:00 a.m. (local time in such interbank market) two (2) Business Days prior to the first day of such Interest Period for a period approximately equal to such Interest Period and in an amount approximately equal to the amount of such 2016 Advance.”
“ LIBOR Advance ” means a 2016 Advance that bears interest based at the LIBOR Rate plus the LIBOR Rate Margin . ”
“ “ LIBOR Rate ” means, for each Interest Period in respect of LIBOR Advances comprising part of the same 2016 Advances, an interest rate per annum (rounded upward, if necessary, to the nearest 0.0001%) equal to LIBOR for such Interest Period divided by one (1) minus the Reserve Requirement for such Interest Period.”
12
“
“
LIBOR Rate Margin
” is two and one half of one percent (2.50%); provided, however, that during the Performance Pricing Period, the LIBOR Rate Margin is determined based upon Borrower’s Leverage Ratio for the subject
quarter
as follows:
Performance Pricing |
|
Leverage Ratio of > 2.0: 1.0 at any time during such period |
LIBOR Rate plus 2.75 % |
Leverage Ratio of < 2.0: 1.0 at all times during such period |
LIBOR Rate plus 2.50 % |
“ “ Maturity Date ” is the 2016 Revolving Line Maturity Date, the Revolving Line Maturity Date, Equipment Maturity Date, First Equipment Maturity Date , Second Equipment Maturity Date , and Third Equipment Maturity Date , as applicable. ”
“ “ Obligations ” are Borrower’s obligations to pay when due any debts, principal, interest, fees, Bank Expenses, the Anniversary Fee, the Unused 2016 Revolving Line Facility Fee, and other amounts Borrower owes Bank now or later, whether under this Agreement, the other Loan Documents, or otherwise, including, without limitation, any interest accruing after Insolvency Proceedings begin and debts, liabilities, or obligations of Borrower assigned to Bank, and to perform Borrower’s duties under the Loan Documents. ”
“ “ Permitted Acquisitions ” means the acquisition by Borrower of all or substantially all of the assets of another company or companies (collectively, the “ Target ”), provided that (a) Target is engaged in a similar line of business as Borrower both prior to and after giving effect to such acquisition, (b) such acquisition is non-hostile in nature, (c) no Event of Default has occurred and is continuing or would exist after giving effect to such acquisition, (d) Borrower provides evidence to Bank acceptable to Bank in its sole and absolute discretion that Borrower is and shall be in compliance with the terms of this Agreement both prior to and after giving effect to such acquisition, (e) such acquisition is consummated within a reasonable amount of time, as determined by Bank in its sole and absolute discretion, (f) Borrower shall provide evidence to Bank, acceptable to Bank in its sole and absolute discretion, that immediately after giving effect to such acquisition, that Borrower shall have (i) unrestricted and unencumbered cash and Cash Equivalents in accounts with Bank or Bank’s Affiliates , plus (ii) without duplication of (i), amounts held in securities/investment accounts with Bank’s Affiliates that are subject to a Control Agreement , plus ( ii i) the unused Availability Amount on the 2016 Revolving Line , in an amount of at least Thirty Million Dollars ($ 30 ,000,000.00) ( without taking into account the amount of any potential earn-out payments pursuant to such acquisition) , ( g) within thirty (30) days after giving effect to such acquisition, upon request of Bank, Borrower shall (i) cause Target to become a co-borrower hereunder and provide to Bank such appropriate financing statements and/or Control Agreements, all in form and substance satisfactory to Bank (including being sufficient to grant Bank a first priority Lien (subject to Permitted Liens) in and to the assets of Target), (ii) provide to Bank appropriate certificates and powers and financing statements, pledging all of the direct or beneficial ownership interest in Target, in form and substance satisfactory to Bank, and (iii) provide to Bank all other documentation in form and substance satisfactory to Bank, including one or more opinions of counsel satisfactory to Bank, which in its opinion is appropriate with respect to the execution and delivery of the
13
applicable documentation referred to above, ( h ) Borrower remains a separate legal entity following the transactions in connection with and contemplated by such acquisition, ( i ) prior to the consummation of such acquisition, Borrower delivers to Bank evidence that the assets of Target are fre e and clear of all Liens, and (j ) no Indebtedness, other than Permitted Indebtedness, shall be assumed or incurred by Borrower in connection with such acquisition. ”
“ “ Prime Rate Advance ” means a 2016 Advance that bears interest based at the Prime Rate plus the Prime Rate Margin .”
“ “ Reserve Requirement ” means, for any Interest Period, the average maximum rate at which reserves (including any marginal, supplemental, or emergency reserves) are required to be maintained during such Interest Period under Regulation D against “Eurocurrency liabilities” (as such term is used in Regulation D) by member banks of the Federal Reserve System. Without limiting the effect of the foregoing, the Reserve Requirement shall reflect any other reserves required to be maintained by Bank by reason of any Regulatory Change against (a) any category of liabilities which includes deposits by reference to which the LIBOR Rate is to be determined as provided in the definition of LIBOR or (b) any category of extensions of credit or other assets which include 2016 Advances. ”
19 The Loan Agreement shall be amended by deleting the following definition s app earing in Section 13.1 thereof:
“ “ Audit Trigger Event ” means the date on which an Advance request has been made or Advances are outstanding, p rovided however that the Audit Trigger Event shall not include any Advance requests that are made or Advances that are outstanding within five (5) days prior to and within five (5) days after any fiscal quarter end of Borrower. ”
“ “ Borrowing Base Report ” is defined in Section 6.2(a). ”
“ “ Borrowing Base Trigger Event ” means the first date on which the aggregate amount of outstanding Advances exceeds Five Million Dollars ($5,000,000).”
“ “ Unused Revolving Line Facility Fee ” is defined in Section 2.4(d).”
20 The Form of Notice of Borrowing appearing as Exhibit B to the Loan Agreement is hereby replaced with the Form of Notice of Borrowing attached as Schedule 1 hereto.
21 The Form of Notice of Conversion/Continuation appearing as Exhibit C to the Loan Agreement is hereby replaced with the Form of Notice of Conversion/Continuation attached as Schedule 2 hereto.
22 The Compliance Certificate appearing as Exhibit E to the Loan Agreement is hereby replaced with the Compliance Certificate attached as Schedule 3 hereto.
23 The Loan Payment/Advance Request Form appearing as Exhibit F to the Loan Agreement is hereby replaced with the Loan Payment/Advance Request Form attached as Schedule 4 hereto.
4. FEES . Borrower shall pay to Bank a 2016 Revolving Line commitment fee equal to Seventy-Five Thousand Dollars ($ 75,000.00 ), which fee shall be due on the date hereof and shall be deemed fully ear ned as of the
14
date hereof. Borrower shall also reimburse Bank for all legal fees and expenses incurred in connection with this amendment to the Existing Loan Documents.
5. UPDATED PERFECTION CERTIFICATE . Borrower has delivered an updated Perfection Certificate in connection with this Loan Modification Agreement (the “ Updated Perfection Certificate ”) dated as of the Second Amendment Effective Date , which Updated Perfection Certificate shall supersede in all respects that certain Perfection Certificate dated as of June 26, 2013 . Borrower agrees that all references in the Loan Agreement to “Perfection Certificate” shall hereinafter be deemed to be a reference to the Updated Perfection Certificate.
6. CONSISTENT CHANGES . The Existing Loan Documents are hereby amended wherever necessary to reflect the changes described above.
7. RATIFICATION OF LOAN DOCUMENTS . Borrower hereby ratifies, confirms, and reaffirms all terms and conditions of all security or other collateral granted to the Bank, and confirms that the indebtedness secured thereby includes, without limitation, the Obligations.
8. NO DEFENSES OF BORROWER . Borrower hereby acknowledges and agrees that Borrower has no offsets, defenses, claims, or counterclaims against Bank with respect to the Obligations, or otherwise, and that if Borrower now has, or ever did have, any offsets, defenses, claims, or counterclaims against Bank, whether known or unknown, at law or in equity, all of them are hereby expressly WAIVED and Borrower hereby RELEASES Bank from any liability thereunder.
9. CONTINUING VALIDITY . Borrower understands and agrees that in modifying the existing Obligations, Bank is relying upon Borrower’s representations, warranties, and agreements, as set forth in the Existing Loan Documents. Except as expressly modified pursuant to this Loan Modification Agreement, the terms of the Existing Loan Documents remain unchanged and in full force and effect. Bank’s agreement to modifications to the existing Obligations pursuant to this Loan Modification Agreement in no way shall obligate Bank to make any future modifications to the Obligations. Nothing in this Loan Modification Agreement shall constitute a satisfaction of the Obligations. It is the intention of Bank and Borrower to retain as liable parties all makers of Existing Loan Documents, unless the party is expressly released by Bank in writing. No maker will be released by virtue of this Loan Modification Agreement.
10. COUNTERSIGNATURE . This Loan Modification Agreement shall become effective only when it shall have been executed by Borrower and Bank .
[The remainder of this page is intentionally left blank]
15
This Loan Modification Agreement is executed as of the date first written above.
|
|
|
|
|
BORROWER: |
|
BANK: |
||
CONTROL4 CORPORATION |
|
SILICON VALLEY BANK |
||
By: |
/s/Mark Novakovich |
|
By: |
/s/ Jason Davis |
Name: |
Mark Novakovich |
|
Name: |
Jason Davis |
Title: |
CFO |
|
Title: |
Vice President |
16
Schedule 1
EXHIBIT B
To:
Silicon Valley Bank
3003 Tasman Drive
Santa Clara, CA 95054
Attention: Corporate Services Department
Re : Amended and Restated Loan and Security Agreement dated as of June 26 , 2013 (as amended, modified, supplemented or restated from time to time, the “ Loan Agreement ”), by and between SILICON VALLEY BANK , a California corporation with a loan production office located at 2755 East Cottonwood Parkway, Suite 540, Salt Lake City, Utah 84121 (“ Bank ”), and CONTROL 4 CORPORATION , a Delaware corporation (“ Borrower ”)
The undersigned refers to the Loan Agreement, the terms defined therein and used herein as so defined, and hereby gives you notice irrevocably, pursuant to Section 3.4 of the Loan Agreement, of the borrowing of a 2016 Advance.
The Funding Date 1 , which shall be a Business Day, of the requested borrowing is _______________.
The aggregate amount of the requested 2016 Advance is $_____________.
The requested 2016 Advance shall consist of $___________ of Prime Rate Advances and $__________ of LIBOR Advances.
The duration of the Interest Period for the LIBOR Advances included in the requested 2016 Advance shall be __________ months.
The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the proposed 2016 Advance before and after giving effect thereto, and to the application of the proceeds therefrom, as applicable:
(a) all representations and warranties of Borrower contained in the Loan Agreement are true, accurate and complete in all material respects as of the date hereof; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date;
(b) no Event of Default has occurred and is continuing, or would result from such proposed 2016 Advance; and
(c) the requested 2016 Advance will not cause the aggregate principal amount of the outstanding 2016 Advances to exceed, as of the designated Funding Date, the 2016 Availability Amount.
1 2016 Advance requests for LIBOR Advances must be submitted by 12:00 pm Pacific time at least three (3) Business Days prior to Funding Date. 2016 Advance requests for Prime Rate Advances must be submitted by 12:00 pm Pacific time on the Funding Date.
LIBOR Pricing Date |
LIBOR |
LIBOR Variance |
Maturity Date |
|
|
____% |
|
2
Schedule 2
FORM OF NOTICE OF CONVERSION/CONTINUATION
To:
Silicon Valley Bank
3003 Tasman Drive
Santa Clara, CA 95054
Attention: Corporate Services Department
Re : Amended and Restated Loan and Security Agreement dated as of June 26, 2013 (as amended, modified, supplemented or restated from time to time, the “ Loan Agreement ”), by and between SILICON VALLEY BANK , a California corporation with a loan production office located at 2755 East Cottonwood Parkway, Suite 540, Salt Lake City, Utah 84121 (“ Bank ”), and CONTROL 4 CORPORATION , a Delaware corporation (“ Borrower ”)
The undersigned refers to the Loan Agreement, the terms defined therein being used herein as therein defined, and hereby gives you notice irrevocably, pursuant to Section 3.4 of the Loan Agreement, of the [conversion] [continuation] of the 2016 Advances specified herein, that:
1. The date of the [conversion] [continuation] is , 20___.
2. The aggregate amount of the proposed 2016 Advances to be [converted] is $ or [continued] is $ .
3. The 2016 Advances are to be [converted into] [continued as] [LIBOR] [Prime Rate] Advances.
4. The duration of the Interest Period for the LIBOR Advances included in the [conversion] [continuation] shall be months.
The undersigned, on behalf of Borrower, hereby certifies that the following statements are true on the date hereof, and will be true on the date of the proposed [conversion] [continuation], before and after giving effect thereto and to the application of the proceeds therefrom:
(a) all representations and warranties of Borrower stated in the Loan Agreement are true, accurate and complete in all material respects as of the date hereof; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date;
(b) no Event of Default has occurred and is continuing, or would result from such proposed [conversion] [continuation]; and
(c) the requested [conversion] [continuation] will not cause the aggregate principal amount of the outstanding 2016 Advances to exceed, as of the designated Funding Date, the 2016 Availability Amount.
1
Borrower: |
|
CONTROL 4 CORPORATION |
|
By: |
|
Name: |
|
Title: |
|
LIBOR Pricing Date |
LIBOR |
LIBOR Variance |
Maturity Date |
|
|
____% |
|
2
Schedule 3
EXHIBIT E
COMPLIANCE CERTIFICATE
|
|
|
|
|
TO: |
SILICON VALLEY BANK |
|
Date: |
|
FROM: CONTROL4 CORPORATION |
The undersigned authorized officer of CONTROL4 CORPORATION (“Borrower”) certifies that under the terms and conditions of the Amended and Restated Loan and Security Agreement between Borrower and Bank (the “Agreement”):
(1) Borrower is in complete compliance for the period ending _______________ with all required covenants except as noted below; (2) there are no Events of Default; (3) all representations and warranties in the Agreement are true and correct in all material respects on this date except as noted below; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date ; (4) Borrower, and each of its Subsidiaries, has timely filed all required tax returns and reports, and Borrower has timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower except as otherwise permitted pursuant to the terms of Section 5.9 of the Agreement; and (5) no Liens have been levied or claims made against Borrower or any of its Subsidiaries relating to unpaid employee payroll or benefits of which Borrower has not previously provided written notification to Bank.
Attached are the required documents supporting the certification. The undersigned certifies that these are prepared in accordance with GAAP consistently applied from one period to the next except as explained in an accompanying letter or footnotes. The undersigned acknowledges that no borrowings may be requested at any time or date of determination that Borrower is not in compliance with any of the terms of the Agreement, and that compliance is determined not just at the date this certificate is delivered. Capitalized terms used but not otherwise defined herein shall have the meanings given them in the Agreement.
Financial Covenants |
Required |
Actual |
Complies |
|
|
|
|
Maintain |
|
|
|
Liquidity ( during Testing Period only ) ( tested as of beginning of Testing Period and mont h ly thereafter ) |
1.50:1.0 |
_____:1.0 |
Yes No |
Interest Coverage Ratio ( tested quarterly ) |
2.0:1.0 |
_____:1.0 |
Yes No |
1
Performance Pricing * |
|
||
|
LIBOR Advance |
Primate Rate Advance |
Applies |
Leverage Ratio > 2.0:1.0 at any time during such period |
LIBOR Rate plus 2.75 % |
Prime Rate plus 0.25 % |
Yes No |
Leverage Ratio < 2.0:1.0 at all times during such period |
LIBOR Rate plus 2.50 % |
Prime Rate plus 0.0 % |
Yes No |
*Available after first anniversary of Second Amendment Effective Date
The following financial covenant analyses and information set forth in Schedule 1 attached hereto are true and accurate as of the date of this Certificate.
Other Matters
Have there been any amendments of or other changes to the capitalization table of Borrower and to the Operating Documents of Borrower or any of its Subsidiaries? If yes, provide copies of any such amendments or changes with this Compliance Certificate. |
Yes |
No |
The following are the exceptions with respect to the certification above: (If no exceptions exist, state “No exceptions to note.”)
2
Schedule 1 to Compliance Certificate
Financial Covenants of Borrower
In the event of a conflict between this Schedule and the Loan Agreement, the terms of the Loan Agreement shall govern.
Dated: ____________________
I. Liquidity Coverage (Section 6.7(a))
Required: During any Testing Period, to be tested as of the beginning of each Testing Period and as of the last day of each month during which a Testing Period was in effect, a ratio of (i) Borrower’s unrestricted and unencumbered cash at Bank plus net billed accounts receivable to (ii) the aggregate amount of outstanding Obligations of Borrower to Bank, of at least 1.50:1.0 .
Actual: _____:1.0
|
|
|
|
A. |
Aggregate value of Borrower’s unrestricted and unencumbered cash at Bank |
$ |
|
B. |
Aggregate value of Borrower’s net billed accounts receivable |
$ |
|
C. |
Sum of Line A plus Line B |
$ |
|
D. |
Aggregate amount of outstanding O bligations of Borrower to Bank |
$ |
|
E. |
Liquidity Coverage (line C divided by line D) |
$ |
|
Is line E e qual to or greater than 1.50:1: 0?
|
|
|
|
|
|
|
|
|
|
|
No, not in compliance |
|
|
Yes, in compliance |
I I. Interest Coverage Ratio (Section 6.7(c ))
Required: To be tested as of the last day of each quarter, an Interest Coverage Ratio of at least 2.0:1.0 .
Actual: _____:1.0
|
|
|
|
A. |
Adjusted EBITDA (during subject twelve (12) month period) |
$ |
|
B. |
Unfunded capital expenditures (during subject twelve (12) month period) |
$ |
|
C. |
Cash taxes (during subject twelve (12) month period) |
$ |
|
D. |
Line A minus Line B minus Line C |
$ |
|
E. |
A ctual interest payments on all outstanding Indebtedness of Borrower (during subject twelve (12) month period) |
$ |
|
F. |
Interest Coverage Ratio (line D divided by line E) |
|
|
3
Is line F equal to or greater than 2.0:1:0?
|
|
|
|
|
|
|
|
|
|
|
No, not in compliance |
|
|
Yes, in compliance |
4
Schedule 4
EXHIBIT F – LOAN PAYMENT/ADVANCE REQUEST FORM
Deadline for same day processing is Noon Pacific Time 2
* Unless otherwise provided for a 2016 Advance bearing interest at LIBOR.
Control4 Annou nces Financial Results for Fourth Quarter and Fiscal Year 2015
SALT LAKE CITY — Feb. 4, 2016 4 :05 PM EST — Control4 Corporation (NASDAQ: CTRL), a leading global provider of smart home solutions, today announced financial results for its fourth quarter and fiscal year ended December 31 , 2015.
Revenue for the fourth quarter of 2015 was $ 42.9 milli on, compared to revenue of $41.2 million for the fourth quarter of 2014, representing a year-over-year growth rate for the quarter of 4 %. R evenue for the twelve months ended December 31, 2015 was $ 163. 2 million , representing a 10 % increase from $148.8 million for the twelve months ended December 31, 2014 .
Net loss for the fourth quarter o f 2015 was $ 0.7 million, or $ (0.03) per diluted share , compared to net income of $3.9 million, or $0.15 per diluted share, in the fourth quarter of 2014. Net loss for the twelve months ended December 31, 2015 was $ 1.7 million, or $ (0.07) per diluted sha re, compared to net income of $8.2 million, or $0.32 per diluted share, for the twelve months ended December 31 , 2014.
N on-GAAP net income for th e fourth quarter of 2015 was $ 1.6 million, or $0.07 per diluted share, compa red to non-GAAP net income of $ 5.4 million, or $0. 21 per diluted share, in the fourth quarter of 2014. Non-GAAP net income for the twelve months ended December 31, 2015 was $8.3 million, or $ 0.33 per diluted share, co mpared to non-GAAP income of $ 14.0 million, or $ 0.55 per diluted share, for the twelve months ended December 31, 2014 . A reconciliation of GAAP to non-GAAP financial information is contained in the attached tables.
Unrestricted cash and net investments decreased by $3.4 million to $81 .0 million as of December 31, 2015, compared to $84.4 million on September 30, 2015. Excluding the $4.1 million in cash used to repurchase Control4 shares, cash genera ted du ring the fourth quarter was $ 0 .7 million.
“ Expanded product development , marketing , and sales presence in 2015 has set the stage for a stronger 2016 ,” said Martin Plaehn, chairman and chief executive officer of Control4. “ Our new Q4 products are running in tens-of-thousands of homes , and our worldwide dealer network is enthusiastically embracing our newest EA-Series Controllers that we announced and began shipping in January 2016 – all the result of the foundational investments we made during 2015 . ”
Commenting on the company’s financial results for the fourth quarter, Mark Novakovich, chief financial officer of Control4, added: “ 2015 was a significant investment year in both product development and sales & marketing , and we plan to hold operating expense s at these levels with the intent to significantly improve profitably and cash-flow as revenue growth is delivered in 2016 .”
Control4 Announces Fourth Quarter and Fiscal 2015 Financial Results
2016 Guidance
Control4 announced that it expects its Q1 2016 revenue to be between $38.5 million and $41.5 million, including two months of contribution from Pakedge Device & Software (Pakedge), which the Company announced today it acquired on January 29, 2016. Control4 further expects non-GAAP net income for the quarter to be between a net loss of $0.9 million and net income of $0.9 million, or between $(0.04) and $0.04 per diluted share. Control4 indicated that Q1 is the seasonally lowest revenue quarter for both its historical business and that of Pakedge. The Company anticipates that it will incur incremental operating expenses during the expected 3-5 months of Pakedge integration, but once that is completed, the Company expects to benefit from operating synergies, resulting in improved operating margins compared to historical operating margins of the Pakedge business.
For the full year 2016, Control4 expect s revenue to be between $ 198 million and $ 202 million , which includes 11 months of revenue contribution from Pakedge. Control4 also expect s its non-GAAP Net Income for the full year to be between $ 16 and 18 million, with earnings per share of between $0. 67 and $0. 76 .
Operational Metrics
|
|
|
|
|
|
|
|
Revenue ($ mm) |
|
4Q 2015 |
|
3Q 2015 |
|
4Q 2014 |
|
|
|
|
|
|
|
|
|
North America Core Revenue |
|
|
|
|
|
|
|
International Core Revenue |
|
|
|
|
|
|
|
Other Revenue 1 |
|
|
|
|
|
|
|
Total Revenue |
|
|
|
|
|
|
|
1 Primarily consist s of Hospitality Revenue
|
|
|
|
|
|
|
|
|
|
Q4 2015 |
|
3Q 2015 |
|
Q4 2014 |
|
Dealer Adds |
|
|
|
|
|
|
|
North America |
|
|
|
|
|
|
|
International |
|
|
|
|
|
|
|
Total Dealer Adds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Active Dealers |
|
|
|
|
|
|
|
North America |
|
|
|
|
|
|
|
International |
|
|
|
|
|
|
|
Total Active Dealers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Dealers |
|
|
|
|
|
|
|
North America |
|
|
|
|
|
|
|
International |
|
|
|
|
|
|
|
Total Dealers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Controller Shipments |
|
|
|
|
|
|
|
2
Control4 Announces Fourth Quarter and Fiscal 2015 Financial Results
Conference Call
On February 4, 2016 , Control4 Corporation (NASDAQ: CTRL) will host an investor conference call and will webcast the event beginning at 3:00 p.m. Mountain Time (5:00 p.m. Eastern Time). To access the conference call, dial 719-325-2177 or 888-438-5448 (toll free) and enter passcode 489225.
The webcast and replay will be accessible on Control4’s investor relations website at http://investor.control4.com/ . A replay of the conference call will be available within two hours of the conclusion of the conference through February 18, 2016. To access the replay, please dial 719-457-0820 or 888-203-1112 and enter passcode 489225.
About Control4 Corporation:
Control4 [NASDAQ:CTRL] is a leading provider of automation systems for homes and businesses, offering personalized control of lighting, music, video, temperature, security, communications and similar functionalities into a unified home automation solution that enhances the daily lives of its customers. Control4 unlocks the potential of connected devices, making entertainment systems easier to use, homes more comfortable and energy efficient, and families more secure. More than 75% of Control4's consumers have integrated two or more functionalities with Control4's solution, which is available through more than 3, 600 custom integrators, retail outlets, and distributors in over 90 countries. By delivering insightfully simple control solutions that enhance the lives of individuals and families, Control4 is the automation platform of choice for consumers, major consumer electronics companies, hotels, and businesses around the world.
Copyright © 201 6 Control4 Corporation. All rights reserved. Control4 and the Control4 logo are registered trademarks ofControl4 Corporation in the United States and/or other countries. Other names or brands may be claimed as the property of others. All specifications subject to change without notice.
Forward-Looking Statements
This press release contains "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to, statements regarding Control4's possible future products and financial outlook. All statements other than statements of historical fact contained in this press release are forward-looking statements. These forward-looking statements are made as of the date they were first issued, and were based on the then-current expectations, estimates, forecasts, and projections, as well as the beliefs and assumptions of management. Forward-looking statements are subject to a number of risks and uncertainties, many of which involve factors or circumstances that are beyond Control4's control. Control4's actual results could differ materially from those stated or implied in forward-looking statements due to a number of factors, including but not limited to, risks detailed in Control4's most recent Annual Report on Form 10-K and subsequent reports filed with the Securities and Exchange Commission, as well as other documents
3
Control4 Announces Fourth Quarter and Fiscal 2015 Financial Results
that may be filed by the company from time to time with the Securities and Exchange Commission. Past performance is not necessarily indicative of future results. The forward-looking statements included in this press release represent Control4's views as of the date of this press release. The company anticipates that subsequent events and developments may cause its views to change. Control4 has no intention and undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. These forward-looking statements should not be relied upon as representing Control4's views as of any date subsequent to the date of this press release.
Non-GAAP Financial Measures
Control4’s stated results include certain non-GAAP financial measures, including non-GAAP gross margin, non-GAAP gross margin percentage, non-GAAP income from operations, non-GAAP operating income percentage, non-GAAP net income, non-GAAP net income per diluted share, and net investments. Non-GAAP gross margin exclude s non-cash expenses related to stock - based compensation, amortization of intangible assets, and acquisition-related costs . We further exclude expenses related to litigation settlements from non-GAAP income from operations and non-GAAP net income .
Management believes that it is useful to exclude stock-based compensation expense because the amount of such expense in any specific period may not directly correlate to the underlying performance of the business operations.
The Company has recently completed acquisitions which resulted in operating expenses that would not have otherwise been incurred. Management has provided supplementary non-GAAP financial measures, which exclude acquisition-related expense items resulting from acquisitions, to allow more accurate comparisons of the financial results to historical operations, forward-looking guidance and the financial results of less acquisitive peer companies. Management considers these types of costs and adjustments, to a great extent, to be unpredictable and dependent on a significant number of factors that are outside of the Company’s control. Furthermore, the Company does not consider these acquisition-related costs and adjustments to be related to the organic continuing operations of the acquired businesses and are generally not relevant to assessing or estimating the long-term performance of the acquired assets. In addition, the size, complexity and/or volume of past acquisitions, which often drives the magnitude of acquisition-related costs, may not be indicative of the size, complexity and/or volume of future acquisitions. By excluding acquisition-related costs and adjustments from the non-GAAP measures, management is better able to evaluate the ability to utilize its existing assets and estimate the long-term value that acquired assets will generate. The Company believes that providing a supplemental non-GAAP measure which excludes these items allows management and investors to consider the ongoing operations of the business both with, and without, such expenses.
These acquisition-related costs are included in the following categories: (i) professional service fees, recorded in operating expenses, which include third - party costs related to the acquisition, and legal and other professional service fees associated with diligence, entity formation and corporate structuring, disputes and regulatory matters related to acquired entities, (ii) transition and integration costs, recorded in operating expenses, which include retention payments, transitional employee costs, earn-out payments treated as compensation expense, as well as the costs of integration-related services provided by third parties, and (iii) acquisition-related adjustments which include adjustments to acquisition-related items such as being required to record acquired inventory at its fair value, resulting in a step-up in the inventory value. The step-up is recorded through cost of goods sold when the
4
Control4 Announces Fourth Quarter and Fiscal 2015 Financial Results
inventory is sold, resulting in a negative impact to our gross margin. Although these expenses are not recurring with respect to past acquisitions, the Company will generally incur these expenses in connection with any future acquisitions.
The Company excludes the amortization of acquired intangible assets from non-GAAP measures. These amounts are inconsistent in amount and frequency and are significantly impacted by the timing and size of acquisitions. Providing a supplemental measure which excludes these charges allows management and investors to evaluate results “as-if” the acquired intangible assets had been developed internally rather than acquired. Although the Company excludes amortization of acquired intangible assets from non-GAAP measures, management believes that it is important for investors to understand that such intangible assets contribute to revenue generation. Amortization of intangible assets that relate to past acquisitions will recur in future periods until such intangible assets have been fully amortized. Future acquisitions may result in the amortization of additional intangible assets.
Furthermore, we believe it is useful to exclude expenses related to litigation settlements because of the variable and unpredictable nature of these expenses which are not indicative of past or future operating performance. We believe that past and future periods are more comparable if we exclude those expenses.
Management provides a non-GAAP measure representing the fair market value of the available-for-sale investments. We account for purchases and sales of investments on a trade-date basis. This is a non-GAAP measure representing the fair market value of our available-for-sale investments on a settlement date basis because from time to time, the investment trade date and the investment settlement date will cross a reporting period. We believe presentation of our investments on a settlement date basis is relevant to readers of our financial statements.
Management believes these adjustments provide useful comparative information to investors. Non-GAAP results are presented for supplemental informational purposes only for understanding the operating results. The non-GAAP results should not be considered a substitute for financial information presented in accordance with generally accepted accounting principles, and may be different from non-GAAP measures used by other companies. The non-GAAP financial measures may not provide information that is directly comparable to that provided by other companies in the industry, as other companies in the industry may calculate non-GAAP financial results differently, particularly related to non-recurring, unusual items. Management urges investors to review the reconciliation of non-GAAP financial measures to the comparable GAAP financial measures included below, and not to rely on any single financial measure to evaluate the business.
5
Control4 Announces Fourth Quarter and Fiscal 2015 Financial Results
CONTROL4 CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
|
|
|
|
|
|
|
|
|
|
December 31, |
|
December 31, |
|
||
|
|
2014 |
|
2015 |
|
||
|
|
(unaudited) |
|
||||
Assets |
|
|
|
|
|
||
Current assets: |
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
|
|
$ |
|
|
Restricted cash |
|
|
|
|
|
|
|
Short-term investments |
|
|
|
|
|
|
|
Accounts receivable, net |
|
|
|
|
|
|
|
Inventories |
|
|
|
|
|
|
|
Prepaid expenses and other current assets |
|
|
|
|
|
|
|
Total current assets |
|
|
|
|
|
|
|
Property and equipment, net |
|
|
|
|
|
|
|
Long-term investments |
|
|
|
|
|
|
|
Intangible assets, net |
|
|
|
|
|
|
|
Goodwill |
|
|
|
|
|
|
|
Other assets |
|
|
|
|
|
|
|
Total assets |
|
$ |
|
|
$ |
|
|
Liabilities and stockholders’ equity |
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
Accounts payable |
|
$ |
|
|
$ |
|
|
Accrued liabilities |
|
|
|
|
|
|
|
Deferred revenue |
|
|
|
|
|
|
|
Current portion of notes payable |
|
|
|
|
|
|
|
Total current liabilities |
|
|
|
|
|
|
|
Notes payable |
|
|
|
|
|
|
|
Other long-term liabilities |
|
|
|
|
|
|
|
Total liabilities |
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
Stockholders’ equity: |
|
|
|
|
|
|
|
Common stock, $0.0001 par value; 500,000,000 shares authorized; 24,305,381 and 24,590,768 shares issued; 24,305,381 and 23,436,288 shares outstanding at December 31, 2014 and December 31, 2015 (unaudited), respectively |
|
|
|
|
|
|
|
Treasury stock, at cost; 0 and 1,154,480 shares at December 31, 2014 and December 31, 2015 (unaudited), respectively |
|
|
— |
|
|
|
|
Additional paid-in capital |
|
|
|
|
|
|
|
Accumulated deficit |
|
|
|
|
|
|
|
Accumulated other comprehensive loss |
|
|
|
|
|
|
|
Total stockholders’ equity |
|
|
|
|
|
|
|
Total liabilities and stockholders’ equity |
|
$ |
|
|
$ |
|
|
6
Control4 Announces Fourth Quarter and Fiscal 2015 Financial Results
CONTROL4 CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Years Ended |
|
||||||||
|
|
December 31, |
|
December 31, |
|
||||||||
|
|
2014 |
|
2015 |
|
2014 |
|
2015 |
|
||||
|
|
(unaudited) |
|
(unaudited) |
|
||||||||
Revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Cost of revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing |
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
|
Litigation settlement |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Net income (loss) per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Diluted |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Weighted-average number of shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense included in the consolidated statements of operations data (unaudited) :
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Years Ended |
|
||||||||
|
|
December 31, |
|
December 31, |
|
||||||||
|
|
2014 |
|
2015 |
|
2014 |
|
2015 |
|
||||
Cost of revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Research and development |
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing |
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stock-based compensation expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
7
Control4 Announces Fourth Quarter and Fiscal 2015 Financial Results
CONTROL4 CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
||||
|
|
December 31, |
|
||||
|
|
2014 |
|
2015 |
|
||
|
|
(unaudited) |
|
||||
Operating activities |
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
|
|
$ |
|
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
|
|
|
|
|
|
|
Depreciation expense |
|
|
|
|
|
|
|
Amortization of intangible assets |
|
|
|
|
|
|
|
Provision for doubtful accounts |
|
|
|
|
|
|
|
Stock-based compensation |
|
|
|
|
|
|
|
Excess tax benefit from exercise of options for common stock |
|
|
|
|
|
— |
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
Accounts receivable |
|
|
|
|
|
|
|
Inventories |
|
|
|
|
|
|
|
Restricted cash |
|
|
|
|
|
— |
|
Prepaid expenses and other current assets |
|
|
|
|
|
|
|
Other assets |
|
|
|
|
|
|
|
Accounts payable |
|
|
|
|
|
|
|
Accrued liabilities |
|
|
|
|
|
|
|
Deferred revenue |
|
|
|
|
|
|
|
Other long-term liabilities |
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
|
|
Purchases of available-for-sale investments |
|
|
|
|
|
|
|
Proceeds from sales of available-for-sale investments |
|
|
|
|
|
|
|
Proceeds from maturities of available-for-sale investments |
|
|
|
|
|
|
|
Purchases of property and equipment |
|
|
|
|
|
|
|
Business acquisitions, net of cash acquired |
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities |
|
|
|
|
|
|
|
Financing activities |
|
|
|
|
|
|
|
Proceeds from exercise of options for common stock |
|
|
|
|
|
|
|
Excess tax benefit from exercise of options for common stock |
|
|
|
|
|
— |
|
Repurchase of common stock |
|
|
— |
|
|
|
|
Repayment of notes payable |
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents |
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period |
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
|
|
$ |
|
|
Supplemental disclosure of cash flow information |
|
|
|
|
|
|
|
Cash paid for interest |
|
$ |
|
|
$ |
|
|
Cash paid for taxes |
|
|
|
|
|
|
|
Supplemental schedule of non-cash investing and financing activities |
|
|
|
|
|
|
|
Landlord paid tenant improvements |
|
|
|
|
|
— |
|
Purchases of property and equipment financed by accounts payable |
|
|
|
|
|
— |
|
Net unrealized losses on available-for-sale investments |
|
|
|
|
|
|
|
8
Control4 Announces Fourth Quarter and Fiscal 2015 Financial Results
CONTROL4 CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(in thousands, except percentages and per share data)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Years Ended |
|
||||||||
|
|
December 31, |
|
December 31, |
|
||||||||
|
|
2014 |
|
2015 |
|
2014 |
|
2015 |
|
||||
|
|
(in thousands, except percentages and per share data) |
|
||||||||||
Reconciliation of Gross Margin to Non-GAAP Gross Margin: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Stock-based compensation expense in cost of revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets in cost of revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition-related costs in cost of revenue |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
Non-GAAP gross margin |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Gross margin percentage |
|
|
|
% |
|
|
% |
|
|
% |
|
|
% |
Non-GAAP gross margin percentage |
|
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Income (Loss) from Operations to Non-GAAP Income from Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition-related costs |
|
|
— |
|
|
|
|
|
— |
|
|
|
|
Litigation settlements |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP income from operations |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Operating margin percentage |
|
|
|
% |
|
|
% |
|
|
% |
|
|
% |
Non-GAAP operating margin percentage |
|
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Net Income (Loss) to Non-GAAP Net Income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition-related costs |
|
|
— |
|
|
|
|
|
— |
|
|
|
|
Litigation settlements |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP net income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Non-GAAP net income per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Diluted |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Weighted-average number of shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Investments to Investments, net: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term investments |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Long-term investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments, net |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
9
Control4 Announces Fourth Quarter and Fiscal 2015 Financial Results
CONTACTS:
|
Investor Relations |
|
Media |
|
Mike Bishop |
|
Blair Sonnen |
|
The Blueshirt Group |
|
Control4 |
|
Tel: +1 415-217-4968 |
|
Tel: +1 801-619-4245 |
|
mike@blueshirtgroup.com |
|
bsonnen@control4.com |
# # #
Source: Control4
10
Exhibit 99.2
Control4 Acquires Pakedge Device & Software, a Leader in Advanced Home Networking
Transaction brings to Control4 deep networking expertise, an industry-leading suite of networking, power management, and cloud-based remote management capabilities, as well as an expanded sales channel of over 1,100 additional independent dealers
Salt Lake City, UT — February 4, 2016 4:05 PM EST — Control4 Corporation (NASDAQ: CTRL), a leading global provider of smart home solutions, today announced the acquisition of Pakedge Device & Software, Inc., a leader in advanced networking products and cloud network-management services for both wireless and wired networking solutions for the connected home and business.
“The connected consumer, connected home, and connected business opportunity is expanding along with the complexities of supporting thousands of different devices and services in homes and business around the world,” said Martin Plaehn, Control4 Chairman and CEO. “By embracing networking as an expanded core-competency, integrating it tightly with our entertainment and automation capabilities, and delivering a single cloud-based reporting and management solution, Control4 will be able to harness the expanding opportunity, bring more simplicity to the complicated, and increase satisfaction for our end customers.”
Pakedge is known in the industry for its many innovations and its dependable and high performance solutions. Pakedge Connect+ is an innovative next-generation network platform comprised of wired and wireless networking products that are integrated through advanced software and connected to the cloud. Connect+ incorporates proprietary artificial intelligence-based algorithms to detect, diagnose, self-repair and resolve network problems. Pakedge virtualization technologies enable network devices, whether within a single network or across multiple networks, to be uniquely grouped and managed in new ways. Pakedge advanced software, such as Pakedge Zones, creates new networking capabilities for prioritizing network use for audio, video, communication, security, bulk-data and management applications. The cloud-based management technology, BakPak, enables remote management and maintenance. The Pakedge platform-architecture approach enables scalable and tightly defined integration with third-party devices from many manufacturers, similar to how Control4’s architecture enables third-party products to integrate with its platform.
Page 1 of 3
“Pakedge began 12 years ago with the strategic vision that everything, starting with audio / video systems, will be connected over an IP-based platform” said Victor Pak, Pakedge Founder and CEO. “Our success was driven by a combination of customer focused innovation, engineering excellence, and passionate customers. Control4 shares our corporate philosophy and strategic vision. Joining together is a logical and exciting step to accelerate the realization of that vision for our customers.”
Pakedge had approximately $18.5 million in sales in 2015, delivered through its professional sales and installation channel of 1,700 independent dealers, 560 of which are also Control4 certified dealers. Control4 intends to fully support the Pakedge product-line for all Pakedge dealers, regardless of whether they are also Control4 certified-dealers. Pakedge dealers will continue to order product from the Pakedge dealer portal while Control4 dealers will now be able to order the most popular Pakedge products via the Control4 dealer portal, which will expand to offer the full Pakedge line in the near term. The combined company intends to grow both the Pakedge and Control4 businesses through a com bined dealer channel of over 4,7 00 dealers. All qualified dealers will be encouraged to explore both product-lines, and the combined Control4 and Pakedge team intends to actively cross-train and cross-certify dealers who desire to represent both product lines but are currently only qualified for one.
The Pakedge founders, senior management team and broader organization are joining Control4. The Pakedge teams in Huntington Beach and Hayward, California and its independent development office in Belgrade, Serbia, will begin working together with Control4 to create, market, and support industry-leading and tightly integrated solutions for the connected smart home and business.
Control4 acquired Pakedge for approximately $32.7 million in cash on January 29, 2016. Control4 expects the acquisition to contribute to revenue growth, and to be both Gross Margin and EPS accretive on a non-GAAP basis for the full-year 2016.
For more information, please visit www.control4.com and www.pakedge.com
About Control4
Control4 [NASDAQ: CTRL] is a leading provider of automation systems for homes and businesses, offering personalized control of lighting, music, video, temperature, security, communications and similar functionalities into a unified home automation solution that enhances the daily lives of its customers. Control4 unlocks the potential of connected devices, making entertainment systems easier to use, homes more comfortable and energy efficient, and families more secure. More than 75% of Control4’s consumers have integrated two or more functionalities with Control4’s solution, which is available through more than 3,600 custom integrators, retail outlets, and distributors in over 90 countries. By delivering insightfully simple control solutions
Page 2 of 3
that enhance the lives of individuals and families, Control4 is the automation platform of choice for consumers, major consumer electronics companies, hotels, and businesses around the world.
Forward-Looking Statements
This press release contains “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to, statements regarding Control4’s possible future products and the impact of the Pakedge acquisition. All statements other than statements of historical fact contained in this press release are forward-looking statements. These forward-looking statements are made as of the date they were first issued, and were based on the then-current expectations, estimates, forecasts, and projections, as well as the beliefs and assumptions of management. Forward-looking statements are subject to a number of risks and uncertainties, many of which involve factors or circumstances that are beyond Control4’s control. Control4’s actual results could differ materially from those stated or implied in forward-looking statements due to a number of factors, including but not limited to, risks detailed in Control4’s most recent Annual Report on Form 10-K and subsequent reports filed with the Securities and Exchange Commission, as well as other documents that may be filed by the company from time to time with the Securities and Exchange Commission. Past performance is not necessarily indicative of future results. The forward-looking statements included in this press release represent Control4’s views as of the date of this press release. The company anticipates that subsequent events and developments may cause its views to change. Control4 has no intention and undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. These forward-looking statements should not be relied upon as representing Control4’s views as of any date subsequent to the date of this press release.
Press Contact
Blair Sonnen, Control4
bsonnen@Control4.com
801.619.4245
Kimberly Lancaster, Caster
klancaster@castercomm.com
401.829.0111
# # #
Copyright ©2016, Control4 Corporation. All rights reserved. Control4, the Control4 logo, the 4-ball logo, 4Store, 4Sight, Control4 My Home, and Everyday Easy are registered trademarks or trademarks of Control4 Corporation in the United States and/or other countries. All other names and brands may be claimed as the property of their respective owners. All specifications subject to change without notice.
Source: Control4
Page 3 of 3