UNITED STATES
SECURITIES 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): November 24, 2015
MICROSEMI CORPORATION
(Exact name of registrant as specified in its charter)
Delaware | 0-8866 | 95-2110371 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) | (IRS Employer Identification No.) |
One Enterprise, Aliso Viejo, California | 92656 | |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code
(949) 380-6100
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:
x | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | 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.
Merger Agreement
On November 24, 2015, Microsemi Corporation (“Microsemi”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) with PMC-Sierra, Inc., a Delaware corporation (“PMC”) and Lois Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of Microsemi (“Merger Sub”).
Upon the terms and subject to the conditions of the Merger Agreement, Merger Sub will commence a tender offer (the “Offer”) for any and all outstanding shares of common stock of PMC (the “PMC Common Stock”), for $9.22 in cash and 0.0771 of a share of common stock of Microsemi per share of PMC Common Stock (the “Offer Price”), without interest and subject to any required withholding for taxes, and Merger Sub will subsequently merge with and into PMC (the “Merger”). The Merger Agreement contemplates that, subject to PMC’s stockholders tendering and not withdrawing a majority of the outstanding shares of PMC stock in the exchange offer, the Merger will be effected pursuant to Section 251(h) of the Delaware General Corporation Law, and PMC, as the surviving corporation, will become a wholly-owned subsidiary of Microsemi without any additional stockholder approval, and each issued and outstanding share of PMC Common Stock, other than shares of PMC Common Stock held in treasury of PMC, shares of PMC Common Stock owned by Microsemi or any subsidiary of Microsemi (including Merger Sub) or shares of PMC Common Stock owned by stockholders who have validly exercised their appraisal rights under Delaware law, will be converted into the right to receive the Offer Price. Microsemi intends to fund the Offer Price with a combination of cash on hand and committed debt financing.
Microsemi, Merger Sub and PMC have made customary representations and warranties in the Merger Agreement and agreed to certain customary covenants, including covenants regarding the operation of the business of PMC, and to a lesser extent Microsemi, prior to the closing.
Pursuant to the terms of the Merger Agreement, on November 24, 2015, simultaneously with the execution and delivery of the Merger Agreement, Microsemi paid to PMC, and PMC paid to Skyworks Solutions, Inc. (“Skyworks”) the termination fee of $88,500,000 in cash pursuant to and in accordance with the requirements of the Amended and Restated Agreement and Plan of Merger, dated as of October 29, 2015, by and among Skyworks, Amherst Acquisition, Inc. and PMC.
The Merger Agreement contains certain termination rights for each of Microsemi and PMC, including, among others, if the exchange offer is not consummated at or prior to 11:59 p.m. (New York City Time) on March 31, 2016. Upon termination of the Merger Agreement under specified circumstances, including a termination by PMC to enter into an agreement for an alternative transaction pursuant to a “superior proposal,” PMC has agreed to pay Microsemi a termination fee of $88,500,000 and to reimburse Microsemi for the termination fee paid on behalf of PMC to Skyworks of $88,500,000.
The foregoing description of the Merger Agreement and the transactions contemplated thereby does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Merger Agreement, which is attached hereto as Exhibit 2.1 and incorporated herein by reference.
The Merger Agreement has been included to provide investors and security holders with information regarding the terms of the Merger. It is not intended to provide any other factual information about Microsemi or PMC. The representations, warranties, covenants and agreements contained in the Merger Agreement, which were made only for purposes of that agreement and as of specific dates, were solely for the benefit of the parties to the Merger Agreement, may be subject to limitations agreed upon by the contracting parties (including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Merger Agreement instead of establishing these matters as facts) and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors and security holders. Investors and security holders are not third-party beneficiaries under the Merger Agreement and should not rely on the representations, warranties, covenants and agreements or any descriptions thereof as characterizations of the actual state of facts or condition of PMC, Microsemi or Merger Sub or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in PMC’s or Microsemi’s public disclosures.
Commitment Letter
On November 17, 2015, Microsemi entered into a second amended and restated commitment letter (the “Commitment Letter”) with Morgan Stanley Senior Funding, Inc. (“Morgan Stanley”) pursuant to which Morgan Stanley has committed to provide (i) a $350,000,000 senior secured revolving credit facility, (ii) a $375,000,000 senior secured term loan A facility and (iii) a $2,200,000,000 senior secured term loan B facility ((i), (ii) and (iii) together, the “Facilities” and the provision of such funds as set forth in the Commitment Letter, the “Financing”), subject to satisfaction of customary closing conditions. Pursuant to a Joinder Agreement dated as of November 5, 2015, The Bank of Tokyo-Mitsubishi UFJ, Ltd. and Deutsche Bank AG New York Branch assumed 26.25% and 25% respectively of Morgan Stanley’s commitment under the Commitment Letter. The Facilities are available to (a) finance the Offer and the Merger, (ii) repay existing indebtedness of Microsemi under its existing credit facilities, (iii) repay existing indebtedness of PMC following any consummation of the Merger, (iv) pay fees and expenses related to the Offer, the Merger and the Financing, and (v) for working capital and other general corporate purposes. Under the terms of the Commitment Letter and Joinder Agreement, Morgan Stanley and affiliates of The Bank of Tokyo-Mitsubishi UFJ, Ltd. and Deutsche Bank AG New York Branch will act as lead arrangers and bookrunners. The actual documentation governing the Facilities has not been finalized, and accordingly, the actual terms may differ from the description of such terms in the Commitment Letter.
The foregoing summary of the Commitment Letter and the Joinder Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Commitment Letter and the Joinder Agreement attached as Exhibits 10.1 and 10.2 respectively to this Report and incorporated herein by reference.
Item 8.01 Other Events
On November 24, 2015, Microsemi and PMC issued a joint press release announcing entry into the Merger Agreement. The full text of the press release is attached hereto as Exhibit 99.1 and incorporated in its entirety herein by reference.
Item 9.01 Financial Statements and Exhibits.
(d) | Exhibits. |
Exhibit No. | Description | |
2.1 | Agreement and Plan of Merger, dated as of November 24, 2015, by and among PMC-Sierra, Inc., Microsemi Corporation and Lois Acquisition Corp. | |
10.1 | Commitment Letter, dated November 17, 2015, between Morgan Stanley Senior Funding, Inc. and Microsemi Corporation. | |
10.2 | Joinder Agreement, dated November 5, 2015, by and among Morgan Stanley Senior Funding, Inc., The Bank of Tokyo-Mitsubishi UFJ, Ltd., Deutsche Bank Securities Inc., Deutsche Bank AG New York Branch and Microsemi Corporation. | |
99.1 | Joint press release issued by Microsemi Corporation and PMC-Sierra, Inc. on November 24, 2015. |
Cautionary Note Concerning Forward-Looking Statements
Certain statements made herein, including, for example, information regarding the proposed transaction between Microsemi and PMC, the expected timetable for completing the transaction, and the potential benefits of the transaction, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1965, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements reflect the current analysis of existing information and are subject to various risks and uncertainties. As a result, caution must be exercised in relying on forward-looking statements. Due to known and unknown risks, our actual results may differ materially from our expectations or projections.
The following factors, among others, could cause actual results to differ materially from those described in these forward-looking statements: the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement; the outcome of any legal proceedings that could be instituted against PMC or its directors or Microsemi related to the merger agreement; the possibility that various conditions to the consummation of the Microsemi exchange offer and merger may not be satisfied or waived, including the receipt of all regulatory clearances related to the merger; the failure of Microsemi to obtain the necessary financing pursuant to the arrangements set forth in the debt commitment letters delivered pursuant to the merger agreement or otherwise; uncertainty as to how many shares of PMC common stock will be tendered into the Microsemi exchange offer; the risk that the Microsemi exchange offer and merger will not close within the anticipated time periods; risks related to the ultimate outcome and results of integrating the operations of Microsemi and PMC, the ultimate outcome of Microsemi’s operating strategy applied to PMC and the ultimate ability to realize synergies; the effects of the business combination on Microsemi and PMC, including on the combined company’s future financial condition, operating results, strategy and plans; risks that the proposed transaction disrupts current plans and operations, and potential difficulties in employee retention as a result of the merger; risks related to Microsemi’s ability to successfully implement its acquisition strategy or integrate other acquired companies; uncertainty as to the future profitability of businesses acquired by Microsemi, and delays in the realization of, or the failure to realize, any accretion from acquisition transactions by Microsemi; risks related to Microsemi’s reliance on government contracts for a significant portion of its sales, including impacts of any termination or renegotiation of such contracts, uncertainties of governmental appropriations and national defense policies and priorities and effects of any past or future government shutdowns; the risk of downturns in the highly cyclical semiconductor industry; the effects of local and national economic, credit and capital market conditions on the economy in general, and other risks and uncertainties described herein, as well as those risks and uncertainties discussed from time to time in our other reports and other public filings with the U.S. Securities and Exchange Commission (“SEC”), including, but not limited to, those detailed in PMC’s Annual Report on Form 10-K for the year ended December 27, 2014 and PMC’s most recent quarterly report filed with the SEC, and Microsemi’s Annual Report on Form 10-K for the year ended September 27, 2015 filed with the SEC. The forward-looking statements contained herein are made only as of the date hereof, and we undertake no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.
Important Additional Information to be Filed with the SEC
This document relates to a pending business combination transaction between Microsemi and PMC. The exchange offer referenced in this document has not yet commenced. This document does not constitute an offer to sell or exchange, or the solicitation of an offer to buy or exchange, any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, sale or exchange would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. Microsemi will file a registration statement on Form S-4 related to the transaction with the SEC and may file amendments thereto. Microsemi and a wholly-owned subsidiary of Microsemi will file a tender offer statement on Schedule TO (including a prospectus/offer to exchange, a related letter of transmittal and other exchange offer documents) related to the transaction with the SEC and may file amendments thereto. PMC will file a recommendation statement on Schedule 14D-9 with the SEC and may file amendments thereto. PMC and Microsemi may also file other documents with the SEC regarding the transaction. This document is not a substitute for any registration statement, Schedule TO, Schedule 14D-9 or any other document which PMC or Microsemi may file with the SEC in connection with the transaction. Investors and security holders are urged to read the registration statement, the Schedule TO (including the prospectus/offer to exchange, related letter of transmittal and other exchange offer documents), the recommendation statement on Schedule 14D-9 and the other relevant materials with respect to the transaction carefully and in their entirety when they become available before making any investment decision with respect to the transaction, because they will contain important information about the transaction.
Such materials (and all other offer documents filed with the SEC) will be available at no charge on the SEC’s Web site: www.sec.gov. In addition, PMC’s stockholders will be able to obtain free copies of such materials by contacting Joel Achramowicz at (408) 239-8630.
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.
MICROSEMI CORPORATION (Registrant) | ||
Date: November 24, 2015 | By: | /s/John W. Hohener |
Name: John W. Hohener Title: Executive Vice President, Chief Financial Officer, Secretary and Treasurer |
EXHIBIT INDEX
Exhibit No. | Description | |
2.1 | Agreement and Plan of Merger, dated as of November 24, 2015, by and among PMC-Sierra, Inc., Microsemi Corporation and Lois Acquisition Corp. | |
10.1 | Commitment Letter, dated November 17, 2015, between Morgan Stanley Senior Funding, Inc. and Microsemi Corporation. | |
10.2 | Joinder Agreement, dated November 5, 2015, by and among Morgan Stanley Senior Funding, Inc., The Bank of Tokyo-Mitsubishi UFJ, Ltd., Deutsche Bank Securities Inc., Deutsche Bank AG New York Branch and Microsemi Corporation. | |
99.1 | Joint press release issued by Microsemi Corporation and PMC-Sierra, Inc. on November 24, 2015. |
Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
by and among
MICROSEMI CORPORATION,
LOIS ACQUISITION CORP.,
and
PMC-SIERRA, INC.
November 24, 2015
Table of Contents
Page | |||
Article I DEFINITIONS AND TERMS | 2 | ||
Section 1.1 | Definitions | 2 | |
Section 1.2 | Other Definitional Provisions; Interpretation. | 15 | |
Article II THE OFFER | 15 | ||
Section 2.1 | The Offer. | 15 | |
Section 2.2 | Company Action. | 18 | |
Article III THE MERGER | 19 | ||
Section 3.1 | The Merger | 19 | |
Section 3.2 | Effective Time | 20 | |
Section 3.3 | Closing | 20 | |
Section 3.4 | Effect of the Merger | 20 | |
Section 3.5 | Certificate of Incorporation and By-laws of the Surviving Corporation | 20 | |
Section 3.6 | Directors and Officers of the Surviving Corporation | 20 | |
Article IV CONVERSION OF SHARES | 21 | ||
Section 4.1 | Conversion of Shares. | 21 | |
Section 4.2 | Surrender and Payment. | 21 | |
Section 4.3 | Dissenting Stockholders | 24 | |
Section 4.4 | Treatment of Company Stock Options; Company Restricted Stock Units; and Company Performance Restricted Stock Units. | 24 | |
Section 4.5 | Withholding Rights | 26 | |
Section 4.6 | Company Special Shares | 27 | |
Article V REPRESENTATIONS AND WARRANTIES OF THE COMPANY | 27 | ||
Section 5.1 | Organization. | 27 | |
Section 5.2 | Capitalization; Subsidiaries. | 28 | |
Section 5.3 | Authorization; Validity of Agreement; Necessary Action | 30 | |
Section 5.4 | Consents and Approvals; No Violations | 30 | |
Section 5.5 | SEC Reports; Company Financial Statements. | 31 | |
Section 5.6 | No Undisclosed Liabilities | 32 | |
Section 5.7 | Absence of Certain Changes | 33 | |
Section 5.8 | Material Contracts. | 33 | |
Section 5.9 | Employee Benefit Plans; ERISA. | 36 | |
Section 5.10 | Litigation | 38 | |
Section 5.11 | Compliance with Law. | 38 | |
Section 5.12 | Intellectual Property. | 39 | |
Section 5.13 | Taxes. | 41 | |
Section 5.14 | Real Property and Tangible Assets. | 43 | |
Section 5.15 | Environmental | 43 |
i |
Table of Contents
(continued)
Page | |||
Section 5.16 | Labor Matters. | 44 | |
Section 5.17 | Licenses and Permits | 45 | |
Section 5.18 | Insurance | 45 | |
Section 5.19 | Significant Suppliers and Customers. | 45 | |
Section 5.20 | Brokers or Finders | 46 | |
Section 5.21 | Vote Required | 46 | |
Section 5.22 | Board Recommendation | 46 | |
Section 5.23 | Opinion of Financial Advisors | 46 | |
Section 5.24 | Takeover Statutes | 46 | |
Section 5.25 | Investigation by the Company | 46 | |
Article VI REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB | 47 | ||
Section 6.1 | Organization. | 47 | |
Section 6.2 | Authorization; Validity of Agreement; Necessary Action | 47 | |
Section 6.3 | Capitalization | 48 | |
Section 6.4 | Consents and Approvals; No Violations | 48 | |
Section 6.5 | SEC Reports; Parent Financial Statements | 49 | |
Section 6.6 | Absence of Certain Changes | 50 | |
Section 6.7 | Litigation | 50 | |
Section 6.8 | Brokers or Finders | 50 | |
Section 6.9 | Vote Required | 50 | |
Section 6.10 | Share Ownership | 51 | |
Section 6.11 | Investigation by Parent and Sub | 51 | |
Section 6.12 | Capitalization and Operations of Sub | 51 | |
Section 6.13 | Availability of Funds; Financing | 51 | |
Section 6.14 | Solvency | 52 | |
Article VII COVENANTS | 53 | ||
Section 7.1 | Interim Operations of the Company and Parent. | 53 | |
Section 7.2 | Access to Information | 58 | |
Section 7.3 | Board Recommendation; Acquisition Proposals. | 59 | |
Section 7.4 | Employee Benefits. | 62 | |
Section 7.5 | Publicity | 64 | |
Section 7.6 | Directors’ and Officers’ Insurance and Indemnification. | 65 | |
Section 7.7 | Reasonable Best Efforts. | 66 | |
Section 7.8 | ESPP | 69 | |
Section 7.9 | Section 16 Matters | 69 | |
Section 7.10 | Filing of Form S-8 | 69 | |
Section 7.11 | Notification of Certain Matters | 70 | |
Section 7.12 | Financing. | 70 | |
Section 7.13 | Financing Cooperation | 73 | |
Section 7.14 | Transaction Litigation | 74 | |
Section 7.15 | Approval of the Merger | 75 |
ii |
Table of Contents
(continued)
Page | |||
Section 7.16 | Skyworks Termination Fee | 75 | |
Article VIII CONDITIONS | 75 | ||
Section 8.1 | Conditions to Each Party’s Obligation to Effect the Merger | 75 | |
Article IX TERMINATION | 76 | ||
Section 9.1 | Termination | 76 | |
Section 9.2 | Effect of Termination. | 78 | |
Article X MISCELLANEOUS | 80 | ||
Section 10.1 | Amendment and Modification | 80 | |
Section 10.2 | Non-Survival of Representations and Warranties | 80 | |
Section 10.3 | Notices | 81 | |
Section 10.4 | Interpretation | 82 | |
Section 10.5 | Counterparts | 82 | |
Section 10.6 | Entire Agreement; Third-Party Beneficiaries | 82 | |
Section 10.7 | Severability | 83 | |
Section 10.8 | Governing Law | 83 | |
Section 10.9 | Jurisdiction | 84 | |
Section 10.10 | Service of Process | 84 | |
Section 10.11 | Specific Performance; Remedies | 84 | |
Section 10.12 | Assignment | 85 | |
Section 10.13 | Expenses | 85 | |
Section 10.14 | Headings | 85 | |
Section 10.15 | Waivers | 85 | |
Section 10.16 | WAIVER OF JURY TRIAL | 86 |
iii |
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of November 24, 2015 (this “Agreement”), by and among PMC-Sierra, Inc., a Delaware corporation (the “Company”), Microsemi Corporation, a Delaware corporation (“Parent”), and Lois Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of Parent (“Sub”).
RECITALS
WHEREAS, the boards of directors of Parent, Sub and the Company have each determined that it is in the best interests of their respective stockholders for Parent to acquire the Company upon the terms and subject to the conditions set forth herein;
WHEREAS, in furtherance of such acquisition, it is proposed that, upon the terms and subject to the conditions set forth herein, Sub make a tender offer to purchase any and all of the issued and outstanding shares Company Common Stock (as defined herein) for (i) $9.22 in cash, without interest (such amount, or any greater cash amount per Company Share paid pursuant to the Offer, the “Cash Consideration”) and (ii) 0.0771 (the “Exchange Ratio”) duly authorized, validly issued, fully paid and nonassessable shares of Parent Common Stock (the “Share Consideration” and together with the Cash Consideration, the “Per Share Amount”) (such offer, as it may be amended from time to time pursuant to the terms hereof, the “Offer”) net to the holder thereof, on the terms and subject to the conditions of this Agreement and the Offer;
WHEREAS, Parent, Sub and the Company acknowledge and agree that as soon as practicable following the Acceptance Time, Sub will be merged with and into the Company, on the terms and subject to the conditions set forth in this Agreement (the “Merger”), with the Merger to be effected pursuant to Section 251(h) of the DGCL (as defined herein);
WHEREAS, the board of directors of the Company has: (i) determined that the Offer and the Merger are fair to, and in the best interests of, the Company and its stockholders; (ii) adopted and declared advisable this Agreement and the transactions contemplated hereby, including the Offer and the Merger; (iii) resolved that the Merger shall be effected as soon as practicable following the Acceptance Time without a vote of the Company's stockholders pursuant to Section 251(h) of the DGCL; and (iv) subject to the terms hereof, resolved and agreed to recommend that holders of shares of Company Common Stock accept the Offer and tender their shares of Company Common Stock pursuant to the Offer;
WHEREAS, the board of directors of each of Parent and Sub, has (a) determined that the Merger is advisable and fair to, and in the best interests of, Parent and Sub, respectively, and (b) approved, adopted and declared advisable this Agreement and the transactions contemplated hereby, including the Offer and the Merger;
WHEREAS, concurrently with the execution and delivery of this Agreement by the Company, (a) the Company is terminating that certain Amended and Restated Agreement and Plan of Merger, dated as of October 29, 2015, by and among Skyworks Solutions, Inc., Amherst Acquisition, Inc. and the Company (the “Skyworks Merger Agreement”) in accordance with its terms and (b) Parent is paying to the Company, and the Company is paying to Skyworks
Solutions, Inc., pursuant to Section 8.2(b)(i) of the Skyworks Merger Agreement, the termination fee of $88,500,000 in cash (the “Skyworks Termination Fee”); and
WHEREAS, Parent, Sub and the Company desire to make certain representations, warranties and agreements in connection with, and also to prescribe certain conditions to, the transactions contemplated by this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the representations, warranties, covenants and agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows:
Article I
DEFINITIONS AND TERMS
Section 1.1 Definitions. As used in this Agreement, the following terms have the meanings set forth below:
“Acquisition Proposal” means any inquiry, offer or proposal made by any Person or Persons other than Parent, Sub or any controlled Affiliate thereof relating to, in a single transaction or a series of related transactions, other than in the transactions contemplated by this Agreement (including any such transaction required pursuant to Section 7.7(a) of this Agreement), any (i) purchase or other acquisition, directly or indirectly, of beneficial ownership (as defined under Section 13(d) of the Exchange Act) of securities (or options, rights to purchase or securities convertible into or redeemable or exchangeable for such securities) representing fifteen percent (15%) or more of the issued and outstanding Company Common Stock, including pursuant to a merger, amalgamation, consolidation or other business combination, joint venture, recapitalization, sale of capital stock, issuance of securities, tender offer or exchange offer or other similar transaction involving the Company, (ii) purchase or other acquisition, directly or indirectly, of fifteen percent (15%) or more of the assets (including the capital stock of the Subsidiaries of the Company) of the Company and its Subsidiaries, taken as a whole, (iii) the issuance by the Company of securities representing more than fifteen (15%) of any class of its outstanding voting securities or (iv) a liquidation, dissolution or other winding up of the Company or, to the extent representing fifteen percent (15%) or more of the assets (including the capital stock of the Subsidiaries of the Company) of the Company and its Subsidiaries, taken as a whole, one or more Subsidiaries of the Company.
“Action” means litigation, suit, claim, charge, action, hearing, proceeding, arbitration or mediation.
“Additional Offer Period” has the meaning set forth in Section 2.1(d).
“Affiliate” has the meaning set forth in Rule 12b-2 of the Exchange Act.
“Agreement” has the meaning set forth in the Preamble.
“Alternative Debt Financing” has the meaning set forth in Section 7.12(d).
2 |
“Antitrust Laws” has the meaning set forth in Section 7.7(a).
“Benefit Plans” means (a) each “employee benefit plan” as defined in Section 3(3) of ERISA (whether or not subject to ERISA), (b) each employment, consulting, severance, change of control, retention or similar plan, agreement, arrangement or policy, and (c) each other plan, agreement, arrangement or policy (written or oral) providing for compensation, bonuses, perquisites, profit-sharing, equity or equity-related related rights, incentive or deferred compensation, paid time off, insurance (including any self-insured arrangements), health or medical benefits, employee assistance program, disability or sick leave benefits, workers’ compensation, supplemental unemployment benefits, severance, retention, or change in control benefits or post-employment or retirement benefits (including compensation, pension, health, medical or life insurance benefits), in each case maintained, sponsored or contributed to by the Company or any of its Subsidiaries or with respect to which the Company or any of its Subsidiaries has any direct or indirect liability, other than any such benefits or arrangements if and to the extent required to be provided, maintained or contributed to under applicable Law, in each case, for the benefit of any Service Provider located primarily outside the United States.
“Board Recommendation” has the meaning set forth in Section 5.22.
“Book Entry Shares” means outstanding non-certificated Company Common Stock represented by book-entry shares.
“Business Day” means a day other than a Saturday, a Sunday or another day on which commercial banking institutions in New York, New York are authorized or required by Law to be closed.
“Cash Consideration” has the meaning set forth in the Recitals.
“Certificate of Merger” has the meaning set forth in Section 3.2.
“Certificates” has the meaning set forth in Section 4.1(c).
“Change of Recommendation” has the meaning set forth in Section 7.3(d).
“Cleanup” means all actions required, under applicable Environmental Laws, to clean up, remove, treat or remediate Hazardous Materials.
“Closing” has the meaning set forth in Section 3.3.
“Closing Date” has the meaning set forth in Section 3.3.
“Code” means the United States Internal Revenue Code of 1986, as amended.
“Company” has the meaning set forth in the Preamble.
“Company 401(k) Plan” has the meaning set forth in Section 7.4(e).
3 |
“Company Arrangements” has the meaning set forth in Section 5.9(h).
“Company Balance Sheet” has the meaning set forth in Section 5.6.
“Company Balance Sheet Date” means June 27, 2015.
“Company Common Stock” means the Common Stock, $0.001 par value, of the Company.
“Company Compensation Committee” has the meaning set forth in Section 5.9(h).
“Company Credit Agreement” means the Credit Agreement dated as of August 2, 2013 by and among the Company, PMC-Sierra US, Inc., Bank of America, N.A., as administrative agent, and the lenders from time to time party thereto (as amended, restated, supplemented or otherwise modified from time to time).
“Company Disclosure Schedule” means the disclosure schedule, delivered by the Company to Parent immediately prior to the execution of this Agreement.
“Company Equity Plans” means, collectively, the Company’s 1994 Incentive Stock Plan, 2001 Stock Option Plan and 2008 Equity Plan and the Wintegra, Inc. 2006 Amended and Restated Equity Incentive Plan, each as may be amended, restated, or amended and restated, and the ESPP, as well as any other plans or agreements pursuant to which the Company has granted equity awards (including equity awards granted or assumed by the Company in connection with any acquisitions prior to the Effective Time).
“Company Financial Advisor” has the meaning set forth in Section 5.23.
“Company Financial Statements” has the meaning set forth in Section 5.5(b).
“Company License-In Agreements” has the meaning set forth in Section 5.12(b).
“Company License-Out Agreements” has the meaning set forth in Section 5.12(c).
“Company Material Adverse Effect” means any event, circumstance, change, occurrence, development or effect that has or would reasonably be expected to result in a material adverse change in, or material adverse effect on, (a) the business, financial condition or results of operations of the Company and its Subsidiaries, taken as a whole, or (b) the ability of the Company to consummate the transactions contemplated hereby on or before the Termination Date; provided, however, that for purposes of clause (a) a “Company Material Adverse Effect” shall not include any event, circumstance, change, occurrence, development or effect arising after the date hereof and resulting from or arising in connection with (i) conditions generally affecting the industries and markets in which the Company and its Subsidiaries operate, (ii) general economic, political or financial or securities market conditions, (iii) the announcement of this Agreement or the pendency of the transactions contemplated hereby (including any resulting loss or departure of officers or other employees of the Company or any of its Subsidiaries, or the termination, reduction (or potential reduction) or any other resulting negative development in the Company’s or any of its Subsidiaries’ relationships with any of its
4 |
customers, suppliers, distributors or other business partners), (iv) natural disasters, acts of war, terrorism or sabotage, military actions or the escalation thereof, earthquakes, hurricanes, tornadoes or other natural disasters or other force majeure events, (v) changes in GAAP, in the interpretation of GAAP, in the accounting rules and regulations of the SEC, or changes in applicable Law, (vi) the taking of any action by the Company or any Subsidiary of the Company to the extent the taking of such action is expressly required by this Agreement or such action was taken at the written request of Parent or Sub or the failure by the Company or any of its Subsidiaries to take any action to the extent the taking of such action is expressly prohibited by this Agreement or Parent or Sub requested in writing that the Company or any of its Subsidiaries not take such action, (vii) any proceeding brought or threatened by stockholders of either Parent or the Company (whether on behalf of Company, Parent or otherwise) asserting allegations of breach of fiduciary duty relating to this Agreement or violations of securities Laws in connection with the Disclosure Documents, or (viii) any decrease or decline in the market price or trading volume of the Company Common Stock or any failure by the Company to meet any projections, forecasts or revenue or earnings predictions of the Company or of any securities analysts (provided that, in the case of this clause (viii), the underlying cause of any such decrease, decline, or failure may be taken into account in determining whether a Company Material Adverse Effect has occurred unless otherwise excluded pursuant to another clause in this definition), except, in the case of clauses (i), (ii), (iv), and (v), to the extent that such event, circumstance, change, occurrence, development or effect materially and disproportionately affects the Company and its Subsidiaries, taken as a whole, relative to other Persons engaged in the same industries, geographies, and markets in which the Company operates, in which case, to the extent not otherwise excluded pursuant to another clause of this definition, such disproportionate effects and the events and circumstances underlying such disproportionate effects may be taken into account in determining whether a “Company Material Adverse Effect” has occurred.
“Company Performance Restricted Stock Unit” means a performance-based restricted stock unit issued pursuant to any of the Company Equity Plans that remains unvested and subject to performance-based vesting criteria as of immediately prior to the Effective Time.
“Company Preferred Stock” means the Preferred Stock, $0.001 par value per share, of the Company.
“Company Products” means the products and services designed, developed, manufactured, offered, provided, marketed, licensed, sold, distributed or otherwise made available by the Company or any of its Subsidiaries.
“Company Real Property” has the meaning set forth in Section 5.14(a).
“Company Related Party” means the Company, its Subsidiaries and its affiliates and its and their respective affiliates’ stockholders, partners, members, officers, directors, employees, controlling persons, agents and representatives.
“Company Restricted Stock Unit” means a restricted stock unit issued pursuant to any of the Company Equity Plans that remains outstanding as of immediately prior to the Effective Time (other than Company Performance Restricted Stock Units).
5 |
“Company SEC Reports” has the meaning set forth in Section 5.5(a).
“Company Special Shares” has the meaning set forth in Section 4.6.
“Company Stock Option” means an option to purchase Company Common Stock granted pursuant to one of the Company Equity Plans.
“Confidentiality Agreement” means that certain letter agreement dated as of October 20, 2015, by and between the Company and Parent.
“Consideration Fund” has the meaning set forth in Section 4.2(a).
“Contract” means any note, bond, mortgage, indenture, lease, license, contract, agreement and all other legally binding arrangements, whether oral or written.
“Converted PRSUs” has the meaning set forth in Section 4.4(d).
“Converted RSUs” has the meaning set forth in Section 4.4(b).
“Covered Securityholders” has the meaning set forth in Section 5.9(h).
“Debt Commitment Letter” has the meaning set forth in Section 6.13.
“Debt Financing” has the meaning set forth in Section 6.13.
“Debt Financing Agreements” has the meaning set forth in Section 7.12(b).
“D&O Indemnitee” has the meaning set forth in Section 7.6(a).
“D&O Insurance” has the meaning set forth in Section 7.6(b).
“DGCL” means the General Corporation Law of the State of Delaware.
“Disclosure Document” means the Schedule 14D-9 and each other document required to be filed by the Company with the SEC or required to be distributed or otherwise disseminated to the Company’s stockholders in connection with the transactions contemplated by this Agreement.
“Dissenting Shares” has the meaning set forth in Section 4.3.
“Effective Time” has the meaning set forth in Section 3.2.
“Employees” has the meaning set forth in Section 7.4(a).
“Environmental Claim” means any claim, notice, directive, action, investigation, suit, demand, abatement order or other order by a Governmental Entity alleging liability arising out of, based on, or resulting from (a) the release of any Hazardous Materials at any location or (b) circumstances forming the basis of any violation of any Environmental Law.
6 |
“Environmental Laws” means all applicable and legally enforceable Laws relating to pollution or protection of human health and safety (as such protections of human health and safety relate to exposure to Hazardous Materials) or the environment, including Laws relating to releases of Hazardous Materials and the manufacture, processing, distribution, use, treatment, storage, release, transport or handling of Hazardous Materials.
“Equity Conversion Ratio” means the sum of (i) the Exchange Ratio and (ii) the quotient obtained by dividing (x) the Cash Consideration by (y) the Parent Measurement Price.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
“ERISA Affiliate” means any trade or business, whether or not incorporated, that together with the Company would be, or, within the preceding six years would have been, deemed to be a single employer for purposes of section 4001 of ERISA or Sections 414(b), (c), (m), (n) or (o) of the Code.
“ESPP” means the Company’s 2011 Employee Stock Purchase Plan, as may be amended, restated, or amended and restated.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Exchange Agreement” has the meaning set forth in Section 4.6.
“Exercise Date” has the meaning set forth in Section 7.8.
“Exchange Ratio” has the meaning set forth in the Recitals.
“Expenses” has the meaning set forth in Section 9.2(c).
“Expiration Date” has the meaning set forth in Section 2.1(c).
“FCPA” means the Foreign Corrupt Practices Act of 1977.
“Financing Cooperation Indemnity” has the meaning set forth in Section 7.13(b).
“Financing Indemnitees” has the meaning set forth in Section 7.13(b).
“Financing Sources” shall mean the agents, arrangers, lenders and other entities that have committed to provide or arrange the Debt Financing or any other financing in connection with the transactions contemplated hereby (including any such person that becomes a party to the Debt Commitment Letter after the date hereof or any joinder agreement or credit agreement entered into pursuant thereto, but excluding Parent and Sub), together with their respective affiliates and their and their respective affiliates’ officers, directors, employees, controlling persons and representatives and their respective successors and assigns.
“Foreign Antitrust Approvals” has the meaning set forth in Section 7.7(a).
7 |
“Foreign Benefit Plan” means any Benefit Plan that is maintained pursuant to the Laws of a country other than the United States, excluding any Mandated Benefit Plans.
“GAAP” has the meaning set forth in Section 5.5(b).
“Governmental Entity” has the meaning set forth in Section 5.4.
“Hazardous Materials” means any substance that is listed, defined, designated, regulated or classified as hazardous, toxic, radioactive, dangerous, a pollutant, a contaminant, petroleum, oil, or words of similar meaning or effect under any Law relating to pollution, waste, or the environment.
“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
“Indemnified Parties” has the meaning set forth in Section 7.6(a).
“Intellectual Property” means proprietary rights in (i) patents and patent applications, including any divisionals, continuations, continuations-in-part, extensions and reissues of the foregoing, (ii) trademarks, service marks, trade names, trade dress, logos, slogans, Internet domain names, and applications and registrations for the foregoing, (iii) copyrights (including any applications, registrations and renewals for the foregoing), and proprietary rights in databases, including in software, (iv) semiconductor mask works, (v) trade secrets, including in know-how, technical documentation, specifications, software code, data, designs, plans, and financial information, and (vi) other intellectual property rights recognized in a given jurisdiction.
“Intervening Event” means any event, circumstance, change, occurrence, development or effect that materially affects the business, assets or operations of the Company (other than any event, fact or development or occurrence resulting from a material breach of this Agreement by the Company) that was not known to, or reasonably foreseeable by, the board of directors of the Company as of the date hereof and becomes known to the board of directors of the Company after the date hereof and prior to the Acceptance Time; provided that in no event shall any event, circumstance, change, occurrence, development or effect resulting from or relating to any of the following give rise to an Intervening Event: (i) the receipt of any Acquisition Proposal; (ii) the public announcement, execution, delivery or performance of this Agreement, the identity of Parent or Sub, or the public announcement, pendency or consummation of the transactions contemplated hereby (or the public announcement of any discussions among the parties related thereto); (iii) any change in the trading price or trading volume of Company Common Stock on Nasdaq or any change in the Company’s credit rating (although for purposes of clarity, any underlying facts, events, changes, developments or set of circumstances, with respect to this clause (iii) relating to or causing such change may be considered, along with the effects or consequences thereof); (iv) the fact that the Company has exceeded or met any projections, forecasts, revenue or earnings predictions or expectations of the Company or any securities analysts for any period ending (or for which revenues or earnings are released) on or after the date hereof (although for purposes of clarity, any underlying facts, events, changes, developments or set of circumstances relating to or causing such material
8 |
improvement or improvements may be considered, along with the effects or consequences thereof); (v) changes in GAAP, other applicable accounting rules or applicable Law (including the accounting rules and regulations of the SEC) or, in any such case, changes in the interpretation thereof after the date hereof; or (vi) any changes in general economic or political conditions, or in the financial, credit or securities markets in general (including changes in interest rates, exchange rates, stock, bond and/or debt prices).
“IRS” means the U.S. Internal Revenue Service or successors thereto.
“Knowing and Intentional Breach” means a material breach that is a consequence of an act undertaken by the breaching party with the knowledge that the taking of such act, or failure to act, would, or would be reasonably expected to, result in a breach of this Agreement.
“Knowledge” means, as of the date of determination, (i) with respect to the Company, the actual knowledge of the Persons set forth on Section 1.1 of the Company Disclosure Schedule and (ii) with respect to Parent, the actual knowledge of James J. Peterson, Steven G. Litchfield and John W. Hohener.
“Law” means any federal, state, local or foreign law (including common law), statute, ordinance, regulation, judgment, order, decree, injunction, arbitration award, franchise, license, agency requirement or permit of any Governmental Entity.
“Lien” means, with respect to any property or asset, any mortgage, lien, pledge, charge, security interest, or encumbrance in respect of such property or asset, but does not include licenses or covenants not to assert with respect to Intellectual Property. For purposes of this Agreement, a Person shall be deemed to own subject to a lien any property or asset that it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such property or asset.
“Mandated Benefit Plan” means a plan or arrangement that would be described in Benefit Plan but for the fact, and to the extent that, it is mandated to be provided by the Company or its Subsidiaries pursuant to applicable Law outside the United States.
“Material Contract” has the meaning set forth in Section 5.8(a).
“Maximum Amount” has the meaning set forth in Section 7.6(b).
“Merger” has the meaning set forth in the Recitals.
“Merger Consideration” has the meaning set forth in Section 4.1(c).
“Minimum Condition” has the meaning set forth in Section 2.1(b).
“Nasdaq” means the Nasdaq Global Select Market, but if the Nasdaq Global Select Market is not then the principal U.S. trading market for the Company Common Stock or Parent Common Stock, as applicable,, then “Nasdaq” shall be deemed to mean the principal U.S. national securities exchange registered under the Exchange Act on which the Company Common Stock or Parent Common Stock, as applicable, is then traded.
9 |
“Nasdaq Rules” means the rules and regulations of Nasdaq.
“New Debt Commitment Letter” has the meaning set forth in Section 7.12(d).
“New Exercise Date” has the meaning set forth in Section 7.8.
“OFAC” means the Office of Foreign Assets Control of the U.S. Treasury Department.
“Offer” has the meaning set forth in the Recitals.
“Offer Documents” has the meaning set forth in Section 2.1(g).
“Offering Period” has the meaning set forth in Section 7.8.
“Open Source Material” means any software that is distributed as “free software”, “open source software” (a) under the GNU General Public License (GPL), GNU Lesser General Public License (LGPL), Mozilla Public License (MPL) or substantially similar licenses, or (b) is distributed subject to a requirement that, as a condition of the modification, distribution or other use of such software, the licensee of such software grants, or purports to grant, to any third party, rights or immunities under Intellectual Property owned by such licensee in any derivative works on the same terms and conditions as for such software, including that , as a condition of the modification, distribution or other use of such software, that any software incorporated into, derived from or distributed with such software be (i) disclosed or distributed in source code form, (ii) licensed for the purpose of making derivative works or (iii) redistributable at no charge or minimal charge, in each case to any third parties.
“Option Consideration” means (a) an amount of cash equal to the positive difference, if any, between the Total Cash Consideration, less the Total Cash Exercise Price, and (b) a number of shares of Parent Common Stock equal to (i) the positive difference, if any, between the Total Share Consideration less the Total Share Exercise Price, divided (ii) by the Parent Measurement Price.
“Owned Intellectual Property” has the meaning set forth in Section 5.12(a).
“Parent” has the meaning set forth in the Preamble.
“Parent Common Stock” means the common stock, $0.20 par value per share, of Parent.
“Parent Material Adverse Effect” means any event, circumstance, change, occurrence, development or effect that has or would reasonably be expected to result in a material adverse change in, or material adverse effect on, (a) the business, financial condition or results of operations of Parent and its Subsidiaries, taken as a whole, or (b) the ability of the Parent to consummate the transactions contemplated hereby on or before the Termination Date; provided, however, that for purposes of clause (a) a “Parent Material Adverse Effect” shall not include any event, circumstance, change, occurrence, development or effect arising after the date hereof and resulting from or arising in connection with (i) conditions generally affecting the
10 |
industries and markets in which the Parent and its Subsidiaries operate, (ii) general economic, political or financial or securities market conditions, (iii) the announcement of this Agreement or the pendency of the transactions contemplated hereby (including any resulting loss or departure of officers or other employees of the Parent or any of its Subsidiaries, or the termination, reduction (or potential reduction) or any other resulting negative development in the Parent’s or any of its Subsidiaries’ relationships with any of its customers, suppliers, distributors or other business partners), (iv) natural disasters, acts of war, terrorism or sabotage, military actions or the escalation thereof, earthquakes, hurricanes, tornadoes or other natural disasters or other force majeure events, (v) changes in GAAP, in the interpretation of GAAP, in the accounting rules and regulations of the SEC, or changes in applicable Law, (vi) the taking of any action by Parent or any Subsidiary of Parent to the extent the taking of such action is expressly required by this Agreement or such action was taken at the written request of the Company or the failure by the Parent or any of its Subsidiaries to take any action to the extent the taking of such action is expressly prohibited by this Agreement or the Company requested in writing that Parent or any of its Subsidiaries not take such action, (vii) any proceeding brought or threatened by stockholders of either Parent or the Company (whether on behalf of Company, Parent or otherwise) asserting allegations of breach of fiduciary duty relating to this Agreement or violations of securities Laws in connection with the Disclosure Documents, or (viii) any decrease or decline in the market price or trading volume of the Parent Common Stock or any failure by Parent to meet any projections, forecasts or revenue or earnings predictions of the Company or of any securities analysts (provided that, in the case of this clause (viii), the underlying cause of any such decrease, decline, or failure may be taken into account in determining whether a Company Material Adverse Effect has occurred unless otherwise excluded pursuant to another clause in this definition), except, in the case of clauses (i), (ii), (iv), and (v), to the extent that such event, circumstance, change, occurrence, development or effect materially and disproportionately affects Parent and its Subsidiaries, taken as a whole, relative to other Persons engaged in the same industries, geographies, and markets in which Parent operates, in which case, to the extent not otherwise excluded pursuant to another clause of this definition, such disproportionate effects and the events and circumstances underlying such disproportionate effects may be taken into account in determining whether a “Parent Material Adverse Effect” has occurred.
“Parent Measurement Price” means the volume weighted average trading price of Parent Common Stock on the Parent Stock Exchange for the five (5) consecutive trading days ending on the trading day immediately preceding the Closing Date.
“Parent Plans” has the meaning set forth in Section 7.4(c).
“Parent Reimbursement Fee” has the meaning set forth in Section 9.2(b).
“Parent SEC Reports” means all reports and other documents required to be filed with or furnished to the SEC by Parent since December 31, 2013, together with any documents filed or furnished during such period by Parent to the SEC on a voluntary basis, and amendments thereto.
“Parent Stock Exchange” means the Nasdaq Global Select Market, but if the Nasdaq Global Select Market is not then the principal U.S. trading market for Parent’s common stock, then “Parent Stock Exchange” shall be deemed to mean the principal U.S. national
11 |
securities exchange registered under the Exchange Act on which Parent’s common stock is then traded.
“Partnership” means any partnership, joint venture or similar entity in connection with which the Company or any of its Subsidiaries directly or indirectly holds an ownership interest in such entity.
“Paying and Exchange Agent” has the meaning set forth in Section 4.2(a).
“Permits” has the meaning set forth in Section 5.17.
“Permitted Liens” means (a) Liens for Taxes not yet due and payable or that are being contested in good faith and for which adequate reserves (as determined in accordance with GAAP) have been established on the Company Balance Sheet, (b) Liens in favor of vendors, carriers, warehousemen, repairmen, mechanics, workmen, materialmen, construction or similar Liens or other encumbrances arising in the ordinary course of business with respect to amounts not yet overdue or the validity of which is being contested in good faith by appropriate proceedings and for which adequate reserves (as determined in accordance with GAAP) have been established on the Company Balance Sheet, (c) Liens reflected in the Company Balance Sheet, as applicable, and (d) with respect to any Real Property Lease, Liens imposed or promulgated by operation of applicable Law with respect to real property and improvements, including zoning regulations, permits, licenses, utility easements, rights of way and similar Liens imposed or promulgated by any Governmental Entity which are not violated by the current use or occupancy of the real property or the operation of the business of the Company and its Subsidiaries as presently conducted.
“Person” means any natural person or any corporation, partnership, limited liability company, association, trust or other entity or organization, including any Governmental Entity.
“Per Share Amount” has the meaning set forth in the Recitals.
“Prime Rate” means the rate of interest quoted in the print edition of The Wall Street Journal, “Money Rates” section, as the prime rate (currently defined as the base rate on corporate loans posted by at least 75% of the nation’s 30 largest banks), as in effect from time to time.
“Preliminary Prospectus” has the meaning set forth in Section 2.1(g).
“Qualifying Transaction” shall have the meaning assigned to the term “Acquisition Proposal,” except that all references therein to “fifteen percent (15%)” shall be deemed to be references to “fifty percent (50%)”.
“Real Property Lease” has the meaning set forth in Section 5.14(a).
“Registration Statement” has the meaning set forth in Section 2.1(g).
“Representatives” has the meaning set forth in Section 7.2.
12 |
“Sarbanes-Oxley Act” has the meaning set forth in Section 5.5(d).
“Schedule 14D-9” has the meaning set forth in Section 2.2(b).
“SEC” means the United States Securities and Exchange Commission.
“Section 262” has the meaning set forth in Section 4.3.
“Securities Act” means the Securities Act of 1933, as amended.
“Service Provider” means any director, officer, employee or individual independent contractor of the Company or any Company Subsidiary.
“Share Consideration” has the meaning set forth in the Recitals.
“Share Consideration Value” means the product of the Exchange Ratio and the Parent Measurement Price.
“Significant Customer” has the meaning set forth in Section 5.19(a).
“Significant Supplier” has the meaning set forth in Section 5.19(b).
“Skyworks Merger Agreement” has the meaning set forth in the Recitals.
“Skyworks Termination Fee” has the meaning set forth in the Recitals.
“Specified Contracts” has the meaning set forth in Section 5.8(d).
“Sub” has the meaning set forth in the Preamble.
“Subsidiary” means, as to any Person, any corporation, partnership, limited liability company, association or other business entity (i) of which such Person directly or indirectly owns securities or other equity interests representing more than fifty percent (50%) of the aggregate voting power or (ii) of which such Person possesses more than fifty percent (50%) of the right to elect directors or Persons holding similar positions.
“Superior Proposal” means any Acquisition Proposal (substituting the term “fifty percent (50%)” for the term “fifteen percent (15%)” in each instance where such term appears therein) that the Company’s board of directors determines in its good faith judgment, after consultation with its outside legal counsel and financial advisors, and after taking into account all of the terms and conditions of such Acquisition Proposal (including any termination or break-up fees and conditions to consummation) and the likelihood and timing of consummation (as compared to the transactions contemplated hereby), and after taking into account all financial, legal, regulatory, and other aspects of such Acquisition Proposal, to be more favorable to the Company and its stockholders than the transactions contemplated hereby; provided, however, that no Acquisition Proposal shall be deemed to be a Superior Proposal if any financing required to consummate the Acquisition Proposal is not committed.
“Surviving Corporation” has the meaning set forth in Section 3.1.
13 |
“Tax Incentive” has the meaning set forth in Section 5.13(k).
“Tax Return” means any report, return, document, statement, declaration or other information or filing required to be supplied to any Governmental Entity or jurisdiction (foreign or domestic) with respect to Taxes, including, without limitation, any information return, claim for refund, amended return or declaration of estimated Tax, and any amendments, schedules or attachments to any of the foregoing, and including, for the avoidance of doubt, FinCen Form 114.
“Taxes” means any and all taxes, charges, fees, levies, customs, duties or other assessments, including income, gross receipts, excise, real or personal property, escheat, sales, withholding, social security, occupation, use, service, service use, value added, license, net worth, payroll, franchise, transfer and recording taxes, fees and charges, imposed by the IRS or any other Governmental Entity (whether domestic or foreign including any state, local or foreign government or any subdivision or taxing agency thereof (including a United States possession)), whether computed on a separate, consolidated, unitary, combined or any other basis; and such term shall include any interest, penalties or additional amounts attributable to, or imposed upon, or with respect to, any such taxes, charges, fees, levies or other assessments.
“Tender Offer Conditions” has the meaning set forth in Section 2.1(b).
“Termination Date” has the meaning set forth in Section 9.1(b)(i).
“Total Cash Consideration” means, with respect to each Company Stock Option, the product of (a) the Cash Consideration and (b) the number of shares of Company Common Stock subject to such Company Stock Option immediately prior to the Effective Time.
“Total Cash Exercise Price” means, with respect to each Company Stock Option, the aggregate exercise price of such Company Stock Option, multiplied by a fraction, the numerator of which is the Cash Consideration and the denominator of which is the sum of (a) the Cash Consideration and (b) the Share Consideration Value.
“Total Share Consideration” means, with respect to each Company Stock Option, the product of (a) the Share Consideration Value and (b) the number of shares of Company Common Stock subject to such Company Stock Option immediately prior to the Effective Time.
“Total Share Exercise Price” means, with respect to each Company Stock Option, the aggregate exercise price of such Company Stock Option reduced by the Total Cash Exercise Price.
“Underwater Option” means, with respect to each Company Stock Option, each Company Stock Option with an exercise price equal to or greater than the Merger Consideration.
“United States” and “U.S.” mean the United States of America.
14 |
Section 1.2 Other Definitional Provisions; Interpretation.
The words “hereof,” “herein” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement, and references to articles, sections, paragraphs, clauses, exhibits and schedules are to the articles, sections, clauses and paragraphs of, and exhibits and schedules to, this Agreement, unless otherwise specified.
Whenever “include,” “includes” or “including” is used in this Agreement, such word shall be deemed to be followed by the phrase “without limitation.”
Words describing the singular number shall be deemed to include the plural and vice versa, words denoting any gender shall be deemed to include all genders and words denoting natural persons shall be deemed to include business entities and vice versa.
When used in reference to information or documents, the phrase “made available” means that the information or documents referred to have been made available in that certain virtual data room established by the Company, for the purposes of the transactions contemplated by this Agreement no later than 11:59 p.m. (New York City time) on the date which is one day prior to the date of this Agreement.
Terms defined in the text of this Agreement as having a particular meaning have such meaning throughout this Agreement, except as otherwise indicated in this Agreement.
Article II
THE OFFER
Section 2.1 The Offer.
(a) Provided, that this Agreement shall not have been terminated in accordance with its terms and provided that none of the events set forth in clause (v)(a) of Annex A shall have occurred and subject to no Law having been enacted, entered, enforced, promulgated, amended, issued or deemed applicable to Parent, the Company or any subsidiary or affiliate thereof having such effect, Sub shall (and Parent shall cause Sub to) commence (within the meaning of Rule 14d-2 under the Exchange Act) the Offer as promptly as reasonably practicable, and in any event within twenty (20) Business Days, after the date hereof. Following such launch, each of Parent and Sub shall use its reasonable best efforts to consummate the Offer, subject to the terms and conditions hereof.
(b) The obligation of Sub to accept for payment, purchase and pay for any shares of Company Common Stock tendered pursuant to the Offer (and not validly withdrawn) shall be subject to the satisfaction or waiver pursuant to the terms hereof of (x) the condition (the “Minimum Condition”) that at least that number of shares of Company Common Stock validly tendered and not withdrawn prior to the expiration date of the Offer (other than shares of Company Common Stock tendered by guaranteed delivery that have not yet been “received,” as such term is defined in Section 251(h) of the DGCL, by the depositary for the Offer), when added to any shares of Company Common Stock already owned by Parent or any
15 |
of its controlled subsidiaries, if any, equals a majority of the then outstanding shares of Company Common Stock and (y) the other conditions set forth in Annex A hereto (the conditions described in clauses (x) and (y) are collectively referred to as the “Tender Offer Conditions”). Sub expressly reserves the right (but shall not be obligated) at any time or from time to time, in its sole discretion, to amend or waive any such condition (other than the Minimum Condition which may not be amended or waived), to increase the price per share of Company Common Stock payable in the Offer, and to make any other changes in the terms and conditions of the Offer; provided, that without the prior written consent of the Company no change may be made that decreases the Per Share Amount (except as provided in Section 2.1(h)), changes the form of consideration payable in the Offer, adds to the conditions to the Offer, decreases the number of shares of Company Common Stock sought to be purchased in the Offer, extends the Offer other than in a manner pursuant to and in accordance with the terms of this Section 2.1 or modifies or amends any condition to the Offer in any manner that broadens such conditions or is adverse to the holders of shares of Company Common Stock.
(c) Subject to the terms and conditions thereof, the Offer shall remain open until midnight, New York City time, at the end of the twentieth (20th) Business Day beginning with (and including) the date that the Offer is commenced (determined in accordance with Rule 14d-1(g)(3) under the Exchange Act) (the “Expiration Date”), unless the period of time for which the Offer is open shall have been extended pursuant to, and in accordance with, the provisions of this Section 2.1 or as required by applicable Laws or the interpretations of the SEC (in which event the term “Expiration Date” shall mean the earliest time and date that the Offer, as so extended, may expire).
(d) Notwithstanding the foregoing or anything to the contrary set forth in this Agreement, unless this Agreement shall have been terminated in accordance with Section 9.1, (i) Sub shall extend the Offer for any period required by any rule, regulation, interpretation or position of the SEC or its staff or the Nasdaq Stock Market that is applicable to the Offer and (ii) if, on the initial Expiration Date or any subsequent date as of which the Offer is scheduled to expire, any Tender Offer Condition is not satisfied and has not been waived, then Sub shall extend (and re-extend) the Offer and its expiration date beyond the initial Expiration Date or such subsequent date for successive extension periods of up to ten (10) Business Days each (each such extension period, an “Additional Offer Period”); provided, however, that notwithstanding the foregoing clauses (i) and (ii) of this Section 2.1(d), in no event shall Sub be required to extend the Offer beyond the Termination Date; provided further, that in no event shall Sub be permitted to extend the Offer beyond the Termination Date without the prior written consent of the Company; and provided further, that the foregoing clauses (i) and (ii) of this Section 2.1(d) shall not be deemed to impair, limit or otherwise restrict in any manner the right of Parent or the Company to terminate this Agreement pursuant to Section 9.1.
(e) In the event that this Agreement is terminated pursuant to Section 9.1, Sub shall (and Parent shall cause Sub to) promptly (and in any event within twenty four (24) hours of such termination), irrevocably and unconditionally terminate the Offer.
(f) The Per Share Amount shall, subject to applicable withholding of Taxes, be net to the applicable seller, upon the terms and subject to the conditions of the Offer. Subject to the terms and conditions of this Agreement, Sub or Parent on Sub’s behalf shall accept
16 |
for payment and pay for all shares of Company Common Stock validly tendered and not withdrawn promptly following the expiration of the Offer; provided, however, that without the prior written consent of the Company, Sub shall not accept for payment or pay for any shares of Company Common Stock if, as a result, Sub would acquire less than the number of shares of Company Common Stock necessary to satisfy the Minimum Condition. The time at which Sub first accepts for payment the shares of Company Common Stock tendered in the Offer is referred to as the “Acceptance Time.” If payment of the Per Share Amount is to be made to a person other than the person in whose name the surrendered certificate formerly evidencing shares of Company Common Stock is registered on the stock transfer books of the Company, it shall be a condition of payment that the certificate so surrendered shall be endorsed properly or otherwise be in proper form for transfer and that the person requesting such payment shall have paid all transfer and other similar Taxes required by reason of the payment of the Per Share Amount to a person other than the registered holder of the certificate surrendered, or shall have established to the satisfaction of Sub that such Taxes either have been paid or are not applicable. The Company shall register (and shall instruct its transfer agent to register) in the name of Sub the shares of Company Common Stock accepted for payment by Sub immediately after the Acceptance Time.
(g) As soon as reasonably practicable, and in any event within twenty (20) Business Days, after the date of this Agreement, Parent shall prepare and file with the SEC a registration statement on Form S−4 to register the offer and sale of Parent Common Stock pursuant to the Offer and the Merger (the “Registration Statement”). The Registration Statement will include a preliminary prospectus containing the information required under Rule 14d−4(b) under the Exchange Act (the “Preliminary Prospectus”). On the Offer Commencement Date, Parent and Acquisition Sub shall: (i) cause to be filed with the SEC a Tender Offer Statement on Schedule TO with respect to the Offer, which will contain or incorporate by reference the Preliminary Prospectus and forms of the related letter of transmittal and summary advertisement (such Tender Offer Statement on Schedule TO and all exhibits, amendments and supplements thereto being referred to collectively in this Agreement as the “Offer Documents”); and (ii) cause the Offer Documents to be disseminated to holders of shares of Company Common Stock to the extent required by applicable Law. Parent and Sub shall use reasonable best efforts to cause the Registration Statement and the Offer Documents to comply in all material respects with applicable Law. The Company and its counsel shall be given reasonable opportunity to review and comment on the Registration Statement and the Offer Documents (including all amendments and supplements thereto) prior to the filing thereof with the SEC. Parent and Sub shall promptly provide the Company and its counsel with a copy or a description of any comments received by Parent, Sub or their counsel from the SEC or its staff with respect to the Registration Statement or the Offer Documents. Each of Parent and Sub shall use reasonable best efforts to respond promptly to any comments of the SEC or its staff with respect to the Registration Statement, the Offer Documents or the Offer. To the extent required by applicable Law, each of Parent, Sub and the Company shall use reasonable best efforts to (1) correct promptly any information provided by it for use in the Registration Statement or the Offer Documents to the extent that it becomes aware that such information shall have become false or misleading in any material respect and (2) take all steps necessary to promptly cause the Registration Statement and the Offer Documents, as supplemented or amended to correct such information, to be filed with the SEC and to be disseminated to holders of shares of Company Common Stock. The Company shall promptly furnish to Parent and Sub all information concerning the Company and the
17 |
Company’s stockholders that may be required or reasonably requested in connection with any action contemplated by this Section 2.1(g). Parent shall use reasonable best efforts to have the Registration Statement declared effective under the Securities Act as promptly as possible after its filing and to maintain its effectiveness for so long as shall be required for the issuance of Parent Common Stock pursuant to the Offer and the Merger. Following the time the Registration Statement is declared effective, Parent shall file the final prospectus included therein under Rule 424(b) under the Securities Act.
(h) If, between the date of this Agreement and the Acceptance Time, any change in the number of issued or outstanding shares of Company Common Stock or Parent Common Stock shall occur as a result of a reclassification, recapitalization, share split (including a reverse share split), or combination, exchange or readjustment of shares, or any share dividend or share distribution (including any dividend or distribution of securities convertible into Company Common Stock or Parent Common Stock) with a record date during such period, the Per Share Amount shall be equitably adjusted to reflect such change.
(i) No fraction of a share of Parent Common Stock will be issued in connection with the Offer, but in lieu thereof each holder of Company Common Stock that would otherwise be entitled to a fraction of a share of Parent Common Stock (after aggregating all fractional shares of Parent Common Stock that otherwise would be received by such holder) shall in lieu of such fractional share, be paid an amount of cash (rounded to the nearest whole cent), without interest, equal to the product of: (i) such fraction, multiplied by (ii) the volume weighted average trading price of Parent Common Stock on Nasdaq for the five (5) consecutive trading days ending on the trading day immediately preceding the Closing Date.
Section 2.2 Company Action.
(a) The Company hereby consents to and approves the Offer pursuant to the terms of this Agreement. The Company hereby further consents to the inclusion in the Offer Documents of such approval and Board Recommendation, provided that the Company shall not have withdrawn or modified such Board Recommendation as provided in Section 7.3(e) or Section 7.3(f). The Company shall not withdraw or modify such Board Recommendation in any manner adverse to Sub or Parent except as provided in Section 7.3(e) or Section 7.3(f).
(b) Promptly following the filing of the Schedule TO by Sub, the Company shall file with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9 (together with all amendments and supplements thereto, the “Schedule 14D-9”) containing, except as provided in Section 7.3(e) or Section 7.3(f), Board Recommendation. The Company shall use its reasonable best efforts to cause the Schedule 14D-9 to be filed with the SEC on the same day as the Schedule TO shall be filed with the SEC. The Company shall promptly mail the Schedule 14D-9 to the holders of shares of Company Common Stock together with the Offer Documents and shall use its reasonable best efforts to cause the Offer Documents to be disseminated in all material respects as required by applicable federal securities laws. The Company shall also include a notice, in compliance with Section 251(h) and Section 262 of the DGCL, of appraisal rights in connection with the Merger under the DGCL. The Company shall use its reasonable best efforts to cause the Schedule 14D-9 to comply in all material respects with the applicable requirements of federal securities laws. The Company, Parent and Sub agree
18 |
to correct promptly any information provided by any of them for use in the Schedule 14D-9 that shall have become false or misleading in any material respect, and the Company further agrees to use its reasonable best efforts to cause the Schedule 14D-9, as so corrected, to be filed with the SEC and disseminated to holders of shares of Company Common Stock, in each case in all material respects as required by applicable federal securities laws. Parent or Sub shall promptly furnish to the Company all information concerning Parent and Sub that is required or reasonably requested by the Company in connection with its obligations relating to the Schedule 14D-9. The Company shall give Parent, Sub and their counsel a reasonable opportunity to review and comment on the Schedule 14D-9 before it is filed with the SEC. In addition, the Company agrees to (i) provide Parent, Sub and their counsel in writing with any written comments the Company or its counsel may receive from time to time from the SEC or its staff with respect to the Schedule 14D-9 promptly after the receipt of such comments, (ii) use reasonable best efforts to provide Parent, Sub and their counsel a reasonably detailed description of any oral comments the Company or its counsel may receive from time to time from the SEC or its staff with respect to the Schedule 14D-9 promptly after the receipt of such comments, and (iii) unless there has been a Change of Recommendation, provide Parent, Sub and their counsel reasonable opportunity to review and comment on any written or oral response to such comments or any proposed amendment to the Schedule 14D-9 prior to the filing thereof with the SEC.
(c) In connection with the Offer, the Company shall promptly furnish or cause to be furnished (including by instructing its transfer agent to promptly furnish) to Sub mailing labels containing the names and addresses of all record holders of shares of Company Common Stock and with security position listings of shares of Company Common Stock held in stock depositories, each as of a recent date, together with all other available listings and computer files containing names, addresses and security position listings of record holders and non-objecting beneficial owners of shares of Company Common Stock. The Company shall use its reasonable best efforts to promptly furnish or cause to be furnished to Sub such additional information, including updated listings and computer files of stockholders, mailing labels and security position listings, and such other assistance in disseminating the Offer Documents to holders of shares of Company Common Stock as Parent or Sub may reasonably request. Subject to the requirements of Law, including applicable stock exchange rules, and except for such steps as are necessary to disseminate the Offer Documents and any other documents necessary to consummate the Offer or the Merger, Parent and Sub shall hold in confidence the information contained in such labels, listings and files and shall use such information only in connection with the Transactions. If the Offer is terminated or if this Agreement shall be terminated, Sub and Parent will promptly deliver and cause their Representatives to deliver to the Company (and delete electronic copies of) all copies, summaries and extracts of such information then in their possession or control.
Article III
THE MERGER
Section 3.1 The Merger. At the Effective Time and subject to and upon the terms and conditions of this Agreement and the applicable provisions of the DGCL, Sub shall be merged with and into the Company (the “Merger”), the separate corporate existence of Sub shall cease, and the Company shall continue as the surviving company and as a wholly owned
19 |
subsidiary of Parent. The Company, as the surviving corporation after the Merger, is hereinafter sometimes referred to as the “Surviving Corporation”. The Merger shall be effected pursuant to Section 251(h) of the DGCL and shall have the effects set forth in the applicable provisions of the DGCL.
Section 3.2 Effective Time. Subject to the terms of this Agreement, the parties shall prior to the Closing Date, prepare, and on the Closing Date, execute and file or cause to be filed with the Secretary of State of the State of Delaware, the certificate of merger with respect to the Merger (the “Certificate of Merger”), in such form as required by, and executed in accordance with, the relevant provisions of the DGCL (the date and time of such filing of the Certificate of Merger, or such later time as is specified in the Certificate of Merger and as is agreed by the parties hereto, the “Effective Time”).
Section 3.3 Closing. The closing of the Merger (the “Closing”) will take place at 10:00 A.M., New York City Time, on a date to be mutually agreed by the parties, which shall be no later than three (3) Business Days after satisfaction or waiver of all of the conditions set forth in Article VIII hereof (other than conditions that by their terms are to be satisfied at the Closing, but subject to the satisfaction or waiver of such conditions at the Closing), at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 525 University Avenue, Palo Alto, California 94301, unless another time, date or place is agreed to in writing by the parties hereto (such date on which the Closing actually occurs is the “Closing Date”).
Section 3.4 Effect of the Merger. At the Effective Time, the effect of the Merger shall be as provided in this Agreement, the Certificate of Merger, and the applicable provisions of the DGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time all the property, rights, privileges, powers and franchises of the Company and Sub shall vest in the Surviving Corporation, and all debts, liabilities and duties of the Company and Sub shall become the debts, liabilities and duties of the Surviving Corporation.
Section 3.5 Certificate of Incorporation and By-laws of the Surviving Corporation. The certificate of incorporation of the Company, as in effect immediately prior to the Effective Time, shall be the certificate of incorporation of the Surviving Corporation until thereafter amended in accordance with the DGCL and as provided in such certificate of incorporation. The by-laws of the Company, as in effect immediately prior to the Effective Time, shall be the by-laws of the Surviving Corporation until thereafter amended in accordance with the DGCL and as provided in such by-laws.
Section 3.6 Directors and Officers of the Surviving Corporation. The directors of Sub, as of immediately prior to the Effective Time shall, from and after the Effective Time, be the directors of the Surviving Corporation until their successors shall have been duly elected or appointed or qualified or until their earlier death, resignation or removal in accordance with the Surviving Corporation’s certificate of incorporation and by-laws. The officers of the Company at the Effective Time shall, from and after the Effective Time, be the initial officers of the Surviving Corporation until their successors shall have been duly elected or appointed or qualified or until their earlier death, resignation or removal in accordance with the Surviving Corporation’s certificate of incorporation and by-laws.
20 |
Article IV
CONVERSION OF SHARES
Section 4.1 Conversion of Shares.
(a) At the Effective Time, each share of capital stock of Sub issued and outstanding immediately prior to the Effective Time shall be converted into and become one (1) validly issued, fully paid and nonassessable share of common stock of the Surviving Corporation.
(b) All shares of Company Common Stock that are owned by the Company as treasury shares and any shares of Company Common Stock owned by Parent, Sub or any other direct or indirect Subsidiary of Parent shall, at the Effective Time, be cancelled and shall cease to exist, and no consideration shall be delivered in exchange therefor.
(c) At the Effective Time, each share of Company Common Stock then issued and outstanding (other than Company Common Stock to be cancelled pursuant to Section 4.1(b) and Dissenting Shares) shall be automatically cancelled and shall cease to exist and be converted into the right to receive the Per Share Amount (the “Merger Consideration”), and the holders of Book Entry Shares and the holders of certificates that, immediately prior to the Effective Time, represented outstanding Company Common Stock (the “Certificates”) shall cease to have any rights with respect thereto other than the right to receive, upon transfer of such Book Entry Shares or delivery of such Certificates in accordance with Section 4.2, the Merger Consideration, without any interest thereon, for each such share of the Company Common Stock.
(d) No fraction of a share of Parent Common Stock will be issued by virtue of the Merger, but in lieu thereof each holder of Company Common Stock that would otherwise be entitled to a fraction of a share of Parent Common Stock (after aggregating all fractional shares of Parent Common Stock that otherwise would be received by such holder) shall, upon surrender of such holder’s Certificate(s) or Book Entry Share(s) or in the case of a lost, stolen or destroyed certificate, upon delivery of an affidavit in the manner provided in Section 4.2(g), receive from Parent an amount of cash (rounded to the nearest whole cent), without interest, equal to the product of: (i) such fraction, multiplied by (ii) the volume weighted average trading price of Parent Common Stock on Nasdaq for the five (5) consecutive trading days ending on the trading day immediately preceding the date hereof.
Section 4.2 Surrender and Payment.
(a) At or prior to the Closing, Parent shall appoint a United States bank or trust company or other independent financial institution in the United States (the “Paying and Exchange Agent”) that is reasonably acceptable to the Company to act, among other things, as paying agent and exchange agent for the Merger and to deliver the Merger Consideration to former stockholders of the Company. The Company and Parent shall enter into a Paying and Exchange Agent agreement with the Paying and Exchange Agent, which agreement shall set forth the duties, responsibilities and obligations of the Paying and Exchange Agent consistent with the terms of this Agreement. Promptly after the Effective Time on the Closing Date, Parent
21 |
shall deposit (or cause to be deposited) with the Paying and Exchange Agent, for the account and benefit of the former holders of Company Common Stock, the aggregate Cash Consideration payable and the aggregate number of shares of Parent Common Stock issuable pursuant to this Article IV, in an amount sufficient to pay the aggregate Merger Consideration required to be paid by the Paying and Exchange Agent in accordance with this Agreement (such cash and Parent Common Stock shall be referred to in this Agreement as the “Consideration Fund”). In addition, Parent shall make available as necessary cash in an amount sufficient for payment in lieu of fractional shares pursuant to Section 4.1(d) and any dividends or distributions which holders of Company Common Stock may be entitled pursuant to Section 4.2(h). In the event the Consideration Fund shall be insufficient to pay the Merger Consideration (including with respect to Company Common Stock held by stockholders who did not vote in favor of the Merger but who did not exercise, or who shall have effectively withdrawn or lost, their rights to appraisal of such Company Common Stock under the DGCL), Parent shall promptly deliver, or cause to be delivered, additional funds and shares of Parent Common Stock to the Paying and Exchange Agent in an amount that is equal to the deficiency required to make such payments.
(b) Promptly after the Effective Time (and in any event within five (5) Business Days after the Effective Time), Parent shall cause the Paying and Exchange Agent to mail to each stockholder whose shares were converted into the right to receive Merger Consideration pursuant to Section 4.1: (i) a letter of transmittal, in customary form, that shall specify that delivery of such Certificates or transfer of such Book Entry Shares shall be deemed to have occurred, and risk of loss and title to the Certificates or Book Entry Shares, as applicable, shall pass, only upon proper delivery of the Certificates (or affidavits of loss in lieu thereof) or transfer of the Book Entry Shares to the Paying and Exchange Agent and (ii) instructions for use in effecting the surrender of the Certificates or transfer of the Book Entry Shares in exchange for payment of the Merger Consideration, the form and substance of which letter of transmittal and instructions shall be as reasonably agreed to by the Company and Parent and prepared prior to the Closing. Upon receipt of an “agent’s message” by the Paying and Exchange Agent in connection with the transfer of a Book Entry Share or surrender of a Certificate for cancellation to the Paying and Exchange Agent, in each case together with such letter of transmittal, duly executed and completed in accordance with the instructions thereto, and with such other documents as may be required pursuant to such instructions, the holder of such Book Entry Share or Certificate shall be entitled to receive in exchange therefor, subject to any required withholding of Taxes, the Merger Consideration pursuant to the provisions of this Article IV, and the Book Entry Share so transferred or Certificate so surrendered shall forthwith be cancelled. No interest will be paid to holders of Book Entry Shares or Certificates in connection with, or accrued on, the Merger Consideration, any cash paid in lieu of the issuance of any fractional shares or dividends or distributions payable with respect to Share Consideration. If any Merger Consideration is to be paid to a Person other than the stockholder in whose name the Book Entry Share transferred or Certificate surrendered in exchange therefor is registered, it shall be a condition of such exchange that the Person requesting such exchange shall pay to the Paying and Exchange Agent any transfer or other Taxes required by reason of payment of the Merger Consideration to a Person other than the stockholder owning the Book Entry Share transferred or Certificate surrendered, or shall establish to the reasonable satisfaction of the Paying and Exchange Agent that such Tax has been paid or is not applicable.
22 |
(c) The cash in the Consideration Fund shall be invested by the Paying and Exchange Agent as directed by Parent; provided, however, that any such investments shall be in short-term obligations of the United States with maturities of no more than thirty (30) days or guaranteed by the United States and backed by the full faith and credit of the United States. Earnings on the Consideration Fund in excess of the amounts payable to the Company’s former stockholders shall be the sole and exclusive property of Parent and shall be paid as Parent directs. No investment of the Consideration Fund shall relieve Parent, the Surviving Corporation or the Paying and Exchange Agent from promptly making the payments required by this Article IV, and following any losses from any such investment, Parent shall promptly provide additional cash funds to the Paying and Exchange Agent for the benefit of the Company’s stockholders at the Effective Time in the amount of such losses to the extent the funds in the Consideration Fund are insufficient for such purposes, which additional funds will be deemed to be part of the Consideration Fund.
(d) At and after the Effective Time, there shall be no transfers on the share transfer books of the Company of the shares of Company Common Stock that were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates or Book Entry Shares are presented to the Surviving Corporation or the Paying and Exchange Agent for any reason, they shall be cancelled and exchanged for the Merger Consideration pursuant to this Article IV, except as otherwise provided by Law.
(e) Any portion of the Consideration Fund (including the proceeds of any investments thereof) that remains unclaimed by the former Company stockholders one (1) year after the Effective Time shall, to the extent permitted by applicable Law, be delivered to Parent or the Surviving Corporation for no consideration. Any Company stockholder owning Certificates or Book Entry Shares who has not theretofore complied with this Article IV with respect to such Certificates or Book Entry Shares shall thereafter look only to Parent for payment of their claim for Merger Consideration in respect thereof.
(f) Notwithstanding the foregoing, neither the Paying and Exchange Agent nor any party hereto shall be liable to any Person in respect of cash from the Consideration Fund delivered to a public official pursuant to any applicable abandoned property, escheat or similar Law. If any Certificate or Book Entry Share shall not have been surrendered or transferred, respectively, prior to the date on which any Merger Consideration in respect thereof would otherwise escheat to or become the property of any Governmental Entity pursuant to applicable Law, any such Merger Consideration in respect of such Certificate or Book Entry Shares shall, to the extent permitted by applicable Law, become the property of Parent or the Surviving Corporation, and any stockholder of such Certificate or Book Entry Share who has not theretofore complied with this Article IV with respect thereto shall thereafter look only to Parent for payment of their claim for Merger Consideration in respect thereof.
(g) If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact (which affidavit shall be in a form reasonably satisfactory to Parent and the Paying and Exchange Agent) by the Person claiming such certificate to be lost, stolen or destroyed, the Paying and Exchange Agent shall issue in exchange for such lost, stolen or destroyed Certificate the Merger Consideration to which such Person is entitled in respect of such Certificate pursuant to this Article IV.
23 |
(h) Whenever a dividend or other distribution is declared or made after the date hereof with respect to Parent Common Stock with a record date after the Effective Time, such declaration shall include a dividend or other distribution in respect of all Parent Common Stock issuable pursuant to this Agreement. No dividends or other distributions declared or made after the date hereof with respect to Parent Common Stock with a record date after the Effective Time, and no payment in lieu of fractional shares pursuant to Section 4.1(d) will be paid to the holders of any unsurrendered Certificates or Book Entry Shares with respect to Parent Common Stock represented thereby until the holders of record of such Certificates or Book Entry Shares shall surrender such Certificates or Book Entry Shares. Subject to applicable Law, following surrender of any such Certificates or Book Entry Shares, the Paying and Exchange Agent shall deliver to the holders thereof, without interest (i) promptly after such surrender, the Cash Consideration payable and the Share Consideration payable in exchange therefor, in each case pursuant to Section 4.1(a), along with payment in lieu of fractional shares pursuant to Section 4.1(d) and the amount of any such dividends or other distributions with a record date after the Effective Time and theretofore paid with respect to such Parent Common Stock, and (ii) at the appropriate payment date, the amount of dividends or other distributions with a record date after the Effective Time and a payment date subsequent to such surrender payable with respect to such Parent Common Stock.
Section 4.3 Dissenting Stockholders. Notwithstanding anything in this Agreement to the contrary, shares of Company Common Stock that are outstanding immediately prior to the Effective Time and that are held by any Person who is entitled to demand and properly demands appraisal of such shares (“Dissenting Shares”) pursuant to, and who complies in all respects with, Section 262 of the DGCL (“Section 262”) shall not be converted into the right to receive the Merger Consideration as provided in Section 4.1, but rather the holders of Dissenting Shares shall be entitled to payment by the Surviving Corporation of the “fair value” of such Dissenting Shares in accordance with Section 262; provided, however, that if any such holder shall fail to perfect or otherwise shall waive, withdraw or lose the right to appraisal under Section 262, then the right of such holder to be paid the fair value of such holder’s Dissenting Shares shall cease and such Dissenting Shares shall be deemed to have been converted as of the Effective Time into, and to have become exchangeable solely for, the right to receive the Merger Consideration as provided in Section 4.1. The Company shall provide prompt notice to Parent of any demands received by the Company for appraisal of any shares of Company Common Stock, withdrawals of such demands and any other instruments served pursuant to Section 262 received by the Company. To the extent permitted by applicable Law, Parent shall have the opportunity to participate in and direct any and all negotiations and proceedings with respect to such demands. Neither the Company nor Parent shall, without the prior written consent of the other party, voluntarily make any payment with respect to, or settle, or offer to settle, any such demands or applications, or waive any failure to timely deliver a written demand for appraisal or agree to do any of the foregoing.
Section 4.4 Treatment of Company Stock Options; Company Restricted Stock Units; and Company Performance Restricted Stock Units.
(a) At the Effective Time, each outstanding Company Stock Option shall, without any further action on the part of any holder thereof, (i) to the extent unvested, be fully vested, and (ii) be cancelled and the holder thereof shall be entitled to receive Option
24 |
Consideration (subject to any applicable withholding or other Taxes or other amounts required by applicable Law to be withheld (which withholding shall first be applied against the cash portion of the Option Consideration)). For the avoidance of doubt, if the Option Consideration for any Company Option is zero or a negative number, such Company Option will be cancelled at the Effective Time without any payment therefor. Following the Effective Time, any such cancelled Company Stock Option shall no longer be exercisable for shares of Company Common Stock and shall only entitle the holder of such Company Stock Option to the payment described in this Section 4.4(a), which shall be made by the Surviving Corporation as of, or within two (2) Business Days after the Effective Time.
(b) At the Effective Time, by virtue of the Merger, the unvested Company Restricted Stock Units outstanding immediately prior to the Effective Time shall be converted into that number of Parent restricted stock units of Parent Common Stock, rounded down to the nearest whole share, (“Converted RSUs”) equal to the product of (x) the number of shares of Company Common Stock subject to such Company Restricted Stock Units and (y) the sum of (A) the Exchange Ratio, and (B) the quotient obtained by dividing (i) the Cash Consideration by (ii) the Parent Measurement Price. Any Converted RSUs issued pursuant to this Section 4.4(b) shall be subject to the same terms and conditions as were applicable under such Company Restricted Stock Units (including any applicable change of control or other accelerated vesting provisions, and this transaction shall constitute a change of control for all relevant provisions that accelerate vesting), with the terms and conditions modified as appropriate to reflect the assumption; provided, that all references to the “Company” in the applicable Company Equity Plans and award agreements will be references to Parent. Each Converted RSU that vests after the Effective Time shall be settled in shares of Parent Common Stock; provided, that in the event that Parent shall reasonably determine at any time prior to the Effective Time that it would not be permitted to consummate the Merger or the other transactions contemplated hereby without the prior approval of Parent’s stockholders under applicable Laws or the rules of Nasdaq, Parent shall have the power to provide that any such Converted RSU that vests after the Effective Time shall be settled by a cash payment equal to the value of a share of Parent Common Stock at the time of such settlement.
(c) At the Effective Time, each outstanding and vested Company Restricted Stock Unit (including those Company Restricted Stock Units that become vested by their terms immediately prior to or as of the Effective Time) shall, without any further action on the part of any holder thereof, be cancelled and extinguished, and the holder thereof shall be entitled to receive (subject to any applicable withholding or other Taxes or other amounts required by applicable Law to be withheld, which withholding shall first be applied against the cash portion of the consideration paid in respect of a vested Company Restricted Stock Unit) (i) an amount in cash equal to the product of (A) the Cash Consideration multiplied by (B) the total number of shares of Company Common Stock subject to such Company Restricted Stock Unit, and (ii) a number of shares of Parent Common Stock equal to the product of the (A) Share Consideration and (B) the total number of shares of Company Common Stock subject to such Company Restricted Stock Unit, provided that any fraction of a share of Parent Common Stock resulting from such product should be treated consistently with Section 4.1(d) hereof. The payment described in this Section 4.4(c) shall be made by the Surviving Corporation in the next practicable payroll following the Effective Time; provided, that payment shall be made at such other time or times following the Effective Time consistent with the terms of the Company
25 |
Restricted Stock Unit to the extent necessary to avoid the imposition of additional income tax under Section 409A of the Code.
(d) At the Effective Time, by virtue of the Merger, the unvested Company Performance Restricted Stock Units outstanding immediately prior to the Effective Time shall be assumed and converted into that number of restricted stock units of Parent Common Stock, rounded down to the nearest whole share (“Converted PRSUs”) equal to the product of (x) the number of shares of Company Common Stock subject to such Company Performance Restricted Stock Units, assuming achievement of target-level performance with respect to each performance period, performance cycle or measurement cycle applicable to such Company Performance Restricted Stock Units and (y) the Equity Conversion Ratio. Any Converted PRSUs issued pursuant to this Section 4.4(d) shall continue to be subject to the vesting schedule applicable to the Company Performance Restricted Stock Units, including that the Converted PRSUs will be settled no later than the fifteenth (15th) day of the third (3rd) calendar month following the applicable vesting date (or as otherwise required by the applicable award agreement) subject only to the continued service of the grantee with the Surviving Corporation, Parent or an Affiliate through each applicable vesting date or measurement cycle end date but shall not be subject to any performance metrics following the Effective Time, and shall otherwise be subject to the same terms and conditions (modified as appropriate to reflect the assumption) as were applicable under such Company Performance Restricted Stock Units (after giving effect to and including any applicable change of control or other accelerated vesting provisions, for which purposes this transaction shall constitute a change of control); provided, that all references to the “Company” in the applicable Company Equity Plans and award agreements will be references to Parent. Each Converted PRSU that vests after the Effective Time shall be settled in shares of Parent Common Stock; provided, that in the event that Parent shall reasonably determine at any time prior to the Effective Time that it would not be permitted to consummate the Merger or the other transactions contemplated hereby without the prior approval of Parent’s stockholders under applicable Laws or the rules of Nasdaq, Parent shall have the power to provide that any such Converted PRSU that vests after the Effective Time shall be settled by a cash payment equal to the value of a share of Parent Common Stock at the time of such settlement.
(e) Prior to the Acceptance Time, the Company shall take all actions necessary (including obtaining any required consents) to effectuate the provisions set forth in this Section 4.4; provided, that no action taken by the Company shall be required to be irrevocable until immediately prior to the Acceptance Time. The parties shall, to the extent reasonably practicable, cooperate in good faith prior to the Effective Time to develop mechanisms with respect to any Company Stock Options, Company Restricted Stock Units and Company Performance Restricted Stock Units held by individuals subject to the Laws of a country other than the United States to mitigate the tax impact of the provisions set forth in this Section 4.4 and adhere to applicable Law (without creating obligations that extend to future grants).
Section 4.5 Withholding Rights. The Paying and Exchange Agent, Parent, Sub and the Surviving Corporation shall be entitled to deduct and withhold from any Merger Consideration or other amounts payable pursuant to this Agreement such amounts as may be required under the Code or any other provision of applicable federal, state, local or foreign Tax Law. To the extent that such amounts are so deducted or withheld and are paid over to the
26 |
applicable Governmental Entity, such deducted or withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Person in respect of whom such deduction or withholding was made.
Section 4.6 Company Special Shares. The special shares (the “Company Special Shares”) of PMC-Sierra, Ltd., a Canadian subsidiary of the Company, shall remain outstanding, and subject to and from and after the Effective Time, the holders of each Company Special Share shall be entitled to receive, upon the exchange or retraction (i.e., redemption at the option of the holder) thereof, in lieu of each share of Company Common Stock that would have been issuable in respect of such redacted Company Special Shares, (a) an amount in cash, without interest, equal to the Cash Consideration, and (b) a number of shares of Parent Common Stock equal to the product of (x) the Exchange Ratio, times (y) the applicable exchange ratio under that certain Exchange Agreement, dated as of September 2, 1994, as amended (the “Exchange Agreement”) among the Company, PMC-Sierra, Ltd. and the other parties thereto, in accordance with the terms of the Exchange Agreement.
Article V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as disclosed (a) in the Company SEC Reports filed or furnished at least one (1) Business Day prior to the date of this Agreement (but (i) without giving effect to any amendment thereof filed with or furnished to the SEC on or after such date, and (ii) excluding any disclosures contained under the heading “Risk Factors” and any disclosure of risks included in any “forward-looking statements” disclaimer or other such statements that are similarly predictive or forward-looking), but only to the extent such Company SEC Reports are publicly available on the SEC’s Electronic Data Gathering Analysis and Retrieval System, or (b) in the Company Disclosure Schedule (subject to Section 10.4), the Company represents and warrants to Parent and Sub as follows:
Section 5.1 Organization.
(a) The Company is a corporation duly organized, validly existing and in good standing under the Laws of Delaware, and has all requisite corporate power and authority to own its properties and assets and to conduct its business as it is currently being conducted. The Company is duly qualified to do business as a foreign corporation and, where applicable, is in good standing in each jurisdiction in which the nature of the business conducted by it makes such qualification necessary, except where the failure to be so qualified or to be in good standing would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
(b) Section 5.1(b) of the Company Disclosure Schedule sets forth a true, correct and complete list of the Company’s Subsidiaries, as of the date of this Agreement. Each Subsidiary of the Company (i) has been duly organized and is validly existing and, where applicable and except as has not had and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, in good standing under the Laws of the jurisdiction of its organization; (ii) is duly qualified to do business and, where applicable, is in
27 |
good standing as a foreign entity in all jurisdictions in which the nature of the business conducted by it makes such qualification necessary except where the failure to be so qualified and in good standing has not had and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect; and (iii) has all corporate power and authority required to carry on its business as currently conducted.
(c) The Company has made available to Parent (i) accurate and complete copies of the certificate of incorporation and by-laws (or equivalent constituent documents), including all amendments thereto through the date hereof, of the Company and its Subsidiaries, and (ii) the minutes of the meetings and other proceedings (including any actions taken by written consent or otherwise without a meeting) of the stockholders, board of directors (or to the extent applicable, any committee thereof) of the Company and the minutes of the meetings and other proceedings (including any actions taken by written consent or otherwise without a meeting) of the stockholders and boards of directors of PMC-Sierra US, Inc. and PMC-Sierra International Sdn. Bhd., in each case, since December 31, 2012 through the date hereof. Neither the Company nor any Subsidiary of the Company is in violation of any of the provisions of the certificate of incorporation or by-laws (or equivalent constituent documents), including all amendments thereto, of such entity.
Section 5.2 Capitalization; Subsidiaries.
(a) The authorized capital stock of the Company consists of 900,000,000 shares of Company Common Stock and 5,000,000 shares of Company Preferred Stock. As of the close of business on October 1, 2015, there were issued and outstanding (i) 195,674,666 shares of Company Common Stock (with zero shares of Company Common Stock held by the Company in treasury), (ii) zero shares of Company Preferred Stock, (iii) Company Stock Options to purchase an aggregate of 13,945,547 shares of Company Common Stock (of which options to purchase an aggregate of 12,007,635 shares of Company Common Stock were exercisable), (iv) Company Restricted Stock Units in respect of 6,856,788 shares of Company Common Stock, (v) Company Performance Restricted Stock Units in respect of 1,042,769 shares of Company Common Stock (assuming achievement of the target level of performance at the end of the applicable performance period), and (vi) 203,467 shares of Company Common Stock issuable in connection with Company Special Shares. Since the close of business on October 1, 2015, no shares of Company Common Stock, shares of Company Preferred Stock, Company Stock Options, Company Restricted Stock Units or Company Performance Restricted Stock Units have been issued or granted except for shares of Company Common Stock issued (A) pursuant to the exercise of Company Stock Options, the vesting of Company Restricted Stock Units or Company Performance Restricted Stock Units, or in connection with the Company Special Shares, in each case outstanding on October 1, 2015 or (B) after the date hereof, as explicitly permitted under Section 7.1(b)(ii) of this Agreement (as qualified by Section 7.1(b)(ii) of the Company Disclosure Schedule). All of the issued and outstanding shares of the Company’s capital stock are duly authorized, validly issued, fully paid, non-assessable and free of preemptive rights. As of the date of this Agreement, other than pursuant to the Company Equity Plans, the ESPP, or the Company Special Shares, there are no existing (i) options, warrants, calls, subscriptions or other rights, convertible securities, agreements or commitments of any character obligating the Company or any of its Subsidiaries to issue, transfer or sell any capital stock or other equity interest (or securities convertible or
28 |
exchangeable into such capital stock or equity interest) in, the Company or any of its Subsidiaries, (ii) rights that are linked to, or based upon, the value of Company Common Stock, (iii) contractual obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any capital stock or other equity interests of the Company or any of its Subsidiaries, or (iv) voting trusts or similar agreements to which the Company is a party with respect to the voting of the capital stock or equity interests of the Company. There are no bonds, debentures, notes or other indebtedness of the Company or any of its Subsidiaries having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which stockholders of the Company may vote.
(b) All of the outstanding capital stock or equivalent equity interests of each of the Company’s Subsidiaries are validly issued, fully paid (to the extent required under the applicable governing documents) and nonassessable and all such shares (other than directors’ qualifying shares) are owned of record and beneficially, directly or indirectly, by the Company, free and clear of all material Liens, pledges, security interests or other encumbrances.
(c) No Subsidiary of the Company has or is bound by any outstanding subscriptions, options, warrants, calls, commitments, rights agreements or agreements of any character calling for it to issue, deliver or sell, or cause to be issued, delivered or sold any of its equity securities or any securities convertible into, exchangeable for or representing the right to subscribe for, purchase or otherwise receive any such equity security, or obligating such Subsidiary to grant, extend or enter into any such subscriptions, options, warrants, calls, commitments, rights agreements or other similar agreements, except, in each case, to or with the Company or any other Subsidiary of the Company. Other than the Company Special Shares, there are no outstanding contractual obligations of any Subsidiary of the Company to repurchase, redeem or otherwise acquire any of its capital stock or other equity interests, except, in each case, to or with the Company or any other Subsidiary of the Company.
(d) Neither the Company nor any of its Subsidiaries owns any interest or investment (whether equity or debt) in any corporation, partnership, joint venture, trust or other entity, other than a Subsidiary of the Company, which interest or investment is material to the Company and its Subsidiaries, taken as a whole.
(e) Neither the Company nor any of its Subsidiaries has agreed or is obligated to, directly or indirectly, make any future investment in or capital contribution or advance to any Person (other than in or to the Company or any of its Subsidiaries).
(f) Prior to the date hereof, the Company has provided Parent with a complete and correct list of (i) each outstanding Company Stock Option including the date of grant, exercise price, vesting schedule, and number of shares of Company Common Stock subject thereto, and (ii) each Company Restricted Stock Unit and Company Performance Restricted Stock Unit, including the date of grant, vesting schedule and number of shares of Company Common Stock thereof (assuming achievement of the target level of performance at the end of the applicable performance period for each Company Performance Restricted Stock Unit). All grants of Company Stock Options, Company Restricted Stock Units, and Company Performance Restricted Stock Units were validly issued and properly approved by the board of directors of the Company (or a committee thereof) in accordance with the applicable Company
29 |
Equity Plan and applicable Law, including the Nasdaq Rules, and with the rules of any other applicable stock exchanges.
(g) Neither the Company nor any of its Subsidiaries is a party to, or has any commitment to become a party to, any joint venture, off-balance sheet partnership or any similar Contract (including any Contract relating to any transaction or relationship between or among the Company and any of its Subsidiaries, on the one hand, and any unconsolidated Affiliate, including any structured finance, special purpose or limited purpose entity, on the other hand, or any “off-balance sheet arrangement” (as defined in Item 303(a) of Regulation S-K promulgated under the Securities Act)), where the result, purpose, or intended effect of such commitment, joint venture, partnership, Contract or arrangement is to avoid disclosure of any material transaction involving the Company or any of its Subsidiaries in the Company’s or such Subsidiary’s financial statements.
Section 5.3 Authorization; Validity of Agreement; Necessary Action. The Company has the requisite corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby have been duly authorized by its board of directors, and no other corporate action on the part of the Company is necessary to authorize the execution and delivery by the Company of this Agreement and the consummation by it of the transactions contemplated hereby. This Agreement has been duly executed and delivered by the Company and, assuming due and valid authorization, execution and delivery hereof by Parent and Sub, is a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except that (i) such enforcement may be subject to applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws, now or hereafter in effect, affecting creditors’ rights and remedies generally, and (ii) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.
Section 5.4 Consents and Approvals; No Violations. The execution and delivery of this Agreement by the Company do not, and the performance by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby will not, (i) violate any provision of the certificate of incorporation or by-laws of the Company or similar organizational documents of any of its Subsidiaries, (ii) assuming compliance with the matters referred to in Section 5.4(iv)(A)-(C), require any consent by any Person under, conflict with or result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation or acceleration) under any Contract to which the Company or any of its Subsidiaries is a party or by which any of them or any of their properties or assets is bound or result in the creation of any Lien in or upon any of the properties, rights or assets of the Company or any of its Subsidiaries, (iii) violate any Law applicable to the Company, any of its Subsidiaries or any of their properties or assets, or (iv) other than in connection with or compliance with (A) the HSR Act and other Antitrust Laws, (B) Nasdaq Rules and listing standards, and (C) the Exchange Act, require the Company to make any filing or registration with or notification to, or require the Company to obtain any authorization, consent or approval of, any international, national, federal, state, provincial or
30 |
local governmental, court, legislative, executive or regulatory authority or agency or other governmental authority or instrumentality (a “Governmental Entity”), except in the case of clauses (ii), (iii) and (iv), for such violations, breaches or defaults that, or filings, registrations, notifications, authorizations, consents or approvals the failure of which to make or obtain, would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
Section 5.5 SEC Reports; Company Financial Statements.
(a) The Company has filed or furnished, as applicable, all registration statements, reports, forms, certifications, proxy statements and other documents required to be filed or furnished, as applicable, with the SEC by the Company since December 31, 2012 (such documents, together with any documents filed or furnished during such period by the Company to the SEC on a voluntary basis, and including any amendments thereto, the “Company SEC Reports”). All statements, reports, schedules, forms and other documents required to be filed or furnished by the Company with the SEC have been so filed or furnished on a timely basis. None of the Company’s Subsidiaries is required to file any document with the SEC. As of their respective filing dates or, if applicable, as of the time of their most recent amendment made at least one (1) Business Day prior to the date hereof, the Company SEC Reports (i) complied in all material respects with, to the extent in effect at the time of filing or amendment, the applicable requirements of the Securities Act and the Exchange Act, and (ii) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, or are to be made, not misleading. As of the date of this Agreement, there are no material outstanding or unresolved written comments from the SEC with respect to the Company SEC Reports. As of the date of this Agreement, to the Knowledge of the Company, none of the Company SEC Reports filed on or prior to the date hereof is the subject of ongoing SEC review.
(b) Each of the financial statements (including the related notes) of the Company included in the Company SEC Reports (collectively, the “Company Financial Statements”) (i) complied at the time it was filed as to form in all material respects with the applicable accounting requirements and the published rules and regulations of the SEC with respect thereto in effect at the time of such filing, (ii) was prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) (except, in the case of unaudited statements, as permitted by the rules and regulations of the SEC) applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto), and (iii) fairly presented in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries as of the respective dates thereof and the consolidated results of their operations and cash flows for the respective periods then ended (subject, in the case of unaudited statements, to normal year-end adjustments and except as indicated in the notes to such Company Financial Statements or, in the case of unaudited statements, as permitted by Form 10-Q of the SEC, and except that the unaudited Company Financial Statements may not contain footnotes and are subject to normal year-end adjustments, none of which either individually or in the aggregate will be material in amount).
(c) Since December 31, 2012, there has been no change in the Company’s accounting policies or the methods of making accounting estimates or changes in
31 |
estimates that are material to the Company Financial Statements, except as described in the Company SEC Reports or except as may be required by any regulatory authority. The reserves reflected in the Company’s financial statements are in accordance with GAAP and have been calculated in a consistent manner.
(d) With respect to each annual report on Form 10-K and each quarterly report on Form 10-Q included in the Company SEC Reports, the chief executive officer and chief financial officer of the Company have made all certifications required by the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) and any related rules and regulations promulgated by the SEC, and the statements contained in any such certifications are complete and correct as of their respective dates.
(e) The “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) of the Company are reasonably designed to ensure that all information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that all such information is accumulated and communicated to the management of the Company as appropriate to allow timely decisions regarding required disclosure and to make the certifications of the chief executive officer and chief financial officer of the Company required under the Exchange Act with respect to such reports. To the Knowledge of the Company, the Company has disclosed, based on its most recent evaluation prior to the date of this Agreement, to its outside auditors and the audit committee of its board of directors: (i) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect in any material respect its ability to record, process, summarize and report financial data and (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in its internal control over financial reporting.
(f) Since the enactment of the Sarbanes-Oxley Act, the Company has not made any prohibited loans to any executive officer of the Company (as defined in Rule 3b-7 under the Exchange Act) or director of the Company. There are no outstanding loans or other extensions of credit made by the Company to any executive officer (as defined in Rule 3b-7 under the Exchange Act) or director of the Company.
Section 5.6 No Undisclosed Liabilities. Neither the Company nor any of its Subsidiaries has, since the date of the most recent consolidated balance sheet of the Company included in the Company SEC Reports, incurred any liabilities or obligations of any nature (whether absolute, contingent, accrued, contingent, fixed or otherwise) (i) that would be required to be reflected or reserved against in a consolidated balance sheet of the Company and its consolidated Subsidiaries prepared in accordance with GAAP, or (ii) in the case of any liabilities or obligations that are not required to be reflected or reserved against in a consolidated balance sheet of the Company and its consolidated Subsidiaries prepared in accordance with GAAP, to the Company’s Knowledge, except, in each case, for (a) liabilities or obligations reflected or reserved against in the consolidated balance sheet of the Company and its consolidated Subsidiaries included in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 27, 2015 or in the notes thereto (the “Company Balance Sheet”), (b) liabilities and obligations incurred in the ordinary course of business since the date of the Company Balance
32 |
Sheet, (c) liabilities and obligations incurred in connection with the Merger or otherwise as contemplated or permitted by this Agreement, (d) liabilities owed by one wholly owned Company Subsidiary to another wholly owned Company Subsidiary or liabilities owed by the Company to any wholly owned Company Subsidiary, (e) liabilities and obligations that would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, or (f) liabilities or obligations listed on Section 5.6 of the Company Disclosure Schedule.
Section 5.7 Absence of Certain Changes. Since June 27, 2015 through the date hereof, (i) there has not occurred any event, circumstance, change, occurrence, development or effect that has had, individually or in the aggregate, a Company Material Adverse Effect, and (ii) the Company has not taken any action that would be prohibited by Section 7.1, if taken after the date hereof.
Section 5.8 Material Contracts.
(a) As of the date of this Agreement, the Company and its Subsidiaries are not a party to or bound by any Contract:
(i) that would be required to be filed by the Company as a material contract pursuant to Item 601(b)(10) of Regulation S-K of the SEC;
(ii) that is or creates a Partnership with any other Person that is material to the Company and its Subsidiaries, taken as a whole, or that relates to the formation, operation, management or control of any such Partnership;
(iii) that (A) is an indenture, credit agreement, loan agreement, security agreement, guarantee of, note, mortgage or other agreement providing for indebtedness (including obligations under any capitalized leases) in excess of $1,500,000 (other than agreements between the Company and any wholly owned Subsidiary or between wholly owned Subsidiaries) or pursuant to which the Company or any of its Subsidiaries guarantees any such indebtedness of any other Person (other than the Company or another wholly owned Subsidiary), (B) materially restricts the Company’s ability to incur indebtedness or guarantee the indebtedness of others, (C) grants a Lien (other than a Permitted Lien) or restricts the granting of Liens on any property or asset of the Company or its Subsidiaries that is material to the Company and its Subsidiaries, taken as a whole, or (D) is an interest rate derivative, currency derivative or other hedging contract other than foreign currency cash flow hedges entered into in the ordinary course of business and classified as cash flow hedges for accounting purposes;
(iv) that is a Contract (other than this Agreement) for the acquisition of any corporation, partnership or limited liability company or business, or sale of any of its Subsidiaries or businesses after the date hereof, in each case with a fair market value or purchase price (including assumption of debt) in excess of $5,000,000 (other than (x) in the ordinary course of business or (y) intercompany agreements);
(v) that is a Contract (including any Contract providing for the outsourcing, contract manufacturing, testing, assembly or fabrication (as applicable of
33 |
any products, technology or services of the Company or any of its Subsidiaries)) under which the Company and its Subsidiaries have made or received payments in excess of $1,000,000 in the fiscal year ended December 28, 2013, the fiscal year ended December 27, 2014, or the two quarter period ended June 27, 2015;
(vi) that is a dealer, distributor, OEM (original equipment manufacturer), VAR (value added reseller), sales representative or similar Contract under which any third party is authorized to sell, sublicense, lease, distribute, market or take orders for the Company Products (A) with a third party that is one of the Company’s top twenty (20) customers by revenue in fiscal year 2014 or 2015 or (B) under which the Company and its Subsidiaries have made or received payments in excess of $1,000,000 in the fiscal year ended December 28, 2013, the fiscal year ended December 27, 2014, or the two quarter period ended June 27, 2015;
(vii) with respect to the acquisition or disposition of any corporation, partnership, limited liability company or business (whether by merger, amalgamation, consolidation or other business combination, sale of assets, sale of capital stock, tender offer, exchange offer, or similar transaction) pursuant to which the Company or any of its Subsidiaries has (A) material continuing indemnification obligations (and was entered into after March 1, 2005), or (B) any “earn-out” or similar contingent payment obligations in excess of $5,000,000 (other than any Contract that provides solely for the acquisition of inventory, raw materials or equipment in the ordinary course);
(viii) that contains a right of first refusal, first offer, or first negotiation, or a call or put right, with respect to any asset that is material to the Company and its Subsidiaries, taken as a whole;
(ix) that prohibits or restricts the payment of dividends or distributions in respect of the Company’s shares or capital stock;
(x) that is a purchase or sale agreement with any Significant Customer or Significant Supplier under which the Company and its Subsidiaries have made or received payments in excess of $1,000,000 in the fiscal year ended December 28, 2013, the fiscal year ended December 27, 2014, or the two quarter period ended June 27, 2015;
(xi) under which (A) any person (other than the Company or any of its wholly owned Subsidiaries) is guaranteeing any liabilities or obligations of the Company or any of its Subsidiaries, or (B) the Company or any of its Subsidiaries has “take-or-pay” obligations;
(xii) that is between the Company or any of its Subsidiaries, on the one hand, and any of the Company’s or its Subsidiaries’ respective directors or officers or stockholders who own five percent (5%) or more of the Company Common Stock, other than (A) any Benefit Plan or any other employee agreements or
34 |
arrangements, (B) transactions conducted on an arms’ length basis or (C) any agreements with consideration of less than $200,000;
(xiii) providing for the creation or imposition of any Lien, other than a Permitted Lien, with respect to any assets (including Intellectual Property or other intangible assets) material to the conduct of the business of the Company and its Subsidiaries as currently conducted, taken as a whole;
(xiv) that is a settlement, conciliation or similar agreement (x) with any Governmental Entity which (A) materially restricts or imposes material obligations upon the Company or its Subsidiaries, or (B) materially disrupts the business of the Company and its Subsidiaries as currently conducted, or (y) which would require the Company or any of its Subsidiaries to pay consideration of more than $2,000,000 after the date of this Agreement; or
(xv) with any Governmental Entity, or for the purpose of fulfilling a Contract or order from any Governmental Entity as the ultimate customer, that is material to the conduct of the business of the Company and its Subsidiaries as currently conducted, taken as a whole.
Each such Contract described in clauses (i)-(xv) or Section 5.8(c), together with each material Company License-In Agreement, is referred to herein as a “Material Contract”.
(b) Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, (i) each Material Contract is enforceable against the Company in accordance with its terms and, to the Knowledge of the Company, each other party thereto, and is in full force and effect and (ii) the Company or its Subsidiaries, on the one hand, and, to the Knowledge of the Company, each other party to each Material Contract, on the other hand, have performed all obligations required to be performed by it under such Material Contract and, to the Knowledge of the Company, no event has occurred, and no circumstance or condition exists, that (with or without notice or lapse of time) will, or would reasonably be expected to, (A) constitute such a violation or breach, (B) give any Person the right to accelerate the maturity or performance of any Material Contract, or (C) give any Person the right to cancel, terminate or modify any Material Contract.
(c) As of the date of this Agreement, the Company is not a party to or bound by any Contract that (i) contains any provisions materially restricting the right of the Company or any of its Subsidiaries (A) to compete or transact in any business or with any Person or in any geographic area, or (B) to acquire any material product or other asset or service from any other Person; (ii) grants exclusive rights to license, market, sell or deliver any Company Product; or (iii) contains any “most favored nation” or similar provisions in favor of the other party and relates (or would reasonably be expected to relate) to payments in excess of $1,000,000 in any of fiscal years 2014, 2015 or 2016.
(d) (x) There are no licenses granted to third parties under any of the Contracts set forth in Section 5.8(d)(i), Section 5.8(d)(ii) or Section 5.8(d)(iii) of the Company Disclosure Schedule (collectively, the “Specified Contracts”), and (y) to the Knowledge of the
35 |
Company, there are no other Contracts to which the Company or its Subsidiaries is a party, in the case of clause (x) or (y), that would, as a result of the change of control of the Company contemplated by this Agreement, the Closing or the fact of Parent or any of its Affiliates (other than the Company or its Subsidiaries) becoming an Affiliate of the Company or any of its Subsidiaries, grant to any third party a license or right to a license with respect to Parent’s or its Affiliates’ (excluding the Company and its Subsidiaries) Intellectual Property following the Closing, in each case except as would not materially adversely impact Parent and its Affiliates’ (excluding the Company and its Subsidiaries) business.
Section 5.9 Employee Benefit Plans; ERISA.
(a) Section 5.9(a) of the Company Disclosure Schedule lists, as of the date of this Agreement, all material Benefit Plans and separately identifies each material Foreign Benefit Plan. With respect to each Benefit Plan, if applicable, the Company has made available to Parent true and complete copies of (i) the plan document (and, if applicable, related trust or funding agreements or insurance policies), (ii) the most recent summary plan description or prospectus and any summary of material modifications, (iii) the most recent annual report (including all schedules), (iv) if the Benefit Plan is intended to qualify under Section 401(a) of the Code, the most recent determination, advisory, or opinion letter received from the IRS, and (v) the most recent actuarial reports and financial statements.
(b) Each Benefit Plan is and has been in material compliance with applicable Law, including ERISA and the Code and has been administered in all material respects in accordance with its terms. There are no pending or, to the Knowledge of the Company, threatened claims (other than claims for benefits in the ordinary course), lawsuits, charges, complaints, grievances, investigations, audits, proceedings or arbitrations that have been asserted or instituted with respect to any Benefit Plan. Each Benefit Plan intended to be qualified under Section 401(a) of the Code is the subject of an unrevoked favorable determination, advisory, or opinion letter from the IRS, and, to the Knowledge of the Company, nothing has occurred since the date of the most recent such determination that would reasonably be expected to adversely affect such qualification.
(c) Neither the Company nor any Subsidiary or ERISA Affiliate of the Company (i) maintains, sponsors or contributes to, or has within the past six (6) years maintained, sponsored or contributed to, a Benefit Plan that is a “defined benefit plan” (as defined in ERISA Section 3(35)) or otherwise subject to Title IV of ERISA, (ii) has any material liability with respect to any “defined benefit plan,” whether or not subject to ERISA, (iii) has an “obligation to contribute” (as defined in ERISA Section 4212) to a Benefit Plan that is a “multiemployer plan” (as defined in ERISA Sections 4001(a)(3) and 3(37)(A)), and (iv) has any liability, contingent or otherwise, under Title IV of ERISA with respect to a Benefit Plan. No Benefit Plan subject to ERISA holds securities issued by the Company or any of its current ERISA Affiliates.
(d) Neither the Company nor any Subsidiary of the Company sponsors, maintains or contributes to any plan, program or arrangement that provides for post-retirement or other post-employment welfare benefits, including life insurance (other than health care continuation coverage as required by Law).
36 |
(e) Except as contemplated by this Agreement, the execution and delivery of this Agreement and the consummation of the transactions contemplated by this Agreement will not (either alone or in combination with another event) (i) result in any material payment from the Company or any of its Subsidiaries becoming due, or materially increase the amount of any compensation due, to any Service Provider, (ii) increase any benefits otherwise payable under any Benefit Plan, (iii) result in the acceleration of the time of payment or vesting of any compensation or benefits from the Company or any of its Subsidiaries to any Service Provider, or (iv) limit or restrict the right of the Company to merge, amend or terminate any of the Benefit Plans. Without limiting the generality of the foregoing, no amount payable to any Service Provider (whether in cash or property or as a result of accelerated vesting) as a result of the execution of this Agreement or the consummation of the transactions contemplated by this Agreement (either alone or together with any other event) under any Benefit Plan or other compensation arrangement would be nondeductible under Sections 280G of the Code. Neither the Company nor any Company Subsidiary has any obligation to compensate any Service Provider for any excise taxes incurred by such Service Provider, including under Sections 409A and 4999 of the Code.
(f) To the Knowledge of the Company, (i) each Foreign Benefit Plan and related trust, if any, complies with and has been administered in material compliance with its terms and the Laws of the applicable foreign country, (ii) each Foreign Benefit Plan which, under the Laws of the applicable foreign country, is required to be registered or approved by any Governmental Entity, has been so registered or approved, and (iii) each Foreign Benefit Plan intended to qualify for special tax treatment meets all the requirements for such treatment. The Company and its Subsidiaries have complied in all material respects with all applicable Laws regarding participation in and contributions required to be made to any Mandated Benefit Plans.
(g) To the Knowledge of the Company, each Benefit Plan that is a “nonqualified deferred compensation plan” (as defined in Code Section 409A(d)(1)) has been operated since December 31, 2004 in compliance with applicable guidance under Code Section 409A and has been documented in accordance with Section 409A since January 1, 2009.
(h) The parties acknowledge that certain payments have been made or are to be made and certain benefits have been granted or are to be granted according to employment compensation, severance and other employee benefit plans of the Company and the Company Subsidiaries or pursuant to other arrangements with the Company and the Company Subsidiaries, including the Plans, to holders of Company Common Stock and other securities of the Company (the “Covered Securityholders”) (with all such plans and arrangements being collectively referred to as the “Company Arrangements”). All such amounts payable under the Company Arrangements (i) have been or are being paid or granted as compensation for past services performed, future services to be performed, or future services to be refrained from performing, by the Covered Securityholders (and matters incidental thereto) and (ii) were not, and are not, calculated based on the number of shares tendered or to be tendered into the Offer by the applicable Covered Securityholder. The adoption, approval, amendment or modification of each Company Arrangement has been approved as an employment compensation, severance or other employee benefit arrangement solely by independent directors of the Company in accordance with the requirements of Rule 14d–10(d)(2) under the Exchange Act and the instructions thereto and the “safe harbor” provided pursuant to Rule 14d–10(d)(2) is otherwise
37 |
applicable thereto as a result of the taking prior to the execution of this Agreement of all necessary actions by the board of directors of the Company, the compensation committee of the board of directors of the Company (the “Company Compensation Committee”) or its independent directors. A true and complete copy of any resolutions of any committee of the Company Board reflecting any approvals and actions referred to in the preceding sentence and taken prior to the date of this Agreement has been made available to Parent prior to the execution of this Agreement.
Section 5.10 Litigation. As of the date of this Agreement, there is no action, claim, suit or proceeding pending against or, to the Knowledge of the Company, threatened against the Company or any of its Subsidiaries that would, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. As of the date of this Agreement, there are no investigations by any Governmental Entity pending, or, to the Knowledge of the Company, threatened against the Company or any of its Subsidiaries that would, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. As of the date of this Agreement, neither the Company nor any of its Subsidiaries nor any of their respective assets, rights or properties is or are subject to any injunction, judgment, order or decree except for those that would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
Section 5.11 Compliance with Law.
(a) The Company and its Subsidiaries (i) are and have at all times since December 31, 2012 been in compliance with applicable Laws; and (ii) since December 31, 2012, have not received any written notice from any Governmental Entity alleging, or to the Knowledge of the Company, has any Governmental Entity otherwise threatened, that the Company or any of its Subsidiaries is in violation of any applicable Law, except, in the case of each of clauses (i) and (ii), for such non-compliance and violations that would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
(b) The Company and each of its Subsidiaries are and have at all times since December 31, 2012, been in compliance in all material respects with United States and foreign export control laws and regulations, including: the United States Export Administration Act and implementing Export Administration Regulations; the Arms Export Control Act and implementing International Traffic in Arms Regulations; and the various economic sanctions laws administered by OFAC, applicable to its export transactions. Without limiting the foregoing, there are no pending or, to the Knowledge of the Company, threatened claims or investigations by any Governmental Entity of potential violations against the Company or any of its Subsidiaries with respect to export activity or licenses or other approvals.
(c) Since December 31, 2012, neither the Company nor any of its Subsidiaries nor, to the Knowledge of the Company, any agent, director, officer, employee or other Person associated with or acting on behalf of the Company or any of its Subsidiaries has, directly or indirectly:
(i) made, offered, authorized or agreed to make, offer or authorize any unlawful contributions, gifts, entertainment or other unlawful expenses
38 |
relating to political activity and related in any way to the Company’s or any of its Subsidiaries’ business;
(ii) made, offered, authorized or agreed to make, offer or authorize any unlawful payment to any foreign or domestic government official or employee, foreign or domestic political parties or campaigns, official of any public international organization, or official of any state-owned enterprise;
(iii) violated any provision of the FCPA, or any other applicable Laws relating to anti-corruption or anti-bribery; or
(iv) made, offered, authorized or agreed to make, offer or authorize any bribe, payoff, influence payment, kickback or other similar unlawful payment.
(d) Notwithstanding the foregoing, this Section 5.11 shall not apply to the subject matters of the representations and warranties in Section 5.9, Section 5.13, Section 5.15 and Section 5.16, respectively.
Section 5.12 Intellectual Property.
(a) To the Knowledge of the Company, (i) the Company and/or one or more of its Subsidiaries are the sole owners of each item of Intellectual Property owned by the Company and/or one or more of its Subsidiaries that has not expired, been allowed to lapse or abandoned (the “Owned Intellectual Property”), free and clear of any Lien, except for Permitted Liens, (ii) each item of Owned Intellectual Property is not subject to any outstanding injunction, judgment, order, decree or ruling of which the Company has received written notice, (iii) no action, suit, proceedings, complaint or claim of which the Company has received written notice is pending before any court or arbitrator or was threatened in writing during the three (3) years prior to the date of this Agreement that challenges the validity, enforceability, or the Company’s ownership of any item of Owned Intellectual Property, (iv) Section 5.12(a) of the Company Disclosure Schedule contains a complete and accurate list of all material registered Owned Intellectual Property and applications therefor, and (v) all fees currently due in the United States and, to the Knowledge of the Company, in any other jurisdiction, as of the signing date of this Agreement for maintaining any registered Owned Intellectual Property shall have been paid in full to the proper Governmental Entity, in each case, except as would not reasonably be expected to have, either individually or in the aggregate, a Company Material Adverse Effect.
(b) To the Knowledge of the Company, each material agreement under which, as of the date of this Agreement, the Company or any of its Subsidiaries licenses from a third party material Intellectual Property that is used by the Company or such Subsidiary in any of its current material customer offerings, except for off-the-shelf and internal use software, including but not limited to licenses to software (including as a service) that the Company and any of its Subsidiaries use in the ordinary course of business, (such agreements being referred to as “Company License-In Agreements”) (i) is in full force and effect, (ii) is not the subject of a claim that the Company or any of its Subsidiaries is in material breach, in each case, except as would not reasonably be expected to have, individually or in the aggregate, a Company Material
39 |
Adverse Effect. Section 5.12(b) of the Company Disclosure Schedule contains a complete and accurate list of all Company License-In Agreements.
(c) To the Knowledge of the Company, each agreement pursuant to which the Company or any of its Subsidiaries has granted a material license to a third party with respect to Intellectual Property that is owned by the Company or such Subsidiary, including but not limited to, licenses to software (including as a service), but excluding any such licenses granted in the ordinary course of business (such agreements being referred to as “Company License-Out Agreements”) (i) is in full force and effect, and (ii) is not the subject of a claim that the Company or any of its Subsidiaries is in material breach, in each case, except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. Section 5.12(c) of the Company Disclosure Schedule contains a complete and accurate list of all Company License-Out Agreements.
(d) To the Knowledge of the Company and its Subsidiaries, no Person (including, without limitation, any current or former employee or consultant of Company or the Subsidiaries) is infringing, violating, claiming ownership rights in or misappropriating any of the Intellectual Property owned by the Company or any of its Subsidiaries, in each case, except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
(e) To the Knowledge of the Company, neither the Company nor any of its Subsidiaries is infringing or misappropriating any Intellectual Property owned by a third party, except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. Section 5.12(e) of the Company Disclosure Schedule lists any written complaint, claim, notice or threat of any of the foregoing (including any notification that a license under any patent is or may be required), received by the Company or any Subsidiary during the three (3) years prior to the date of this Agreement alleging any such infringement, violation or misappropriation and any written request or demand for indemnification or defense of an infringement claim received by the Company or any Subsidiary during the three (3) years prior to the date of this Agreement from any reseller, distributor, customer or end user of a Company product, in each case except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
(f) There is no Intellectual Property that is owned by the Company in which any third party has any exclusive right(s) therein, except in each case as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
(g) There are no royalties or similar other payments based on revenues (such as earn-outs) that are payable by the Company or any Subsidiary to any third person (excluding, for the avoidance of doubt, salaries, benefits, employee invention and achievement award programs and any legally required payments to employees for inventions, patents or similar achievements that are payable to employees and independent contractors) for the use, license-in, manufacture, sale, offering for sale, copying, distribution, or disposition of any Intellectual Property of such third person used by the Company or any Subsidiary, except as
40 |
would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
(h) (i) Since five (5) years prior to the date of this Agreement, the Company has maintained a process whereby each new employee of the Company or any Subsidiary executes a written agreement expressly assigning to the Company or a Subsidiary all of such employee’s right, title and interest in any Intellectual Property created by such employee within the scope of his or her employment during the term of such employment and (ii) to the Knowledge of the Company, (1) all new employees of the Company and its Subsidiaries since five (5) years prior to the date of this Agreement have executed such written agreements, and (2) with respect to other employees of the Company and its Subsidiaries, the Company or its Subsidiaries either by operation of law or contract has acquired ownership of Intellectual Property created by such other employees involved in technology development during the term and within the scope of their employment, in each case except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
(i) The Company takes commercially reasonable actions to protect the confidentiality and security of personally identifiable information and of its information technology systems and material proprietary data, and, to the Knowledge of the Company, there have been during the past two (2) years no violations or unauthorized access to same, in each case except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
(j) Section 5.12(j) of the Disclosure Schedule describes the Company’s and its Subsidiaries’ Open Source Materials compliance for products.
(k) No funding from any Governmental Entity or facilities of a university, college, other educational institution or non-profit organization were used in the development of the Owned Intellectual Property, and no Governmental Entity, university, college, other educational institution or non-profit organization has a claim or right to claim any right in the Owned Intellectual Property, in each case, except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
Section 5.13 Taxes.
(a) Each of the Company and its Subsidiaries has (i) timely filed all income Tax Returns and all other material Tax Returns required to be filed by any of them (taking into account applicable extensions) and all such returns are true, correct and complete in all material respects and (ii) paid or accrued (in accordance with GAAP) all material Taxes due and payable other than such Taxes as are being contested in good faith by the Company or its Subsidiaries.
(b) There are no material federal, state, local or foreign audits or examinations of any Tax Return of the Company or its Subsidiaries ongoing or pending and neither the Company nor any Subsidiary has received written notice of any such material audit or examination. No claim for material unpaid Taxes has been asserted in writing against the Company or any of its Subsidiaries by a Governmental Entity, other than any claim that has been
41 |
resolved. No claim has been made in writing by a Governmental Entity in a jurisdiction where the Company or any of its Subsidiaries does not file Tax Returns that it is or may be subject to taxation by that jurisdiction.
(c) The Company and each of its Subsidiaries have withheld all Taxes required to have been withheld from payments made to its employees, independent contractors, creditors, stockholders and other third parties and, to the extent required, such Taxes have been paid to the relevant Governmental Entity.
(d) There are no outstanding written waivers to extend the statutory period of limitations applicable to the assessment of any material Taxes or material deficiencies against the Company or any of its Subsidiaries.
(e) Neither the Company nor any of its Subsidiaries is a party to any agreement providing for the allocation or sharing of material Taxes, except for any such agreements that (i) are solely between the Company and/or any of its Subsidiaries, (ii) will terminate as of the Closing, or (iii) are entered into in the ordinary course of business, the principal purpose of which is not the allocation or sharing of Taxes.
(f) There are no material Liens for Taxes upon the assets of the Company or any of its Subsidiaries that are not provided for in the Company SEC Reports, except Liens for Taxes not yet due and payable and Liens for Taxes that are being contested in good faith and for which adequate reserves have been established on the Company Balance Sheet.
(g) In the last two (2) years, none of the Company or any of its Subsidiaries has distributed stock of another Person or has had its stock distributed by another Person, in a transaction that was purported or intended to be governed in whole or in part by Section 355 of the Code (or any similar provision of state, local, or non-U.S. Law).
(h) Neither the Company nor any of its Subsidiaries (A) is or has been in the past five (5) years a member of a group (other than a group the common parent of which is the Company or one of its Subsidiaries) filing a consolidated, combined, affiliated, unitary or similar income Tax Return, or (B) has any liability for Taxes of any Person (other than the Company or any of its Subsidiaries) arising from the application of Treasury Regulation Section 1.1502-6 or any analogous provision of state, local or foreign Law, as a transferee or successor, or pursuant to any contractual obligation.
(i) Neither the Company nor any of its Subsidiaries has participated in any “listed transaction” within the meaning of Treasury Regulation Section 1.6011-4(b)(2).
(j) The U.S. federal income tax entity classification of each Subsidiary of the Company not organized within the United States is set forth on Section 5.13(j) of the Company Disclosure Schedule.
(k) The Company and each of its Subsidiaries are in compliance in all material respects with all terms and conditions of any Tax exemption, Tax holiday or other Tax reduction agreement or order (“Tax Incentive”), and the consummation of the transactions
42 |
contemplated by this Agreement will not have any adverse effect on the continued validity and effectiveness of any such Tax Incentive.
Section 5.14 Real Property and Tangible Assets.
(a) The Company does not own any real property. Except in each case as would not materially affect the business and operations of the Company and its Subsidiaries, taken as a whole, the Company or one of its Subsidiaries (i) has valid leasehold title (as applicable) to each location occupied or otherwise used by the Company or any of its Subsidiaries as of the date of this Agreement (the “Company Real Property”) pursuant to leases, subleases, licenses, occupancy or other similar agreements to which the Company or any of its Subsidiaries is a party as of the date of this Agreement (each, a “Real Property Lease”), and (ii) has good and marketable title or valid leasehold title to the other tangible assets reflected on the Company Balance Sheet or acquired after the Company Balance Sheet Date, in each case, free and clear of all Liens, except (x) for Permitted Liens, and (y) for the property and assets that have been disposed of since the Company Balance Sheet Date in the ordinary course of business. Section 5.14 of the Company Disclosure Schedule contains a complete list of all Company Real Property.
(b) Each Real Property Lease under which the Company or any of its Subsidiaries leases, subleases, licenses or otherwise occupies any real property is valid, binding and in full force and effect, except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, there is not under any Real Property Lease (i) any existing default by the Company or any of its Subsidiaries or, to the Knowledge of the Company, any other party thereto or (ii) to the Knowledge of the Company, any condition or event which, with notice or lapse of time, or both, would constitute a default under the provisions of such Real Property Lease.
Section 5.15 Environmental. Except for such matters that, individually or in the aggregate, have not resulted, and would not reasonably be expected to result, in any liability that is material to the Company and its Subsidiaries, taken as a whole:
(a) Each of the Company and its Subsidiaries is in compliance with all, and has not violated any, Environmental Laws, which compliance includes the possession by the Company and its Subsidiaries of Permits required for their operations under Environmental Laws, and compliance with the terms and conditions thereof.
(b) As of the date of this Agreement, there is no Environmental Claim pending against or, to the Knowledge of Company, threatened against or affecting the Company or any Subsidiary.
(c) To the Knowledge of the Company, with respect to any real property owned, leased or operated by the Company or any of its Subsidiaries since January 1, 2010, and, there have been no releases of Hazardous Materials that require a Cleanup.
43 |
(d) To the Knowledge of the Company, neither the Company nor any of its Subsidiaries has assumed or retained, by Contract or operation of law, any obligation under any Environmental Law or concerning any Hazardous Materials.
Section 5.16 Labor Matters.
(a) Neither the Company nor any of its Subsidiaries is or has, since December 31, 2012, been, a party to any collective bargaining agreement or any labor union contract or trade union agreement or work rules, nor are there any employees of the Company or any of its Subsidiaries who are, or since December 31, 2012 have been, represented by a works council or a labor organization, nor, to the Knowledge of the Company, are there, nor since December 31, 2012 have there been, any pending activities or proceedings of any labor union to organize any employees of the Company or any of its Subsidiaries.
(b) As of the date of this Agreement, there is no material pending or, to the Knowledge of the Company, threatened, labor strike, walkout, work stoppage, slowdown or lockout with respect to employees of the Company or any of its Subsidiaries.
(c) As of the date of this Agreement, there is no unfair labor practice or labor arbitration proceeding pending or, to the Knowledge of the Company, threatened against the Company or its Subsidiaries that would reasonably be expected, individually or in the aggregate, to be material to the Company and its Subsidiaries, taken as a whole.
(d) Except as would not reasonably be expected, individually or in the aggregate, to be material to the Company and its Subsidiaries, taken as a whole, (i) the Company and each of its Subsidiaries are and have been in compliance in all material respects with all applicable local, state, federal and foreign Laws relating to employment, including, without limitation, Laws relating to discrimination, hours of work and the payment of wages or overtime wages, classification of employees and independent contractors, health and safety, layoffs and plant closings and collective bargaining, (ii) the Company and its Subsidiaries have not received notice of any charge or complaint with respect to or relating to them pending before the United States Equal Employment Opportunity Commission or any other Governmental Entity responsible for the prevention of unlawful employment practices, or notice of the intent of any Governmental Entity responsible for the enforcement of labor, employment, wages and hours of work, child labor, immigration, or occupational safety and health laws to conduct an investigation with respect to or relating to them or notice that such investigation is in progress, and (iii) as of the date of this Agreement, there are no complaints or lawsuits, pending or, to the Knowledge of the Company, threatened against the Company or any of its Subsidiaries brought by or on behalf of any applicant for employment, any current employee or any class of the foregoing, relating to any such Laws, or alleging breach of any express or implied contract of employment, wrongful termination of employment or any other discriminatory, wrongful or tortious conduct in connection with the employment relationship.
(e) The Company is in compliance with all Laws relating to the confidentiality, security, use and treatment of employee information and personally identifiable data, except in each case as would not reasonably be expected, individually or in the aggregate, to be material to the Company and its Subsidiaries, taken as a whole.
44 |
Section 5.17 Licenses and Permits. Except in each case as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, (i) the Company and its Subsidiaries have, and at all times since December 31, 2012 have had, all licenses, permits, qualifications, accreditations, approvals and authorizations of any Governmental Entity (collectively, the “Permits”), and have made all necessary filings required under applicable Law, necessary to conduct the business of the Company and its Subsidiaries, (ii) since December 31, 2012, neither the Company nor any of its Subsidiaries has received any written notice of any violation of or failure to comply with any Permit or any actual or possible revocation, withdrawal, suspension, cancellation, termination or material modification of any Permit, and (iii) each such Permit has been validly issued or obtained and is in full force and effect.
Section 5.18 Insurance. Except as has not had, and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, as of the date of this Agreement, (i) all material insurance policies of the Company and its Subsidiaries are in full force and effect, (ii) no written notice of default or termination has been received by the Company or any of its Subsidiaries in respect thereof, and (iii) all premiums due thereon have been paid.
Section 5.19 Significant Suppliers and Customers.
(a) Section 5.19(a) of the Company Disclosure Schedule sets forth an accurate and complete list, with respect to each of the fiscal year ended December 28, 2013, the fiscal year ended December 27, 2014 and the two quarter period ended June 27, 2015, of each customer (including distributors) who was one of the twenty (20) largest sources of revenues for the Company during any such period, based on amounts paid or payable (each, a “Significant Customer”). None of the Company nor any of its Subsidiaries has any outstanding material dispute with any Significant Customer. As of the date of this Agreement, to the Knowledge of the Company, neither the Company nor any of its Subsidiaries has received written notice from any Significant Customer that such customer shall not continue as a customer of the Company or any of its Subsidiaries, as applicable, or that such customer intends to terminate or materially modify existing Contracts with the Company or any of its Subsidiaries, as applicable, including by materially reducing the scale of the business conducted with the Company.
(b) Section 5.19(b) of the Company Disclosure Schedule sets forth an accurate and complete list, with respect to each of the fiscal year ended December 28, 2013, the fiscal year ended December 27, 2014, and the two quarter period ended June 27, 2015, of the twenty (20) largest sources of amounts payable to suppliers for the Company during any such period, based on amounts paid or payable (each a “Significant Supplier”). None of the Company nor any of its Subsidiaries has any outstanding material dispute with any Significant Supplier. As of the date of this Agreement, to the Knowledge of the Company, neither the Company nor any of its Subsidiaries has received any written notice from any Significant Supplier that such supplier shall not continue as a supplier of the Company or any of its Subsidiaries, as applicable, or that such supplier intends to terminate or materially modify existing Contracts with the Company or any of its Subsidiaries, as applicable, including by materially reducing the scale of the business conducted with the Company.
45 |
Section 5.20 Brokers or Finders. No investment banker, broker, consultant, finder, financial advisor or intermediary, other than Qatalyst Partners LP and Needham & Company, LLC, the fees and expenses of which will be paid by the Company, is entitled to any investment banking, brokerage, consulting, finder’s or similar fee or commission in connection with this Agreement or the transactions contemplated hereby based upon arrangements made by or on behalf of the Company or any of its Subsidiaries.
Section 5.21 Vote Required. No vote or consent of the holders of any class or series of capital stock of the Company is necessary to approve this Agreement or the Merger or the other transactions contemplated hereby.
Section 5.22 Board Recommendation. The Company’s board of directors has (a) determined that this Agreement and the Merger are advisable and in the best interests of the Company and its stockholders, (b) approved this Agreement, including the Offer and the Merger and the other transactions contemplated hereby and thereby, (c) subject to Section 7.3, resolved to recommend that the stockholders of the Company tender their shares into the Offer, ((a), (b) and (c) together, the “Board Recommendation”), and, as of the date of this Agreement, none of such actions by Company’s board of directors has been amended, rescinded, or modified.
Section 5.23 Opinion of Financial Advisors. The board of directors of the Company has received (i) from the Company’s financial advisors, Qatalyst Partners LP an opinion, dated as of the date of such opinion, to the effect that, as of such date and based upon and subject to the various matters and limitations set forth therein, the Merger Consideration to be received in the Offer and the Merger by the Company stockholders (other than Parent or any affiliate of Parent) is fair, from a financial point of view, to such holders and (ii) from its financial advisors Needham & Company, LLC (together with Qatalyst Partners LP, the “Company Financial Advisors”) an opinion, dated as of the date of such opinion, to the effect that, as of such date and based upon and subject to the various matters and limitations set forth therein, the Merger Consideration to be received by the holders of Company Common Stock (other than Parent or any of its affiliates and other than holders of Dissenting Shares) pursuant to this Agreement is fair, from a financial point of view, to such holders. Prior to the date of this Agreement, a true, correct and complete copy of such opinions was delivered or will be delivered to Parent for information purposes only. The Company has been authorized by the Company Financial Advisors to permit the inclusion of such opinion in the Schedule 14D-9.
Section 5.24 Takeover Statutes. The board of directors of the Company has taken all actions so that the restrictions applicable to business combinations contained in Section 203 of the DGCL are, and will be, inapplicable to the execution, delivery and performance of this Agreement and to the consummation of the transactions contemplated by this Agreement. No other “fair price,” “moratorium,” “control share acquisition,” “interested stockholder” or other anti-takeover statute or regulation would restrict, prohibit or otherwise be applicable with respect to this Agreement and the transactions contemplated herein and therein (including the Offer and the Merger).
Section 5.25 Investigation by the Company. The Company acknowledges that it has conducted its own independent investigation and analysis of the business, operations, assets, liabilities, results of operations and condition (financial or otherwise) of Parent and that it has
46 |
received access to such books and records, facilities, equipment, contracts and other assets of Parent that it has requested to review for such purpose, and that it had an opportunity to meet with the management of Parent and to discuss the business and assets of Parent. Except for the representations and warranties made by the Company in this Article V, none of the Company, any Subsidiary of the Company or any other person makes any express or implied representation or warranty with respect to the Company or its Subsidiaries or their respective businesses, operations, assets, liabilities or condition (financial or otherwise).
Article VI
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Except as disclosed in the Parent SEC Reports filed or furnished at least one (1) Business Day prior to the date of this Agreement (but (i) without giving effect to any amendment thereof filed with, or furnished to the SEC on or after such date, and (ii) excluding any disclosures contained under the heading “Risk Factors” and any disclosure of risks included in any “forward-looking statements” disclaimer or other such statements that are similarly predictive or forward-looking), but only to the extent such Parent SEC Reports are publicly available on the SEC’s Electronic Data Gathering Analysis and Retrieval System, Parent and Sub jointly and severally represent and warrant to the Company as follows:
Section 6.1 Organization.
(a) Each of Parent and Sub is a corporation duly organized, validly existing and in good standing under the Laws of the jurisdiction of its incorporation, and has all requisite corporate power and authority to own its properties and assets and to conduct its business as it is currently being conducted. Each of Parent and Sub is duly qualified to do business and, where applicable, is in good standing in each jurisdiction in which the nature of the business conducted by it makes such qualification necessary, except where the failure to be so qualified or to be in good standing would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.
(b) Parent has made available to the Company a copy of Parent and Sub’s certificate of incorporation and by-laws, as currently in effect, and neither Parent nor Sub is in violation of any provision of, respectively, its certificate of incorporation or by-laws. The minutes of the meetings and other proceedings (including actions taken by written consent or otherwise without a meeting) of the board of directors (or to the extent applicable, any committee thereof) of Parent made available to the representatives of the Company were complete and redacted only with respect to discussions of the transaction contemplated hereby or other similar strategic transactions, and not with respect to other matters.
Section 6.2 Authorization; Validity of Agreement; Necessary Action. Each of Parent and Sub has the requisite corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution, delivery and performance by Parent and Sub of this Agreement, approval of this Agreement, and the consummation of the transactions contemplated hereby have been duly and validly authorized by all necessary action of Parent and Sub, and no other action on the part of Parent or Sub is
47 |
necessary to authorize the execution and delivery by Parent and Sub of this Agreement and the consummation by them of the transactions contemplated hereby (other than the approval of this Agreement and the transactions contemplated hereby by Parent in its capacity as sole stockholder of Sub, which approval shall be provided by the written consent of Parent immediately following execution of this Agreement). This Agreement has been duly executed and delivered by Parent and Sub and, assuming due and valid authorization, execution and delivery hereof by the Company, is a valid and binding obligation of each of Parent and Sub, enforceable against each of them in accordance with its terms, except that (i) such enforcement may be subject to applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws, now or hereafter in effect, affecting creditors’ rights and remedies generally, and (ii) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.
Section 6.3 Capitalization. The authorized capital stock of Parent consists of 250,000,000 shares of Parent Common Stock and 1,000,000 shares of preferred stock of Parent. As of the close of business on October 23, 2015, there were issued and outstanding (i) 95,648,761 shares of Parent Common Stock (with 2,026 shares of Parent Common Stock held by Parent in treasury), (ii) no shares of Parent preferred stock, (iii) options to purchase an aggregate of 675,701 shares of Parent Common Stock (of which options to purchase an aggregate of 537,917 shares of Parent Common Stock were exercisable), (iv) 2,443,554 Parent restricted stock units, and (v) no warrants for shares of Parent Common Stock exercisable. From the close of business on October 23, 2015 until the date of this Agreement, no shares of Parent Common Stock or Parent preferred shares have been issued except for shares of Parent Common Stock issued pursuant to the exercise of Parent options or warrants, or the vesting of any restricted stock units of Parent, in each case outstanding on October 23, 2015 and in accordance with their terms. All of the issued shares of Parent’s capital stock are duly authorized, validly issued, fully paid, nonassessable, and free of preemptive rights. All of the rights granted and not yet exercised to subscribe for shares of Parent’s capital stock are duly authorized and free of preemptive rights. As of the date of this Agreement, other than pursuant to any equity plans or employee share purchase plans of Parent, there are no existing (i) options, warrants, calls, subscriptions or other rights, convertible securities, depositary receipts in respect of shares, agreements or commitments of any character obligating Parent or any of its Subsidiaries to issue, transfer or sell any capital stock or other equity interest in, Parent or any of its Subsidiaries, (ii) contractual obligations of Parent or any of its Subsidiaries to repurchase, redeem or otherwise acquire any capital stock of Parent or any of its Subsidiaries, or (iii) voting trusts or similar agreements to which Parent is a party with respect to the voting of the capital stock of Parent.
Section 6.4 Consents and Approvals; No Violations. The execution and delivery of this Agreement by Parent and Sub do not, and the performance by Parent and Sub of this Agreement and the consummation by Parent and Sub of the transactions contemplated hereby will not, (i) violate any provision of the certificate of incorporation or by-laws of Parent or Sub, in each case, as currently in effect, (ii) assuming compliance with the matters referred to in Section 6.4(iv)(A)-(C), require any consent by any Person under, conflict with or result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation or acceleration) under, any Contract to which Parent or any of its Subsidiaries is a party or by which any of them or any of their
48 |
properties or assets is bound, or result in the creation of any Lien in or upon any of the properties, rights or assets of Parent or Sub, (iii) violate any Law applicable to Parent, any of its Subsidiaries or any of their properties or assets, or (iv) other than in connection with or compliance with (A) the HSR Act and other Antitrust Laws, (B) Nasdaq Rules and listing standards, and (C) the Exchange Act and the Securities Act, require on the part of Parent or Sub any filing or registration with or notification to, or require Parent to obtain any authorization, consent or approval of, any Governmental Entity, except in the case of clauses (ii), (iii) and (iv), for such violations, breaches or defaults that, or filings, registrations, notifications, authorizations, consents or approvals the failure of which to make or obtain, would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.
Section 6.5 SEC Reports; Parent Financial Statements.
(a) All Parent SEC Reports have been filed on a timely basis. As of their respective filing dates, the Parent SEC Reports (i) complied in all material respects with, to the extent in effect at the time of filing, the applicable requirements of the Securities Act and the Exchange Act, and (ii) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, or to be made, not misleading. As of the date of this Agreement, there are no material outstanding or unresolved written comments from the SEC with respect to the Parent SEC Reports. As of the date of this Agreement, to the Knowledge of Parent, none of the Parent SEC Reports filed on or prior to the date hereof is the subject of ongoing SEC review.
(b) Each of the financial statements (including the related notes) of Parent included in the Parent SEC Reports (collectively, the “Parent Financial Statements”) (i) complied at the time it was filed as to form in all material respects with the applicable accounting requirements and the published rules and regulations of the SEC with respect thereto in effect at the time of such filing, (ii) was prepared in accordance with GAAP (except, in the case of unaudited statements, as permitted by the rules and regulations of the SEC) applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto), and (iii) fairly presented in all material respects the consolidated financial position of Parent and its consolidated Subsidiaries as of the respective dates thereof and the consolidated results of their operations and cash flows for the respective periods then ended (subject, in the case of unaudited statements, to normal year-end adjustments and except as indicated in the notes to such Parent Financial Statements or, in the case of unaudited statements, as permitted by Form 10-Q of the SEC, and except that the unaudited Parent Financial Statements may not contain footnotes and are subject to normal year-end adjustments, none of which individually or in the aggregate will be material in amount).
(c) Since December 31, 2013, there has been no change in Parent’s accounting policies or the methods of making accounting estimates or changes in estimates that are material to the Parent Financial Statements, except as described in the Parent SEC Reports or except as may be required by any regulatory authority. The reserves reflected in the Parent Financial Statements are in accordance with GAAP and have been calculated in a consistent manner.
49 |
(d) With respect to each annual report on Form 10-K and each interim report on Form 10-Q included in the Parent SEC Reports, the chief executive officer and chief financial officer of Parent have made all certifications required by the Sarbanes-Oxley Act and any related rules and regulations promulgated by the SEC, and the statements contained in any such certifications are complete and correct as of their respective dates.
(e) The “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) of Parent are reasonably designed to ensure that all information required to be disclosed by Parent in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that all such information is accumulated and communicated to the management of Parent as appropriate to allow timely decisions regarding required disclosure and to make the certifications of the chief executive officer and chief financial officer of Parent required under the Exchange Act with respect to such reports. To the Knowledge of Parent, Parent has disclosed, based on its most recent evaluation prior to the date of this Agreement, to its outside auditors and the audit committee of its board of directors: (i) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect in any material respect its ability to record, process, summarize and report financial data, and (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in its internal control over financial reporting.
Section 6.6 Absence of Certain Changes. Except as contemplated by this Agreement, since June 28, 2015 through the date hereof, Parent (i) has not suffered a Parent Material Adverse Effect, and (ii) has not taken any action that would be prohibited by Section 7.1(d)(i) through Section 7.1(d)(iv) if taken after the date hereof.
Section 6.7 Litigation. As of the date of this Agreement, there is no action, claim, suit or proceeding pending against or, to the Knowledge of Parent, threatened against Parent or any of its Subsidiaries that would, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect. As of the date of this Agreement, there are no investigations by any Governmental Entity pending or, to the Knowledge of Parent, threatened against Parent or any of its Subsidiaries that would, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect. As of the date of this Agreement, neither Parent nor any of its Subsidiaries nor any of their respective assets, rights or properties is or are subject to any injunction, judgment, order or decree, except for those that would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.
Section 6.8 Brokers or Finders. Except for Stifel Nicolaus & Company, Incorporated, no investment banker, broker, consultant, finder, financial advisor or intermediary is entitled to any investment banking, brokerage, consulting, finder’s or similar fee or commission in connection with this Agreement or the transactions contemplated hereby based upon arrangements made by or on behalf of Parent or any of its Subsidiaries.
Section 6.9 Vote Required. No vote or consent of the holders of any class or series of capital stock of Parent is necessary to approve this Agreement or the Merger or the
50 |
other transactions contemplated hereby. The vote or consent of Parent as the sole stockholder of Sub (which has been obtained) is the only vote or consent of the holders of any class or series of capital stock of Sub necessary to approve this Agreement or the Merger or the other transactions contemplated hereby.
Section 6.10 Share Ownership. Except for 100 shares of Company Common Stock owned by Parent, none of Parent, Sub or any of their respective controlled Affiliates beneficially owns (as such term is used in Rule 13d-3 promulgated under the Exchange Act) any Company Common Stock or any options, warrants or other rights to acquire Company Common Stock or other securities of, or any other economic interest (through derivatives, securities or otherwise) in the Company.
Section 6.11 Investigation by Parent and Sub. Each of Parent and Sub acknowledges that it has conducted its own independent investigation and analysis of the business, operations, assets, liabilities, results of operations and condition (financial or otherwise) of the Company and that it has received access to such books and records, facilities, equipment, contracts and other assets of the Company and the Company’s Subsidiaries that it has requested to review for such purpose, and that it had an opportunity to meet with the management of the Company and the Company’s Subsidiaries and to discuss the business and assets of the Company and the Company’s Subsidiaries. Except for the representations and warranties made by the Company in this Article VI, none of Parent, Sub, any Subsidiary of Parent or Sub or any other person makes any express or implied representation or warranty with respect to Parent, Sub, any Subsidiary of Parent or Sub or their respective businesses, operations, assets, liabilities or condition (financial or otherwise).
Section 6.12 Capitalization and Operations of Sub. The authorized capital stock of Sub consists solely of 1,000 shares of common shares, par value $0.001 per share, all of which are validly issued and outstanding. All of the issued and outstanding capital stock of Sub is, and at the Effective Time will be, owned by Parent or a direct or indirect wholly-owned Subsidiary of Parent. Sub has been formed solely for the purpose of engaging in the transactions contemplated by this Agreement, has not conducted any business prior to the date hereof, and has no, and prior to the Effective Time will have no, assets, liabilities or obligations of any nature other than those incident to its formation and pursuant to this Agreement, the Offer, the Merger and the other transactions contemplated by this Agreement.
Section 6.13 Availability of Funds; Financing. Parent’s and Sub’s obligations hereunder are not subject to a condition regarding Parent’s or Sub’s obtaining of funds to consummate the Offer and the Merger and the other transactions contemplated hereby. Assuming the Debt Financing is funded in accordance with the Debt Commitment Letter, the accuracy of the representations and warranties set forth in Article V to the extent necessary to satisfy the conditions set forth in clause (v)(c) of Annex A, Parent and/or Sub will have available to it sufficient funds to pay the Cash Consideration and any other amounts required to be paid by Parent and Sub in connection with the consummation of the Offer and the Merger at the Acceptance Time and on the Closing Date and the other transactions contemplated hereby, including all related fees and expenses. Parent has delivered to the Company true, complete and correct copies of a fully executed commitment letter, together with the related fee letter (solely in the case of the fee letter, with only the fee amounts, pricing, “market flex” provisions and other
51 |
economic terms that do not adversely affect the enforceability, availability or conditionality of, or the aggregate amount of proceeds available under, the Debt Financing contained therein redacted), each in effect as of the date of this Agreement from Morgan Stanley Senior Funding, Inc. (together, as they may be amended, modified or replaced in accordance with Section 7.12 and together with all annexes, exhibits, schedules and other attachments thereto the “Debt Commitment Letter”) to provide debt financing in an aggregate amount set forth therein and subject to the terms and conditions set forth therein (being collectively referred to as the “Debt Financing”). As of the date of this Agreement, the Debt Commitment Letter has not been amended or modified in any manner, and, as of the date of this Agreement, to the Knowledge of Parent, no amendment or modification of the Debt Commitment Letter is contemplated. The Debt Commitment Letter, including the commitments contained therein, has not been terminated, reduced, withdrawn or rescinded in any respect and, to the Knowledge of Parent, no such termination, reduction, withdrawal or rescission is contemplated. Parent has paid in full any and all commitment fees or other fees and amounts in connection with the Debt Commitment Letter that are payable on or prior to the date of this Agreement, and, as of the date of this Agreement, the Debt Commitment Letter is in full force and effect and is the valid, binding and enforceable obligation of Parent and, to the Knowledge of Parent, the other parties thereto, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar Laws now or hereinafter in effect, affecting creditors’ rights and remedies generally, and to general principles of equity. There are no conditions precedent or other contingencies related to the funding of the full amount (or any portion) of the Debt Financing, other than as expressly set forth in the Debt Commitment Letter. Subject to Section 7.12(c), as of the date of this Agreement, there are no side letters, understandings or other agreements or contracts of any kind, in each case to which Parent is a party, relating to the Debt Financing that could affect the availability of the Debt Financing contemplated by the Debt Commitment Letter, other than as expressly set forth in the Debt Commitment Letter. As of the date of this Agreement, no event has occurred which (with or without notice, lapse of time or both) would constitute a default or breach or failure to satisfy a condition by Parent or, to the Knowledge of Parent, any other party thereto, under the terms and conditions of the Debt Commitment Letter, and assuming the conditions set forth in Section 8.1 and Annex A are satisfied at Closing and assuming the performance by the Company of its obligations under Section 7.12, Parent does not have any reason to believe that any of the conditions to the Debt Financing will not be satisfied by Parent prior to the Acceptance Time or that the Debt Financing will not be available to Parent at the Acceptance Time and on Closing Date.
Section 6.14 Solvency. Parent is not entering into this Agreement with the intent to hinder, delay or defraud either present or future creditors of the Company or any of its Subsidiaries. Immediately following the Closing after giving effect to the transactions contemplated by this Agreement, and excluding the effect of any inaccuracy of the representations and warranties contained in Article V, Parent and its Subsidiaries, taken as a whole, will be Solvent. As used herein, “Solvent” means with respect to any Person on a particular date, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including, contingent liabilities, of such Person, (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person has not incurred, and does not intend to incur, debts or liabilities beyond such Person’s ability to pay such debts and liabilities as they mature and (d) such Person is not engaged in
52 |
business or a transaction, and is not about to engage in business or a transaction, for which such Person’s property would constitute an unreasonably small capital. The amount of contingent liabilities at any time shall be computed under this Section 6.14 as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that is probable to become an actual or matured liability.
Article VII
COVENANTS
Section 7.1 Interim Operations of the Company and Parent.
(a) During the period from the date of this Agreement until the earlier of the Effective Time (except (w) as may be required by Law, (x) with the prior written consent of Parent, (y) as contemplated by this Agreement, or (z) as set forth in the Company Disclosure Schedule), the business of the Company and its Subsidiaries shall be conducted in the ordinary and usual course of business in all material respects, and, to the extent consistent therewith, the Company and its Subsidiaries shall use commercially reasonable efforts to (i) preserve intact their current business organization and (ii) preserve their relationships with customers, suppliers and others having business dealings with them; provided, however, that no action by the Company or any of its Subsidiaries with respect to matters addressed specifically by any provision of Section 7.1(b) shall be deemed a breach of this Section 7.1(a) unless such action would constitute a breach of such specific provision.
(b) Except (w) as may be required by Law, (x) with the prior written consent of Parent (which consent, in the case of clauses (vi), (vii), (viii), (ix), (x), (xi), (xiii), (xvi) and (xvii) and to the extent relating to the foregoing clauses, (xviii), shall not be unreasonably withheld, delayed or conditioned), (y) as contemplated by this Agreement, or (z) as set forth in the Company Disclosure Schedule, prior to the Effective Time, neither the Company nor any of its Subsidiaries will:
(i) amend its certificate of incorporation or by-laws (or equivalent organizational documents), or enter into any written agreement with any of the Company’s stockholders in their capacity as such;
(ii) except for (w) issuances of shares of Company Common Stock issuable in connection with the retraction or exchange of the Company Special Shares, (x) awards of Company Stock Options (granted with exercise prices no less than the greater of the grant date closing price or the Merger Consideration), Company Restricted Stock Units and Company Performance Restricted Stock Units granted in aggregate amounts consistent with the terms of, and not to exceed the underlying share amounts set forth on, Annex A to Section 7.1(b)(ii) of the Company Disclosure Schedule, in each case in the ordinary course of business consistent with past practice, provided that the terms of all awards granted after the date of this Agreement pursuant to this Section 7.1(b)(ii)(x), other than the awards set forth for the individual identified on Section 5.2(a)(1) of the Company Disclosure Schedule, shall provide that none of the transactions contemplated by this Agreement shall constitute a “change of control” or
53 |
otherwise result in the acceleration of vesting of any such Company Stock Options, Company Restricted Stock Units or Company Performance Restricted Stock Units so granted, or (y) shares of Company Common Stock to be issued or delivered pursuant to the (A) Company Equity Plans in satisfaction of Company Stock Options, Company Restricted Stock Units and Company Performance Restricted Stock Units outstanding on the date hereof or issued after the date hereof in accordance with the requirements of this Agreement, or (B) rights under the ESPP (subject to Section 7.8) outstanding on the date hereof in accordance with the requirements of this Agreement, issue, deliver, sell, dispose of, or authorize or agree to the issuance, sale or other disposition of (a) any capital stock or other ownership interest of the Company or any of its Subsidiaries, or any securities or rights convertible into, exchangeable for, or evidencing the right to subscribe for any capital stock or other ownership interest of the Company or any of its Subsidiaries, (b) any rights, warrants, options, calls, rights agreements or plans, commitments or any other agreements of any character to purchase or acquire capital stock or any other ownership interest of the Company or any of its Subsidiaries or any securities or rights convertible into, exchangeable for, or evidencing the right to subscribe for, any capital stock or any other ownership interest of the Company or any of its Subsidiaries, or (c) any other securities of the Company or any of its Subsidiaries in respect of, in lieu of, or in substitution for, Company Common Stock outstanding on the date hereof or such capital stock, ownership interests, securities or rights in any Subsidiary of the Company (other than, in each case, any such issuances, sales and dispositions by a wholly owned Subsidiary to the Company or any other wholly owned Subsidiary of the Company);
(iii) redeem, purchase or otherwise acquire, or agree to redeem, purchase or otherwise acquire, any outstanding Company Common Stock (except in respect of any Tax withholding or exercise price in connection with the Company Equity Plan) or other capital stock or other equity securities of the Company or any of its Subsidiaries (other than a Subsidiary), other than retractions or exchanges of Company Special Shares in accordance with the terms thereof;
(iv) split, combine, subdivide or reclassify any Company Common Stock or other capital stock of the Company or any of its Subsidiaries or declare, set aside for payment or pay any dividend (whether in cash, stock or property or any combination thereof) or other distribution in respect of any Company Common Stock or other capital stock of the Company or any of its Subsidiaries (except dividends and distributions paid by Subsidiaries of the Company to the Company or to any of its wholly owned Subsidiaries) or otherwise make any payments to stockholders of the Company in their capacity as such, other than retractions or exchanges of Company Special Shares in accordance with the terms thereof;
(v) adopt a plan of complete or partial liquidation, dissolution, merger, amalgamation, consolidation, restructuring, recapitalization or other reorganization of the Company or any Subsidiary (other than solely among the Company’s Subsidiaries), other than the Offer or the Merger;
(vi) acquire, sell or dispose of, or agree to acquire, sell or dispose of, any assets material to the Company and its Subsidiaries, taken as a whole,
54 |
including any corporation, partnership, limited partnership, or business or division thereof, or any equity interest therein (whether by merger, amalgamation, consolidation or other business combination, sale of assets, sale of capital stock, tender offer, exchange offer or similar transaction), other than (x) acquisitions, sales, or dispositions among the Company and any of its Subsidiaries, (y) acquisitions, sales or dispositions described in Section 7.1(b)(vi) of the Company Disclosure Schedule, or (z) purchases or sales of inventory or Company Products in the ordinary course of business;
(vii) incur any indebtedness for borrowed money in addition to that incurred as of the date of this Agreement or guarantee any such indebtedness or make any loans or advances to any other Person, other than (w) indebtedness, guarantees, loans and advances between or among the Company and its Subsidiaries, (x) revolving loans available under the Company Credit Agreement incurred in the ordinary course of business to fund working capital requirements of the Company and its Subsidiaries, (y) letters of credit issued, maintained or guaranteed by the Company or its Subsidiaries in the ordinary course of business and reimbursement obligations in respect thereof, or (z) performance bonds issued and maintained by the Company or its Subsidiaries in the ordinary course of business;
(viii) other than as required by applicable Law or agreements existing on the date hereof, or as required to comply with any Benefit Plan in effect on the date hereof, with regard to any Service Provider (A) enter into, adopt, terminate or amend in any material respect any compensation or benefit plan, policy, practice, arrangement or agreement for any Service Provider or accelerate the vesting or payment of any equity award held by any Service Provider, other than payments or benefits to new hires or renewals or replacements of employment agreements that expire in accordance with their terms for existing Service Providers, in each case in the ordinary course of business and not prohibited by another subclause of this Section 7.1(b)(viii), (B) materially increase the benefits or compensation provided to any Service Provider (except for salary and/or target bonus increases in connection with and corresponding to any promotion or job change that are provided in the ordinary course of business), (C) pay or provide to any Service Provider any material compensation or benefit not provided for under a Benefit Plan as in effect on the date of this Agreement, other than payments or benefits to new hires or renewals or replacements of employment agreements that expire in accordance with their terms for existing Service Providers, in each case in the ordinary course of business and not prohibited by another subclause of this Section 7.1(b)(viii), (D) amend any awards under any Benefit Plan (including the grant or amendment of any equity or equity-based compensation, except to the extent expressly permitted by this Section 7.1(b)), or remove or modify existing restrictions in any Benefit Plan or awards made thereunder, (E) grant or pay any severance, separation, change of control, retention, termination or similar compensation or benefits to, or to increase in any manner the severance, separation, change of control, retention, termination or similar compensation or benefits of, any Service Provider other than severance benefits paid in the ordinary course of business consistent with past practice, or (F) take any action to accelerate the time of payment or vesting of any compensation or benefits under any Benefit Plan;
55 |
(ix) change in (x) any material respect any of the accounting methods used by the Company and its Subsidiaries unless required by GAAP, SEC rules and regulations or applicable Law, or (y) with respect to the Subsidiaries of the Company, the accounting standards applicable to the preparation of the financial statements and accounts of each such Subsidiary unless required by applicable accounting standards or Law;
(x) except for the expenditures contemplated by and consistent with (x) the budget for capital expenditures for fiscal 2015, or (y) a budget for capital expenditures for each quarter of fiscal 2016 consistent with the budget for the corresponding quarter of fiscal 2015, as applicable, as set forth in Section 7.1(b)(x) of the Company Disclosure Schedule, make or authorize any capital expenditures in excess of $2,500,000 in the aggregate in any fiscal quarter following the date of this Agreement, or $6,000,000 in the aggregate;
(xi) enter into any collective bargaining agreement or any other material agreement with any labor organization, works council, trade union, or other labor association;
(xii) convene any special meeting of the Company’s stockholders;
(xiii) initiate, compromise or settle any material litigation or arbitration proceeding, or any actual or threatened litigation (other than any such litigation arising out of any of the transactions contemplated by this Agreement) (except to enforce the Company’s rights hereunder) if the amount at issue is greater than $1,000,000;
(xiv) sell, assign, transfer or grant any rights, title or interests in any material Owned Intellectual Property other than non-exclusive licenses to customers, suppliers or service providers granted in the ordinary course of business;
(xv) change any material method of Tax accounting, settle or compromise any audit or other proceeding relating to a material amount of Tax (excluding for these purposes any settlement or compromise relating to a Tax item to the extent that such settlement or compromise does not materially exceed the reserves for such Tax item established in the Company Financial Statements), make or change any material Tax election or file any material Tax Return (including any material amended Tax Return), agree to an extension or waiver of the statute of limitations with respect to the assessment or determination of a material amount of Taxes, enter into any closing agreement with respect to any material amount of Tax or surrender any right to claim any material Tax refund;
(xvi) enter into, modify or amend any material Contract outside of the ordinary course of business, or release or assign any material rights or claims thereunder outside of the ordinary course of business, which if so entered into, modified,
56 |
amended, waived, released or assigned would reasonably be expected to be materially adverse to any business or product line of the Company or its Subsidiaries;
(xvii) invest any funds available for investment (including any proceeds received upon maturity of existing investments) other than in “cash and cash equivalents” (as defined in the financial statements included in the Company SEC Reports); or
(xviii) enter into any Contract, commitment or arrangement to do any of the foregoing.
(c) As soon as practicable following the date of this Agreement (but, in any event within twenty (20) Business Days thereafter), the Company shall provide the information with respect to non-U.S. employees, Foreign Benefit Plans, and non-U.S. based equity compensation that it was unable to provide before the date of this Agreement. The Company and each Subsidiary shall comply (prior to the Closing Date) with their respective obligations, if any, to inform, consult with, and/or obtain consent from any of its employees or their related trade unions, works councils, or other collective representatives about the transactions contemplated by this Agreement.
(d) Except (w) as may be required by Law, (x) with the prior written consent of the Company, which consent shall not be unreasonably withheld, delayed or conditioned or (y) as contemplated or permitted by this Agreement, prior to the Effective Time, neither Parent nor any of its Subsidiaries will:
(i) amend its certificate of incorporation or by-laws (or equivalent organizational documents in any manner that would prohibit or hinder, impede or delay in any material respect the Offer or the Merger or the consummation of the other transactions contemplated hereby or have a material and adverse impact on the value of the Parent Common Stock;
(ii) adopt a plan of complete or partial liquidation, dissolution, merger, amalgamation, consolidation, restructuring, recapitalization or other reorganization of Parent, other than the Offer or the Merger;
(iii) issue, split, combine, subdivide or reclassify any Parent capital stock, or declare, set aside for payment or pay any dividend of any Parent capital stock, or other distribution in respect of any Parent capital stock or otherwise make any payments to stockholders in their capacity as such (other than issuances of Parent Common Stock pursuant to (x) Parent’s employee equity plans or exercise of equity-based awards granted pursuant to Parent’s employee equity plans, or (y) in connection with acquisitions consistent with past practice, and except for the issuance, grant or delivery of equity-based awards granted pursuant to Parent’s employee equity plans in the ordinary course of business consistent with past practice);
(iv) acquire, sell or dispose of, or agree to acquire, sell or dispose of, any corporation, partnership, limited partnership or other business or division thereof or any equity interest therein (whether by merger, amalgamation, consolidation or
57 |
other business combination, sale of assets, sale of share capital, tender offer or exchange offer or similar transaction) that, at the time such action is taken, to the Knowledge of Parent, would be likely to delay, prevent or impede the consummation of the Offer, the Merger and the other transactions contemplated hereby;
(v) change any material method of Tax accounting, settle or compromise any audit or other proceeding relating to a material amount of Tax (excluding for these purposes any settlement or compromise relating to a Tax item to the extent that such settlement or compromise does not exceed the reserves for such Tax item established in the Parent Financial Statements), make or change any material Tax election or file any material Tax Return (including any material amended Tax Return), agree to an extension or waiver of the statute of limitations with respect to the assessment or determination of a material amount of Taxes, enter into any closing agreement with respect to any material amount of Tax or surrender any right to claim any material Tax refund; or
(vi) enter into any Contract, commitment or arrangement to do any of the foregoing.
Section 7.2 Access to Information. The Company shall (and shall cause each of its Subsidiaries to) afford to directors, officers, employees, counsel, investment bankers, accountants and other authorized representatives (“Representatives”) of Parent reasonable access, in a manner not unreasonably disruptive to the operations of the business of the Company and its Subsidiaries, during normal business hours and upon reasonable notice throughout the period prior to the Effective Time, to the properties, books and records of the Company and its Subsidiaries and, during such period, shall (and shall cause each of its Subsidiaries to) furnish promptly to such Representatives all information concerning the business, properties and personnel of the Company and its Subsidiaries in each case as may reasonably be requested for reasonable purposes related to the consummation of the transactions contemplated by this Agreement; provided, however, that nothing herein shall require the Company or any of its Subsidiaries to disclose any information to Parent or Sub if such disclosure would, in the reasonable judgment of the Company, be expected to (i) violate applicable Law or the provisions of any agreement to which the Company or any of its Subsidiaries is a party as of the date of this Agreement (as long as the Company has used commercially reasonable efforts to obtain the consent of the other party to the agreement), or (ii) constitute a waiver of the attorney-client, work product doctrine or other legal privilege held by the Company or any of its Subsidiaries; provided further, however, that nothing herein shall authorize Parent or its Representatives to undertake any invasive additional diligence investigation after the date of this Agreement, including investigations or sampling at any property owned, operated or leased by the Company or its Subsidiaries without the prior written consent of the Company. Without limiting the foregoing, in the event that the Company does not provide access or information in reliance on the immediately preceding sentence, it shall provide notice to Parent that it is withholding such access or information and shall use its reasonable efforts to communicate, to the extent feasible, the applicable information in a way that would not violate the applicable Law, Contract or obligation or risk waiver of such privilege. The Confidentiality Agreement shall apply with respect to information furnished hereunder by or on behalf of the Company, its Subsidiaries and the Company’s Representatives (as defined in the Confidentiality Agreement). The Company
58 |
agrees that the Confidentiality Agreement is hereby amended to permit the inclusion of all actual or prospective sources of debt financing (including convertible or equity-linked debt) (and representatives of such financing sources) in the term “Representative” as such term is defined therein.
Section 7.3 Board Recommendation; Acquisition Proposals.
(a) The Company and its Subsidiaries will not, and will use their reasonable best efforts to cause their respective officers, directors, employees and other Representatives not to, directly or indirectly (i) initiate, solicit, seek or knowingly take any action to facilitate or encourage, any inquiry, proposal or offer that constitutes or could reasonably be expected to lead to an Acquisition Proposal, (ii) participate or engage in any negotiations, inquiries or discussions with respect to any Acquisition Proposal, (iii) in connection with any such inquiries, proposals or offers, disclose or furnish any nonpublic information or data to any Person concerning the Company’s business or properties or afford any Person other than Parent or its Representatives access to its properties, books, or records pursuant to a governmental subpoena or other governmental request for information, (iv) enter into or execute, or propose to enter into or execute, any agreement relating to an Acquisition Proposal, (v) approve, endorse, recommend or make or authorize any public statement, recommendation, or solicitation in support of, or submit to the Company’s stockholders, any Acquisition Proposal, (vi) take any action to make the provisions of any takeover statute inapplicable to any transactions contemplated by an Acquisition Proposal, or (vii) publicly propose to do any of the foregoing described in clauses (i) through (vi). The Company and its Subsidiaries will, and will cause their respective Representatives to, cease immediately and cause to be terminated all activities, discussions and negotiations that commenced prior to the date of this Agreement regarding any proposal that constitutes, or would reasonably be expected to lead to, an Acquisition Proposal, and shall terminate access to any virtual data room established by the Company and request that all confidential or proprietary information previously furnished to any party (other than Parent) in connection with any such discussions and negotiations be promptly returned or destroyed. The Company acknowledges and agrees that, in the event any Representative of the Company or any of its Subsidiaries takes any action that if taken by the Company would be a breach of this Section 7.3, the taking of such action by such Representative shall be deemed to constitute a breach of this Agreement by the Company.
(b) Notwithstanding anything to the contrary contained in this Agreement, at any time after the date of this Agreement and prior to the Acceptance Time, in the event that the Company receives an unsolicited Acquisition Proposal that did not result from a material breach of this Section 7.3, the Company and its board of directors may (subject to compliance with this Section 7.3) participate in discussions or negotiations (including, as a part thereof, making any counterproposal) with, or furnish any nonpublic information to, any Person or Persons (but only after any such Person enters into a confidentiality agreement with the Company containing terms that are not materially less favorable to the Company than those contained in the Confidentiality Agreement, which may not provide for an exclusive right to negotiate with the Company and may not restrict the Company from complying with this Section 7.3(b)) making such contact or making such Acquisition Proposal and their respective Representatives and potential sources of financing, if prior to the Acceptance Time (i) the Company’s board of directors determines in good faith, after consultation with its financial
59 |
advisors and outside legal counsel, that such Person or Persons have submitted to the Company an Acquisition Proposal that is, or would reasonably be expected to lead to, a Superior Proposal, and (ii) the Company’s board of directors determines in good faith, after consultation with outside legal counsel, that the failure to participate in such discussions or negotiations, furnish such information, enter into any agreement related to any Acquisition Proposal or accept any offer or proposal relating to an Acquisition Proposal would reasonably be expected to be inconsistent with the fiduciary duties of the Company’s directors under applicable Law.
(c) The Company will as promptly as reasonably practicable (and in any event within twenty-four (24) hours after receipt) (i) notify Parent of the receipt by the Company of any Acquisition Proposal and (ii) provide to Parent a copy of such Acquisition Proposal (if written), or a summary of the material terms and conditions of such Acquisition Proposal (if oral), including the identity of the Person making such Acquisition Proposal, and copies of all written communications with such Person with respect to such actual or potential Acquisition Proposal. The Company shall notify Parent, in writing, of any decision of its board of directors as to whether to consider any Acquisition Proposal or to enter into discussions or negotiations concerning any Acquisition Proposal or to provide non-public information with respect to the Company to any Person, which notice shall be given as promptly as practicable after such determination was reached (and in any event no later than twenty-four (24) hours after such determination was reached). The Company will (i) provide Parent with written notice setting forth all such information as is reasonably necessary to keep Parent informed in all material respects of the status and material terms of any such Acquisition Proposal and of any material amendments thereto, (ii) keep Parent informed as promptly as practicable with respect to any changes to the material terms of an Acquisition Proposal submitted to the Company (and in any event within twenty-four (24) hours following any such changes), including by providing a copy of all written proposals and a summary of all oral proposals or material oral modifications to an earlier written proposal, in each case relating to any Acquisition Proposal, (iii) promptly (and in any event within twenty-four (24) hours) following the provision of any non-public information of the Company to any such Person, provide such information to Parent (including by posting such information to an electronic data room), to the extent such information has not previously been provided or made available to Parent, and (iv) promptly (and in any event within twenty-four (24) hours of such determination) notify Parent of any determination by the Company’s board of directors that such Acquisition Proposal constitutes a Superior Proposal.
(d) Subject to Section 7.3(e) and Section 7.3(f), neither the board of directors of the Company nor any committee thereof shall, directly or indirectly, (A) (i) withdraw, modify or qualify, or propose publicly to withdraw, modify or qualify, in a manner adverse to Parent or Sub, the Board Recommendation, (ii) approve, adopt, or recommend, or propose publicly to approve, adopt, or recommend, any Acquisition Proposal, (iii) in the case of any Acquisition Proposal that is a tender offer or exchange offer, fail to recommend against such Acquisition Proposal, or fail to confirm the Board Recommendation, within ten (10) Business Days of the commencement of such Acquisition Proposal, or (iv) in the case of any publicly announced Acquisition Proposal that is not a tender offer or exchange offer, fail to issue a press release confirming the Board Recommendation within ten (10) Business Days following Parent’s written request to the board of directors of the Company that the board of directors of the Company issue such press release (provided the board of directors shall not be required to issue more than one such press release in response to any Acquisition Proposal), or
60 |
(v) make any public statement that is inconsistent with the Board Recommendation (it being understood that a statement to the effect that the board of directors of the Company is considering an Acquisition Proposal in accordance with the requirements of this Agreement and its fiduciary duties and confirming the Board Recommendation shall not be deemed to be inconsistent with the Board Recommendation) (any action described in clause (i), (ii), (iii) or (iv) being referred to as a “Change of Recommendation”) or (B) approve or recommend, or publicly propose to approve or recommend, or allow the Company to execute or enter into, any letter of intent, memorandum of understanding, agreement in principle, merger agreement, acquisition agreement, option agreement, joint venture agreement, partnership agreement, or other similar agreement, arrangement, or understanding (i) constituting or related to, or that is intended to or would reasonably be expected to lead to, any Acquisition Proposal, or (ii) requiring it to abandon, terminate, or fail to consummate the Offer, the Merger or any other transaction contemplated by this Agreement.
(e) Notwithstanding the foregoing, at any time prior to the Acceptance Time, the Company’s board of directors may, if the Company’s board of directors determines in good faith, after consultation with its outside legal counsel and financial advisors, that the failure to take such action would be inconsistent with the fiduciary duties of the Company’s directors under applicable Law, make a Change of Recommendation unrelated to an Acquisition Proposal (it being understood and agreed that any Change of Recommendation proposed to be made in relation to an Acquisition Proposal may only be made pursuant to and in accordance with Section 7.3(f)) in response to an Intervening Event; provided, that:
(i) the Company has provided to Parent at least three (3) Business Days prior written notice that it intends to take such action, which notice must specify the reasons for proposing to take such action, and include a reasonably detailed description of the Intervening Event; and
(ii) Parent shall not have made a proposal that, if accepted, would be binding on Parent and that has not been withdrawn, within three (3) Business Days (during which period the Company shall, and shall cause its Representatives to, negotiate with Parent in good faith regarding any proposal by Parent) after receipt of such notice from the Company, to make such adjustments in the terms and conditions of this Agreement in such manner that would obviate the need for the Company’s board of directors to effect such Change of Recommendation.
(f) Notwithstanding the foregoing, at any time prior to the Acceptance Time, the Company’s board of directors may, if the Company’s board of directors determines in good faith, after consultation with its outside legal counsel and financial advisors, that the failure to take such action would be inconsistent with the fiduciary duties of the Company’s directors under applicable Law, approve or recommend a Superior Proposal; provided, that:
(i) the Company has provided to Parent at least three (3) Business Days prior written notice that it intends to take such action, which notice must specify the reasons for taking such action and, a written copy of the relevant proposed transaction agreements with the party making such potential Superior Proposal, the
61 |
identity of such party and a summary description of the material terms and conditions of such potential Superior Proposal; and
(ii) Parent shall not have made a proposal that, if accepted, would be binding on Parent and that has not been withdrawn, within three (3) Business Days (during which period the Company shall, and shall cause its Representatives to, negotiate with Parent in good faith regarding any proposal by Parent) after receipt of such notice from the Company, to make such adjustments in the terms and conditions of this Agreement so that such Acquisition Proposal ceases to constitute a Superior Proposal. In the event of any revisions to the Superior Proposal (including any revision in the amount, form or mix of consideration the Company’s stockholders would receive as a result of such potential Superior Proposal), the Company shall be required to provide Parent with notice of such material amendment and there shall be a new two (2) Business Day period following such notification during which the Company shall negotiate with Parent and otherwise comply again with the requirements of this Section 7.3(f) and the board of directors of the Company shall not make a Change of Recommendation prior to the end of any such period as so extended.
(g) Nothing in this Agreement shall prohibit the board of directors of the Company from (i) taking and disclosing to the stockholders of the Company a position contemplated by Rule 14e-2(a) under the Exchange Act or complying with the provisions of Rule 14d-9 promulgated under the Exchange Act, and (ii) making any disclosure to the stockholders of the Company that the board of directors of the Company determines in good faith (after consultation with its outside legal counsel) that the failure to make such disclosure would reasonably be expected to be inconsistent with directors’ fiduciary duties under applicable Law; provided, that any such disclosure referred to in clauses (i) or (ii) that relates to an Acquisition Proposal shall be deemed to be a Change of Recommendation unless (x) the board of directors of the Company expressly reaffirms the Board Recommendation in such disclosure or (y) such disclosure is a “stop, look and listen” communication to the stockholders of the Company pursuant to Rule 14d-9(b) promulgated under the Exchange Act; provided, further, that this Section 7.3(g) shall not be deemed to permit the Company’s board of directors to make a Change of Recommendation or to take any of the actions referred to in Section 7.3(e) or Section 7.3(f), except, in each case, to the extent expressly permitted by Section 7.3(e) or Section 7.3(f), as applicable.
Section 7.4 Employee Benefits.
(a) For the benefit of employees of the Company and its Subsidiaries employed as of the Effective Time (the “Employees”), for a period of 12 months following the Effective Time (or, if shorter, during an Employee’s period of employment or December 31, 2016), Parent agrees to provide or cause its Subsidiaries (including the Surviving Corporation) to provide (i) each Employee with (x) a base salary or wage rate and (y) aggregate cash incentive compensation opportunity that is no less favorable than the base salary or wage rate and aggregate incentive compensation opportunity in effect for such Employee immediately prior to the Effective Time (but without any requirement to provide comparability for any equity or cash awards granted in connection with or anticipation of the transactions contemplated by this Agreement or with any change of control or retention features or as new hire awards), and (ii) the
62 |
Employees as a whole with employee benefits that, in the aggregate, are no less favorable than those in effect for the Employees on the date hereof (excluding any change in control or retention benefits, defined benefit plans, and post-employment welfare benefits). Notwithstanding the foregoing, nothing in this Agreement shall be interpreted as (i) prohibiting Parent from converting the employee benefits offered to the Employees at any time during the aforementioned period to employee benefits offered by Parent to comparably situated Parent employees, (ii) prohibiting the termination of any employee benefits being offered to the Employees by the Company which are not being offered by Parent to comparable situated Parent employees, or (iii) conferring, or intending to confer, on any Employee a right to continued employment with Parent, the Surviving Corporation or any of their Subsidiaries. This Section 7.4 shall not apply with respect to individuals covered by collective bargaining agreements or other collective representations, in which case the terms of the applicable collective bargaining agreement or collective representation shall apply, or (other than with respect to equity-based incentive compensation) with respect to individuals subject to non-United States law, in which case Parent agrees to comply with any applicable laws or employment agreements with respect to compensation and benefits. Notwithstanding anything to the contrary in this Section 7.4, for not fewer than six months following the Effective Time, Parent shall provide U.S. Employees with severance benefits not less favorable than those available to such U.S. Employees pursuant to the PMC-Sierra U.S. Severance Guidelines.
(b) As of the Effective Time, Parent shall honor or cause to be honored, in accordance with their terms, all material Benefit Plans and material Foreign Benefit Plans.
(c) With respect to each benefit plan, program, practice, policy or arrangement maintained by Parent or its Subsidiaries (including the Surviving Corporation) following the Effective Time and in which any of the Employees participate (the “Parent Plans”), and except to the extent necessary to avoid duplication of benefits, for purposes of determining eligibility to participate, vesting, service-based accrual rates of and entitlement to benefits (including without limitation severance plans and arrangements), service with the Company and its Subsidiaries (or predecessor employers to the extent the Company provides past service credit) shall be treated as service with Parent and its Subsidiaries. Each applicable Parent Plan shall take commercially reasonable steps to waive eligibility waiting periods and pre-existing condition limitations to the extent waived or not included under the corresponding Benefit Plan providing medical coverage, for purposes of the first plan year ending after the Closing Date. Parent agrees to take commercially reasonable steps to give or cause its Subsidiaries (including the Surviving Corporation) to give the Employees credit under the applicable Parent Plan (in the first such Parent Plan year ending after the Effective Time) for amounts paid prior to the Effective Time during the calendar year in which the Effective Time occurs under a corresponding Benefit Plan for purposes of applying deductibles, co-payments and out-of-pocket maximums as though such amounts had been paid in accordance with the terms and conditions of the Parent Plan.
(d) Prior to the Effective Time, Parent and the Company will in good faith discuss the development of retention programs in connection with the Employees continuing employment with the Surviving Corporation or Parent after the Effective Time.
63 |
(e) At least two (2) Business Days prior to the scheduled expiration of the Offer, Parent shall have received evidence that the Company has, subject to the occurrence of the Closing, terminated, if and to the extent requested by Parent, the Benefit Plan intended to comply with Section 401(k) of the Code (the “Company 401(k) Plan”) and any other Benefit Plan or other similar Contract maintained by the Company in each case as identified on Schedule 6.4(e), in a form and on terms and timing reasonably satisfactory to Parent (and, with respect to the Company 401(k) Plan, subject to the occurrence of the Closing, prospectively effective no later than the day before the scheduled expiration of the Offer).
(f) The parties hereto acknowledge and agree that all provisions contained in this Section 7.4 with respect to employees of the Company and its Subsidiaries are included for the sole benefit of the respective parties hereto and shall not create any direct or third party beneficiary right (i) in any other Person, including employees, former employees, any participant or any beneficiary thereof in any Benefit Plan, Foreign Benefit Plan or Parent Plans, or (ii) to continued employment with the Company and its Subsidiaries, Parent or the Surviving Corporation or their Subsidiaries. Notwithstanding anything in this Section 7.4 to the contrary, nothing in this Agreement, whether express or implied, shall be treated as an amendment or other modification of any Benefit Plan or Foreign Benefit Plan or any other employee benefit plans of the Company, any Company Subsidiary or Parent or prohibits Parent or any of its Subsidiaries, including the Surviving Corporation, from amending or terminating any employee benefit plan.
(g) If the Company or any of its Subsidiaries enters into, adopts, amends, modifies or terminates any Company Arrangement, all such amounts payable under such Company Arrangement shall (i) be paid or granted as compensation for past services performed, future services to be performed, or future services to be refrained from performing, by the Covered Securityholders (and matters incidental thereto) and (ii) shall not be calculated based on the number of shares tendered or to be tendered into the Offer by the applicable Covered Securityholder. Moreover, the Company shall take all actions necessary so that, prior to the Expiration Date: (i) the adoption, approval, amendment or modification of each such Company Arrangement shall be approved as an employment compensation, severance or other employee benefit arrangement solely by independent directors of the Company in accordance with the requirements of Rule 14d–10(d)(2) under the Exchange Act and the instructions thereto and (ii) the “safe harbor” provided pursuant to Rule 14d–10(d)(2) is otherwise applicable thereto as a result of the taking prior to the Expiration Date of all necessary actions by the board of directors of the Company, the Company Compensation Committee or its independent directors.
Section 7.5 Publicity. The initial press release by each of Parent and the Company with respect to the execution of this Agreement shall be approved by each of Parent and the Company. Thereafter, neither the Company nor Parent (nor any of their respective Affiliates) shall issue any other press release or make any other public announcement with respect to this Agreement or the transactions contemplated hereby without the prior review and approval of the other party (such approval not to be unreasonably withheld, conditioned or delayed), except as may be required by Law or by any listing agreement with a national securities exchange, in which case the party proposing to issue such press release or make such public announcement shall use its commercially reasonable efforts to consult in good faith with the other party before making any such public announcements; provided, that the Company will not be required to obtain the prior approval of or consult with the other party in connection with
64 |
any such press release or public announcement if (a) the Company’s board of directors has effected a Change of Recommendation pursuant to Section 7.3(e), (b) in connection with any such press release or public announcement pursuant to Section 7.3(f), or (c) such press release or public announcement consists solely of information previously disclosed in all material respects in a previously distributed press release or public announcement.
Section 7.6 Directors’ and Officers’ Insurance and Indemnification.
(a) From and after the Effective Time, the Surviving Corporation shall, and Parent shall cause the Surviving Corporation to, indemnify and hold harmless the individuals who at any time prior to the Effective Time were directors or officers of the Company or any of its present or former Subsidiaries (the “Indemnified Parties”) against any costs or expenses (including reasonable attorneys’ fees), judgments, fines, losses, claims, damages or liabilities in connection with actions or omissions occurring at or prior to the Effective Time (including the transactions contemplated by this Agreement) to the fullest extent permitted by Law and by the by-laws of the Company or any applicable Subsidiary, and Parent shall, and shall cause the Surviving Corporation to, promptly advance expenses as incurred to the fullest extent permitted by Law and the by-laws of the Company or any applicable Subsidiary. After the Effective Time, Parent and the Surviving Corporation shall (and Parent shall cause the Surviving Corporation to) fulfill and honor to the maximum extent permitted by applicable Law, all rights to exculpation or indemnification for acts or omissions occurring prior to the Effective Time existing as of the Effective Time in favor of directors and officers of the Company, its Subsidiaries or any of their predecessors in their capacity as officers or directors, and the heirs, executors, trustees, fiduciaries and administrators of such officer or director (each, a “D&O Indemnitee”), as provided in the Company’s or each of its Subsidiaries’ respective certificate of incorporation and by-laws (or comparable organizational or governing documents) or in any agreement, shall survive the transactions contemplated by this Agreement and shall continue in full force and effect in accordance with their terms. After the Effective Time, Parent and the Surviving Corporation shall (and Parent shall cause the Surviving Corporation to) fulfill and honor such obligations to the maximum extent permitted by applicable Law. In addition, for a period of six (6) years following the Effective Time, Parent shall, and shall cause the Surviving Corporation and its Subsidiaries to, cause the certificate of incorporation and by-laws (and other similar organizational documents) of the Surviving Corporation and its Subsidiaries to contain provisions with respect to indemnification and exculpation that are at least as favorable as the indemnification and exculpation provisions contained in the certificate of incorporation or by-laws (or other similar organizational documents) of the Company and its Subsidiaries immediately prior to the Effective Time, and during such six (6) year period, such provisions shall not be amended, repealed or otherwise modified in any respect, except as required by applicable Law.
(b) Prior to the Effective Time, the Company shall or, if the Company is unable to, Parent shall cause the Surviving Corporation as of the Effective Time to, obtain and fully pay the premium for the non-cancellable extension of the directors’ and officers’ liability coverage of the Company’s existing directors’ and officers’ insurance policies and the Company’s existing fiduciary liability insurance policies (collectively, the “D&O Insurance”), in each case for a claims reporting or discovery period of at least six (6) years from and after the Effective Time with respect to any claim related to any period of time at or prior to the Effective
65 |
Time from an insurance carrier with the same or better credit rating as the Company’s current D&O Insurance carrier with respect to directors’ and officers’ liability insurance in an amount and scope at least as favorable as the Company’s existing policies; provided, that in no event shall the Company pay, and in no event shall Parent or the Surviving Corporation be required to pay, an aggregate premium for any such insurance policy or policies in excess of 300% of the annual premium currently paid by the Company for such coverage (the “Maximum Amount”); provided, further, that if the annual premium of such policy exceeds the Maximum Amount, Parent shall cause the Surviving Corporation to obtain a policy with the greatest coverage available for a cost not exceeding such amount. If the Company or the Surviving Corporation for any reason fails to obtain such “tail” insurance policies as of the Effective Time, (i) the Surviving Corporation shall continue to maintain in effect, for a period of at least six (6) years from and after the Effective Time, the D&O Insurance in place as of the date of this Agreement with the Company’s current insurance carrier or with an insurance carrier with the same or better credit rating as the Company’s current D&O Insurance carrier with respect to directors’ and officers’ liability insurance in an amount and scope at least as favorable as the Company’s existing policies, or (ii) Parent will provide, or cause the Surviving Corporation to provide, for a period of not less than six (6) years after the Effective Time, the D&O Indemnitees who are insured under the Company’s D&O Insurance with comparable D&O Insurance that provides coverage for events occurring at or prior to the Effective Time from an insurance carrier with the same or better credit rating as the Company’s current D&O Insurance carrier, that is no less favorable than the existing policy of the Company or, if substantially equivalent insurance coverage is unavailable, the best available coverage; provided, however, that Parent and the Surviving Corporation shall not be required to pay an annual premium for the D&O Insurance in excess of three hundred percent (300%) of the annual premium currently paid by the Company for such insurance; and provided further, that if the annual premiums of such insurance coverage exceed such amount, Parent or the Surviving Corporation shall be obligated to obtain a policy with the greatest coverage available, with respect to matters occurring prior to the Effective Time, for a cost not exceeding such amount. Section 7.6(b) of the Company Disclosure Schedule sets forth in reasonable detail a description of the Company’s D&O Insurance existing as of the date hereof, including the annual premium for such D&O Insurance.
(c) This Section 7.6 is intended to benefit the Indemnified Parties and the D&O Indemnitees, and shall be enforceable by, each Indemnified Party or D&O Indemnitee, his or her heirs and his or her representatives.
(d) In the event that Parent, the Surviving Corporation or any of their respective successors or assigns (i) consolidates or amalgamates with or merges into any other Person and shall not be the continuing or surviving Person of such consolidation or merger, or (ii) transfers or conveys a majority of its properties and assets to any Person, then, and in each such case, proper provision shall be made so that the successors, assigns and transferees of Parent or the Surviving Corporation, or their respective successors or assigns, as the case may be, assume the obligations set forth in this Section 7.6.
Section 7.7 Reasonable Best Efforts.
(a) Notwithstanding anything in this Agreement to the contrary, the parties hereto agree to make an appropriate filing of a Notification and Report Form pursuant to
66 |
the HSR Act and to make all other filings required by, or advisable under, applicable foreign Antitrust Laws (collectively, “Foreign Antitrust Approvals”) with respect to the transactions contemplated hereby as promptly as practicable and in any event prior to the expiration of any applicable legal deadline (provided, that the submission or filing (i) of a Notification and Report Form pursuant to the HSR Act will be made within ten (10) Business Days of the date of this Agreement, and (ii) for applicable foreign Antitrust Laws shall be submitted by the parties with the relevant notification forms, or a draft thereof, for jurisdictions where submission of a draft prior to formal notification is appropriate, within forty-five (45) calendar days of the date of this Agreement; provided, further that, in the case of clause (ii), if a party is not prepared to file any such submission or filing within such period, such party’s senior executives shall discuss the reasons for the failure to meet such submission or filing deadlines with the senior executives from the other party) and to supply as promptly as practicable any additional information and documentary material that may be requested pursuant to the HSR Act and any other filings required or advisable in connection with the Foreign Antitrust Approvals or any other Antitrust Law. Parent shall be entitled to direct the antitrust defense of the transaction contemplated by this Agreement in any investigation or litigation by, or negotiations with, any Governmental Entity or other person relating to the Offer or the Merger or regulatory filings under applicable Antitrust Laws, provided that Parent shall consult with, and consider in good faith the views of, the Company throughout the antitrust defense of the transaction contemplated by this Agreement, including by providing the Company with reasonable opportunity to evaluate, as promptly as practicable, steps to be taken in pursuit of such defense. The Company shall not make any offer, acceptance or counter-offer to or otherwise engage in negotiations or discussions with any Governmental Entity with respect to any proposed settlement, consent decree, commitment or remedy, or, in the event of litigation, discovery, admissibility of evidence, timing or scheduling, except as specifically requested by or agreed with Parent. The Company shall use its reasonable best efforts to provide full and effective support of Parent in all material respects in all such investigations, litigation, negotiations and discussions to the extent requested by Parent. Without limiting the foregoing, the parties shall provide to the other parties in advance, any analyses, appearances, presentations, memoranda, briefs, arguments, opinions and proposals made or submitted by or on behalf of any party hereto in connection with proceedings under or relating to any such Antitrust Laws. The parties hereto agree to (i) give each other reasonable advance notice of all meetings with any Governmental Entity relating to any Antitrust Laws, (ii) give each other an opportunity to participate in each of such meetings, (iii) to the extent practicable, give each other reasonable advance notice of all substantive oral communications with any Governmental Entity relating to any Antitrust Laws, (iv) if any Governmental Entity initiates a substantive oral communication regarding any Antitrust Laws, promptly notify the other party of the substance of such communication, (v) provide each other with a reasonable advance opportunity to review and comment upon all written communications (including any analyses, presentations, memoranda, briefs, arguments, opinions and proposals) with a Governmental Entity regarding any Antitrust Laws, and (vi) provide each other with copies of all written communications to or from any Governmental Entity relating to any Antitrust Laws. Any such disclosures or provision of copies by one party to the other may be made on an outside counsel basis if appropriate. Notwithstanding anything in this Agreement to the contrary, and without limiting Parent’s right to direct the antitrust defense of the transaction contemplated by this Agreement, each of the Company and Parent agrees, and shall cause each of its Subsidiaries, to use reasonable best efforts to obtain any consents, clearances or approvals required under or in
67 |
connection with the HSR Act, the Sherman Act, as amended, the Clayton Act, as amended, the Federal Trade Commission Act, as amended, and any other federal, state or foreign law, regulation or decree designed to prohibit, restrict or regulate actions for the purpose or effect of monopolization or restraint of trade or the significant impediment of effective competition (collectively “Antitrust Laws”), to enable all waiting periods under applicable Antitrust Laws to expire, and to avoid or eliminate each and every impediment under applicable Antitrust Laws asserted by any Governmental Entity, in each case, to cause the consummation of the Offer, the Merger and the other transactions contemplated hereby to occur prior to the Termination Date, including but not limited to (x) promptly complying with or modifying any requests for additional information (including any second request) by any Governmental Entity, (y) if necessary to obtain clearance by any Governmental Entity before the Termination Date, offering, negotiating, committing to and effecting, by consent decree, hold separate order or otherwise, the sale, divestiture, license or other disposition of any and all of the capital stock, assets, rights, products or businesses of the Company and its Subsidiaries and any other restrictions on the activities of the Company and its Subsidiaries (but not, in each case, of Parent or any of its Subsidiaries other than the Company and its Subsidiaries), and (z) contesting, defending and appealing any threatened or pending preliminary or permanent injunction or other order, decree or ruling or statute, rule, regulation or executive order that would adversely affect the ability of any party hereto to consummate the transactions contemplated hereby, and taking any and all other actions to prevent the entry, enactment or promulgation thereof.
(b) Subject to the terms hereof, and except with regard to the Antitrust Laws which shall be governed by Section 7.7(a), the Company, Parent and Sub shall, and Parent and the Company shall cause their respective Subsidiaries to, each use their reasonable best efforts to:
(i) take, or cause to be taken, all actions, and do, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and make effective the transactions contemplated hereby as promptly as reasonably practicable;
(ii) obtain from any Governmental Entity or any other third party any consents, licenses, permits, waivers, approvals, authorizations, or orders, and send any notices, in each case, which are required to be obtained, made or sent by such party or any of their Subsidiaries in connection with the authorization, execution and delivery of this Agreement and the consummation of the transactions contemplated hereby; provided, that in connection therewith none of Parent, Sub, the Company or their respective Subsidiaries will be required to make or agree to make any material payment or accept any material conditions or obligations, including amendments to existing conditions and obligations;
(iii) as promptly as practicable, make all necessary filings and notifications, and thereafter make any other required submissions and applications with respect to this Agreement, the Offer and the Merger required under any applicable statute, law, rule or regulation; and
68 |
(iv) execute or deliver any additional instruments necessary to consummate the transactions contemplated by, and to fully carry out the purposes of, this Agreement.
The Company and Parent shall cooperate with each other in connection with the making of all such filings, submissions, applications and requests. The Company and Parent shall each use their reasonable best efforts to furnish to each other (on an outside counsel basis if appropriate) all information required for any filing, submission, application or request to be made pursuant to the rules and regulations of any applicable statute, law, rule or regulation in connection with the transactions contemplated by this Agreement. For the avoidance of doubt, Parent and the Company agree that nothing contained in this Section 7.7(b) shall modify, limit or otherwise affect their respective rights and responsibilities under Section 7.7(a).
Section 7.8 ESPP. The ESPP shall continue to be operated in accordance with its terms and past practice, provided, that if the Closing is expected to occur prior to the end of an Offering Period (as defined in the ESPP) (“Offering Period”), the Company shall take action to provide for an earlier Exercise Date (as defined in the ESPP) in accordance with Section 19 of the ESPP. Such earlier Exercise Date (the “New Exercise Date”) shall be as reasonably close to the Closing Date as is administratively practicable, and the Company shall notify each participant in writing at least fifteen (15) days prior to the earlier Exercise Date that the Exercise Date for his or her option (including for purposes of determining the Purchase Price (as defined in the ESPP) of such option) has been changed to the New Exercise Date, and that his or her option will be exercised automatically on the New Exercise Date, unless prior to such date he or she has withdrawn from the Offering Period as provided in Section 11 of the ESPP. The Company will not begin an Offering Period after the date of this Agreement.
Section 7.9 Section 16 Matters. Prior to the Expiration Date, the board of directors of the Company, or an appropriate committee of non-employee directors, shall adopt a resolution consistent with the interpretive guidance of the SEC so that the disposition of Company Common Stock, Company Stock Options, Company Performance Restricted Stock Units and Company Restricted Stock Units pursuant to this Agreement by any officer or director of the Company who is a covered person for purposes of Section 16 of the Exchange Act shall be an exempt transaction for purposes of Section 16 of the Exchange Act. Prior to the Expiration Date, the board of directors of Parent, or an appropriate committee of non-employee directors, shall adopt a resolution consistent with the interpretative guidance of the SEC so that the acquisition of Parent Common Stock, Converted PRSUs and Converted RSUs pursuant to this Agreement by any officer or director of the Company who may become a covered person for purposes of Section 16 of the Exchange Act shall be an exempt transaction for purposes of Section 16 of the Exchange Act.
Section 7.10 Filing of Form S-8. Parent agrees to file no later than ten (10) Business Days after the Effective Time a registration statement on Form S-8 (or any successor form) with respect to the shares of Parent Common Stock issuable with respect to Converted PRSUs, Converted RSUs and shall use all reasonable efforts to maintain the effectiveness of such registration statement or registration statements (and maintain the current status of the prospectus or prospectuses contained therein) for so long as the Converted PRSUs and Converted RSUs assumed in accordance with this Agreement remain outstanding. Parent shall at
69 |
times ensure that there will remain a sufficient amount of unissued shares of Parent Common Stock to meet its share issuance obligations in connection with the Company Performance Restricted Stock Units and Company Restricted Stock Units. Parent shall also use its reasonable best efforts to take any action required to be taken by it under any applicable state securities laws in connection with the conversion of the conversion of the Company Restricted Stock Units into Converted RSUs and the conversion of the Company Performance Restricted Stock Units into Converted PRSUs, and the Company shall furnish to Parent any information concerning the Company and holders of the Company Restricted Stock Units and the Company Performance Restricted Stock Units as may be reasonably requested by Parent in connection with any such action. Parent shall take all action necessary to cause the shares of Parent Common Stock to be issuable upon the vesting of the Company Restricted Stock Units and the Company Performance Restricted Stock Units, to be approved for listing on Nasdaq at or prior to the Acceptance Time.
Section 7.11 Notification of Certain Matters. The Company shall promptly notify Parent in writing, and Parent shall promptly notify the Company in writing, of: (a) any written communication from any Person alleging that the consent of such Person (or another Person) is or may be required in connection with the Offer, the Merger and the transactions contemplated hereby, (b) any written communication from any Governmental Entity in connection with the Offer, the Merger and the transactions contemplated hereby (other than such communications contemplated by Section 7.7, which shall be governed by such Section) or (c) any actions, claims, investigations, suits or proceedings commenced or, to the Knowledge of the Company or Parent, as applicable, threatened against the Company or any of its Subsidiaries (in the case of the Company) or Parent or any of its Subsidiaries (in the case of Parent) that are related to the Offer, the Merger and the transactions contemplated hereby (including any transaction litigation brought by a stockholder of the Company or Parent, as applicable). The Company shall give prompt notice to Parent, and Parent shall give prompt notice to the Company, of the occurrence, or non-occurrence of any event, which would be reasonably likely to cause (i) any representation or warranty of such party contained in this Agreement that is qualified as to materiality to not be true and accurate in any respect as if such representation or warranty were made at such time, or any such representation or warranty that is not so qualified to not be true and accurate in any material respect as if such representation were made at such time, or (ii) the Company or Parent, as applicable, to fail to comply with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfied by it under this Agreement; provided, that no such notification shall be deemed to cure any breach or otherwise affect the representations, warranties, covenants or agreements of the Company or the conditions to the obligations of the parties hereunder.
Section 7.12 Financing.
(a) Subject to the terms and conditions of this Agreement, Parent shall use its reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, advisable or proper to arrange and obtain the Debt Financing on the terms and conditions described in the Debt Commitment Letter pursuant to the terms thereof (including any “market flex” provisions) including using its reasonable best efforts to seek to enforce its rights with respect to funding under the Debt Commitment Letter in the event of a breach thereof by the financing provider(s) thereunder. Parent shall not, without the Company’s prior written consent, permit any amendment, supplement, replacement or modification to be
70 |
made to, or any waiver of any provision under, the Debt Commitment Letter if such amendment, supplement, replacement, modification or waiver (A) subject to Parent’s rights under Section 7.12(b) which shall not require the Company’s consent, reduces the aggregate amount of the cash proceeds from the Debt Financing or (B) imposes new or additional conditions to the initial funding or otherwise expands any of the conditions to the receipt of the Debt Financing, or otherwise expands, amends or modifies any other provision of the Debt Commitment Letter in a manner that would reasonably be expected to (x) delay or prevent the funding in full of the Debt Financing (or satisfaction of the conditions to the Debt Financing) on the Closing Date, or (y) adversely affect the ability of Parent to enforce its rights with respect to funding against other parties to the Debt Commitment Letter or the definitive agreements with respect thereto (provided, that Parent may amend the Debt Commitment Letter to add or replace lenders, lead arrangers, bookrunners, syndication agents or similar entities so long as such action would not reasonably be expected to delay or prevent the Acceptance Time or the Closing). Parent shall promptly deliver to the Company true, complete and correct copies of any such amendment, modification or replacement.
(b) Parent shall, and shall cause its Affiliates and Representatives to, use its reasonable best efforts (A) to maintain in effect the Debt Commitment Letter (provided that the Debt Commitment Letter may be amended, supplemented, replaced, modified or waived as provided in this Section 7.12), (B) to negotiate and enter into definitive agreements with respect to the Debt Commitment Letter (the “Debt Financing Agreements”) on the terms and conditions that are not materially less favorable to Parent than those contained in the Debt Commitment Letter, (C) to satisfy on a timely basis (or obtain the waiver of), and in a manner that will not impede the ability of the parties to consummate the Offer or the Merger, all conditions to receipt of the full amount of the Debt Financing at the Closing set forth therein that are within its control or subject to its influence and, upon satisfaction of the conditions set forth in the Debt Commitment Letter, to consummate the Debt Financing at or prior to the Closing, (D) to comply with its obligations under the Debt Commitment Letter, and (E) to consummate the Debt Financing at or prior to the Effective Time. In the event that all conditions precedent expressly set forth in the Debt Commitment Letter have been or, upon funding of the Debt Financing will be, satisfied, Parent and Sub shall use their reasonable best efforts to enforce their rights with respect to funding under, and cause the Financing Sources, lenders and the other persons providing or committing to provide the Debt Financing to comply with their obligations with respect to funding under the Debt Commitment Letter and definitive financing agreements and to fund on or before the Effective Time the Debt Financing. Parent shall keep the Company informed on a current basis and in reasonable detail of the status of its efforts to arrange the Debt Financing, and, promptly following request by the Company, provide to the Company copies of all executed Debt Financing Agreements.
(c) Without limiting the foregoing, Parent agrees to notify the Company promptly, and in any event within two (2) Business Days, if at any time prior to the Closing Date (i) the Debt Commitment Letter is terminated for any reason, (ii) Parent becomes aware of any breach or default (A) by any Financing Source party to the Debt Commitment Letter or any Debt Financing Agreement or (B) any other party to the Debt Commitment Letter or any Debt Financing Agreement if, in the case of this clause (B), such breach or default would reasonably be expected to affect the availability of the Debt Financing or (iii) a counterparty indicates in writing or orally that it will not provide, or it refuses to provide, all or any portion of
71 |
the Debt Financing contemplated by the Debt Commitment Letter on the terms set forth therein. Parent shall promptly provide any information reasonably requested by the Company relating to any circumstances referred to in this Section 7.12(c). Parent shall not, nor shall it permit any of its Affiliates to, without the prior written consent of the Company, take any action or enter into any transaction that would reasonably be expected to materially impair, delay or prevent consummation of all or any portion of the Debt Financing.
(d) Parent shall have the right to substitute the net cash proceeds received by Parent after the date hereof and prior to the Closing from consummated offerings or other incurrences of debt (including notes) by Parent for all or any portion of the Debt Financing by reducing commitments under the Debt Commitment Letter; provided that (v) such offering or other incurrence of debt does not result in a breach or default under, or violation of, the Debt Commitment Letter, (w) the aggregate amount of the Debt Financing committed under the Debt Commitment Letter following such reduction, together with other cash and cash equivalents available to Parent, is sufficient to pay all cash amounts required to be paid in connection with the transactions contemplated by this Agreement, (x) the proceeds of such debt offerings or other incurrences have been received by Parent in cash, (y) Parent promptly notifies the Company of such substitution and reduction and (z) true, correct and complete copies of each material amendment or modification to the Debt Commitment Letter relating thereto will be promptly provided to the Company. If commitments under the Debt Commitment Letter have been reduced to zero in connection with the preceding sentence, the obligations of the Company and its Subsidiaries pursuant to Section 7.13 shall no longer be in effect. Further, Parent shall have the right to substitute commitments in respect of other financings for all or any portion of the Debt Financing from the same and/or alternative financing sources so long as the aggregate amount of the Debt Financing, together with other cash and cash equivalents available to Parent, is sufficient to pay all cash amounts required to be paid in connection with the transactions contemplated by this Agreement and all conditions precedent to funding of such financing are, in respect of certainty of funding, equivalent to (or more favorable to the Company than) the conditions precedent set forth in the Debt Commitment Letter, to supplement or replace the Debt Financing (“Alternative Debt Financing”). True, correct and complete copies of each alternative financing commitment in respect of such Alternative Debt Financing (each, a “New Debt Commitment Letter”), together with all related fee letters and associated engagement letters (solely in the case of the fee letter, with only the fee amounts, pricing, “market flex” provisions and other economic terms that do not adversely affect the enforceability, availability or conditionality of, or the aggregate amount of proceeds available under, the Debt Financing contained therein redacted), will be promptly provided to the Company. In the event any New Debt Commitment Letter is obtained, (i) any reference in this Agreement to the “Debt Financing” shall include the debt financing contemplated by the Debt Commitment Letter as modified pursuant to clause (ii) below, (ii) any reference in this Agreement to the “Debt Commitment Letter” shall be deemed to include the Debt Commitment Letter which is not superseded by a New Debt Commitment Letter at the time in question and each New Debt Commitment Letter to the extent then in effect, and (iii) any reference in this Agreement to “fee letter” shall be deemed to include any fee letter relating to the Debt Commitment Letter that is not superseded by any New Debt Commitment Letter at the time in question and each fee letter relating to each New Debt Commitment Letter to the extent then in effect.
72 |
(e) On the Closing Date, Parent shall provide all funds required to effect the repayment of all indebtedness under the Company Credit Agreement in full in accordance with the Company Credit Agreement, subject to compliance with Section 7.13(a)(vi).
(f) Notwithstanding anything to the contrary contained herein, Parent’s obligations hereunder are not subject to a condition regarding Parent’s or any of its Affiliates’ obtaining funds to consummate the Offer, the Merger and the transactions contemplated by this Agreement.
Section 7.13 Financing Cooperation.
(a) Subject to Section 7.13(b) and (c), prior to the Closing, the Company shall use its reasonable best efforts to provide, and shall use its reasonable best efforts to cause its Subsidiaries and their officers, employees, consultants and advisors, including legal and accounting advisors to, provide, at Parent’s sole cost and expense, to Parent all cooperation as may be reasonably requested by Parent in connection with the Debt Financing, including (i) participation by senior management in a reasonable number of meetings, presentations, and due diligence sessions at times and locations mutually agreed and reasonably coordinated in advance thereof, (ii) reasonably assisting with the preparation of materials (to the extent relating to the Company and its Subsidiaries) for rating agency presentations, information and offering memoranda, lender presentations, and similar marketing documents to be used in connection with the Debt Financing, including customary comfort and authorization letters, and such information and data related to the Company and its Subsidiaries as is reasonably required by Parent for Parent to produce the financial statements and information identified in paragraph 6 of Exhibit C of the Debt Commitment Letter or otherwise required in connection with the Debt Financing, (iii) assisting in the preparation of definitive financing documents, as may be reasonably requested by Parent, (iv) facilitating the pledging of collateral for the Debt Financing, (v) obtaining customary payoff letters, lien terminations and instruments of discharge in respect of the payoff, discharge and termination on the Closing Date of all obligations under the Company Credit Agreement, including releases of liens relating thereto, in each case as reasonably requested by Parent, (vi) using commercially reasonable efforts to ensure that the syndication efforts for the Debt Financing benefit from the Company’s existing lending and banking relationships, (vii) using commercially reasonable efforts in assisting Parent in its efforts to obtain corporate credit or family ratings of Parent to the extent reasonably requested by Parent, (viii) as promptly as practicable after reasonable request therefor, furnishing the Financing Sources with reasonable documents or other information reasonably requested by the Financing Sources relating to the Company and its Subsidiaries required by bank regulatory authorities with respect to the Financing under applicable “know your customer” and anti-money laundering rules and regulations, including the U.S.A. Patriot Act of 2011 and (ix) cooperating with Parent to satisfy the conditions precedent to the Debt Financing to the extent reasonably requested by Parent and within the control of the Company and its Subsidiaries, and taking all corporate actions, subject to the occurrence of the Closing, reasonably requested by Parent to permit the consummation of the Debt Financing and taking all corporate actions, subject to the occurrence of the Closing, reasonably requested by Parent to permit the consummation of the Debt Financing. Without limiting the generality of the foregoing, the Company shall ensure that all financial and other projections concerning the Company and its Subsidiaries that are made available to Parent after the date of this Agreement are prepared in good faith. The Company
73 |
consents to the use of its logos in connection with the Debt Financing; provided that such logos shall be used solely in a manner that is not intended or reasonably likely to harm, disparage or otherwise adversely affect the Company or any of its Subsidiaries.
(b) Notwithstanding anything in this Agreement to the contrary, (x) neither the Company nor any of its Subsidiaries shall be required to take or permit the taking of any action to the extent it would (1) interfere unreasonably with the business or operations of the Company or any of its Subsidiaries (2) require the Company or any of its Subsidiaries or any of their respective Affiliates to pay (or agree to pay) any fees, or reimburse any expenses prior to the Closing for which it is not promptly reimbursed, or otherwise incur any other obligations or give any indemnities prior to the Closing that are not contingent on the Closing, (3) cause any representation or warranty or covenant in this Agreement to be breached by the Company or any of its Subsidiaries, (4) cause any director, officer or employee of the Company or any of its Subsidiaries to incur any personal liability, (5) conflict with the organizational documents of the Company or any of its Subsidiaries or any Laws, (6) result in the contravention or breach of, or default under, any Material Contract, (7) provide access to or disclose information that the Company or any of its Subsidiaries determines would jeopardize any attorney-client privilege of the Company or any of its Subsidiaries, or (8) prepare separate financial statements for any Subsidiary of the Company or change any fiscal period; or (y) none of the Company, any of its Subsidiaries or any of their respective directors or officers shall be obligated to adopt resolutions or execute consents to approve or authorize the execution of the Debt Financing; provided that this clause (y) shall not prohibit the adoption or execution of any resolutions or consents effective no earlier than the Closing Date by any persons that shall remain or will become officers or directors of the Company or any of its Subsidiaries as of the Effective Time; and (z) any documentation executed by the Company of any of its Subsidiaries shall not become effective until the Effective Time. Parent shall (1) promptly upon request by the Company, reimburse the Company for all reasonable out-of-pocket costs and expenses (including attorney’s fees) incurred by the Company or any of its Subsidiaries and their respective Representatives, as applicable, in connection with the Debt Financing and providing the assistance contemplated by this Section 7.13 and (2) indemnify and hold harmless the Company and its Subsidiaries and its and their respective Representatives (collectively, the “Financing Indemnitees”) from and against any and all liabilities, losses, damages, claims, costs, expenses (including attorney’s fees), awards, judgments and penalties suffered or incurred by any of them in connection with the Debt Financing and any information used in connection therewith or providing the assistance contemplated by this Section 7.13, in each case other than to the extent any of the foregoing arises from the fraud, intentional misrepresentation or willful misconduct of such Financing Indemnitee, as finally determined by a court of competent jurisdiction (the obligations of Parent in this clause (2), the “Financing Cooperation Indemnity”). The Financing Cooperation Indemnity shall survive the consummation of the Merger and any termination of this Agreement.
(c) All non-public or otherwise confidential information regarding the Company or any of its Affiliates and Subsidiaries obtained by Parent or its Affiliates or Representatives pursuant to this Section 7.13 shall be kept confidential in accordance with the Confidentiality Agreement.
Section 7.14 Transaction Litigation. Subject to applicable Law, other than with respect to any litigation where Parent is adverse to the Company, the Company will give Parent
74 |
the reasonable opportunity, at Parent’s sole cost and expense, to participate, subject to a customary joint defense agreement, in (but not control) the defense of any action, claim, suit or proceeding against the Company or its directors or officers relating to the Offer. the Merger or the other transactions contemplated hereby, and no such settlement will be agreed to or offered without the prior written consent of Parent (such consent not to be unreasonably withheld, conditioned or delayed); provided, that Parent shall not be obligated to consent to any settlement (i) which does not include full release of Parent and its Affiliates or which imposes an injunction or other equitable relief upon Parent or any of its Affiliates (including, after the Effective Time, the Surviving Corporation), or (ii) that would result in the payment by Parent, the Company or any Subsidiary thereof of any amount in excess of the retention or deductible under any applicable insurance policy of the Company. Subject to applicable Law, other than with respect to any litigation where the Company is adverse to Parent, Parent will give the Company the reasonable opportunity, at the Company’s sole cost and expense, to participate, subject to a customary joint defense agreement, in (but not control) the defense or settlement of any action, claim, suit or proceeding against Parent or its directors or officers relating to the Offer, the Merger or the other transactions contemplated hereby. Prior to the consummation of the Merger, without the prior written consent of the Company, Parent shall not settle any action, claim, suit or proceeding related to the Offer, the Merger or the other transactions contemplated hereby unless such settlement provides a full and unconditional release for the Company and each officer and director of the Company party to such litigation. Each of the Company and Parent shall, and shall cause their respective Subsidiaries to, cooperate in the defense or settlement of any litigation contemplated by this Section 7.14. The parties acknowledge that this Section 7.14 in no way limits the parties’ obligations under Section 7.7.
Section 7.15 Approval of the Merger. The Merger shall be governed by Section 251(h) of the DGCL and shall be effected by Parent, Sub and the Company as soon as practicable following the Acceptance Time without a stockholders meeting pursuant to Section 251(h) of the DGCL.
Section 7.16 Skyworks Termination Fee. Simultaneously with the execution and delivery of this Agreement by the Company, Parent shall pay to the Company and the Company shall pay to Skyworks, in accordance with the requirements of the Skyworks Merger Agreement, the Skyworks Termination Fee.
Article VIII
CONDITIONS
Section 8.1 Conditions to Each Party’s Obligation to Effect the Merger. The obligations of the Company, on the one hand, and Parent and Sub, on the other hand, to consummate the Merger are subject to the satisfaction (or waiver by the Company, Parent and Sub, if permissible under applicable Law) of the following conditions:
(a) no Governmental Entity having jurisdiction over the Company, Parent or Sub shall have issued an order, decree or ruling or taken any other material action enjoining or otherwise prohibiting consummation of the Merger substantially on the terms contemplated by this Agreement; provided, that any order, decree or ruling with respect to
75 |
foreign Antitrust Laws other than those set forth on Section 8.1(a) of the Company Disclosure Schedule shall be disregarded for purposes of this Section 8.1(a); and
(b) Sub shall have accepted for payment all shares of Company Common Stock validly tendered and not withdrawn pursuant to the Offer.
Article IX
TERMINATION
Section 9.1 Termination. Anything herein or elsewhere to the contrary notwithstanding, this Agreement may be terminated and the Offer and the Merger contemplated herein may be abandoned at any time prior to the Acceptance Time:
(a) by the mutual written consent of the Company and Parent;
(b) by either the Company or Parent:
(i) if the Acceptance Time shall not have occurred at or prior to 11:59 p.m. (New York City Time) on March 31, 2016 (the “Termination Date”); provided, however, that the right to terminate this Agreement under this Section 9.1(b)(i) shall not be available to any party whose action or failure to fulfill any obligation under this Agreement proximately caused (A) any of the conditions to the Offer set forth in Annex A having failed to be satisfied or such action or failure to act constitutes a material breach of this Agreement or (B) the expiration or termination of the Offer in accordance with the terms of this Agreement and the Offer without Sub having accepted for payment any shares of Company Common Stock tendered in the Offer and such action or failure constitutes a material breach of this Agreement;
(ii) if any Governmental Entity having jurisdiction over the Company, Parent or Sub shall have issued an order, decree or ruling or taken any other action, in each case, such that the conditions set forth in Section 8.1(a) or clause (v)(a) of Annex A would not be satisfied, and such order, decree, ruling or other action shall have become final and non-appealable, unless (x) the party seeking to terminate this Agreement pursuant to this Section 9.1(b)(ii) has materially breached its obligations under Section 7.7(a), or (y) Parent or Sub is seeking to terminate this Agreement pursuant to this Section 9.1(b)(ii) and the Governmental Entity action is a result of Parent or Sub being in material breach of any representation or warranty under this Agreement; or
(c) by the Company:
(i) upon a breach of any covenant or agreement on the part of Parent or Sub, or if any of the representations and warranties of Parent and the Sub shall be untrue, in any case such that any of the representations of Parent and the Sub (assuming that the date of such determination is the Closing Date) (x) set forth in Section 6.3 shall not be true and correct except for inaccuracies that have not had and would not reasonably be expected to, individually or in the aggregate, result in more than a de minimis impact on the aggregate consideration payable by Parent and Sub pursuant
76 |
to this Agreement, as of immediately prior to the expiration of the Offer as though made on or as of such date (other than those representations and warranties that address matters only as of a particular date or only with respect to a specified period of time, which need only be true and correct as of such date or with respect to such period), (y) set forth in Section 6.1(a), Section 6.2 and Section 6.8 shall not be true and correct in all material respects as of the date of this Agreement and as of the Closing Date as if made on and as of the Closing Date (unless any such representation or warranty addresses matters only as of a particular date or with respect to a specific period in which event such representation or warranty shall be so true and correct in all material respects only as of such particular date or with respect to such specific period), or (z) set forth in this Agreement, other than those Sections specifically identified in clauses (x) or (y) of this Section 9.1(c)(i), shall not be true and correct as of the date of this Agreement and as of the Closing Date (unless any such representation or warranty addresses matters only as of a particular date or with respect to a specific period in which event such representation or warranty shall be true and correct only as of such particular date or with respect to such specific period), except, in the case of this clause (z), where the failure to be so true and correct (without giving effect to any limitation as to “materiality”, “Parent Material Adverse Effect” or similar qualifications as set forth therein) would not, either individually or in the aggregate, have a Parent Material Adverse Effect, or (assuming that the date of such determination is the Closing Date) if Parent or Sub shall not have performed in all material respects all of the respective obligations hereunder required to be performed by Parent or Sub, as the case may be, at or prior to the Closing; provided, that if such breach is reasonably capable of being cured by Parent and Sub through the exercise of their reasonable best efforts within the earlier of (A) the forty-five (45) day period following notification by the Company to Parent of such breach or inaccuracy or (B) the then-scheduled expiration date of the Offer (provided, for purposes of this clause (B), Parent may extend the expiration date of the Offer up to the forty-fifth day after the notice contemplated by clause (A) in order to extend the cure period to forty-five days, provided that Parent may not extend the expiration date of the Offer beyond the Termination Date), and in each case Parent and Sub continue to exercise such reasonable best efforts, the Company may not terminate this Agreement under this Section 9.1(c)(i) prior to the expiration of such period; provided further that the right to terminate this Agreement under this Section 9.1(c)(i) shall not be available to the Company if it has failed to perform in any material respect any of its obligations under or in connection with this Agreement or is in breach of any representation or warranty such that the conditions set forth in clauses (v)(c) or (v)(d) of Annex A would not be satisfied;
(ii) prior to the Acceptance Time, if all of the following occur: (A) the Company shall have received a Superior Proposal; (B) the Company shall have complied in all material respects with its obligations under Section 7.3(b) in order to accept a Superior Proposal in compliance with Section 7.3; (C) the board of directors of the Company approves, and the Company substantially concurrently with the termination of this Agreement, enters into, a definitive agreement with respect to such Superior Proposal; and (D) prior to or substantially concurrently with such termination, the Company pays to the Parent the amounts contemplated by Section 9.2(b); or
77 |
(d) by Parent:
(i) upon a breach of any covenant or agreement on the part of the Company, or if any representation or warranty of the Company shall be untrue, in any case such that the events set forth in clauses (v)(c) or (v)(d) of Annex A shall have occurred; provided, that if such breach is reasonably capable of being cured by the Company through the exercise of its reasonable best efforts during the forty-five (45) day period following notification by Parent to the Company of such breach or inaccuracy and the Company continues to exercise such reasonable best efforts, Parent may not terminate this Agreement under this Section 9.1(d)(i) prior to the expiration of such period; provided further that the right to terminate this Agreement under this Section 9.1(d)(i) shall not be available to Parent if it has failed to perform in any material respect any of its obligations under or in connection with this Agreement or if any of the representations and warranties of Parent and the Sub (assuming that the date of such determination is the Closing Date) (x) set forth in Section 6.3 shall not be true and correct except for inaccuracies that have not had and would not reasonably be expected to, individually or in the aggregate, result in more than a de minimis impact on the aggregate consideration payable by Parent and Sub pursuant to this Agreement, as of immediately prior to the expiration of the Offer as though made on or as of such date (other than those representations and warranties that address matters only as of a particular date or only with respect to a specified period of time, which need only be true and correct as of such date or with respect to such period), (y) set forth in Section 6.1(a), Section 6.2 and Section 6.8 shall not be true and correct in all material respects as of the date of this Agreement and as of the Closing Date as if made on and as of the Closing Date (unless any such representation or warranty addresses matters only as of a particular date or with respect to a specific period in which event such representation or warranty shall be so true and correct in all material respects only as of such particular date or with respect to such specific period), or (z) set forth in this Agreement, other than those Sections specifically identified in clauses (x) or (y)of this Section 9.1(d)(i), shall not be true and correct as of the date of this Agreement and as of the Closing Date (unless any such representation or warranty addresses matters only as of a particular date or with respect to a specific period in which event such representation or warranty shall be true and correct only as of such particular date or with respect to such specific period), except, in the case of this clause (z), where the failure to be so true and correct (without giving effect to any limitation as to “materiality”, “Parent Material Adverse Effect” or similar qualifications as set forth therein) would not, either individually or in the aggregate, have a Parent Material Adverse Effect; or
(ii) prior to the Acceptance Time, if either of the following occur: (A) if a Change of Recommendation shall have occurred or been otherwise publicly disclosed, or (B) the Company shall have committed a Knowing and Intentional Breach of its obligations under Section 7.3.
Section 9.2 Effect of Termination.
(a) In the event of the termination of this Agreement in accordance with Section 9.1, written notice thereof shall forthwith be given to the other party or parties
78 |
specifying the provision hereof pursuant to which such termination is made (other than in the case of termination pursuant to Section 9.1(a)), and this Agreement shall forthwith become null and void, and there shall be no damages or liability on the part of Parent, Sub or the Company or their respective directors, officers, employees, stockholders, Representatives, agents or advisors other than, with respect to Parent, Sub and the Company, the obligations pursuant to the Confidentiality Agreement, this Section 9.2, and Article X. Nothing contained in this Section 9.2 shall relieve Parent, Sub or the Company from liability for fraud or a Knowing and Intentional Breach of this Agreement.
(b) If, but only if,
(i) this Agreement is terminated by the Company pursuant to Section 9.1(c)(ii) or by Parent pursuant to Section 9.1(d)(ii), or
(ii) (A) this Agreement is terminated by either Parent or the Company pursuant to Section 9.1(b)(i) as a result of the failure to satisfy the Minimum Condition prior to such termination, (B) there has been received after the date of this Agreement and not withdrawn or publicly disclosed prior to the termination of this Agreement an Acquisition Proposal and (C) within twelve (12) months after such termination, either (1) the Company enters into a definitive agreement with respect to a Qualifying Transaction, which is subsequently consummated, or (2) a Qualifying Transaction is consummated,
then the Company shall (x) pay to Parent a termination fee of eighty-eight million five hundred thousand dollars ($88,500,000) and (y) reimburse Parent for its payment to the Company of the Skyworks Termination Fee (the “Parent Reimbursement Fee”), in each case, in cash,
(iii) concurrently with any termination pursuant to Section 9.1(c)(ii);
(iv) within three (3) Business Days following any termination pursuant to Section 9.1(d)(ii); and
(v) within three (3) Business Days after the consummation of a Qualifying Transaction following a termination of this Agreement under the circumstances set forth in Section 9.2(b)(ii);
it being understood that in no event shall the Company be required to pay the fee referred to in this Section 9.2(b) on more than one occasion. Upon payment of such fee, the Company shall have no further liability to Parent or Sub with respect to this Agreement or the transactions contemplated hereby, provided, that nothing herein shall release any party from liability for fraud or a Knowing and Intentional Breach of this Agreement.
(c) If this Agreement is terminated by Parent pursuant to Section 9.1(d)(i) and it shall be judicially determined that this termination has been caused by a Knowing and Intentional Breach by the Company, the Company shall (i) pay Parent an amount in cash equal to the Parent Reimbursement Fee and (ii) reimburse Parent and Sub and their respective affiliates for all out-of-pocket expenses and fees (including fees and expenses payable
79 |
to all banks, investment banking firms, other financial institutions and other persons and their respective agents and counsel, for arranging, committing to provide or providing any financing for the transactions contemplated by this Agreement or structuring the transactions contemplated by this Agreement and all fees and expenses of counsel, accountants, experts and consultants to Parent or Sub, and all printing and advertising expenses) actually incurred or accrued by Parent or Sub or on their behalf in connection with the transactions contemplated by this Agreement, including the financing thereof, and actually incurred or accrued by banks, investment banking firms, other financial institutions and other persons and assumed by Parent or Sub in connection with the negotiation, preparation, execution and performance of this Agreement, the structuring and financing of the transactions contemplated by this Agreement and any financing commitments or agreements relating thereto in an amount not to exceed Fifteen Million Dollars ($15,000,000) (all the foregoing being referred to herein collectively as the “Expenses”). The Expenses shall be paid promptly following submission of statements therefor to an account designated by Parent. Such payment shall be in addition to, and not in lieu of, all rights and remedies Parent and Sub may have in such circumstances under this Agreement.
(d) All payments contemplated by this Section 9.2 shall be made by wire transfer of immediately available funds to an account designated by Parent and shall be reduced by any amounts required to be deducted or withheld therefrom under applicable Law in respect of Taxes. If the Company fails to timely pay any amount due pursuant to this Section 9.2, or any portion thereof, (i) such amount or portion shall accrue interest from the date such payment was required to be made through the date of payment at the Prime Rate in effect on the date such payment was required to be made plus five percent (5%) and (ii) the Company shall pay to Parent or Sub its out-of-pocket costs and expenses (including attorneys’ fees) in connection with any suit that results in a judgment against the Company in respect of the amount set forth in Section 9.2 or any portion thereof.
Article X
MISCELLANEOUS
Section 10.1 Amendment and Modification. Subject to applicable Law, this Agreement may be amended, modified and supplemented in any and all respects by written agreement signed by each of the parties hereto as approved by action taken by each of their respective boards of directors, at any time prior to the Closing Date with respect to any of the terms contained herein; provided, that Section 10.6, Section 10.8, Section 10.9, Section 10.11, Section 10.16 and this Section 10.1 (to the extent an amendment, supplement, waiver or other modification of such provision would modify the substance of such Sections) may not be amended, supplemented, waived or otherwise modified in any manner that is adverse in any respect to the Financing Sources without the prior written consent of the adversely affected Financing Sources; provided further, that, after the approval of this Agreement by the stockholders of the Company.
Section 10.2 Non-Survival of Representations and Warranties. None of the representations and warranties in this Agreement or in any schedule, instrument or other document delivered pursuant to this Agreement shall survive the Effective Time or the termination of this Agreement. This Section 10.2 shall not limit any covenant or agreement
80 |
contained in this Agreement that by its terms is to be performed in whole or in part after the Effective Time or the termination of this Agreement.
Section 10.3 Notices. All notices, consents and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by hand delivery, by prepaid overnight courier (providing written proof of delivery), by confirmed e-mail transmission or by certified or registered mail (return receipt requested and first class postage prepaid), addressed as follows:
(a) | if to Parent or Sub, to: |
Microsemi Corporation
One Enterprise
Aliso Viejo, CA 92656
Email: to be provided the Company supplementally by Parent
Attention: Chief Executive Officer
with a copy to:
O’Melveny & Myers LLP
2765 Sand Hill Road
Menlo Park, CA 94025
Email: | wlazarow@omm.com |
stonsfeldt@omm.com | |
pscrivano@omm.com |
Attention: | Warren Lazarow |
Steven Tonsfeldt | |
Paul Scrivano |
(b) | if to the Company, to: |
PMC-Sierra, Inc.
1380 Bordeaux Drive
Sunnyvale, CA 94089
Email: Alinka.Flaminia@pmcs.com
Attention: Alinka Flaminia
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
525 University Avenue
California 94301
Email: | kenton.king@skadden.com |
amr.razzak@skadden.com |
Attention: | Kenton King |
Amr Razzak |
81 |
or to such other address (i.e., e-mail address) for a party as shall be specified in a notice given in accordance with this Section 10.3; provided, that any notice received by email transmission or otherwise at the addressee’s location on any Business Day after 5:00 P.M. (addressee’s local time) shall be deemed to have been received at 9:00 A.M. (addressee’s local time) on the next Business Day; provided further that notice of any change to the address or any of the other details specified in or pursuant to this Section 10.3 shall not be deemed to have been received until, and shall be deemed to have been received upon, the later of the date specified in such notice or the date that is five (5) Business Days after such notice would otherwise be deemed to have been received pursuant to this Section 10.3.
Section 10.4 Interpretation. The parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement. Information disclosed in one section or subsection of the Company Disclosure Schedule shall be deemed to be included in each other section or subsection of such Company Disclosure Schedule to which the relevance of such information would be reasonably apparent on the face thereof without further inquiry. The inclusion of any item in the Company Disclosure Schedule shall not be deemed to be an admission or evidence of materiality of such item, nor shall it establish any standard of materiality for any purpose whatsoever. References to “$”, “dollar”, or “dollars” are to the lawful currency of the United States. References to “ordinary course of business,” when used with respect to a party’s business, means the ordinary course of such party’s business, consistent with past practice, including with respect to frequency and amount.
Section 10.5 Counterparts. This Agreement may be executed in multiple counterparts, each of which when executed and delivered shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.
Section 10.6 Entire Agreement; Third-Party Beneficiaries. This Agreement (including the Company Disclosure Schedule and the exhibits and instruments referred to herein) and the Confidentiality Agreement (a) constitute the entire agreement and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof, (b) are not intended to confer upon any Person or any of their respective successors and permitted assigns, other than the parties hereto, any rights, benefits, remedies, obligations or liabilities hereunder or to otherwise create any third-party beneficiary hereto, except for (i) prior to the Effective Time or earlier termination of this Agreement, the rights of Company stockholders to pursue claims for damages based on loss of the economic benefits of the transaction to the stockholders of the Company in the event of Parent’s or Sub’s fraud or Knowing and Intentional Breach of this Agreement, which right is hereby acknowledged and agreed by Parent and Sub, and (ii) from and after the Effective Time, as provided in this Section 10.6 and in Section 7.6 (which is intended for the benefit of the Indemnified Parties and the D&O Indemnitees) and in Section 7.13 (which is intended for the benefit of the Financing Indemnitees); provided, that each of the Financing Sources shall be express third party beneficiaries of the first proviso in Section 10.1(Amendment and Modification), Section 10.8(b) (Governing Law), Section 10.9(b) (Jurisdiction), Section 10.11(b) (Specific Performance; Remedies), Section 10.16 (Waiver of Jury Trial) and this proviso in this Section 10.6, each of
82 |
such Sections shall expressly inure to the benefit of the Financing Sources and each of the Financing Sources shall be entitled to rely on and enforce the provisions of such Sections. The rights granted pursuant to the foregoing clause (i) of this Section 10.6 shall be enforceable on behalf of the stockholders of the Company only by the Company in its sole and absolute discretion, as agent for the stockholders of the Company, it being understood and agreed that any and all interests in any claims arising therefrom shall attach to such shares of Company Common Stock and subsequently transfer therewith and, consequently, any damages, settlements or other amounts recovered or received by the Company with respect to such claims (net of expenses incurred by the Company in connection therewith) may, in the Company’s sole and absolute discretion, be (A) distributed, in whole or in part, by the Company to the holders of shares of Company Common Stock of record as of any date determined by the Company or (B) retained by the Company for the use and benefit of the Company on behalf of its stockholders in any manner the Company deems fit.
Section 10.7 Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void, unenforceable or against its regulatory policy, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated.
Section 10.8 Governing Law.
(a) This Agreement and all litigation, claims, actions, suits, hearings or proceedings (whether civil, criminal or administrative and whether based on contract, tort or otherwise), directly or indirectly, arising out of or relating to this Agreement, any of the transactions contemplated by this Agreement or the actions of Parent, Sub or the Company in the negotiation, administration, performance and enforcement hereof or thereof, shall be governed by and construed in accordance with the Laws of the State of Delaware, without giving effect to any choice or conflict of Laws provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the Laws of any jurisdiction other than the State of Delaware.
(b) Notwithstanding anything to the contrary contained herein, any and all claims or causes of action (whether civil, criminal or administrative and whether based on contract, tort or otherwise), directly or indirectly, arising out of or relating to the Debt Financing (including any claim, controversy or dispute against or involving any Financing Source, including their respective successors and permitted assigns) shall be governed by and construed in accordance with the laws of the State of New York (except as otherwise provided in the Debt Commitment Letter), without giving effect to any choice of law or conflicts of laws rules or provisions (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York; provided, that, notwithstanding the foregoing, it is understood and agreed that any proceeding with respect to the Debt Financing, any Financing Source or the Debt Commitment Letter involving (a) the interpretation of the definition of “Company Material Adverse Effect” (and whether or not a Company Material Adverse Effect has occurred), (b) the determination of the accuracy of any Specified Merger Agreement Representation (as defined in the Debt Commitment Letter) and whether as a result of any inaccuracy thereof Parent and/or Sub have the right to terminate its
83 |
obligations under this Agreement or decline to consummate the Offer and the Merger and (c) the determination of whether the Merger has been consummated in accordance with the terms of this Agreement, in each case shall be governed by, and construed in accordance with, the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof.
Section 10.9 Jurisdiction.
(a) Each of the parties hereto hereby (i) expressly and irrevocably submits to the exclusive personal jurisdiction of the Delaware Court of Chancery and any state appellate court therefrom within the State of Delaware (or, if the Delaware Court of Chancery and any state appellate court therefrom declines to accept jurisdiction over a particular matter, any United States federal court located in the State of Delaware or any Delaware state court) in the event any dispute arises out of this Agreement or any of the transactions contemplated by this Agreement, (ii) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, and (iii) agrees that it will not bring any action relating to this Agreement or any of the transactions contemplated by this Agreement in any court other than the Delaware Court of Chancery and any state appellate court therefrom within the State of Delaware (or, if the Delaware Court of Chancery and any state appellate court therefrom declines to accept jurisdiction over a particular matter, any United States federal court located in the State of Delaware or any Delaware state court); provided, that each of the parties shall have the right to bring any action or proceeding for enforcement of a judgment entered by any United States federal court located in the State of Delaware or any Delaware state court in any other court or jurisdiction.
(b) Notwithstanding the foregoing, none of the parties hereto will bring, or support, any action, cause of action, claim, cross-claim, counterclaim or third-party claim of any kind or description, whether at law or in equity, whether in contract or in tort or otherwise, against any Financing Source in any way relating to this Agreement or any of the transactions contemplated by this Agreement, including but not limited to any dispute arising out of or relating in any way to the Debt Financing or the performance thereof or the transactions contemplated thereby, anywhere other than in (i) any New York State court sitting in the Borough of Manhattan or (ii) the United States District Court for the Southern District of New York.
Section 10.10 Service of Process. Each party irrevocably consents to the service of process outside the territorial jurisdiction of the courts referred to in Section 10.9 in any such action or proceeding in connection with this Agreement or the transactions contemplated hereby by mailing copies thereof by registered United States mail, postage prepaid, return receipt requested, to its address as specified in or pursuant to Section 10.3. However, the foregoing shall not limit the right of a party to effect service of process on the other party by any other legally available method.
Section 10.11 Specific Performance; Remedies.
(a) The parties hereby acknowledge and agree that the failure of any party to perform its agreements and covenants hereunder, including its failure to take all actions
84 |
as are necessary on its part to consummate the Offer and the Merger, will cause irreparable injury to the non-breaching parties, for which damages, even if available, will not be an adequate remedy. Accordingly, each party hereby consents to the granting of injunctive relief by any court of competent jurisdiction to prevent breaches of this Agreement, to enforce specifically the terms and provisions hereof, and to compel performance of such party’s obligations (including the taking of such actions as are required of such party to consummate the Offer and the Merger), this being in addition to any other remedy to which any party is entitled under this Agreement. The parties further agree to waive any requirement for the securing or posting of any bond in connection with any such remedy, and that such remedy shall be in addition to any other remedy to which a party is entitled at law or in equity.
(b) Notwithstanding anything to the contrary contained herein, no Company Related Party (other than Parent and Sub) shall have any rights or claims against any Financing Source in connection with this Agreement, the Debt Financing or the transactions contemplated hereby or thereby, and no Financing Source shall have any rights or claims against any Company Related Party (other than Parent or Sub) in connection with this Agreement, the Debt Financing or the transactions contemplated hereby or thereby, whether at law or equity, in contract, in tort or otherwise; provided that, following the Closing and the consummation of the Debt Financing, the foregoing will not limit any rights the Financing Sources have against the Company and its Subsidiaries under the Debt Commitment Letter.
Section 10.12 Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties, except that the Parent and/or Sub may assign this Agreement to any direct or indirect wholly owned Subsidiary of Parent without the consent of the Company; provided that Parent and/or Sub, as the case may be, shall remain liable for all of its obligations under this Agreement. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective permitted successors and assigns. Any assignment in violation of this Section 10.12 shall be null and void.
Section 10.13 Expenses. All costs and expenses incurred in connection with the Offer, the Merger, this Agreement and the consummation of the transactions contemplated hereby shall be paid by the party incurring such costs and expenses, whether or not the Offer, the Merger or any of the other transactions contemplated hereby is consummated.
Section 10.14 Headings. Headings of the articles and sections of this Agreement and the table of contents, schedules and exhibits are for convenience of the parties only and shall be given no substantive or interpretative effect whatsoever.
Section 10.15 Waivers. Except as otherwise provided in this Agreement, any failure of any of the parties to comply with any obligation, covenant, agreement or condition herein may be waived by the party or parties entitled to the benefits thereof only by a written instrument signed by the party granting such waiver, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure.
85 |
Section 10.16 WAIVER OF JURY TRIAL. EACH OF PARENT, SUB AND THE COMPANY HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE, INCLUDING IN ANY ACTION, PROCEEDING OR COUNTERCLAIM AGAINST ANY FINANCING SOURCE) ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY (INCLUDING, WITHOUT LIMITATION, THE DEBT FINANCING AND ANY RELATED COMMITMENT LETTER OR FEE LETTER RELATED THERETO) OR THE ACTIONS OF PARENT, SUB OR THE COMPANY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT THEREOF. EACH OF THE PARTIES HERETO CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS Section 10.16.
[Remainder of page intentionally left blank.]
86 |
IN WITNESS WHEREOF, the Company, Parent and Sub have caused this Agreement to be signed by their respective officers thereunto duly authorized as of the date first written above.
PMC-SIERRA, INC. | ||
By: | /s/Gregory S. Lang | |
Name: Gregory S. Lang | ||
Title: President and Chief Executive Officer | ||
MICROSEMI CORPORATION | ||
By | /s/ James J. Peterson | |
Name: James J. Peterson | ||
Title: Chairman of the Board | ||
and Chief Executive Officer | ||
LOIS ACQUISITION CORP. | ||
By: | /s/ Steven G. Litchfield | |
Name: Steven G. Litchfield | ||
Title: President and Chief Executive Officer |
87 |
INDEX OF DEFINED TERMS
Term | Section | |
Action | 1.1 | |
Acquisition Proposal | 1.1 | |
Acceptance Time | 2.1(f) | |
Additional Offer Period | 2.1(d) | |
Affiliate | 1.1 | |
Agreement | Preamble | |
Alternative Debt Financing | 7.12(d) | |
Antitrust Laws | 7.7(a) | |
Benefit Plans | 1.1 | |
Board Recommendation | 5.22 | |
Book Entry Shares | 1.1 | |
Business Day | 1.1 | |
Cash Consideration | Recitals | |
Certificate of Merger | 3.2 | |
Certificates | 4.1(c) | |
Change of Recommendation | 7.3(d) | |
Cleanup | 1.1 | |
Closing | 3.3 | |
Closing Date | 3.3 | |
Code | 1.1 | |
Company | Preamble | |
Company 401(k) Plan | 7.4(e) | |
Company Arrangements | 5.9(h) | |
Company Balance Sheet | 5.6 | |
Company Balance Sheet Date | 1.1 | |
Company Common Stock | 1.1 | |
Company Credit Agreement | 1.1 | |
Company Compensation Committee | 5.9(h) | |
Company Disclosure Schedule | 1.1 | |
Company Equity Plans | 1.1 | |
Company Financial Advisors | 5.23 | |
Company Financial Statements | 5.5(b) | |
Company License-In Agreements | 5.12(b) | |
Company License-Out Agreements | 5.12(c) | |
Company Material Adverse Effect | 1.1 | |
Company Performance Restricted Stock Unit | 1.1 |
88 |
Term | Section | |
Company Preferred Stock | 1.1 | |
Company Products | 1.1 | |
Company Real Property | 5.14(a) | |
Company Related Party | 1.1 | |
Company Restricted Stock Unit | 1.1 | |
Company SEC Reports | 5.5(a) | |
Company Special Shares | 4.6 | |
Company Stock Option | 1.1 | |
Confidentiality Agreement | 1.1 | |
Consideration Fund | 4.2(a) | |
Contract | 1.1 | |
Converted PRSU | 4.4(d) | |
Converted RSUs | 4.4(b) | |
Covered Securityholders | 5.9(h) | |
D&O Indemnitee | 7.6(a) | |
D&O Insurance | 7.6(b) | |
Debt Commitment Letter | 6.13 | |
Debt Financing | 6.13 | |
Debt Financing Agreements | 7.12(b) | |
DGCL | 1.1 | |
Disclosure Document | 1.1 | |
Dissenting Shares | 4.3 | |
Effective Time | 3.2 | |
Employees | 7.4(a) | |
Environmental Claim | 1.1 | |
Environmental Laws | 1.1 | |
Equity Conversion Ratio | 1.1 | |
ERISA | 1.1 | |
ERISA Affiliate | 1.1 | |
ESPP | 1.1 | |
Exchange Act | 1.1 | |
Exchange Agreement | 4.6 | |
Exchange Ratio | Recitals | |
Expenses | 9.2(c) | |
Expiration Date | 2.1(c) | |
FCPA | 1.1 | |
Financing Cooperation Indemnity | 7.13(b) | |
Financing Indemnitees | 7.13(b) |
89 |
Term | Section | |
Financing Sources | 1.1 | |
Foreign Antitrust Approvals | 7.7(a) | |
Foreign Benefit Plan | 1.1 | |
GAAP | 5.5(b) | |
Governmental Entity | 5.4 | |
Hazardous Materials | 1.1 | |
HSR Act | 1.1 | |
Indemnified Parties | 7.6(a) | |
Intellectual Property | 1.1 | |
Intervening Event | 1.1 | |
IRS | 1.1 | |
Knowing and Intentional Breach | 1.1 | |
Knowledge | 1.1 | |
Law | 1.1 | |
Lien | 1.1 | |
Mandated Benefit Plan | 1.1 | |
Material Contract | 5.8(a) | |
Maximum Amount | 7.6(b) | |
Merger | Recitals | |
Merger Consideration | 4.1(c) | |
Minimum Condition | 2.1(b) | |
Nasdaq | 1.1 | |
Nasdaq Rules | 1.1 | |
New Debt Commitment Letter | 7.12(d) | |
New Exercise Date | 7.8 | |
OFAC | 1.1 | |
Offer | Recitals | |
Offer Documents | 2.1(g) | |
Offering Period | 7.8 | |
Open Source Material | 1.1 | |
Option Consideration | 1.1 | |
Owned Intellectual Property | 5.12(a) | |
Parent | Preamble | |
Parent Common Stock | 1.1 | |
Parent Material Adverse Effect | 1.1 | |
Parent Measurement Price | 1.1 | |
Parent Plans | 7.4(c) | |
Parent Reimbursement Fee | 9.2(b) |
90 |
Term | Section | |
Parent SEC Reports | 1.1 | |
Parent Stock Exchange | 1.1 | |
Partnership | 1.1 | |
Paying and Exchange Agent | 4.2(a) | |
Permits | 5.17 | |
Permitted Liens | 1.1 | |
Person | 1.1 | |
Per Share Amount | Recitals | |
Preliminary Prospectus | 2.1(g) | |
Prime Rate | 1.1 | |
Share Consideration | Recitals | |
Share Consideration Value | 1.1 | |
Qualifying Transaction | 1.1 | |
Real Property Lease | 5.14(a) | |
Registration Statement | 2.1(g) | |
Representatives | 7.2 | |
Sarbanes-Oxley Act | 5.5(d) | |
SEC | 1.1 | |
Section 262 | 4.3 | |
Securities Act | 1.1 | |
Service Provider | 1.1 | |
Schedule 14D-9 | 2.2(b) | |
Significant Customer | 5.19(a) | |
Significant Supplier | 5.19(b) | |
Skyworks Merger Agreement | Recitals | |
Skyworks Termination Fee | Recitals | |
Specified Contracts | 5.8(d) | |
Sub | Preamble | |
Subsidiary | 1.1 | |
Superior Proposal | 1.1 | |
Surviving Corporation | 3.1 | |
Tax Incentive | 5.13(k) | |
Tax Return | 1.1 | |
Taxes | 1.1 | |
Tender Offer Conditions | 2.1(b) | |
Termination Date | 9.1(b)(i) | |
Total Cash Consideration | 1.1 | |
Total Cash Exercise Price. | 1.1 |
91 |
Term | Section | |
Total Share Consideration | 1.1 | |
Total Share Exercise Price. | 1.1 | |
Underwater Option | 1.1 | |
United States and U.S. | 1.1 |
92 |
Annex A
Conditions to the Offer
Notwithstanding any other provision of the Offer, but subject to the terms of this Agreement and in addition to (and not in limitation of) Sub’s right to extend or amend the Offer at any time pursuant to the terms of this Agreement, neither Parent nor Sub shall be required to accept for payment or, subject to any applicable rules and regulations of the SEC, pay for any shares of Company Common Stock tendered pursuant to the Offer if at or prior to the expiration of the Offer:
(i) the Minimum Condition shall not have been satisfied;
(ii) any applicable waiting period (and any extensions thereof) applicable to the Offer and the Merger under the HSR Act shall not have expired or otherwise been terminated;
(iii) the Registration Statement shall not have been declared effective by the SEC under the Securities Act, a stop order suspending the effectiveness of the Registration Statement shall have been issued by the SEC or a proceedings for that purpose shall have been initiated or threatened in writing by the SEC;
(iv) the shares of Parent Common Stock issuable in the Offer and the Merger shall have not been authorized for listing on Nasdaq, subject to official notice of issuance.
(v) any of the following shall have occurred and continue to exist as of immediately prior to the expiration of the Offer:
(a) a Governmental Entity having jurisdiction over the Company, Parent or Sub shall have issued an order, decree or ruling or taken any other material action enjoining or otherwise prohibiting consummation of the Offer or the Merger substantially on the terms contemplated by this Agreement; provided, that any order, decree or ruling with respect to foreign Antitrust Laws shall be disregarded for purposes of this clause (v)(a);
(b) since the date of this Agreement, a Company Material Adverse Effect shall have occurred;
(c) any of the representations and warranties of the Company (I) set forth in Section 5.2 shall not be true and correct except for inaccuracies that have not had and would not reasonably be expected to, individually or in the aggregate, result in more than a de minimis increase in the aggregate consideration payable by Parent and Sub pursuant to this Agreement, as of immediately prior to the expiration of the Offer as though made on or as of such date (other than those representations and warranties that address matters only as of a particular date or only with respect to a specified period of time, which need only be true and correct as of such date or with respect to such period), (II) set forth in Section 5.1(a), Section 5.3, Section 5.20, Section 5.21 and Section 5.23shall not be true and correct in all material respects as of the date of
93 |
this Agreement and as of immediately prior to the expiration of the Offer as though made on or as of such date (other than those representations and warranties that address matters only as of a particular date or only with respect to a specified period of time, which need only be true and correct as of such date or with respect to such period), (III) set forth in Section 5.7(i) shall be true and correct as of immediately prior to the expiration of the Offer as though made on or as of such date (excluding, however, clause (b) of the definition of Company Material Adverse Effect for the purposes of this clause (III)), and (IV) set forth in this Agreement, other than those Sections specifically identified in clauses (I), (II) and (III) of this clause (d), shall not be true and correct as of immediately prior to the expiration of the Offer as though made on or as of such date (other than those representations and warranties that address matters only as of a particular date or only with respect to a specified period of time, which need only be true and correct as of such date or with respect to such period), except, in the case of this clause (IV), where the failure to be so true and correct (without giving effect to any limitation as to “materiality”, “Company Material Adverse Effect” or similar qualifications as set forth therein) would not, either individually or in the aggregate, have a Company Material Adverse Effect;
(d) the Company shall have failed to comply with or perform in all material respects its obligations hereunder required to be performed at or prior to the Expiration Date;
(e) the Company shall not have furnished Parent with a certificate signed by an authorized officer of the Company, dated as of the Expiration Date, to the effect that, to the knowledge of such officer, the conditions set forth in clauses (v)(c) and (v)(d) of this Annex A shall not have occurred; or
(f) the Agreement shall have been terminated in accordance with its terms or the Offer shall have been terminated in accordance with the terms of the Agreement.
The foregoing conditions are for the sole benefit of Sub and Parent and subject to the terms of the Agreement and rules and regulations of the SEC, may be asserted by Sub or Parent regardless of the circumstances giving rise to any such condition or may be waived by Sub or Parent in whole or in part at any time and from time to time in their sole discretion, provided, that the Minimum Condition may not be waived, in each case, subject to the terms of the Agreement and the rules and regulations of the SEC. The failure by Parent or Sub at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right; the waiver of any such right with respect to particular facts and other circumstances shall not be deemed a waiver with respect to any other facts and circumstances; and each such right shall be deemed an ongoing right that may be asserted at any time and from time to time.
The capitalized terms used in this Annex A shall have the meanings set forth in the Agreement to which it is attached.
94 |
Exhibit 10.1
Execution Version
MORGAN STANLEY SENIOR FUNDING, INC.
1585 Broadway
New York, NY 10036
CONFIDENTIAL
November 17, 2015
Microsemi Corporation
One Enterprise
Aliso Viejo, CA 92656
Attention: | John Hohener |
Chief Financial Officer
Project Forest
$350,000,000 Senior Secured Revolving Credit Facility
$375,000,000 Senior Secured Term Loan A Facility
$2,200,000,000 Senior Secured Term Loan B
Facility
Second Amended and Restated Commitment Letter
Ladies and Gentlemen:
This second amended and restated commitment letter amends, restates and supersedes that certain amended and restated commitment letter dated as of November 9, 2015 (the “Amended and Restated Commitment Letter”) from Morgan Stanley Senior Funding, Inc. (as defined below) to Microsemi Corporation, a Delaware corporation (“you” or the “Borrower”), and such Amended and Restated Commitment Letter shall be of no further force or effect. You have advised Morgan Stanley Senior Funding, Inc. (“Morgan Stanley”, “we”, “us” and, together with any Additional Arranger appointed, in each case, pursuant to Section 2 below, the “Commitment Parties”) that you intend to acquire (the “Acquisition”), directly or indirectly, the Target (as defined in Exhibit A) and consummate the other transactions described in Exhibit A. Capitalized terms used but not defined herein shall have the meanings assigned to them in the Exhibits attached hereto (such Exhibits, together with this letter, collectively, the “Commitment Letter”).
1. Commitments.
In connection with the Transactions (as defined in Exhibit A), Morgan Stanley is pleased to advise you of its commitment to provide to you 100% of each of (a) the aggregate principal amount of the $350,000,000 Senior Secured Revolving Credit Facility, (b) the aggregate principal amount of the $375,000,000 Senior Secured Term Loan A Facility and (c) the aggregate principal amount of the $2,200,000,000 Senior Secured Term Loan B Facility, in each case, on the terms set forth in the Summary of Principal Terms and Conditions attached as Exhibit B (and, together with Exhibit C, collectively, the
“Term Sheets”), and in each case subject only to the satisfaction or waiver of the conditions set forth in Section 6 hereof.
2. Titles and Roles.
It is agreed that (a) Morgan Stanley will act as a lead arranger and bookrunner for each of the Credit Facilities (as defined in Exhibit A) (in such capacities, the “Lead Arranger”) and (b) Morgan Stanley will act as sole administrative agent and collateral agent (in such capacity, the “Administrative Agent”) for the Credit Facilities (as defined in Exhibit A). It is further agreed that Morgan Stanley shall have “left side” designation and shall appear on the top left of any Information Materials (as defined below) and all other marketing materials in respect of the Credit Facilities and will hold the leading role and responsibilities conventionally associated with such “left” placement, including maintaining sole physical books in respect of the Credit Facilities. You agree that no other agents, co-agents, arrangers or bookrunners will be appointed, no other titles will be awarded and no compensation (other than compensation expressly contemplated by this Commitment Letter and the Fee Letter referred to below) will be paid to any Lender (as defined below) in order to obtain its commitment to participate in the Credit Facilities unless you and we shall so agree. You acknowledge that Morgan Stanley appointed with your consent each of The Bank of Tokyo-Mitsubishi UFJ, LTD. and Deutsche Bank Securities Inc. as a joint lead arranger and bookrunner (the “Additional Arrangers”; together with Morgan Stanley, Deutsche Bank AG New York Branch and any other affiliate of an Additional Arranger to whom Morgan Stanley assigns a portion of its commitments pursuant to this Section 2, the “Initial Lenders”) pursuant to a Joinder Agreement to Commitment Letter dated as of November 5, 2015.
3. Syndication.
The Lead Arranger reserves the right, prior to or after the Closing Date (as defined below), to syndicate all or a portion of the Initial Lenders’ commitments hereunder to a group of banks, financial institutions and other institutional lenders (together with the Initial Lenders, the “Lenders”) identified by the Lead Arranger in consultation with you and acceptable to you such acceptance not to be unreasonably withheld, delayed or conditioned); provided that (a) the Lead Arranger agrees not to syndicate its commitments to (i) competitors of the Borrower, the Target and their respective subsidiaries specified to us by you in writing from time to time, (ii) any persons that are engaged as principals primarily in private equity, mezzanine financing or venture capital and certain banks, financial institutions, other institutional lenders and other entities, in each case, that have been specified to us by you in writing on or prior to October 18, 2015 (the “Original Signing Date”) and (iii) as to any entity referenced in each case of clauses (i) and (ii) above (the “Primary Disqualified Lender”), any of such Primary Disqualified Lender’s known affiliates readily identifiable by name, but excluding any affiliate that is primarily engaged in, or that advises funds or other investment vehicles that are engaged in, making, purchasing, holding or otherwise investing in commercial loans, bonds and similar extensions of credit or securities in the ordinary course and with respect to which the Primary Disqualified Lender does not, directly or indirectly, possess the power to direct or cause the direction of the investment policies of such entity (clauses (i), (ii) and (iii) above collectively, the “Disqualified Lenders”) and (b) notwithstanding the Lead Arranger’s right to syndicate the Credit Facilities and receive commitments with respect thereto, (A) the Initial Lenders shall not be relieved, released or novated from their obligations hereunder (including their obligation to fund the Credit Facilities on the date of the consummation of the Acquisition with the proceeds of the initial funding under the Credit Facilities (the date of such funding, the “Closing Date”)) in connection with any syndication, assignment or participation of the Credit Facilities, including their commitments in respect thereof, until after the Closing Date has occurred, (B) except as contemplated in Section 2 above, no assignment or novation shall become effective with respect to all or any portion of the Initial Lenders’ commitments in respect of the Credit Facilities until the initial funding of the Credit Facilities and (C) unless you otherwise agree in writing, each Commitment Party shall retain exclusive
2 |
control over all rights and obligations with respect to its commitments in respect of the Credit Facilities, including all rights with respect to consents, modifications, supplements, waivers and amendments, until the Closing Date has occurred.
Without limiting your obligations to assist with syndication efforts as set forth herein prior to the Syndication Date (as defined below), it is understood that the Initial Lender’s commitments hereunder are not conditioned upon the syndication of, or receipt of commitments in respect of, the Credit Facilities and in no event shall the commencement or successful completion of syndication of the Credit Facilities constitute a condition to the availability of the Credit Facilities on the Closing Date. The Lead Arranger may commence syndication efforts promptly upon the execution of this Commitment Letter and, as part of our syndication efforts, it is our intent to have Lenders commit to the Credit Facilities prior to the Closing Date (subject to the limitations set forth in the preceding paragraph). Until the earlier of (a) the date on which a Successful Syndication (as defined in the Fee Letter) is achieved and (b) the date that is 60 days following the Closing Date (the “Syndication Date”), you agree to actively assist the Lead Arranger in completing a timely syndication that is reasonably satisfactory to us and you. Such assistance shall include, until the later of the Syndication Date and the Closing Date, (i) your using commercially reasonable efforts to ensure that any syndication efforts benefit from your existing lending and investment banking relationships, (ii) direct contact between senior management, certain representatives and certain advisors of the Borrower, on the one hand, and the proposed Lenders, on the other hand, in all such cases at times and locations mutually agreed upon, (iii) your assistance in the preparation of the Information Materials and other customary marketing materials to be used in connection with the syndication of the Credit Facilities, (iv) your using commercially reasonable efforts to obtain, at your expense, prior to the launch of general syndication of the Credit Facilities, public ratings for the Term Loan B Facility from each of Standard & Poor’s Ratings Services (“S&P”) and Moody’s Investors Service, Inc. (“Moody’s”) and a public corporate credit rating and a public corporate family rating in respect of the Borrower after giving effect to the Transactions from each of S&P and Moody’s, respectively, (v) the hosting, with the Lead Arranger, of a reasonable number of meetings or conference calls to be mutually agreed upon of prospective Lenders at reasonable times and locations to be mutually agreed upon and upon reasonable advance notice, (vi) your promptly preparing and providing pro forma financial projections of the Borrower and its subsidiaries, including pro forma balance sheets and income statements, for a five year period, which shall be on a quarterly basis for first year following the Closing Date and on an annual basis thereafter and (vii) your ensuring that, prior to the later of the Syndication Date and the Closing Date, there will not be any competing issues, offerings, placements or arrangements of debt securities or credit facilities by or on behalf of you or any of your subsidiaries (and, in the case of a Negotiated Transaction (as defined in Exhibit A hereto), your using commercially reasonable efforts to cause the Target to ensure that there will not be any competing issues, offerings, placements or arrangements of debt securities or credit facilities of the Target or its subsidiaries) being offered, placed or arranged (other than the Credit Facilities, ordinary course capital leases, purchase money indebtedness and equipment financings, deferred purchase price obligations, obligations under the Acquisition Agreement, indebtedness of the Target and its subsidiaries disclosed or otherwise permitted under the Acquisition Agreement or other indebtedness that has otherwise been consented to by the Lead Arranger) without the consent of the Lead Arranger, if such issuance, offering, placement or arrangement would materially impair the primary syndication of the Credit Facilities. Notwithstanding anything to the contrary contained in this Commitment Letter, the Fee Letter or any other letter agreement or undertaking concerning the financing of the Transactions to the contrary, your obligations to assist in syndication efforts as provided herein (including commercially reasonable efforts to obtain the ratings referenced above) shall not constitute a condition to the commitments hereunder or the funding of the Credit Facilities on the Closing Date and shall terminate on the later of the Syndication Date and the Closing Date.
3 |
Except as otherwise expressly provided herein, the Lead Arranger, in its capacities as such, will manage all aspects of any syndication of the Credit Facilities, in consultation with you, including decisions as to the selection of institutions to be approached and when they will be approached, when their commitments will be accepted, which institutions will participate (subject to your prior consent (not to be unreasonably withheld, delayed or conditioned) and excluding Disqualified Institutions), the allocation of the commitments among the Lenders and the amount and distribution of fees among the Lenders. To assist the Lead Arranger in its syndication efforts, you agree to promptly prepare and provide (and, in the case of a Negotiated Transaction, to use commercially reasonable efforts to cause the Target to promptly prepare and provide) to us, in each case prior to the later of the Syndication Date and the Closing Date, such customary information with respect to the Borrower, the Target and each of their respective subsidiaries and the Transactions, including all financial information and projections prepared by you (including financial estimates, financial models, forecasts and other forward-looking information, the “Projections”), as the Lead Arranger may reasonably request in connection with the structuring, arrangement and syndication of the Credit Facilities. Notwithstanding anything herein to the contrary, the only financial statements that shall be required to be provided to the Commitment Parties in connection with the syndication of the Credit Facilities shall be those required to be delivered pursuant to paragraph 6 of Exhibit C.
You hereby acknowledge that (a) the Lead Arranger will make available Information (as defined below), Projections and other marketing material and presentations, including confidential information memoranda to be used in connection with the syndication of the Credit Facilities (any such memorandum, an “Information Memorandum”, and such Information, Projections, other marketing material and Information Memoranda, collectively with the Term Sheets, the “Information Materials”) on a confidential basis to the proposed syndicate of Lenders by posting the Information Materials on IntraLinks, Debt X, SyndTrak Online or another similar electronic system and (b) certain of the Lenders may be “public side” Lenders (i.e., Lenders that wish to receive only information that (i) is publicly available or of a type that would be publicly available if the Borrower and the Target were public reporting companies or (ii) is not material with respect to you, the Borrower, the Target or your or their respective subsidiaries or securities for purposes of United States federal and State securities laws (collectively, the “Public Side Information”; any information that is not Public Side Information, “Private Side Information”)) and who may be engaged in investment and other market related activities with respect to you, the Borrower, the Target or your or their respective subsidiaries or securities (each, a “Public Sider”, and each Lender that is not a Public Sider, a “Private Sider”). You will be solely responsible for the contents of the Information Materials and the Commitment Parties shall be entitled to use and rely upon the information contained therein without responsibility for independent verification thereof.
You agree to assist (and, in the case of a Negotiated Transaction, use commercially reasonable efforts to cause the Target to assist) us in preparing an additional version of the Information Materials to be used in connection with the syndication of the Credit Facilities that includes only Public Side Information with respect to you, the Borrower, the Target and/or any of your or their respective subsidiaries or securities, to be used by Public Siders. It is understood that in connection with your assistance described above, customary authorization letters will be included in any Information Materials that (i) contain a customary “10b-5” representation and a customary representation by you to the Commitment Parties that any Public Side Information does not include any Private Side Information and (ii) exculpate us and our affiliates with respect to any liability related to the use of the contents by the recipients thereof and exculpate you and your affiliates, the Target and its affiliates (including, without limitation, the Seller (as defined in Exhibit A)), in the event of any unauthorized use or misuse of any of the Information Materials or related marketing materials by the recipients thereof. Before distribution of any Information Materials, at our request, you agree to identify that portion of the Information Materials that may be distributed to the Public Siders as “Public Information”, which, at a minimum, shall mean
4 |
that the word “PUBLIC” shall appear prominently on the first page thereof. By marking Information Materials as “PUBLIC”, you shall be deemed to have authorized the Commitment Parties and the proposed Lenders to treat such Information Materials as containing only Public Side Information (it being understood that you shall not be under any obligation to mark the Information Materials “PUBLIC”). We will not make any materials not marked “PUBLIC” available to Public Siders.
You acknowledge and agree that the following documents, without limitation, may be distributed to both Private Siders and Public Siders, unless you advise the Lead Arranger in writing (including by email) within a reasonable time prior to its intended distribution that such materials should only be distributed to Private Siders, provided you have been given a reasonable opportunity to review such materials and comply with federal securities laws’ disclosure obligations: (a) administrative materials prepared by the Lead Arranger for prospective Lenders (such as a lender meeting invitation, bank allocation, if any, and funding and closing memoranda), (b) term sheets (including revisions thereto) and notification of changes in the Credit Facilities’ terms and conditions, (c) drafts and final versions of the Facilities Documentation (as defined below) and (d) financial statements of the Target and its subsidiaries of the type that would be included in public filings with the United States Securities and Exchange Commission if the Target were a public reporting company. If you advise us in writing (including by email), within a reasonable period of time prior to dissemination, that any of the foregoing should be distributed only to Private Siders, then Public Siders will not receive such materials without your consent.
4. Information.
You hereby represent and warrant that (with respect to information relating to the Target or any of its subsidiaries, to the best of your knowledge), (a) all written information other than (i) the Projections and (ii) forward looking information and other information of a general economic or industry specific nature (the “Information”) that has been or will be made available to the Commitment Parties, directly or indirectly, by you or by any of your representatives on your behalf in connection with the transactions contemplated hereby, when taken as a whole, is or will be correct in all material respects and does not or will not, when taken as a whole, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein not materially misleading in light of the circumstances under which such statements are made (after giving effect to all supplements and updates thereto prior to the Original Signing Date or, in the case of Information provided after the Original Signing Date, prior to the date such Information is provided) and (b) the Projections that have been or will be made available to us by you or your representatives in connection with the transactions contemplated hereby have been or will be prepared in good faith based upon assumptions that are believed by you to be reasonable at the time when made and at the time delivered to us, it being understood that the Projections are as to future events and are not to be viewed as facts, the Projections are subject to significant uncertainties and contingencies, many of which are beyond your control, no assurance can be given that any particular Projection will be realized and actual results during the period or periods covered by any such Projection may differ significantly from the projected results and such differences may be material. You agree that, if at any time prior to the later of the Syndication Date and the Closing Date, you become aware that any of the representations and warranties in the preceding sentence would be incorrect in any material respect (with respect to information relating to the Target or any of its subsidiaries or any controlled affiliate of any thereof, to the best of your knowledge) if the Information and the Projections were being furnished, and such representations were being made, at such time, then you will (or, in the case of a Negotiated Transaction, prior to the Closing Date, with respect to the Information and such Projections relating to the Target, will use commercially reasonable efforts to) promptly supplement the Information and Projections such that such representations and warranties are (prior to the Closing Date with respect to information relating to the Target or any of its subsidiaries, to the best of your knowledge) correct in all material respects under those circumstances. In arranging and syndicating the Credit Facilities, the Commitment Parties will be entitled to use and rely primarily on the Information and the
5 |
Projections without responsibility for independent verification thereof and does not assume responsibility for the accuracy or completeness of the Information or Projections.
5. Fees.
As consideration for the commitments of the Initial Lenders hereunder and for the agreement of the Lead Arranger to perform the services described herein, you agree to pay (or cause to be paid) the fees set forth in the Term Sheets and in the Second Amended and Restated Fee Letter, dated the date hereof, and delivered herewith with respect to the Credit Facilities (the “Fee Letter”), if and to the extent payable in accordance with the terms thereof. Once paid, except as provided herein or in the Fee Letter, such fees shall not be refundable under any circumstances. Notwithstanding anything to the contrary herein or otherwise, if the Transactions are not consummated and the Closing Date does not occur, no fees, costs or expenses (other than amounts payable pursuant to clause (a) of Section 7 below, but not any fees, costs, expenses or disbursements of counsel pursuant to clause (b) of Section 7 below, except to the extent required to be paid pursuant to “Break Up Compensation” in the Fee Letter), shall be payable or reimbursable by you pursuant to this Commitment Letter, the Fee Letter or any other agreement entered into between you and the Lead Arranger, any Administrative Agent, any Commitment Party and/or any of their respective affiliates (other than the Alternate Transaction Fee (as defined in the Fee Letter) solely to the extent such fee would be required to be paid pursuant to the terms of the Fee Letter).
6. Conditions.
The commitments of the Initial Lenders hereunder to fund the Credit Facilities on the Closing Date are subject solely to (a) the conditions set forth in the section entitled “Conditions to Initial Borrowing” in Exhibit B hereto, (b) delivery of a customary borrowing notice (clauses (a) and (b) subject, on the Closing Date, to the Certain Funds Provisions (as defined below)); provided that such notice shall not include any representation or statement as to the absence (or existence) of any default or event of default under the Facilities Documentation, (c) the conditions expressly set forth in this Section 6 and (d) the conditions set forth in Exhibit C hereto, and, upon satisfaction (or waiver by the Lead Arranger) of such conditions, the initial funding of the Credit Facilities shall occur.
Notwithstanding anything in this Commitment Letter (including the immediately preceding paragraph), the Fee Letter, the Facilities Documentation or any other agreement or other undertaking concerning the financing of the Transactions to the contrary, (a) the only representations or warranties the accuracy of which shall be a condition to the availability and funding of the Credit Facilities on the Closing Date shall be (i) such of the representations and warranties made with respect to the Target and its subsidiaries in the Acquisition Agreement, if any, as are material to the interests of the Lenders, but only to the extent that you or your applicable affiliates have the right to terminate your obligations under the Acquisition Agreement or decline to consummate the Acquisition as a result of a breach of such representations or warranties in the Acquisition Agreement (the “Specified Acquisition Agreement Representations”) if any Acquisition Agreement is executed prior to the Closing Date and (ii) the Specified Representations (as defined below), and (b) the terms of the Facilities Documentation shall be in a form such that they do not impair the availability or funding of the Credit Facilities on the Closing Date if the conditions set forth in this Section 6 are satisfied or waived by the Lead Arranger. Notwithstanding anything to the contrary herein or otherwise, to the extent any security interest in any Collateral is not or cannot be provided and/or perfected on the Closing Date (other than (A) the pledge and perfection of security interests, to the extent required by the Term Sheets, in the equity interests of the material wholly owned domestic subsidiaries of the Borrower (excluding (x) the Target and its material wholly owned domestic subsidiaries (it being understood that the pledge and perfection of the equity interests of the Target and its material wholly owned domestic subsidiaries shall be governed by the succeeding sentence) and (y) including subsidiaries that are Guarantors) with respect to which a lien may
6 |
be perfected by the delivery of a certificate representing such interests, if any, and (B) the pledge and perfection of security interests in Collateral with respect to which a lien may be perfected by the filing of financing statements under the Uniform Commercial Code in the applicable office in the respective jurisdiction of organization of the Borrower or any Guarantor (as defined in Exhibit B) (the Collateral described in this clause (B), the “Filing Collateral”)) after your use of commercially reasonable efforts to do so, then the provision and/or perfection of a security interest in any such Collateral shall not constitute a condition precedent to the availability of the Credit Facilities on the Closing Date, but shall instead be provided after the Closing Date pursuant to arrangements and timing (which shall, in any event, be not less than 90 days after the Closing Date or such later date as the Administrative Agent and the Borrower mutually agree upon in good faith) to be mutually agreed by the Administrative Agent and the Borrower acting reasonably. Further, it is hereby understood and agreed that, notwithstanding anything to the contrary in this Commitment Letter or otherwise, any obligation of Borrower, Target or their respective subsidiaries to deliver Collateral related to the Target and its subsidiaries or for any of the Target or its subsidiaries to become Guarantors shall be as set forth in the Facilities Documentation (but in any event shall occur within 30 days following the Closing Date or as the Administrative Agent may agree in its sole discretion) and shall not be a condition precedent to the Credit Facilities. For purposes hereof, “Specified Representations” means the representations and warranties of the Borrower and the Guarantors to be set forth in the Facilities Documentation relating to organizational status of the Borrower and the Guarantors, no conflicts of the Facilities Documentation with charter documents of the Borrower and the Guarantors in each case, related to the entering into and performance of the Facilities Documentation, organizational power and authority to enter into the Facilities Documentation, due authorization, due execution, delivery and enforceability, in each case, relating to the entering into and performance of the Facilities Documentation, solvency as of the Closing Date (after giving effect to the Transactions) of the Borrower and its subsidiaries on a consolidated basis (such representation and warranty to be consistent with the solvency certificate in the form set forth in Annex I to Exhibit C), Federal Reserve margin regulations, the Investment Company Act, OFAC, the PATRIOT Act, the use of the loan proceeds not violating the FCPA, the status of the Credit Facilities and the guarantees thereof provided for in Exhibit B hereto, respectively, as senior debt and, subject to the immediately preceding sentence, the creation, validity and perfection of security interests in the Filing Collateral (subject to permitted liens to be mutually agreed and the preceding provisions of this Section 6). This paragraph and the provisions herein shall be referred to as the “Certain Funds Provisions”.
The definitive documentation for the Credit Facilities (the “Facilities Documentation”) shall (a) be consistent with this Commitment Letter (including the Certain Funds Provisions), the Term Sheet set forth in Exhibit B hereto, and the Fee Letter, and contain only those conditions precedent, mandatory prepayments, representations, warranties, affirmative covenants, negative covenants, financial covenants and events of default expressly set forth in the Term Sheets (subject only to the exercise of any “market flex” expressly provided in the section of the Fee Letter entitled “Market Flex”) and, to the extent such terms are not expressly set forth in the Term Sheets, but are instead to be determined in accordance with a specified standard or principle, such terms will be negotiated in good faith in accordance with such standard or principle (it being understood that all conditions precedent to fund the Credit Facilities on the Closing Date are expressly set forth in this Section 6), (b) subject to clauses (a) and (d) be based on the Amended and Restated Credit Agreement dated as of October 13, 2011 as amended by Amendment No. 3 dated as of February 17, 2012, Amendment No. 4 dated as of February 19, 2013, Amendment No. 5 dated as of March 18, 2014 and Amendment No. 6 dated as of March 31, 2015 (as so amended and as amended and supplemented by incremental joinders prior to the date hereof and as it may be further amended, modified or supplemented prior to the date hereof, the “Existing Credit Agreement”) among the Borrower, the lenders party thereto and Bank of America, N.A. as administrative agent, (c) subject to clauses (a) and (d) of this paragraph, be based on the operational requirements of the Borrower and its subsidiaries (after giving effect to the Acquisition) in light of their size, structure, industries, businesses, business practices, matters disclosed in the Acquisition Agreement and proposed business plan and
7 |
operations, which will include, for the avoidance of doubt, increases in the size of certain “baskets” and thresholds to be mutually agreed, (d) give due regard to the most recent model delivered to the Lead Arranger prior to the Original Signing Date, and (e) be negotiated in good faith by the Borrower and the Lead Arranger to finalize such documentation, giving effect to the Certain Funds Provisions, as promptly as practicable after the acceptance of this Commitment Letter. This paragraph and the provisions herein are referred to as the “Documentation Principles”.
7. Indemnity.
To induce the Commitment Parties to enter into this Commitment Letter and the Fee Letter and to proceed with the documentation of the Credit Facilities, you agree (a) to indemnify and hold harmless each Commitment Party, its respective affiliates and the respective officers, directors, employees, agents, controlling persons, equityholders, partners, members and other representatives of each of the foregoing (each, an “Indemnified Person”), from and against any and all losses, claims, damages and liabilities of any kind or nature and reasonable and documented out-of-pocket fees and expenses, joint or several, to which any such Indemnified Person may become subject to the extent arising out of, resulting from or in connection with, any claim, litigation, investigation or proceeding (including any inquiry or investigation) relating to any of the foregoing (any of the foregoing, a “Proceeding”) in connection with this Commitment Letter, the Fee Letter, the Transactions, the Credit Facilities or any use of the proceeds thereof, regardless of whether any such Indemnified Person is a party thereto and whether or not such Proceeding is brought by you, your equityholders, your affiliates, creditors or any other third person, and to reimburse each such Indemnified Person promptly following written demand (together with back-up documentation supporting such reimbursement request) for any reasonable and documented out-of-pocket legal expenses of one firm of counsel for all such Indemnified Persons, taken as a whole, and, in the case of an actual or perceived conflict of interest, one additional firm of counsel to the affected Indemnified Persons taken as a whole, and, if necessary, of a single local counsel in each appropriate jurisdiction (which may include a single special counsel acting in multiple jurisdictions) for all such Indemnified Persons taken as a whole (and, in the case of an actual or perceived conflict of interest, one additional firm of counsel to the affected Indemnified Persons taken as a whole), and other reasonable and documented out-of-pocket fees and expenses incurred in connection with investigating or defending any of the foregoing; provided that the foregoing indemnity will not, as to any Indemnified Person, apply to any loss, claim, damage, liability, cost or expense to the extent (i) it has been determined by a court of competent jurisdiction in a final, non-appealable judgment to have resulted from (A) the willful misconduct, bad faith or gross negligence of such Indemnified Person or (B) a material breach of the obligations of such Indemnified Person under this Commitment Letter or the Fee Letter, (ii) resulting from any Proceeding between or among Indemnified Persons that does not involve an action or omission by you or your affiliates (other than claims against any Commitment Party in its capacity or in fulfilling its role as the agent or arranger or any other similar role under the Credit Facilities (excluding its role as a Lender)) and (b) if the Transactions are consummated and the Closing Date occurs, to reimburse Morgan Stanley and its affiliates, from time to time, for all reasonable and documented out-of-pocket expenses, due diligence expenses, syndication expenses, travel expenses and reasonable fees, disbursements and other charges of the single firm of counsel to Morgan Stanley specified in the Term Sheets, and of a single local counsel to Morgan Stanley in each appropriate jurisdiction (which may include a single special counsel acting in multiple jurisdictions), in each case incurred in connection with the Credit Facilities and the preparation, negotiation and enforcement of this Commitment Letter, the Fee Letter, the Facilities Documentation and any security arrangements in connection therewith. The foregoing provisions in this paragraph shall be superseded in each case, to the extent covered thereby, by the applicable provisions contained in the Facilities Documentation upon execution thereof and thereafter shall have no further force and effect.
8 |
Notwithstanding any other provision of this Commitment Letter, (a) no Indemnified Person shall be liable for any damages arising from the use by others of information or other materials obtained through internet, electronic, telecommunications or other information transmission systems, except to the extent that such damages have resulted from the willful misconduct, bad faith or gross negligence of such Indemnified Person (as determined by a court of competent jurisdiction in a final non-appealable judgment) and (b) none of you, the Indemnified Persons, the Target, the Borrower or any of your or their respective affiliates or the respective directors, officers, employees, advisors and agents of the foregoing shall be liable for any indirect, special, punitive or consequential damages (including, without limitation, any loss of profits, business or anticipated savings) in connection with this Commitment Letter, the Fee Letter, the Transactions (including the Credit Facilities and the use of proceeds thereunder), or with respect to any activities related to the Credit Facilities, including the preparation of this Commitment Letter, the Fee Letter and the Facilities Documentation; provided that nothing in this sentence shall limit your indemnification obligations set forth herein to the extent such indirect, special, punitive or consequential damages are included in any third party claim in connection with which such Indemnified Person is entitled to indemnification hereunder. Notwithstanding the foregoing, each Indemnified Person shall be obligated to refund and return promptly any and all amounts paid by you under the immediately preceding paragraph to such Indemnified Person for any such losses, claims, damages, liabilities and expenses to the extent it has been determined by a court of competent jurisdiction in a final, non-appealable judgment that such Indemnified Person is not entitled to payment of such amounts in accordance with the terms hereof.
You shall not be liable for any settlement of any Proceeding effected without your written consent (which consent shall not be unreasonably withheld, delayed or conditioned), but if settled with your written consent or if there is a final and non-appealable judgment by a court of competent jurisdiction for the plaintiff against any Indemnified Person in any such Proceeding, you agree to indemnify and hold harmless such Indemnified Person in the manner set forth above.
You shall not, without the prior written consent of any Indemnified Person (which consent shall not be unreasonably withheld, delayed or conditioned), effect any settlement of any pending or threatened Proceedings in respect of which indemnity could have been sought hereunder by such Indemnified Person unless such settlement (a) includes an unconditional release of such Indemnified Person from all liability arising out of such Proceedings and (b) does not include any statement as to, or any admission of, fault, culpability, wrongdoing or a failure to act by or on behalf of such Indemnified Person.
8. Sharing of Information, Absence of Fiduciary Relationships, Affiliate Activities.
You acknowledge that the Commitment Parties and their respective affiliates may be providing debt financing, equity capital or other services (including, without limitation, investment banking and financial advisory services, securities trading, hedging, financing and brokerage activities and financial planning and benefits counseling) to other persons in respect of which you, the Target and your and their respective affiliates may have conflicting interests regarding the transactions described herein and. No Commitment Party or its affiliates will use confidential information obtained from you, the Target or your or its affiliates or representatives by virtue of the transactions contemplated by this Commitment Letter or their other relationships with you in connection with the performance by them or their respective affiliates of services for other persons, and no Commitment Party or its affiliates will furnish any such information to other persons in contravention of Section 9. You also acknowledge that no Commitment Party or its affiliates has any obligation to use in connection with the transactions contemplated by this Commitment Letter, or to furnish to you, confidential information obtained by them from other persons.
The Commitment Parties and their respective affiliates may have economic interests that conflict with those of you or the Target. You agree that the Commitment Parties will act under this Commitment
9 |
Letter as an independent contractor and that nothing in this Commitment Letter or the Fee Letter will be deemed to create an advisory, fiduciary or agency relationship or fiduciary or other implied duty between the Commitment Parties and you or the Target, your or its respective equityholders or your or its respective affiliates. You acknowledge and agree that (a) the transactions contemplated by this Commitment Letter and the Fee Letter are arm’s-length commercial transactions between the Commitment Parties and, if applicable, their respective affiliates, on the one hand, and you, on the other, (b) in connection therewith and with the process leading to such transactions, the Commitment Parties and their applicable affiliates (as the case may be) are acting solely as principals and not as agents or fiduciaries of you, the Target, your or their respective management, equityholders, creditors or affiliates, (c) the Commitment Parties and their applicable affiliates (as the case may be) have not assumed an advisory or fiduciary responsibility or any other obligation in favor of you or your affiliates with respect to the transactions contemplated hereby or the process leading thereto (irrespective of whether any Commitment Party or any of their respective affiliates have advised or are currently advising you or the Target on other matters), except the obligations expressly set forth in this Commitment Letter and the Fee Letter, (d) you have consulted your own legal, accounting and financial advisory, regulatory and tax advisors to the extent you deem appropriate, and (e) you are responsible for making your own independent judgment with respect to such transactions and the process leading thereto. You agree that you will not claim, and hereby waive any such claim, that any Commitment Party or any of their respective affiliates, as the case may be, have rendered advisory services of any nature or respect, or owe a fiduciary or similar duty to you or your affiliates, in connection with such transaction or the process leading thereto.
9. Confidentiality.
You agree that you will not disclose, directly or indirectly, the Fee Letter or the contents thereof or this Commitment Letter or the contents hereof to any person or entity without the prior written approval of the Lead Arranger (such approval not to be unreasonably withheld, delayed or conditioned), except (a) to your affiliates and officers, directors, agents, employees, attorneys, accountants, advisors, members, partners, stockholders, controlling persons or equityholders of the foregoing, (b) if the Commitment Parties consent in writing to such proposed disclosure or (c) pursuant to the order of any court or administrative agency in any pending legal, judicial or administrative proceeding, or otherwise as required by applicable law or compulsory legal process or to the extent requested or required by governmental and/or regulatory authorities, in each case based on the reasonable advice of your legal counsel (in which case you agree, to the extent practicable and not prohibited by applicable law, to inform us promptly thereof prior to disclosure); provided that (i) you may disclose this Commitment Letter and its contents (but not the Fee Letter except as provided in clause (vi) below) to the Seller, the Target, the Target’s subsidiaries and their respective officers, directors, agents, employees, attorneys, accountants, advisors, members, partners, stockholders, controlling persons or equityholders of the foregoing, in each case, who are informed of the confidential nature of this Commitment Letter, the Fee Letter and the contents hereof and thereof and who are or have been advised of their obligation to keep the same confidential, (ii) you may disclose this Commitment Letter and its contents (but not the Fee Letter or its contents) in any syndication or other marketing materials in connection with the Credit Facilities (including the Information Materials) or in connection with any proxy or public filing, (iii) you may disclose the Term Sheets and other Exhibits and annexes to this Commitment Letter, and the contents thereof, to potential Lenders and to rating agencies in connection with obtaining ratings for the Borrower or the Credit Facilities, (iv) you may disclose the aggregate fee amount contained in the Fee Letter as part of Projections, pro forma information or a generic disclosure of aggregate sources and uses related to fee amounts in connection with the Transactions in marketing materials for the Credit Facilities or in any proxy or public filing, (v) you may make public disclosure of the existence and amount of the commitments hereunder and of the identities of the Administrative Agent, the Lead Arranger and the Additional Arrangers, (vi) to the extent portions thereof have been redacted in a manner to be reasonably
10 |
satisfactory to us and you (including the portions thereof addressing fees payable to the Commitment Parties and/or the Lenders), you may disclose the Fee Letter and the contents thereof to the Target, its subsidiaries and their respective officers, directors, agents, employees, attorneys, accountants, advisors, members, partners, stockholders, controlling persons or equityholders of the foregoing on a confidential and need to know basis (with you being responsible for such person’s compliance with this paragraph), (vii) you may disclose this Commitment Letter, the Fee Letter and the contents hereof and thereof to the extent this Commitment Letter, the Fee Letter or the contents hereof or thereof, as applicable, become publicly available other than by reason of disclosure by you in breach of this Commitment Letter, and (viii) you may disclose this Commitment Letter, the Fee Letter and contents hereof and thereof to the extent required by applicable law, rule or regulation, subpoena or other compulsory legal process (in which case, you agree, to the extent practicable and not prohibited by law, to inform us promptly thereof prior to disclosure).
The Commitment Parties and their respective affiliates will use all information provided to it or such affiliates by or on behalf of you hereunder or in connection with the Acquisition and the Transactions solely for the purpose of providing the services which are the subject of this Commitment Letter and shall treat confidentially all such information and shall not publish, disclose or otherwise divulge such information; provided that nothing herein shall prevent any Commitment Party or their respective affiliates from disclosing any such information (a) pursuant to the order of any court or administrative agency or in any pending legal, judicial or administrative proceeding, or otherwise as required by applicable law or compulsory legal process (in which case the Commitment Parties agree (except with respect to any audit or examination conducted by bank accountants or any governmental bank regulatory authority exercising examination or regulatory authority), to the extent practicable and not prohibited by applicable law, to inform you promptly thereof prior to disclosure), (b) upon the request or demand of any regulatory authority having jurisdiction over any Commitment Party or any of their respective affiliates (in which case the Commitment Parties agree (except with respect to any audit or examination conducted by bank accountants or any governmental bank regulatory authority exercising examination or regulatory authority), to the extent practicable and not prohibited by applicable law, to inform you promptly thereof prior to disclosure), (c) to the extent that such information becomes publicly available other than by reason of disclosure by the Commitment Parties or any of their respective affiliates or any related parties thereto in violation of any confidentiality obligations owing to you, the Target, the Seller or any of your or their respective affiliates (including those set forth in this paragraph), (d) to the extent that such information is received by any Commitment Party from a third party that is not, to such Commitment Party’s knowledge, subject to contractual or fiduciary confidentiality obligations owing to you, the Target, the Seller or any of your or their respective affiliates or related parties, (e) to each Commitment Party’s affiliates and to their respective officers, directors, employees, legal counsel, independent auditors, professionals and other experts or agents who need to know such information in connection with the Transactions and who are informed of the confidential nature of such information and who are subject to customary confidentiality obligations of professional practice or who are or have been advised to keep the same confidential (with the applicable Commitment Party responsible for such person’s compliance with this paragraph), (f) to potential or prospective Additional Arrangers, Lenders, participants or assignees and to any direct or indirect contractual counterparty to any swap or derivative transaction (each a “Swap Counterparty”) relating to the Borrower or any of its subsidiaries, in each case other than Disqualified Institutions; provided that the disclosure of any such information to any Lenders, participants, assignees or Swap Counterparties or prospective Lenders, participants, assignees or Swap Counterparties referred to above shall be made subject to the acknowledgment and acceptance by such Lender, participant, assignee or Swap Counterparty or prospective Lender, participant, assignee or Swap Counterparty that such information is being disseminated on a confidential basis (on substantially the terms set forth in this paragraph or as is otherwise reasonably acceptable to you and the Commitment Parties, including as expressly agreed in any Information Materials or other marketing materials) in accordance with the standard syndication processes of the Commitment Parties or customary market
11 |
standards for dissemination of such type of information, (g) to rating agencies in connection with obtaining ratings for the Borrower or the Credit Facilities, (h) for purposes of establishing a “due diligence” or similar defense in connection with or arising out of the making of loans pursuant to this Commitment Letter, (i) with your prior written consent or (j) to enforce their rights and remedies hereunder or under the Fee Letter. Upon the entering into of the Facilities Documentation, the Commitment Parties and their respective affiliates’, if any, obligations under this paragraph shall terminate automatically and be superseded by the confidentiality provisions in the Facilities Documentation upon the initial funding thereunder.
10. Miscellaneous.
This Commitment Letter and the commitments hereunder shall not be assignable by any party hereto (other than, subject to the limitations set forth in Section 3, by the Initial Lenders to any other Lender), in each case, immediately prior to or otherwise substantially concurrently with the consummation of the Acquisition) without the prior written consent of each other party hereto (such consent not to be unreasonably withheld, delayed or conditioned) (and any attempted assignment without such consent shall be null and void). This Commitment Letter and the commitments hereunder are intended to be solely for the benefit of the parties hereto (and Indemnified Persons to the extent expressly set forth herein) and are not intended to and do not confer any benefits upon, or create any rights in favor of, any person other than the parties hereto (and Indemnified Persons to the extent expressly set forth herein). Subject to the limitations set forth in Section 2 and Section 3 above, the Commitment Parties reserve the right to employ the services of their respective affiliates in providing services contemplated hereby and to allocate, in whole or in part, to their affiliates certain fees payable to the Commitment Parties in such manner as such Commitment Party and its affiliates may agree in their sole discretion and, to the extent so employed, such affiliates shall be entitled to the benefits and protections afforded to, and subject to the provisions governing the conduct of, the Commitment Parties hereunder (provided that the applicable Commitment Party shall be liable for the actions or inactions of any such person whose services are so employed). This Commitment Letter may not be amended or any provision hereof waived or modified except by an instrument in writing signed by the Commitment Parties and you. This Commitment Letter may be executed in any number of counterparts, each of which shall be deemed an original and all of which, when taken together, shall constitute one agreement. Delivery of an executed counterpart of a signature page of this Commitment Letter by facsimile transmission or other electronic transmission (e.g., a “PDF” or “TIFF”) shall be effective as delivery of a manually executed counterpart hereof. This Commitment Letter (including the Exhibits hereto), together with the Fee Letter, (i) are the only agreements that have been entered into among the parties hereto with respect to the Credit Facilities, and (ii) supersede all prior understandings, whether written or oral, among us with respect to the Credit Facilities and set forth the entire understanding of the parties hereto with respect thereto. THIS COMMITMENT LETTER AND ANY CLAIM, CONTROVERSY, DISPUTE OR CAUSE OF ACTION (WHETHER IN CONTRACT OR TORT OR OTHERWISE) BASED UPON, ARISING OUT OF OR RELATING TO THIS COMMITMENT LETTER AND THE TRANSACTIONS CONTEMPLATED HEREBY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES; provided, however, that (a) the accuracy of any Specified Acquisition Agreement Representations and whether you have the right to terminate your obligations under the Acquisition Agreement or decline to consummate the Acquisition (in each case, in accordance with the terms of the Acquisition Agreement) as a result of a breach of such representations and warranties in the Acquisition Agreement and (b) whether the Acquisition has been consummated in accordance with the terms of the Acquisition Agreement shall, in each case, be governed by the
12 |
laws of the State of Delaware, without regard to the principles of conflict of laws thereof.
EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM BROUGHT BY OR ON BEHALF OF ANY PARTY RELATED TO OR ARISING OUT OF THIS COMMITMENT LETTER, THE FEE LETTER OR THE PERFORMANCE OF SERVICES HEREUNDER OR THEREUNDER.
Each of the parties hereto hereby irrevocably and unconditionally (a) submits, for itself and its property, to the exclusive jurisdiction of any New York State court or federal court of the United States of America sitting in New York County, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Commitment Letter, the Fee Letter or the transactions contemplated hereby or thereby, or for recognition or enforcement of any judgment, and agrees that all claims in respect of any such action or proceeding shall be heard and determined in such New York State court or, to the extent permitted by law, in such federal court, (b) waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Commitment Letter or the transactions contemplated hereby in any New York State or in any such federal court, (c) waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court, and (d) agrees that a final judgment in any such suit, action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other matter provided by law. Each of the parties hereto agrees that service of process, summons, notice or document by registered mail addressed to you or us at the addresses set forth above shall be effective service of process for any suit, action or proceeding brought in any such court.
We hereby notify you that pursuant to the requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “PATRIOT Act”), we and each of the Lenders may be required to obtain, verify and record information that identifies the Borrower and the Guarantors, which information may include their names, addresses, tax identification numbers and other information that will allow each of us and the Lenders to identify the Borrower and the Guarantors in accordance with the PATRIOT Act. This notice is given in accordance with the requirements of the PATRIOT Act and is effective for each of us and the Lenders.
The indemnification, compensation (if applicable), reimbursement (if applicable), sharing of information, absence of fiduciary relationships, no agency, affiliate activities, jurisdiction, governing law, venue, waiver of jury trial, syndication (including the “Market Flex” provisions in the Fee Letter) and confidentiality provisions contained herein and in the Fee Letter shall remain in full force and effect regardless of whether Facilities Documentation shall be executed and delivered and notwithstanding the termination or expiration of this Commitment Letter or the Initial Lenders’ commitments hereunder; provided that your obligations under this Commitment Letter (other than your obligations with respect to (a) assistance to be provided in connection with the syndication of such commitments (including supplementing and/or correcting Information and Projections) prior to the later of the Syndication Date and the Closing Date, (b) confidentiality of the Fee Letter and the contents thereof) shall automatically terminate and be superseded by the provisions of the Facilities Documentation upon the initial funding thereunder, and you shall automatically be released from all liability in connection therewith at such time, and (c) as of the Closing Date the provisions of Section 7 shall be superseded to the extent the Facilities Documentation includes indemnification and expense reimbursement provisions. You may terminate this Commitment Letter and/or the Initial Lenders’ commitments with respect to the Credit Facilities (or any portion thereof) hereunder at any time subject to the provisions of the preceding sentence.
13 |
Section headings used herein are for convenience of reference only and are not to affect the construction of, or to be taken into consideration in interpreting, this Commitment Letter.
If the foregoing correctly sets forth our agreement, please indicate your acceptance of the terms of this Commitment Letter and the Fee Letter by returning to the Commitment Parties executed counterparts hereof and of the Fee Letter not later than 11:59 p.m., New York City time, on November 17, 2015. The Initial Lenders’ commitments and the obligations of the Lead Arranger hereunder will expire at such time in the event that the Commitment Parties have not received such executed counterparts in accordance with the immediately preceding sentence. If you do so execute and deliver to us this Commitment Letter and the Fee Letter, we agree to hold our commitment available for you until the earliest of (i) after execution of the Acquisition Agreement and prior to the consummation of the Transactions, the termination of the Acquisition Agreement in accordance with its terms, (ii) the consummation of the Acquisition with or without the funding of the Credit Facilities, (iii) 11:59 p.m., New York City time, on March 31, 2016 and (iv) the date on which you elect to terminate this Commitment Letter pursuant to the second preceding paragraph hereof (such earliest date being the “Termination Date”). Upon the occurrence of the Termination Date, this Commitment Letter and the commitments of the Commitment Parties hereunder and the agreement of the Lead Arranger to provide the services described herein shall automatically terminate unless the Commitment Parties shall, in their discretion, agree to an extension in writing (including by email).
[Remainder of this page intentionally left blank]
14 |
We are pleased to have been given the opportunity to assist you in connection with the financing for the Transactions.
Very truly yours, | ||
MORGAN STANLEY SENIOR FUNDING, INC. | ||
By: | /s/Jonathon Rauen | |
Name: Jonathon Rauen | ||
Title: Authorized Signatory |
[SIGNATURE PAGE TO FOREST COMMITMENT LETTER]
Accepted and agreed to as of the date first above written: |
||
MICROSEMI CORPORATION | ||
By: | /s/John W. Hohener | |
Name: John W. Hohener | ||
Title: Executive Vice President, Chief | ||
Financial Officer, Treasurer and | ||
Secretary |
[SIGNATURE PAGE TO FOREST COMMITMENT LETTER]
EXHIBIT A
Project Forest Transaction Description
Capitalized terms used but not defined in this Exhibit A shall have the meanings given to them in the Commitment Letter to which this Exhibit A is attached, including the other Exhibits thereto. In the event any such capitalized term is subject to multiple or differing definitions, the appropriate meaning thereof in this Exhibit A shall be determined by reference to the context in which it is used.
Microsemi Corporation, a Delaware corporation (the “Borrower”), intends to acquire (the “Acquisition”) 100% of the capital stock of PMC-Sierra, Inc., a Delaware corporation (the “Target”) pursuant to either (A) a tender offer by a newly created wholly-owned direct or indirect subsidiary of the Borrower (the “Merger Sub”) followed by a merger of Merger Sub with and into the Target or (B) a merger of Merger Sub with and into the Target as more fully described below. In connection therewith, it is intended that:
(a) The Acquisition will be consummated by means of either (i) the public announcement of your desire to acquire, or the announcement of a proposed tender offer to acquire, shares of the Target, in each case, followed by an actual tender offer to acquire such shares without the prior approval and consent of the board of directors and/or stockholders or other equity holders of the Target to acquire not less than a majority of the outstanding capital stock of the Target (the “Non-Consensual Tender Offer” or a “Hostile Transaction”) that is made by MergerSub followed by a merger of Merger Sub with and into the Target or (ii) a tender offer and/or merger by MergerSub pursuant to a negotiated transaction approved by the board directors and/or stockholders or other equity holders of the Target (a “Negotiated Transaction”) which may follow the entering into by the Borrower and the Target of a definitive merger/acquisition agreement (any such merger/acquisition agreement, the “Acquisition Agreement”) which Acquisition Agreement may provide that the Borrower will acquire the capital stock of the Target either through a tender offer followed by a merger or a merger from the holders of such capital stock (collectively, the “Seller”) with the Seller receiving consideration consisting of cash and equity in the Borrower in accordance with the terms of, and subject to adjustment as provided in, the Acquisition Agreement (such consideration or any other consideration for the capital stock of the Target, the “Acquisition Consideration”).
(b) The Borrower will obtain $350,000,000 in commitments under the senior secured revolving credit facility described in Exhibit B to the Commitment Letter (the “Revolving Credit Facility”).
(c) The Borrower will obtain $375,000,000 in commitments under the senior secured term loan A facility described in Exhibit B to the Commitment Letter (the “Term Loan A Facility”).
(d) The Borrower will obtain $2,200,000,000 in commitments under the senior secured term loan B facility described in Exhibit B to the Commitment Letter (the “Term Loan B Facility” and, together with the Revolving Credit Facility and the Term Loan A Facility, the “Credit Facilities”).
(e) After giving effect to the Transactions, all existing third party indebtedness for borrowed money of the Borrower and its subsidiaries (including, for the avoidance of doubt, the Target and its subsidiaries) (including indebtedness existing under, and all commitments to extend credit under, the Target’s existing credit facilities, if any), other than (i) the Revolving Credit Facility, (ii) the Term Loan A Facility, (iii) the Term Loan B Facility, (iv) indebtedness permitted to remain outstanding under the Acquisition Agreement and (v) existing capital leases, purchase money debt, indebtedness permitted to be outstanding under the Facilities Documentation and other indebtedness to be agreed upon by the
A-1 |
Borrower and the Lead Arranger, will be refinanced, repaid or terminated, and all security and guaranties in respect thereof discharged and released (the “Refinancing”).
(f) The proceeds of (i) cash on hand of the Borrower, (ii) the Term Loan A Facility, (iii) the Term Loan B Facility and (iv) if the Borrower so elects, the Revolving Credit Facility will be applied to pay (A) the Acquisition Consideration, (B) the fees, costs and expenses incurred in connection with the Transactions (including upfront fees and original issue discount) (such fees, costs and expenses, the “Transaction Costs”) and (C) for the Refinancing; provided that, the Revolving Credit Facility may only be drawn on the Closing Date (x) to fund original issue discount (“OID”) and/or upfront fees required to be paid pursuant to the “market flex” provisions of the Fee Letter, (y) to pay for part of the Acquisition Consideration and fund other Transaction Costs, and (z) to backstop or replace or cash collateralize letters of credit outstanding on the Closing Date under facilities no longer available to the Borrower or its subsidiaries (the foregoing clauses (x), (y) and (z), “Permitted Closing Date Revolving Extensions of Credit”); provided, further, that the Borrower shall repay (for the avoidance of doubt, without a permanent reduction of the commitments under the Revolving Credit Facility) any amount drawn under the Revolving Credit Facility on the Closing Date for the purposes of financing amounts referred to in clause (y) above (such amount, the “Transaction Costs Revolving Amount”) within 30 days of the Closing Date in an amount equal to the Transaction Costs Revolving Amount minus $225 million.
The transactions described in clauses (a) through (f) above (including the payment of Transaction Costs) are collectively referred to herein as the “Transactions”.
A-2 |
EXHIBIT B
Project Forest
Senior Secured Revolving Credit Facility
Senior Secured Term Loan A Facility
Senior Secured Term Loan B Facility
Summary of Principal Terms and Conditions1
Borrower: | Microsemi Corporation. |
Transactions: | As set forth in Exhibit A to the Commitment Letter. |
Administrative Agent: | Morgan Stanley Senior Funding, Inc. (“Morgan Stanley”) will act as sole and exclusive administrative agent and collateral agent for the Credit Facilities (in such capacity, the “Administrative Agent”) for a syndicate of banks, financial institutions and other entities acceptable to the Borrower (such acceptance not to be unreasonably withheld, delayed or conditioned) and which syndicate shall not include any Disqualified Institutions (together with the Initial Lenders, the “Lenders”). |
Lead Arranger and Bookrunner: | Morgan Stanley will act as lead arranger and bookrunner for each of the Credit Facilities (the “Lead Arranger”) and will perform the duties customarily associated with such roles. |
Credit Facilities: |
A senior secured revolving credit facility (the “Revolving Credit Facility” and the Lenders with a commitment under the Revolving Credit Facility, the “Revolving Lenders”) in an aggregate principal amount of $350,000,000 (the loans thereunder, together with (unless the context otherwise requires), the swingline borrowings referred to below, the “Revolving Loans”) on the terms and conditions set forth herein.
A senior secured term loan A facility (the “Term Loan A Facility”) in an aggregate principal amount of $375,000,000 (the loans thereunder, the “Term A Loans”) on the terms and conditions set forth herein.
A senior secured term loan B facility (the “Term Loan B Facility”; together with the Term Loan A Facility, the “Term Facilities”) in an aggregate principal amount of $2,200,000,000 (the loans thereunder, the “Term B Loans”; together with the Term A Loans, the “Term Loans”; and, the Term Loans together with the Revolving Loans, the “Loans”) |
1 All capitalized terms used but not defined herein shall have the meanings given to them in the Commitment Letter to which this Term Sheet is attached, including the Exhibits thereto. In the event any such capitalized term is subject to multiple or differing definitions, the appropriate meaning thereof in this Exhibit B shall be determined by reference to the context in which it is used.
B-1 |
on the terms and conditions set forth herein | |
Purpose: |
The proceeds of the Term Facilities will be used directly or indirectly to finance a portion of the Transactions, including upfront fees and original issue discount, if any.
The letters of credit and proceeds of the Revolving Loans will be used by the Borrower and its subsidiaries (a) on the Closing Date, exclusively for Permitted Closing Date Revolving Extensions of Credit and (b) after the Closing Date, for working capital and other general corporate purposes, including the financing of permitted acquisitions and other permitted investments. |
Availability: |
The Term Loans shall be made in a single drawing on the Closing Date. Repayments and prepayments of the Term Loans may not be reborrowed.
Revolving Loans may be borrowed, repaid and reborrowed on and after the Closing Date (without premium or penalty) and prior to the maturity date for the Revolving Credit Facility in accordance with the terms of the Facilities Documentation. |
Swingline Loans: |
In connection with the Revolving Credit Facility, the Administrative Agent (in such capacity, the “Swingline Lender”) will make available, in its sole discretion, to the Borrower a swingline facility under which the Borrower may make short-term borrowings upon same-day notice (in minimum amounts to be mutually agreed upon and integral multiples to be agreed upon) of up to $25,000,000. Except for purposes of calculating the commitment fee described in Annex I hereto, any such swingline borrowings will reduce availability under the Revolving Facility on a dollar-for-dollar basis.
Upon notice from the Swingline Lender, the Revolving Lenders will be unconditionally obligated to purchase participations in any swingline loan pro rata based upon their commitments under the Revolving Facility.
If any Revolving Lender becomes a Defaulting Lender (to be defined in a manner consistent with the Documentation Principles), then the swingline exposure of such defaulting Revolving Lender will automatically be reallocated among the non-defaulting Revolving Lenders pro rata in accordance with their commitments under the Revolving Facility up to an amount such that the revolving credit exposure of such non-defaulting Revolving Lender does not exceed its commitments. In the event such reallocation does not fully cover the exposure of such defaulting Revolving Lender, the Swingline Lender may require the Borrower to repay such “uncovered” exposure in respect of the swingline loans and |
B-2 |
will have no obligation to make new swingline loans to the extent such swingline loans would exceed the commitments of non-defaulting Revolving Lenders. | |
Incremental Facilities: |
The Facilities Documentation will permit the Borrower after the Closing Date to add one or more incremental term loan facilities to the Credit Facilities (each, an “Incremental Term Facility”) and/or increase commitments under the Revolving Credit Facility (any such increase, and “Incremental Revolving Increase”; together with the Incremental Term Facilities, and collectively referred to as the “Incremental Facilities”) in an aggregate amount (the “Available Incremental Amount”) of up to (a) an amount equal to $300.0 million, plus (b) an amount equal to all voluntary prepayments of Term Loans and voluntary prepayments of Revolving Loans to the extent accompanied by a permanent reduction in the commitments thereof (in each case, to the extent not financed with the proceeds from the incurrence of long-term indebtedness), plus (c) an unlimited amount, so long as after giving effect to the borrowings under such Incremental Facility on the effective date thereof on a pro forma basis (as defined below), the Consolidated Net Leverage Ratio is equal to or less than 3.00:1.00 (assuming that any Incremental Revolving Increase is fully drawn and it being understood that cash proceeds of any such Incremental Facility shall not be netted for the purpose of testing such Consolidated Net Leverage Ratio).
The availability of the Incremental Facilities shall be subject solely to the following terms and conditions: (a) no existing Lender shall be required to participate in any such Incremental Facility without its consent; (b) no default or event of default under the Credit Facilities shall have occurred and be continuing or would exist immediately after giving effect thereto (except in connection with permitted acquisitions or investments, which shall be subject to no payment or bankruptcy event of default under the Credit Facilities); (c) such Incremental Facility may, at the discretion of the Borrower, (i) rank pari passu in right of payment with the Credit Facilities, (ii) be subordinated in right of payment to the Credit Facilities, (iii) be secured on a pari passu basis with the Credit Facilities, (iv) be secured on a junior lien basis to the Credit Facilities or (v) be unsecured; provided that if subordinated or secured on a junior lien basis (except to the extent incurred under the Facilities Documentation (as defined below)), any intercreditor or lien subordination arrangements shall be reasonably satisfactory to the Administrative Agent, and if secured on an equal basis with the Credit Facilities, such Incremental Facilities shall be on terms and pursuant to documentation applicable to the Credit Facilities; (d) the maturity date of any such Incremental Term Facility shall be |
B-3 |
no earlier than the then latest maturity date of the Term Facilities or, if the Incremental Term Facility is structured as a “Term A” facility, the latest maturity date of the Term Loan A Facility; (e) the weighted average life to maturity of any such Incremental Term Facility shall be no shorter than the then remaining weighted average life to maturity of the Term Loans or, if the Incremental Term Facility is structured as a “Term A” facility, the then remaining weighted average life to maturity of the Term Loan A Facility; (f) in the case of an Incremental Revolving Increase, the maturity date of such Incremental Revolving Increase shall be the same as the maturity date of the Revolving Credit Facility, such Incremental Revolving Increase shall require no scheduled amortization of mandatory commitment reduction prior to the final maturity of the Revolving Credit Facility and the Incremental Revolving Increase shall be on the same terms and pursuant to the exact same documentation applicable to the Revolving Credit Facility, (g) subject to clauses (d) and (e) above, the amortization schedules applicable to any such Incremental Term Facility shall be as determined by the Borrower and the lenders thereunder; (h) the representations and warranties in the Facilities Documentation shall be true and correct in all material respects immediately after giving effect to the incurrence of such Incremental Term Facility, subject to “SunGard” provisions substantially identical to the Certain Funds Provisions to the extent the proceeds of such Incremental Facility are used to finance, in whole or in part, permitted acquisitions or investments; (i) any fees payable in connection with such Incremental Facility shall be determined by the Borrower and the arrangers and/or lenders providing such Incremental Facility; (j) such Incremental Term Facility may provide for the ability to participate on a pro rata basis or less than pro rata basis in any voluntary or mandatory prepayments of the Term Loans; (k) during the period commencing on the Closing Date and ending on the date that is 12 months after the Closing Date only, the interest rate, upfront fees and original issue discount for any term loans under such Incremental Term Facility shall be as determined by the Borrower and the lenders providing such Incremental Term Facility; provided that in the event that the yield on such Incremental Term Facility (taking into account interest margins, minimum Adjusted LIBOR (as defined in Annex I to Exhibit B), minimum ABR, upfront fees and OID on such term loans, with upfront fees and OID being equated to interest margins based on an assumed four year life to maturity, but exclusive of any arrangement, syndication, structuring, commitment or other fees payable in connection therewith) (the “Incremental Yield”) (other than any Incremental Term Facility that is unsecured, subordinated or secured on a junior-lien basis) exceeds the yield on the Term |
B-4 |
Loan B Facility or, if the Incremental Term Facility is structured as a “Term A” facility, the Term Loan A Facility (determined as provided above), by more than 0.50% per annum, then the interest margins for the Term B Loans and/or the Term A Loans, as applicable, shall automatically be increased to a level such that the yield on the Term B Loans and/or the Term A Loans, as applicable, shall be 0.50% below the Incremental Yield (it being agreed that any increase in yield to any existing facility required due to the application of an Adjusted LIBOR or ABR “floor” on any Incremental Term Facility shall be effected solely through an increase therein (or implementation thereof, as applicable); and (l) except as otherwise provided above, all other terms of such Incremental Term Facility, if not consistent with the terms of the existing Term Facilities, will be as agreed between the Borrower and the lenders providing such Incremental Term Facilities, with such other terms not consistent with the existing Term Facilities to be reasonably satisfactory to the Administrative Agent.
The Borrower may seek commitments in respect of the Incremental Facilities from existing Lenders (each of which shall be entitled to agree or decline to participate in its sole discretion) and additional banks, financial institutions and other institutional lenders or investors who will become Lenders in connection therewith; provided that the consent of the Administrative Agent, the Swing Line Lender and the Issuing Banks (not to be unreasonably withheld, delayed or conditioned) shall be required with respect to any such additional lender if such consent would be required under the caption “Assignments and Participations” for an assignment to such additional lender.
The proceeds of the Incremental Facilities will be used for general corporate purposes of the Borrower and its subsidiaries (including for capital expenditures, acquisitions, restricted payments, refinancing of Indebtedness and any other transaction not prohibited by the Facilities Documentation). The Facilities Documentation shall be amended to give effect to any Incremental Facility by documentation executed by the Lenders making the commitments with respect thereto, the Administrative Agent and the Borrower and without the consent of any other existing Lender. The Facilities Documentation will also permit amendments thereof with the consent of only the Administrative Agent and the Borrower to permit extensions of credit under the Incremental Facilities and the accrued interest and fees in respect thereof to share in the benefits of the Facilities Documentation and to include the Lenders holding such facilities in the definition of Required Lenders and Majority Facility Lenders. |
B-5 |
In addition, the Borrower may, in lieu of adding Incremental Term Facilities, utilize any part of the Available Incremental Amount at any time by issuing or incurring Incremental Equivalent Term Debt, subject to customary terms and conditions (such as customary intercreditor documentation reasonably acceptable to the Administrative Agent, if applicable). | |
“Incremental Equivalent Term Debt” means Indebtedness in an amount not to exceed the then Available Incremental Amount consisting of the issuance of senior secured or junior lien notes, subordinated notes or senior unsecured notes, in each case issued in a public offering, Rule 144A or other private placement or bridge facility in lieu of the foregoing, or secured or unsecured “mezzanine” debt, in each case on customary terms and conditions; provided that (a) such Incremental Equivalent Term Debt shall not be subject to the requirement set forth in clause (h) or the proviso of clause (k) of the second paragraph in this “Incremental Facilities” section, (b) the maturity date of such Incremental Equivalent Term Debt shall be no earlier than the maturity date of the Term Facilities and (c) the weighted average life to maturity of such Incremental Equivalent Term Debt shall be no shorter than the remaining average life to maturity of the Term Facilities. | |
Refinancing Facilities: | The Facilities Documentation will permit the Borrower to refinance loans under the Term Facilities and any Incremental Term Facility or commitments under the Revolving Credit Facility from time to time, in whole or in part, with (a) one or more new term facilities (each, a “Refinancing Facility”) under the Facilities Documentation with the consent of the Borrower, the Administrative Agent (not to be unreasonably withheld, delayed or conditioned) and the entities providing Refinancing Facility, (b) other than in the case of the Revolving Credit Facility, one or more series of senior unsecured notes or loans, (c) other than in the case of the Revolving Credit Facility, one or more series of senior secured notes or loans that will be secured by the Collateral on a pari passu basis with the Credit Facilities, or (d) other than in the case of the Revolving Credit Facility, one or more series of junior lien senior secured notes or loans that will be secured on a subordinated basis to the Credit Facilities, which will be subject to customary intercreditor and/or subordination arrangements reasonably satisfactory to the Administrative Agent and the Borrower (any such notes or loans, “Term Refinancing Notes”), subject, in each case, solely to the following terms and conditions: (i) any such Refinancing Facility or Term Refinancing Notes shall not mature prior to the maturity date of, or have a shorter weighted average life to |
B-6 |
maturity than, the loans under the applicable Credit Facility or Incremental Facility being refinanced; (ii) any Refinancing Facility or Term Refinancing Notes shall not be guaranteed by any person that is not a Guarantor (as defined below); and (iii) to the extent secured, any Refinancing Facility or Term Refinancing Notes shall not be secured by any assets that do not constitute Collateral; (iv) the other terms and conditions of such Refinancing Facility or Term Refinancing Notes (excluding pricing and optional prepayment or redemption terms) shall be substantially identical to, or not materially more favorable (taken as a whole) to the lenders providing such Refinancing Facility or Term Refinancing Notes, as applicable, than those applicable to the Facility or Incremental Facility being refinanced are to the Lenders (except for covenants or other provisions applicable only to periods after the latest final maturity date of the Term Facilities or Incremental Facility existing at the time of such refinancing). | |
Letters of Credit: |
An aggregate amount to be agreed of the Revolving Credit Facility will be available to the Borrower and its subsidiaries for the purpose of issuing letters of credit. Letters of credit under the Revolving Facility will be issued by the Administrative Agent up to $50,000,000 (it being understood that the Administrative Agent shall only issue standby letters of credit) and/or Lenders reasonably acceptable to the Borrower and the Administrative Agent (such consent not to be unreasonably withheld or delayed) who agree to issue letters of credit (each an “Issuing Bank”)); provided that, no Issuing Bank shall be obligated to issue any letters of credit or fund participations in the reimbursement obligations of such letters of credit in an aggregate amount exceeding such Issuing Bank’s unused commitment under the Revolving Credit Facility on a pro rata basis. Each letter of credit shall expire not later than the earlier of (a) 12 months after its date of issuance or such longer period as may be agreed by the applicable Issuing Bank and (b) the third business day prior to the final maturity of the Revolving Facility; provided that any letter of credit may provide for renewal thereof for additional periods of up to 12 months or such longer period as may be agreed by the applicable Issuing Bank (which in no event shall extend beyond the date referred to in clause (b) above, except to the extent cash collateralized or backstopped pursuant to arrangements reasonably acceptable to the relevant Issuing Bank). The face amount of any outstanding letter of credit (and, without duplication, any unpaid drawing in respect thereof) will reduce availability under the Revolving Facility on a dollar-for-dollar basis.
Drawings under any letter of credit shall be reimbursed by the Borrower (whether with its own funds or with the proceeds of loans under the Revolving Facility) within one business day |
B-7 |
after notice of such drawing is received by the Borrower from the relevant Issuing Bank. The Revolving Lenders will be irrevocably and unconditionally obligated to acquire participations in each letter of credit, pro rata in accordance with their commitments under the Revolving Facility, and to fund such participations in the event the Borrower does not reimburse an Issuing Bank for drawings within the time period specified above.
If any Revolving Lender becomes a Defaulting Lender, then the letter of credit exposure of such defaulting Revolving Lender will automatically be reallocated among the non-defaulting Revolving Lenders pro rata in accordance with their commitments under the Revolving Facility up to an amount such that the revolving credit exposure of such non-defaulting Revolving Lender does not exceed its commitments. In the event that such reallocation does not fully cover the exposure of such defaulting Revolving Lender, the applicable Issuing Bank may require the Borrower to cash collateralize such “uncovered” exposure in respect of each outstanding letter of credit and will have no obligation to issue new letters of credit, or to extend, renew or amend existing letters of credit to the extent the letter of credit exposure would exceed the commitments of the non-defaulting Revolving Lenders, unless such “uncovered” exposure is cash collateralized to such Issuing Bank’s reasonable satisfaction. | |
Interest Rate and Fees: | As set forth in Annex I to this Exhibit B. |
Default Rate: | Upon the occurrence and during the continuance of (i) a principal payment or bankruptcy-related Event of Default, or (ii) any other payment Event of Default, at the election of Required Lenders, overdue principal shall bear interest at the applicable interest rate plus 2.0% per annum, and any other overdue interest and fees shall bear interest at the interest rate applicable to ABR loans (as defined in Annex I to this Exhibit B) plus 2.0% per annum, and in each case, shall be payable on demand and shall begin to accrue from the date of such Event of Default. |
Final Maturity and Amortization: | The Term A Loans will mature on the date that is five years after the Closing Date (the “Term Loan A Maturity Date”); provided that the Facilities Documentation shall provide the right for individual Lenders to agree to extend the maturity date of their outstanding Term A Loans upon the request of the Borrower and without the consent of any other Lender (subject to customary terms and conditions). The Term A Loans shall be payable in equal quarterly installments in an aggregate annual amount equal to (x) in respect of each of the first two years following the Closing Date, 5.0% of the original principal amount to the Term Loan A Facility and (y) |
B-8 |
in respect of each of the third, fourth and fifth year following the Closing Date, 10.0% of the original principal amount of the Term Loan A Facility with the balance payable on the Term Loan A Maturity Date; provided that if the Term Loan A Maturity Date for individual Lenders is extended beyond the fifth anniversary of the Closing Date, such extended Term A Loans shall be subject to amortization as agreed by the Borrower and such extending Lenders.
The Term B Loans will mature on the date that is seven years after the Closing Date (the “Term Loan B Maturity Date”); provided that the Facilities Documentation shall provide the right for individual Lenders to agree to extend the maturity date of their outstanding Term B Loans upon the request of the Borrower and without the consent of any other Lender (subject to customary terms and conditions). The Term B Loans shall be payable in equal quarterly installments in an aggregate annual amount equal to 1.0% of the original principal amount of the Term Loan B Facility with the balance payable on the Term Loan B Maturity Date; provided that if the Term Loan B Maturity Date for individual Lenders is extended beyond the seventh anniversary of the Closing Date, such extended Term B Loans shall be subject to amortization as agreed by the Borrower and such extending Lenders.
The Revolving Credit Facility will mature, and commitments thereunder will terminate, on the Term Loan A Maturity Date; provided that the Facilities Documentation shall provide the right for individual Revolving Lenders to agree to extend the maturity date of all or a portion of their Revolving Credit Facility commitments upon the request of the Borrower and without the consent of any other Revolving Lender (subject to customary terms and conditions). | |
Guarantees: | Subject to the Certain Funds Provisions, all obligations of the Borrower under the Credit Facilities and under any interest rate protection or other swap or hedging arrangements (other than any obligation of any Guarantor to pay or perform under any agreement, contract, or transaction that constitutes a “swap” within the meaning of section 1a(47) of the Commodity Exchange Act (a “Swap”), if, and to the extent that, all or a portion of the guarantee by such Guarantor of, or the grant by such Guarantor of a security interest to secure, such Swap (or any guarantee thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation, or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof)), or cash management arrangements entered into with a Lender, the Administrative Agent or any person that at the time such arrangements were entered into was an affiliate of a Lender or |
B-9 |
the Administrative Agent (“Hedging/Cash Management Arrangements”) will be unconditionally guaranteed jointly and severally on a senior secured basis by, subject to certain exceptions, each existing and subsequently acquired or organized direct or indirect wholly owned subsidiary of the Borrower organized under the laws of the United States or any state thereof (the “Guarantors”); provided that Guarantors shall not include, (a) immaterial subsidiaries (to be defined as set forth in the Existing Credit Agreement with such changes as may be mutually agreed consistent with the Documentation Principles), (b) any subsidiary that is prohibited or restricted by applicable law, rule or regulation or by any contractual obligation existing on the Closing Date or at the time of acquisition thereof after the Closing Date, in each case, from guaranteeing the Credit Facilities or which would require governmental (including regulatory) consent, approval, license or authorization to provide a bank guarantee unless such consent, approval, license or authorization has been received, (c) not-for-profit subsidiaries, if any, (d) any non-United States subsidiary for which the providing of a bank guarantee could reasonably be expected to result in any violation or breach of, or conflict with, fiduciary duties of such subsidiary’s officers, directors or managers, (e) any foreign subsidiary that is a controlled foreign corporation within the meaning of Section 957 of the Internal Revenue Code, as amended (a “CFC”), (f) any direct or indirect subsidiary of a CFC, (g) any direct or indirect subsidiary of the Borrower or a Guarantor that owns no material assets other than equity interests in one or more subsidiaries that are CFCs (a “CFC Holdco”) or another CFC Holdco, (h) certain special purpose entities, (i) any subsidiary acquired pursuant to an acquisition permitted under the Facilities Documentation financed with secured Indebtedness permitted to be incurred pursuant to the Facilities Documentation as assumed Indebtedness (and not incurred in contemplation of such acquisition) and any subsidiary thereof that guarantees such Indebtedness, in each case to the extent such secured Indebtedness prohibits such subsidiary from becoming a Guarantor) and subject to a cap to be agreed and (j) certain other subsidiaries as set forth in the Facilities Documentation to be agreed. | |
Security: | Subject to the limitations set forth below and subject to the Certain Funds Provisions, the obligations of the Borrower and the Guarantors in respect of the Credit Facilities and the Hedging/Cash Management Arrangements shall be secured by (a) a perfected pledge of the equity securities of each Guarantor and of each direct, subsidiary of the Borrower, and of each subsidiary Guarantor (which pledge, (i) in the case of voting equity interests in any CFC or any CFC Holdco, shall be limited to 65% of the voting equity interests in such |
B-10 |
subsidiary and (ii) shall not extend to any equity interest in any direct or indirect subsidiary of a CFC) (provided that except as set forth below, any such pledge of the equity securities of a subsidiary (other than Guarantor) organized under laws other than the United States or any state thereof shall not be required to be perfected under the laws of their jurisdiction of organization), and (b) perfected security interests in, and mortgages on, substantially all tangible and intangible personal property and material fee-owned real property of the Borrower and each subsidiary Guarantor (including but not limited to accounts receivable, inventory, equipment, general intangibles (including contract rights), investment property, intellectual property, material intercompany notes and proceeds of the foregoing) (the items described in clauses (a) and (b) above, but excluding the Excluded Assets (as defined below), collectively, the “Collateral”).
Notwithstanding anything to the contrary, the Collateral shall exclude the following: (i) any fee-owned real property with a fair market value of less than $10,000,000 (with all required mortgages being permitted to be delivered post-closing) and all real property leasehold interests (including requirements to deliver landlord lien waivers, estoppels and collateral access letters); (ii) motor vehicles and other assets subject to certificates of title to the extent a lien thereon cannot be perfected by filing a UCC financing statement; (iii) pledges and security interests prohibited by applicable law, rule or regulation; (iv) equity interests in any person other than wholly owned subsidiaries to the extent not permitted by the terms of such person’s organizational or joint venture documents; (v) any lease, license or other agreement or any property subject to a purchase money security interest or similar arrangement to the extent that a grant of a security interest therein would violate or invalidate such lease, license or agreement or purchase money arrangement or create a right of termination in favor of any other party thereto (other than the Borrower or a Guarantor) (in each case, except to the extent such prohibition is unenforceable after giving effect to the applicable anti-assignment provisions of the Uniform Commercial Code other than proceeds and receivables thereof, the assignment of which is expressly deemed effective under the Uniform Commercial Code notwithstanding such prohibition); (vi) those assets as to which the Administrative Agent and the Borrower reasonably agree that the cost of obtaining such a security interest or perfection thereof are excessive in relation to the benefit to the Lenders of the security to be afforded thereby; (vii) any governmental licenses or state or local franchises, charters and authorizations, to the extent security interests in such licenses, franchises, charters or authorizations are prohibited or |
B-11 |
restricted thereby (in each case, except to the extent such prohibition is unenforceable after giving effect to the applicable anti-assignment provisions of the Uniform Commercial Code other than proceeds and receivables thereof, the assignment of which is expressly deemed effective under the Uniform Commercial Code notwithstanding such prohibition); (viii) “intent-to-use” trademark applications; (ix) other customary exclusions under applicable local law or in applicable local jurisdiction as mutually agreed by the Administrative Agent and the Borrower; (x) margin stock; (xi) any voting equity interests of a CFC or any CFC Holdco in excess of 65% of such equity interests; (xii) assets to the extent a security interest in such assets would result in material adverse tax consequences or material adverse regulatory consequences, in each case, as reasonably determined by the Borrower and notified to the Administrative Agent; and (xiii) other exceptions to be mutually agreed upon (the foregoing described in clauses (i) through (xiii) are, collectively, the “Excluded Assets”). In addition, in no event shall (a) control agreements or control or similar arrangements be required with respect to deposit or securities accounts, (b) notices be required to be sent to account debtors or other contractual third-parties prior to the occurrence and during the continuance of an event of default or (c) perfection (except to the extent perfected through the filing of Uniform Commercial Code financing statements) be required with respect to letter of credit rights and commercial tort claims. All the above-described pledges, security interests and mortgages shall be created on terms to be set forth in the Facilities Documentation; and none of the Collateral shall be subject to other pledges, security interests or mortgages (except permitted liens and other exceptions and baskets to be set forth in the Facilities Documentation). | |
Mandatory Prepayments: | The Term B Loans shall be prepaid, on a ratable basis, with, commencing with the 2017 fiscal year, 50% of Excess Cash Flow (to be defined in a manner consistent with the Existing Credit Agreement except as provided below or as mutually agreed), stepping down to 0% upon achievement of a Consolidated Net Leverage Ratio equal to or less than 3.00:1.00; provided that, for any fiscal year, (x) any voluntary prepayments of loans under the Term Facilities (or any Incremental Term Facility) and Revolving Credit Facility (to the extent commitments thereunder are permanently reduced by the amount of such prepayments) or open market or dutch auction repurchases of Term Loans to the extent of the cash payments made in connection therewith, made during such fiscal year or, without giving duplicative effect, after year-end |
B-12 |
and prior to the time such Excess Cash Flow prepayment is due, other than prepayments funded with the proceeds of incurrences of long term Indebtedness, issuances of equity and non-ordinary course asset sales and insurance and condemnation proceeds, shall be credited against Excess Cash Flow prepayment obligations on a dollar-for-dollar basis for such fiscal year (without duplication of any such credit in any prior or subsequent fiscal year) and (y) Excess Cash Flow shall be reduced for, among other things, cash used for capital expenditures, certain permitted investments, permitted acquisitions and certain restricted payments to be agreed, in each case, to the extent financed with internally generated funds made during such fiscal year.
The Loans shall be prepaid with:
(a) 100% of the net cash proceeds of all non-ordinary course asset sales by the Borrower and its subsidiaries (including insurance and condemnation proceeds, but with exceptions for ordinary course dispositions, dispositions of obsolete or worn-out property and property no longer useful in the business, and other exceptions consistent with the Documentation Principles) subject to thresholds to be mutually agreed and the right of the Borrower to reinvest 100% of such proceeds, if such proceeds are reinvested (or committed to be reinvested) within 12 months and, if so committed to be reinvested, so long as such reinvestment is actually completed within 180 days after the expiration of such 12-month period; and
(b) 100% of the net cash proceeds of issuances of debt obligations of the Borrower and its subsidiaries after the Closing Date (other than debt permitted under the Facilities Documentation (excluding the proceeds of any Refinancing Facility or Term Refinancing Notes)).
Mandatory prepayments shall be applied, without premium or penalty, subject to reimbursement of the Lenders’ usual and customary breakage costs (excluding loss of profit), in the case of a prepayment of Adjusted LIBOR borrowings other than on the last day of the relevant interest period, (x) in the case of an Excess Cash Flow prepayment, to the Term B Loans pro rata to the remaining scheduled amortization payments under the Term Loan B Facility (including any Incremental Term Facility) and (y) in the case of any other mandatory prepayment, first, ratably to the Term A Loans and the Term B Loans, in each case pro rata to the remaining scheduled amortization payments under such Term Facility |
B-13 |
(including any Incremental Term Facility), then, ratably to the Revolving Loans (without any permanent reduction of the commitments under the Revolving Credit Facility).
Any Lender may elect not to accept its pro rata portion of any mandatory prepayment other than a mandatory prepayment with proceeds of any Refinancing Facility or other indebtedness permitted under the Facilities Documentation that is incurred for the purpose of refinancing Loans (each, a “Declining Lender”). Any prepayment amount declined by a Declining Lender may be retained by the Borrower.
Prepayments from subsidiaries’ Excess Cash Flow and asset sale proceeds will be limited under the Facilities Documentation to the extent such prepayments (including the repatriation of cash in connection therewith) would (a) be prohibited or delayed by applicable law or (b) result in material adverse tax consequences. | |
Voluntary Prepayments: |
Voluntary prepayments of loans under the Revolving Credit Facility, Term Facilities and any Incremental Term Facilities will be permitted at any time, in minimum principal amounts to be mutually agreed upon, without premium or penalty, subject to reimbursement of the Lenders’ usual and customary breakage costs actually incurred (excluding loss of profit) in the case of a prepayment of Adjusted LIBOR borrowings other than on the last day of the relevant interest period.
All voluntary prepayments of loans under the Term Facilities will be applied as directed by the Borrower (and absent such direction, in direct order of maturity thereof).
In the event that a Repricing Event (as defined below) occurs on or prior to the date that is six months after the Closing Date, a 1.00% prepayment premium shall be paid on the principal amount of Term B Loans prepaid, repaid, assigned or subject to an amendment.
"Repricing Event" shall mean (i) any prepayment or repayment of Term B Loans, in whole or in part, with the proceeds of, or conversion of any portion of any tranche of Term B Loans into, any new or replacement tranche of syndicated term loans under credit facilities bearing interest with an all-in yield less than the all-in yield applicable to such portion of the Term B Loans (as such comparative yields are determined in the reasonable judgment of the Administrative Agent consistent with generally accepted financial practices) and (ii) any amendment to the Term Loan B Facility which reduces the all-in yield applicable to the Term B Loans, but excluding, in any such case, any new or replacement syndicated term loans incurred in connection with a change of control, initial public offering or a transformative acquisition. |
B-14 |
If on or prior to the date that is six months after the Closing Date any Lender is forced to assign its loans under the First Term Loan B Facility following the failure of such Lender to consent to an amendment of the definitive documentation for the Term Loan B Facility that would have the effect of reducing the all-in yield applicable to such loans, such Lender shall be paid a 1.00% fee on the principal amount of the Term B Loans so assigned. | |
Facilities Documentation: |
The definitive documentation for the Credit Facilities (the “Facilities Documentation”) shall be subject to the Documentation Principles.
Notwithstanding anything to the contrary in the Commitment Letter, all leases of the Borrower and its subsidiaries that would be treated as operating leases for purposes of GAAP as in effect on the date hereof shall continue to be accounted for as operating leases for purposes of the Facilities Documentation, regardless of any change to GAAP following such date that would otherwise require such leases to be treated as capital leases.
Consolidated total assets and financial ratios will be calculated on a pro forma basis.
The representations and warranties, covenants and events of default contained in the Facilities Documentation shall consist solely of the provisions described below, in each case, applicable to the Borrower and the Borrower’s subsidiaries.
|
Representations and Warranties: | Consistent with the Documentation Principles and limited to the following (to be applicable to the Borrower and its subsidiaries only and subject, in each case, to materiality thresholds, baskets and other exceptions and qualifications to be agreed upon): organizational status and good standing; power and authority, execution, delivery and enforceability of Facilities Documentation; with respect to Facilities Documentation, no violation of, or conflict with, law, organizational documents or material agreements; compliance with law (including PATRIOT Act); no litigation that could reasonably be expected to have a Material Adverse Effect (to be defined in a manner mutually agreed which shall in no event be less favorable to the Borrower than the Existing Credit Agreement definition); margin regulations; investment company act; material governmental approvals; after the Closing Date, no material adverse change since the date of the most recent audited financial statements delivered prior to the Closing Date; materially accurate and complete disclosure in all material respects; insurance; taxes; ERISA; equity interest and ownership of subsidiaries; intellectual property; environmental laws; use of proceeds; ownership of properties; |
B-15 |
subject to the Certain Funds Provisions and the restrictions described under the caption “Security”, creation, validity and perfection of liens and other security interests; consolidated Closing Date solvency of the Borrower and its subsidiaries; and Patriot Act, OFAC, FCPA and anti-money laundering laws. | |
Conditions to Initial Borrowing: | The availability of the borrowing and other extensions of credit under the Credit Facilities on the Closing Date will be subject solely to the applicable conditions set forth in Section 6 (including by reference to Exhibit C) of the Commitment Letter and, subject to the Certain Funds Provisions, clause (a) below under “Conditions to All Borrowings”. |
Conditions to All Borrowings: |
The making of each extension of credit under the Credit Facilities shall be conditioned upon (a) subject to the Certain Funds Provisions (in the case of an extension of credit on the Closing Date), delivery of a customary borrowing notice, (b) after the Closing Date, the accuracy of representations and warranties in all material respects and (c) after the Closing Date, the absence of defaults or events of defaults at the time of, and after giving effect to the making of, such extension of credit.
|
Affirmative Covenants: | Consistent with the Documentation Principles and limited to the following (to be applicable to the Borrower and its subsidiaries only and subject, in each case, to materiality thresholds, baskets and other exceptions and qualifications to be agreed upon): delivery of annual audited and quarterly unaudited consolidated financial statements (limited, in the case of quarterly financial statements, to the first three fiscal quarters of a fiscal year only), and, in the case of the annual financial statements, an opinion of an independent accounting firm (which opinion shall not be subject to any “going concern” or like qualification or exception (other than a “going concern” or like qualification or exception resulting solely from (x) an upcoming maturity date under the Credit Facilities occurring within one year from the time such opinion is delivered or (y) or any prospective or actual default of any financial covenant under the Facilities Documentation)); annual budget reports (with delivery time periods to be consistent with the delivery requirements for the audited financial statements); notices of knowledge of events of default, ERISA events and litigation that could reasonably be expected to result in a Material Adverse Effect; commercially reasonable efforts to maintain public ratings; maintenance of property (subject to casualty, condemnation and normal wear and tear) and customary insurance; visitation rights; maintenance of existence; maintenance of books and records; payment of taxes; compliance with laws and |
B-16 |
regulations (including ERISA, environmental and PATRIOT Act); OFAC, FCPA and anti-money laundering laws; additional Guarantors and Collateral (subject to limitations set forth under the caption “Security”); use of proceeds; annual lender calls and, at the reasonable request of the Administrative Agent, quarterly lender calls; and further assurances on collateral matters. | |
Negative Covenants: |
Consistent with the Documentation Principles and limited to the following (except as otherwise expressly indicated, to be applicable to the Borrower and its subsidiaries):
Indebtedness. The Borrower shall not, nor shall it permit any of its subsidiaries to, directly or indirectly, create, incur, assume or guaranty, or otherwise become or remain directly or indirectly liable with respect to any Indebtedness, except:
1. obligations under the Credit Facilities, any Incremental Facilities, and Refinancing Facilities (and Term Refinancing Notes);
2. obligations under Incremental Equivalent Debt;
3. intercompany Indebtedness among the Borrower and its wholly-owned subsidiaries, and (ii) intercompany Indebtedness owing by any non-wholly-owned subsidiary that is not a Guarantor to the Borrower or another Guarantor (together with investments in non-Guarantor non-wholly-owned subsidiaries permitted under “Investments” below (considered without double-counting)) to an aggregate amount not to exceed, in the case of this clause (ii), $175.0 million;
4. any Indebtedness permitted to survive after the Closing Date under the terms of the Acquisition Agreement;
5. Indebtedness with respect to capital leases and purchase money Indebtedness in an aggregate amount not to exceed $75.0 million at any time;
6. Indebtedness of a person existing at the time such person became a subsidiary of the Borrower or any Guarantor in an aggregate principal amount not to exceed $100.0 million;
7. Junior Indebtedness so long as, on a pro forma basis after giving effect to such incurrence, the Borrower would be in compliance with the Financial Covenants; |
B-17 |
8. Indebtedness of foreign subsidiaries of the Borrower in an aggregate amount not to exceed $100.0 million at any time;
9. Indebtedness in an aggregate amount not to exceed $100.0 million at any time; and
10. other customary exceptions and exceptions consistent with the Documentation Principles.
Liens. The Borrower shall not, nor shall it permit any of its subsidiaries to, directly or indirectly, create, incur or assume any lien on or with respect to any of its properties or assets except:
1. liens securing the Credit Facilities, any Incremental Facilities, Refinancing Facilities and Indebtedness of the Borrower and its subsidiaries permitted under the Acquisition Agreement to remain outstanding after the Closing Date;
2. liens securing Incremental Equivalent Debt;
3. liens securing Indebtedness described in clauses 5, 6 and 7 under the caption “Indebtedness” above subject to terms and conditions consistent with the Existing Credit Agreement or as mutually agreed;
4. liens on assets of foreign subsidiaries of the Borrower to the extent the Indebtedness secured thereby is permitted and does not exceed $100.0 million in the aggregate at any time;
5. liens not otherwise permitted so long as the aggregate amount secured thereby does not exceed $100.0 million at any time; and
6. other customary permitted liens consistent with the Documentation Principles.
Dispositions. The Borrower shall not, nor shall it permit any of its subsidiaries to, sell, transfer or otherwise dispose of all or any part of its business, assets or property, except:
1. dispositions not to exceed the greater of (i) 25% of the consolidated total assets of the Borrower in the aggregate for any fiscal year of the Borrower and (ii) $10.0 million in any fiscal year of the Borrower, so long as at least 75% of the consideration is in the form of cash or cash equivalents or exchanged for |
B-18 |
other useful assets;
2. dispositions of real property owned in fee for fair market value not to exceed $25.0 million in the aggregate for all such dispositions; and
3. other customary exceptions and exceptions consistent with the Documentation Principles.
Investments. The Borrower shall not, nor shall it permit any of its subsidiaries to, directly or indirectly, make or own any investment in any other person, except:
1. (i) intercompany investments among the Borrower and its wholly-owned subsidiaries (including intercompany loans), and (ii) intercompany investments by the Borrower or any Guarantor in any non-wholly-owned subsidiary that is not a Guarantor, in an aggregate amount not to exceed, in the case of this clause (ii), $175.0 million at any time (together with intercompany Indebtedness of non-Guarantor non-wholly owned subsidiaries permitted under “Indebtedness” above (considered without double-counting);
2. loans and advances to officers, directors, employees and consultants of the Borrower (or any direct or indirect parent thereof) and its subsidiaries in an aggregate amount not to exceed $5.0 million at any time;
3. acquisitions (“Permitted Acquisitions”); provided that (a) no event of default has occurred and is continuing immediately before any such acquisition or investment or would result immediately after giving effect to such acquisition or investment, (b) on a pro forma basis after giving effect to such acquisition, the Borrower would be in compliance with the Financial Covenants and (c) with respect to the acquisitions of entities that do not become Guarantors, the total consideration paid will respect to such entities (exclusive of consideration consisting of common stock of the Borrower or the Available Amount) shall not exceed (i) $450 million plus (ii) an unlimited amount so long as the Consolidated Net Leverage Ratio is less than or equal to 3.00:1.00; provided, further, that clause (c) of this proviso shall not apply to acquisitions where the target is a domestic entity who becomes a Guarantor and where the subsidiaries of such target who do not become Guarantors together with their assets do not comprise a substantial portion |
B-19 |
of the assets of such target and its subsidiaries taken as a whole as further set forth in the Facilities Documentation;
4. investments in cash and cash equivalents;
5. so long as no event of default has occurred and is continuing, additional investments out of the Available Amount Basket (as defined below);
6. so long as no event of default has occurred and is continuing and the Consolidated Net Leverage Ratio is less than or greater than 3.00:1.00, additional investments;
7. additional investments in an aggregate amount (valued at cost, if applicable) not to exceed $50,000,000 at any time outstanding; and
8. other customary exceptions and exceptions consistent with the Documentation Principles.
In addition, the Borrower shall be permitted to designate unrestricted subsidiaries in an aggregate amount to be mutually agreed. Notwithstanding anything herein to the contrary, the provisions of the Facilities Documentation shall be revised as customary to include the concept of unrestricted subsidiaries and exclude unrestricted subsidiaries from the covenant package as shall be mutually agreed.
Restricted Payments. The Borrower shall not, nor shall it permit any of its subsidiaries to, pay any dividends or distributions on, or redemptions of, the Borrower’s or such subsidiary’s equity, except:
1. restricted payments to pay cash payments in lieu of issuing fractional shares in connection with the exercise of warrants, options or other securities convertible into or exchangeable for equity interests of the Borrower;
2. restricted payments consisting of the cashless exercise of options and warrants of the equity interests of Borrower or any of its subsidiaries;
3. (i) restricted payments by the Borrower to (i) purchase capital stock from present or former officers, directors, employees or consultants of the Borrower or any of its subsidiaries upon the death, disability or |
B-20 |
termination of employment or services of such individual, and (ii) redeem or otherwise acquire capital stock from the employees, officers, directors and consultants of the Borrower or any of its subsidiaries by net exercise, net withholding or otherwise, pursuant to the terms of any employee stock option, incentive stock or other equity-based plan or arrangement (provided, that the aggregate amount of payments under clauses (i) and (ii) shall not exceed $5.0 million in any fiscal year of the Borrower and $10.0 million over the life of the Credit Facilities plus, in each case, any proceeds received by the Borrower after the Closing Date in connection with the issuance of common equity that are used for the purposes described in this clause 3);
4. exceptions for restricted payments by subsidiaries shall be consistent with the Existing Credit Agreement with such changes as may be mutually agreed;
5. so long as no event of default has occurred and is continuing and the Consolidated Net Leverage Ratio is equal to or less than 4.00:1.00, other restricted payments out of the Available Amount Basket;
6. so long as no event of default has occurred and is continuing and the Consolidated Net Leverage Ratio is equal to or less than 3.00:1.00, other restricted payments; and
7. other customary exceptions and exceptions consistent with the Documentation Principles.
Payments on/modifications to Subordinated or Junior Lien Debt. The Borrower shall not, nor shall it permit any of its subsidiaries to, directly or indirectly: (a) make payments in cash on any permitted subordinated or junior lien debt (other than (i) regularly scheduled payments of principal and interest, mandatory offers to repay or mandatory prepayments of principal, premium and interest, and payment of fees, expenses and indemnification obligations, (ii) refinancings, conversions or exchanges of such debt for like or junior debt, subject to conditions to be agreed, (iii) payments with, or conversions to, equity (other than disqualified stock), or (iv) other payments of such debt to be mutually agreed upon); provided that notwithstanding the foregoing, so long as no event of default has occurred and is continuing, repayments or redemptions of other debt shall be permitted out of the Available Amount Basket and shall be permitted if restricted payments are permitted under clause 5 under the caption |
B-21 |
“Restricted Payments” above; or (b) modify the terms of any permitted subordinated or junior lien debt to the extent such modification is materially adverse to the Lenders (it being understood that the foregoing limitation shall not otherwise prohibit debt refinancing or replacing or in exchange for the foregoing debt subject to limitations to be agreed upon).
Sale and Leaseback Transactions. The Borrower shall not, nor shall it permit any of its subsidiaries to, directly or indirectly, enter into any sale and leaseback transaction, except customary exceptions and exceptions consistent with the Documentation Principles.
Transactions with Affiliates. The Borrower shall not, nor shall it permit any of its subsidiaries to, directly or indirectly, enter into or permit to exist any transaction with any affiliate of the Borrower on terms that are materially less favorable to the Borrower or such subsidiary, as the case may be, than those that might be obtained at the time from a person who is not such an affiliate; provided that the foregoing restriction shall not apply to:
1. transactions among the Borrower and the Guarantors (collectively, “Loan Parties”);
2. transactions among non-Loan Parties;
3. transactions expressly permitted under other provisions of the negative covenants; and
4. other customary exceptions and exceptions consistent with the Documentation Principles.
Negative Pledge Restrictions. The Borrower shall not, nor shall any of its subsidiaries enter into any agreement prohibiting the creation or assumption of any lien upon any of its properties or assets to secure the obligations under the Credit Facilities or restricting distributions by subsidiaries, subject to customary exceptions and exceptions consistent with the Documentation Principles.
Nature of Business. The Borrower shall not, nor shall it permit any of its subsidiaries to, engage in any business other than the businesses engaged in on the Closing Date and similar, corollary, related, incidental, ancillary or complementary businesses.
Fiscal Year. The Borrower shall not change its fiscal year end.
Fundamental Changes. The Borrower shall not, nor shall it |
B-22 |
permit any of its subsidiaries to, enter into any transaction of merger or consolidation, or liquidate, wind-up or dissolve itself (or suffer any liquidation or dissolution) or sell, transfer or otherwise dispose of all or substantially all of its assets, subject to customary exceptions and exceptions consistent with the Documentation Principles.
Amendment and Waivers of Organizational Documents. The Borrower shall not, nor shall it permit any Loan Party or any subsidiary whose equity is pledged as part of the Collateral to amend, waive or otherwise modify any provision of such person’s organizational documents if such amendment, waiver or modification could reasonably be expected to have a Material Adverse Effect.
“Available Amount Basket” shall mean a cumulative amount equal to (a) an amount equal to $100 million, plus (b) the retained portion of Excess Cash Flow (i.e., Excess Cash Flow as defined for purposes of the Excess Cash Flow mandatory prepayment requirements set forth herein and not otherwise applied to mandatorily prepay the Term B Loans; provided that the retained portion of Excess Cash Flow for any fiscal year shall not be less than zero), plus (c) the cash proceeds of new public or private equity issuances of the Borrower or any parent of the Borrower (other than disqualified stock, any equity contributed as a Specified Equity Contribution (as defined below) to the extent the proceeds thereof are contributed to the Borrower as qualified equity and equity used to incur Equity Proceeds Indebtedness (to be defined as mutually agreed)), plus (d) capital contributions to the Borrower made in cash or cash equivalents (other than in respect of disqualified stock, any equity contributed as a Specified Equity Contribution and any capital contributions used to incur Equity Proceeds Indebtedness), plus (e) returns, profits, distributions and similar amounts received in cash or cash equivalents by the Borrower and its subsidiaries on or proceeds of dispositions of investments made using the Available Amount Basket, plus (f) the aggregate amount of Indebtedness (other than Indebtedness owing to the Borrower or any of its subsidiaries) that has been converted into or exchanged for equity interests (other than disqualified stock) of the Borrower, plus (g) any mandatory prepayment amount declined by a Declining Lender.
The Available Amount Basket may be used for investments, restricted payments and the prepayment, repurchase or redemption of junior capital/subordinated debt or other Indebtedness as provided above. | |
Financial Covenants: | Consistent with the Documentation Principles, the Facilities Documentation will contain the following financial covenants |
B-23 |
(the “Financial Covenants”) which will be calculated on a pro forma basis with regard to the Borrower and its subsidiaries on a consolidated basis, solely for the benefit of the Revolving Lenders and the Lenders under the Term Loan A Facility:
(a) Maintenance of a maximum Consolidated Net Leverage Ratio of no greater than (i) during the period from the Closing Date through the end of the fiscal quarter ending after the second year anniversary of the Closing Date, 5.00:1.00, (ii) during the period commencing after the end of the period described in clause (i) through the end of the fiscal quarter ending after the third anniversary of the Closing Date, 4.50:1.00 and (iii) thereafter, 4.00:1.00, which ratio will be applicable only to the Revolving Credit Facility and the Term Loan A Facility and will be tested, commencing with the first full fiscal quarter after the Closing Date provided that the Borrower shall be permitted one time at the Borrower’s election (upon written notice to the Administrative Agent) during the term of the Credit Facilities, solely in connection with a permitted acquisition with cash (or cash-equivalent) consideration in excess of $50,000,000, to increase the maximum Consolidated Net Leverage levels set forth above by 0.50x for the next four test periods following the closing date of such acquisition (stepping down by 0.25x on an annual basis following the completion of such four test periods (to no less than 4.00:1.00)); provided, further, that in no event shall such Consolidated Leverage Ratio level be set above 5.00:1.00.
(b) Maintenance of a minimum Fixed Charge Coverage Ratio (as defined below) of no less than 1.25:1.00, which ratio will be applicable only to the Revolving Credit Facility and the Term Loan A Facility and will be tested, commencing with the first full fiscal quarter after the Closing Date. | |
Financial Definitions: | “Consolidated EBITDA” means, for any period, for the Borrower and its subsidiaries on a consolidated basis, without duplication, an amount equal to Consolidated Net Income (to be defined in a manner consistent with Documentation Principles) for such period plus (a) the following to the extent deducted in calculating such Consolidated Net Income: (i) interest expense, amortization or writeoff of debt discount and debt issuance costs and commissions, discounts and other fees and charges associated with Indebtedness (including the Loans) for such period, (ii) the provision for federal, state, local and foreign income taxes payable by the Borrower and |
B-24 |
its subsidiaries for such period, (iii) depreciation and amortization expense, (iv) non-cash stock-based compensation expense for such period, (v) all extraordinary, unusual or nonrecurring losses, expenses and charges, (vi) any restructuring charges and reserves and any losses on related sales of personal and real property, including any charges and losses incurred in connection with the closure of any operational facilities of the Borrower and its subsidiaries for such period, (vii) effects of adjustments in any line item in the Borrower’s consolidated financial statements resulting from the application of purchase accounting (including any step-ups with respect to re-valuing assets and liabilities) in relation to the Transactions and any investment, acquisition, merger or consolidation or the depreciation, amortization or write-off of any amounts thereof, (viii) customary costs and expenses incurred in connection with the Transactions, (ix) all customary costs and expenses incurred or paid in connection with permitted investments (including Permitted Acquisitions) or permitted dispositions whether or not such permitted investment or permitted disposition is consummated or occurred or occurs prior to or after the date hereof, including, without limitation, the Acquisition, (x) all customary costs and expenses incurred in connection with the issuance, prepayment or amendment or refinancing of permitted Indebtedness or issuance of capital stock, including, without limitation, the Acquisition, (xi) other expenses of the Borrower and its subsidiaries reducing such Consolidated Net Income which do not represent a cash item in such period or any future period and (xii) the aggregate net loss on the disposition of property (other than accounts (as defined in the Uniform Commercial Code) and inventory) outside the ordinary course of business, and less (b) the following to the extent added in calculating such Consolidated Net Income (A) all interest income for such period, (B) all income tax benefits included in Consolidated Net Income for such period, (C) non-cash purchase accounting adjustments, (D) the aggregate net gain from the disposition of property (other than accounts (as defined in the Uniform Commercial Code) and inventory) outside the ordinary course of business, all as determined on a consolidated basis and (E) all non-cash items increasing Consolidated Net Income which do not represent a cash item in such period or any future period.
“Consolidated Fixed Charge Coverage Ratio” means, for any period of four consecutive fiscal quarters, the ratio of (a) Consolidated EBITDA for such period to (b) Consolidated Fixed Charges (as defined below) for such period.
“Consolidated Fixed Charges” means, for any period, the sum (without duplication) of (a) Consolidated Interest Expense (to be defined in a manner consistent with the |
B-25 |
Documentation Principles) for such period, (b) scheduled amortization payments made during such period on account of principal of Indebtedness of the Borrower or any of its subsidiaries (including scheduled amortization principal payments in respect of the Term Loans but excluding the Revolving Loans), (c) income taxes paid in cash during such period, (d) Capital Expenditures (to be defined in a manner consistent with the Documentation Principles) paid in cash during such period (excluding the principal amount of Indebtedness incurred during such period to finance such expenditures, but including any repayments of any Indebtedness incurred during such period or any prior period to finance such expenditures), and (e) restricted payments pursuant to clauses (3) and (5) under the caption “Restricted Payments” paid in cash during such period.
“Consolidated Funded Debt” shall be defined in a manner consistent with the Documentation Principles.
“Consolidated Net Leverage Ratio” means at any date, the ratio of (a) the total of (i) Consolidated Funded Debt as of such date minus (ii) unrestricted cash and cash equivalents of the Borrower and its subsidiaries as of such date up to $300 million to (b) Consolidated EBITDA for the period of four consecutive fiscal quarters ended on such date (or, if such date is not the last day of any fiscal quarter, the most recently completed fiscal quarter for which financial statements are required to have been delivered to the Administrative Agent).
“Indebtedness” shall be defined in a manner consistent with the Documentation Principles.
“Material Acquisition” means the Acquisition and any other acquisition of property or series of related acquisitions of property that (1) constitutes assets comprising all or substantially all of an operating unit of a business or constitutes all or substantially all of the equity interests of a person and (2) involves the payment of consideration by the Borrower and its subsidiaries in excess of $20,000,000.
“Material Disposition” means any disposition of property or series of related dispositions of property that yields gross proceeds to the Borrower or any of its subsidiaries in excess of $20,000,000.
“pro forma basis” or “pro forma effect” means, with respect to compliance with any test or covenant, compliance with such test or covenant after giving effect to (i) any Material Acquisition, (ii) any incurrence or repayment of Indebtedness or (iii) any Material Disposition (including (a) pro forma adjustments arising out of events which are directly attributable to any proposed Material Acquisition, any |
B-26 |
incurrence or repayment of Indebtedness or any Material Disposition, are factually supportable and are expected to have a continuing impact, in each case as determined on a basis consistent with Article 11 of Regulation S-X of the Securities Act of 1933, as amended, as interpreted by the staff of the Securities and Exchange Commission, (b) pro forma adjustments determined in good faith by the Borrower that are consented to by the Administrative Agent (such consent not to be unreasonably withheld) arising out of operating and other expense reductions attributable to such transaction being given pro forma effect that (1) have been realized or (2) will be implemented within 18 months following such transaction and are supportable and quantifiable and, in each case, including (A) reduction in personnel expenses, (B) reduction of costs related to administrative functions, (C) reduction of costs related to leased or owned properties and (D) reductions from the consolidation of operations and streamlining of corporate overhead, and (c) such other adjustments as determined in good faith by the Borrower that are consented to by the Administrative Agent (such consent not to be unreasonably withheld), in each case as certified by an officer of the Borrower) using, for purposes of determining such compliance, the historical financial statements of all entities or assets so acquired and the consolidated financial statements of the Borrower and its subsidiaries and assuming that all Material Acquisitions that have been consummated during the period, any Material Disposition and any Indebtedness or other liabilities repaid in connection therewith had been consummated and incurred or repaid at the beginning of such period (and assuming that such Indebtedness to be incurred bears interest during any portion of the applicable measurement period prior to the relevant acquisition at the interest rate which is or would be in effect with respect to such Indebtedness as at the relevant date of determination). | |
Events of Default: | Limited to the following (except as otherwise expressly indicated, to be applicable to the Loan Parties): failure to pay any principal when due; non-payment of interest, fees or other amounts after a five business day grace period; default under any covenant or agreement in the Facilities Documentation (subject (i) in the case of certain affirmative covenants, to a 30 day grace period or, in the case of certain other affirmative covenants, a shorter grace period and (ii) with respect to the Financial Covenants, a breach shall only result in an event of default with respect to the Term Loan B Facility when the Revolving Lenders and Lenders under the Term Loan A Facility have terminated the commitments under the Revolving Credit Facility and accelerated any Revolving Loans and Term A Loans then outstanding); actual or asserted |
B-27 |
invalidity of a material Guarantor’s guaranty or material security interest; inaccuracy of representations or warranties in any material respect; cross-default and cross-acceleration to other Indebtedness in excess of $75 million, insolvency or bankruptcy of the Borrower or its material subsidiaries (with a 60 day grace period for involuntary events); ERISA events with respect to the Borrower and its subsidiaries that could reasonably be expected to result in a Material Adverse Effect; change of control (to be defined in a mutually satisfactory manner which shall be no less favorable to the Borrower than the definition in the Existing Credit Agreement); and monetary judgments in respect of the Borrower and its subsidiaries (not vacated, discharged, stayed or bonded pending appeal within 30 days) in an amount in excess of $75 million (to the extent not covered by insurance). | |
Voting: | Amendments and waivers of the Facilities Documentation will require the approval of Lenders holding more than 50% of the aggregate amount of the loans and commitments under the Credit Facilities (the “Required Lenders”); provided that (a) the consent of each Lender directly and adversely affected thereby shall be required with respect to (i) increases in or extensions of the commitment of such Lender, (ii) reductions of principal, interest (other than a waiver of default interest) or fees (it being understood that an amendment to the Financial Covenants or defined terms used in the Financial Covenants shall not constitute a reduction in the rate of interest or fees), (iii) extensions of any scheduled amortization payments, the date for payment of any interest or fees or the final maturity and (iv) changes to the pro rata sharing provisions (with exceptions for certain transactions to be agreed, including amend and extend transactions) ); provided that no amendment or waiver of a required mandatory prepayment or the mandatory prepayment provisions or related definitions shall constitute an amendment or waiver to which this clause (a) is applicable, (b) the consent of 100% of the Lenders will be required with respect to (i) modifications to any of the voting percentages and (ii) releases of all or substantially all Guarantors or releases of all or substantially all of the Collateral (other than in connection with any sale of Collateral or of the relevant Guarantor permitted by the Facilities Documentation), (c) the consent of the Administrative Agent shall be required for any amendment that modifies agency specific provisions, (d) the consent of the Issuing Banks shall be required for any amendment that modifies letter of credit specific provisions, (e) the consent of the Swing Line Lenders shall be required for any amendment that modifies swingline specific provisions, and (f) any amendment or waiver that by its terms affects the rights or duties of Lenders holding loans or |
B-28 |
commitments of a particular class (but not the Lenders holding loans or commitments of any other class) will require only the requisite percentage in interest of the affected class of Lenders that would be required to consent thereto if such class of Lenders were the only class of Lenders.
Notwithstanding the foregoing, amendments and waivers of the Financial Covenants only require the approval of Lenders holding more than 50% of the sum of the aggregate amount of the commitments under the Revolving Facility (other than any Defaulting Lender) and the aggregate amount of the Term Loan A Facility.
Defaulting Lenders shall not be included in the calculation of Required Lenders or other requisite Lenders; provided that, subject to the Borrower’s right to replace Defaulting Lenders described under the caption “Replacement of Lenders” below, Defaulting Lenders shall be included therein with respect to (x) any amendment that would disproportionately affect the obligation of the Borrower to make payment of the loans or commitments under the Credit Facilities of such Defaulting Lender as compared to other Lenders holding the same class of loans or commitments and (y) any amendment relating to (a) increases in the commitment of such Defaulting Lender, (b) reductions of principal, interest, fees or premium applicable to the loans or commitments of such Defaulting Lender, (c) extensions of final maturity or the due date of any amortization, interest, fee or premium payment applicable to the loans or commitments of such Defaulting Lender, and (d) the definition of Required Lenders.
The Facilities Documentation will permit amendments thereof without the approval or consent of the Lenders to effect a permitted “repricing transaction” (i.e., a transaction in which any tranche of Term Loans is refinanced with a replacement tranche of term loans, or is modified with the effect of, bearing a lower rate of interest) other than any Lender holding Term Loans subject to such “repricing transaction” that will continue as a Lender in respect of the repriced tranche of Term Loans or modified Term Loans. | |
The Facilities Documentation will contain customary “amend and extend” provisions (on terms to be mutually agreed by the Administrative Agent and the Borrower) pursuant to which the Borrower may extend commitments and/or outstandings pursuant to one or more tranches with only the consent of the respective extending Lenders; provided that it is understood that no existing Lender will have any obligation to commit to any such extension. | |
In addition, if the Administrative Agent and the Borrower shall have jointly identified an obvious error or any error, |
B-29 |
omission or inconsistency of a technical nature in the Facilities Documentation, then the Administrative Agent and the Borrower shall be permitted to amend such provision without any further action or consent of any other party. | |
Cost and Yield Protection: |
The Facilities Documentation will contain customary provisions protecting the Lenders in the event of prepayment or failure to borrow (funding indemnity), unavailability of funding, capital adequacy requirements and increased costs due to changes in law or regulation after the date of the Credit Facilities or, if later, the date on which the applicable Lender becomes a Lender; provided that a Lender shall not be entitled to submit a claim for compensation based upon a change in law or regulation unless it shall have determined that the making of such claim is consistent with its general practices under similar circumstances in respect of similarly situated borrowers with credit facilities entitling it to make such claims (it being agreed that no Lender shall be required to disclose any confidential or proprietary information in connection with such determination or the making of such claim). The obligation of the Borrower and the Guarantors to gross up for and/or to indemnify Lenders for taxes imposed on payments will be subject to customary mitigation requirements and other exceptions, including the requirement to provide applicable tax-related documentation, it being understood that the gross-up obligations shall not apply to withholding taxes imposed by Sections 1471 through 1474 of the Internal Revenue Code (and any amended or successor provisions to the extent substantially comparable thereto) and any regulations promulgated thereunder or guidance issued pursuant thereto.
Customary protections for increased costs imposed as a result of the Dodd-Frank Act or Basel III shall be included subject to the limitation in the proviso of the first sentence of the immediately preceding paragraph.
|
Assignments and Participations: | After the Closing Date, the Lenders will be permitted to assign loans and/or commitments under the Term Facilities with the consent of the Borrower and the Administrative Agent (in each case, not to be unreasonably withheld, delayed or conditioned) and loans and commitments under the Revolving Credit Facility with the consent of the Borrower, the Swingline Lender, the Issuing Banks and the Administrative Agent (in each case not to be unreasonably withheld or delayed); provided that (i) no consent of the Borrower shall be required (A) with respect to the Term Facilities, if such assignment is made to another Lender or an affiliate or approved fund of such Lender, (B) with respect to the Revolving Credit Facility, if such assignment is made to another Revolving Lender or an affiliate or approved fund of |
B-30 |
such Revolving Lender or (C) after the occurrence and during the continuance of an event of default, (ii) the Borrower’s consent shall be deemed to have been given if the Borrower has not responded within ten business days of an assignment request made in writing and (iii) no consent of the Administrative Agent shall be required with respect to any assignment if such assignment is an assignment to another Lender, an affiliate of a Lender or an approved fund of a Lender; provided, further, that no assignments shall be made to any Disqualified Institutions.
Each assignment (other than to another Lender, an affiliate of a Lender or an approved fund) will be in an amount of an integral multiple of $1,000,000 in the case of the Term Facilities and a minimum amount of $5,000,000 in the case of the Revolving Credit Facility (or lesser amounts, if agreed between the Borrower and the Administrative Agent) or, if less, all of such Lender’s remaining loans and commitments of the applicable class. Assignments will be by novation and will not be required to be pro rata among the Credit Facilities.
The Lenders will be permitted to sell participations in loans without restriction in accordance with applicable law and consistent with the Documentation Principles. Voting rights of participants shall be limited to matters set forth under the caption “Voting” with respect to which the unanimous vote of all Lenders (or all directly and adversely affected Lenders, if the participant is directly and adversely affected) would be required. | |
Subject to the provisions below, non-pro rata distributions will be permitted in connection with loan buy-back programs on terms to be mutually agreed.
Assignments of Term Loans (and loans under any Incremental Term Facilities) to, and purchases by, the Borrower and its subsidiaries will be permitted without any consent solely through Dutch auctions open to all applicable Lenders on a pro rata basis in accordance with customary procedures to be mutually agreed upon, so long as (i) no event of default has occurred and is continuing, (ii) the loans purchased are immediately cancelled and (iii) no proceeds from any Revolving Loan are used to fund such assignments. | |
Expenses and Indemnification: | If the Closing Date occurs, the Borrower shall pay all reasonable and documented out-of-pocket costs and expenses of the Administrative Agent and, in the case of clause (x) below, Morgan Stanley and, in the case of clause (y) below, the Commitment Parties (in each case, without duplication and promptly after a written demand therefor, together with backup documentation supporting such reimbursement |
B-31 |
request, except with respect to reimbursements payable on the Closing Date) associated with (x) the preparation, execution and delivery, amendment, modification, waiver and/or (y) enforcement of the Facilities Documentation (including, in any case, the reasonable and documented legal fees of a single firm of counsel (which shall be the counsel identified herein until the Closing Date) (and in the case of any actual or perceived conflict of interests, one additional counsel for the affected Lender(s) taken as a whole), and, if necessary, a single local counsel in each appropriate jurisdiction (which may include a single special counsel acting in multiple jurisdictions)).
The Borrower will indemnify the Administrative Agent, the Commitment Parties, the Lenders and their affiliates (without duplication) and the officers, directors, employees, advisors, agents, controlling persons, equityholders, partners, members and other representatives and their respective successors and permitted assigns of each of the foregoing, from and against any and all losses, claims, damages, liabilities and reasonable and documented out-of-pocket fees and expenses (limited to reasonable and documented legal fees of a single firm of counsel for all indemnified parties, taken as a whole, and, if necessary, one firm of local counsel in each appropriate jurisdiction (which may include a single special counsel acting in multiple jurisdictions) for all indemnified parties taken as a whole (and, in the case of an actual or perceived conflict of interest, where the indemnified person affected by such conflict informs the Borrower of such conflict and thereafter retains its own counsel, of another firm of counsel for each group of affected indemnified persons similarly situated, taken as a whole)) of any such indemnified person arising out of or relating to any claim or any litigation or other proceeding (regardless of whether such indemnified person is a party thereto and whether or not such proceedings are brought by the Borrower, its equityholders, its affiliates, creditors or any other third person) that relates to the Transactions, including the financing contemplated hereby; provided that no indemnified person will be indemnified for any loss, claim, damage, liability, cost or expense to the extent (a) it has been determined by a court of competent jurisdiction in a final, non-appealable judgment to have resulted from (i) the gross negligence, bad faith or willful misconduct of such indemnified person or any of its affiliates or controlling persons or any of the equityholders, officers, directors, employees, partners, members, agents, advisors or other representatives of any of the foregoing or (ii) a material breach of the obligations of such indemnified person or any of its affiliates under the Facilities Documentation or (b) any proceeding between and among indemnified persons that do not involve an act or omission by the Borrower or its |
B-32 |
subsidiaries (other than claims against any Commitment Party in its capacity or in fulfilling its role as the agent or arranger or any other similar role under the Credit Facilities (excluding its role as a Lender)). | |
Replacement of Lenders: | The Borrower or the Administrative Agent shall, subject to usual and customary conditions, have the right to replace a Lender or, so long as no event of default has occurred and is continuing, prepay such Lender’s outstanding Term Loans in full on a non-pro rata basis without premium or penalty (a) in connection with amendments and waivers requiring the consent of all Lenders or of all Lenders directly affected thereby so long as the consent of a majority of the Lenders or of the Lenders affected thereby has been obtained, (b) if such Lender asserts a claim for any funding protection, whether for increased costs, taxes, required indemnity payments or otherwise, and (c) if such Lender becomes a Defaulting Lender. |
Governing Law and Forum: | New York. |
Counsel to the Administrative Agent: | Shearman & Sterling LLP |
B-33 |
ANNEX I to
EXHIBIT B
Interest Rates: |
At the option of the Borrower, Adjusted LIBOR plus the Applicable Margin or ABR plus the Applicable Margin.
“Applicable Margin” shall mean (x) in respect of the Revolving Credit Facility and the Term Loan A Facility (i) if the Consolidated Net Leverage Ratio is greater than, or equal to, 4.00:1.00, 125 bps in the case of ABR loans and 225 bps in the case of LIBOR loans, (ii) if the Consolidated Net Leverage Ratio is less than 4.00:1.00 but greater than, or equal to, 2.00:1.00, 100 bps in the case of ABR loans and 200 bps in the case of LIBOR loans and (iii) if the Consolidated Net Leverage Ratio is less than 2.00:1.00, 75 bps in the case of ABR loans and 175 bps in the case of LIBOR loans (provided that clause (x)(i) shall apply until delivery by the Borrower to the Administrative Agent of financial statements for the first full fiscal quarter completed after the Closing Date) and (y) in respect of the Term Loan B Facility, 275 bps in the case of ABR loans and 375 bps in the case of LIBOR loans.
All Swingline Loans will be ABR loans.
|
With respect to the Term Loan B Facility, there shall be a minimum Adjusted LIBOR (i.e. Adjusted LIBOR prior to adding any applicable interest rate margins thereto) requirement of 0.75% per annum. With respect to the Revolving Credit Facility and the Term Loan A Facility, there shall be a minimum Adjusted LIBOR requirement (i.e. Adjusted LIBOR prior to adding any applicable interest rate margins thereto) of 0.00% per annum.
The Borrower may elect interest periods of one, two, three or six months (or, if made available by all relevant Lenders, 12 months or a shorter period) for Adjusted LIBOR borrowings.
| |
Interest on any Term Loan and all fees will be payable in arrears on the basis of a 360-day year (calculated on the basis of the actual number of days elapsed); provided that interest on ABR loans, when based on the prime rate, will be payable in arrears on the basis of a 365-day year (or a 366-day year in a leap year), in each case calculated on the basis of the actual number of days elapsed. Interest will be payable on Adjusted LIBOR loans on the last day of the applicable interest period (and at the end of each three months, in the case of interest periods longer than three months) and upon prepayment, and on ABR loans quarterly and upon prepayment. | |
Adjusted LIBOR: | “Adjusted LIBOR” shall mean the London interbank offered |
Annex I-B-1 |
rates for dollars, adjusted for statutory reserve requirements. | |
ABR: | “ABR” shall mean the Alternate Base Rate, which shall be the highest of (i) the prime commercial lending rate published by the Wall Street Journal as the “prime rate”, (ii) the Federal Funds Effective Rate plus 1/2 of 1.0% and (iii) the one-month Adjusted LIBOR plus 1.0% per annum. |
Letter of Credit Fee: | A per annum fee equal to the spread over Adjusted LIBOR under the Revolving Credit Facility will accrue on the aggregate face amount of outstanding letters of credit under the Revolving Credit Facility, payable in arrears at the end of each quarter and upon the termination of the respective letter of credit, in each case for the actual number of days elapsed over a 360-day year. Such fees shall be distributed to the Revolving Lenders pro rata in accordance with the amount of each such Revolving Lender’s Revolving Credit Facility commitment, with exceptions for Defaulting Lenders. In addition, the Borrower shall pay to each Issuing Bank, for its own account, (a) a fronting fee equal to 0.125% upon the aggregate face amount of outstanding letters of credit, payable in arrears at the end of each quarter and upon the termination of the Revolving Credit Facility, calculated based upon the actual number of days elapsed over a 360-day year and (b) customary issuance and administration fees. |
Commitment Fees: | The Borrower shall pay a commitment fee of (i) if the Consolidated Net Leverage Ratio is greater than, or equal to, 4.00:1.00, 35 bps per annum, (ii) if the Consolidated Net Leverage Ratio is less than 4.00:1.00 but greater than, or equal to, 2.00:1.00, 30 bps per annum and (iii) if the Consolidated Net Leverage Ratio is less than 2.00:1.00, 25 bps per annum, in each case, calculated on the average daily unused portion of the Revolving Credit Facility (provided that clause (i) shall apply until delivery by the Borrower to the Administrative Agent of financial statements for the first full fiscal quarter completed after the Closing Date), payable quarterly in arrears commencing with the last business day of the first full fiscal quarter ending after Closing Date, calculated based upon the actual number of days elapsed over a 360-day year. Such fees shall be distributed to the Revolving Lenders (other than the Swingline Lender in its capacity as such) pro rata in accordance with the amount of each such Revolving Lender’s Revolving Credit Facility commitment, with exceptions for Defaulting Lenders. |
Annex I-B-2 |
EXHIBIT C
Project Forest
Summary of Additional Conditions2
The initial borrowings under the Credit Facilities shall be subject to the following conditions (subject in all respects to the Certain Funds Provisions):
1. | Solely to the extent of a Hostile Transaction, (i) the final documentation for the Non-Consensual Tender Offer shall be reasonably satisfactory to the Lead Arranger, (ii) the Non-Consensual Tender Offer shall be (unless the Target and the Borrower or one or more of the subsidiaries of the Borrower shall have entered into an acquisition agreement reasonably satisfactory to the Lead Arranger) for not less than 90% of the outstanding capital stock (on a fully diluted basis) of the Target (or such lesser percentage of capital stock as the Lead Arranger may agree), (iii) the Non-Consensual Tender Offer shall be consummated concurrently with the initial borrowing under the Credit Facilities, in compliance with law and in accordance with the final documentation referred to in clause (i) above, in each case, in all material respects and (iv) the Non-Consensual Tender Offer shall be in full force and effect with no provision thereof amended, waived or otherwise modified or supplemented that is materially adverse to the interests of the Lenders or the Lead Arranger without the prior written consent of the Lead Arranger and the Administrative Agent (which approval shall not be unreasonably withheld, delayed or conditioned); provided that (a) any reduction in the purchase price shall be deemed to be not materially adverse to the Lenders but any such reduction in the cash component of the purchase price in excess of 10% of the purchase price shall be allocated dollar-for-dollar to reduce the Term Loan A Facility and the Term Loan B Facility ratably, (b) any increase in the purchase price shall be deemed to be not materially adverse to the Lenders so long as such increase is not funded with indebtedness and (c) any reduction in the minimum tender offer condition without the prior written consent of the Lead Arranger (not to be unreasonably withheld or delayed) shall be deemed to be materially adverse to the interests of the Lenders and the Lead Arranger. |
2. | Solely to the extent of a Negotiated Transaction, the Acquisition shall have been consummated, or substantially simultaneously with the initial borrowing under the Credit Facilities shall be consummated, in all material respects in accordance with the terms of the Acquisition Agreement after giving effect to any modifications, amendments, consents or waivers by you thereto, other than those that are materially adverse to the interests of the Lenders, without the prior consent of the Lead Arranger (not to be unreasonably withheld, delayed or conditioned); provided that (a) any reduction in the purchase price for the Acquisition shall be deemed to be not materially adverse to the Lenders but any such reduction in the cash component of the purchase price in excess of 10% of the purchase price shall be allocated dollar-for-dollar to reduce the Term Loan A Facility and the Term Loan B Facility ratably, (b) any increase in the purchase price shall be deemed to be not materially adverse to the Lenders so long as such increase is not funded with indebtedness, (c) the granting of any consent under the Acquisition Agreement that is not materially adverse to the |
2 All capitalized terms used but not defined herein shall have the meanings given to them in the Commitment Letter to which this Term Sheet is attached, including the Exhibits thereto. In the event any such capitalized term is subject to multiple or differing definitions, the appropriate meaning thereof in this Exhibit C shall be determined by reference to the context in which it is used.
C-1 |
interests of the Initial Lenders shall not otherwise constitute an amendment or waiver, (d) the Acquisition Agreement shall be reasonably satisfactory to the Lead Arranger, it being understood that the Acquisition Agreement executed by the Borrower on November 17, 2015 that we received is satisfactory and (e) any amendment, waiver or other modification to the definition of “Company Material Adverse Effect” set forth in the Acquisition Agreement or to the “Xerox” provisions in the Acquisition Agreement without the prior written consent of the Lead Arranger (not to be unreasonably withheld or delayed) shall be deemed to be materially adverse to the interests of the Lenders and the Lead Arranger.
3. | The Refinancing shall have been consummated substantially concurrently with the funding of the Credit Facilities. |
4. | Solely to the extent that the Acquisition is not consummated pursuant to a Negotiated Transaction, since the day immediately before the Borrower’s announcement of its offer to acquire shares of Target, there shall not have not occurred a “Company Material Adverse Effect” (as defined in the Acquisition Agreement referred to in paragraph 2 above). |
5. | In the case of a Negotiated Transaction, since the date of the Acquisition Agreement, there shall not have occurred a “Company Material Adverse Effect” (as defined in the Acquisition Agreement). |
6. | The Lead Arranger shall have received (a) unaudited consolidated balance sheets and related statements of income and cash flows of the Target for each fiscal quarter (that is not the last fiscal quarter of a fiscal year) commencing on or after June 28, 2015 and ended at least 45 days prior to the Closing Date, (b) audited consolidated balance sheets and related statements of income and cash flows of the Target for the three most recently completed fiscal years ended at least 90 days before the Closing Date and (c) a pro forma consolidated balance sheet and related pro forma income statement of the Borrower as of and for the 12-month period ending on the last day of the most recently completed four fiscal quarter period ended at least 90 days prior to the Closing Date (if the end of such period is a fiscal year-end of the Borrower) or ended at least 45 days prior to the Closing Date (if the end of such period is not a fiscal year-end of the Target), in each case, prepared after giving effect to the Transactions as if the Transactions had occurred as of such date (in the case of such balance sheet) or at the beginning of such period (in the case of the statement of income). The Lead Arranger acknowledges receipt of the financial statements referred to in clause (b) through the fiscal year ended December 27, 2014. |
7. | Subject in all respects to the Certain Funds Provisions and the limitations described under the caption “Security” in Exhibit B to the Commitment Letter, all documents and instruments required to create and perfect the Administrative Agent’s security interest in the Collateral shall have been executed and delivered and, if applicable, be in proper form for filing. |
8. | The Administrative Agent and the Lead Arranger shall have received, no later than three business days prior to the Closing Date, all documentation and other information about the Borrower and the Guarantors as has been reasonably requested in writing by the Administrative Agent and the Lead Arranger at least seven business days prior to the Closing Date that is required by regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including without limitation the PATRIOT Act. |
9. | (a) The execution and delivery of the Facilities Documentation by the Borrower and the Guarantors party thereto on the Closing Date, which shall be in accordance with the terms of |
C-2 |
the Commitment Letter (subject to modifications, as applicable, pursuant to the “market flex” provisions in the Fee Letter) and subject to the Certain Funds Provisions set forth in the Commitment Letter including Section 6 of the Commitment Letter and (b) the delivery to the Lead Arranger of customary legal opinions, customary officer’s closing certificates, organizational documents, customary evidence of authorization and good standing certificates in jurisdictions of formation/organization, in each case of the Borrower and the Guarantors (to the extent applicable) and a solvency certificate in the form set forth in Annex I to this Exhibit C, signed by the Chief Financial Officer (or similar officer) of the Borrower as of the Closing Date and after giving effect to the Transactions with respect to the Borrower and its subsidiaries, on a consolidated basis.
10. | All fees required to be paid on the Closing Date pursuant to the Commitment Letter and the Fee Letter and reasonable and documented out-of-pocket expenses required to be paid on the Closing Date pursuant to the Commitment Letter, to the extent invoiced at least three business days prior to the Closing Date, shall, upon the initial borrowing under the Credit Facilities, have been paid (which amounts may be offset against the proceeds of the Credit Facilities). |
11. | (a) In the case of a Negotiated Transaction, the Specified Acquisition Agreement Representations (to the extent required by the Certain Funds Provisions) shall be true and correct in all material respects (except in the case of any Specified Acquisition Agreement Representations to which expressly relates to a given date or period, such representation or warranty shall be true and correct in all material respects as of the respective date or period, as the case may be); provided this condition shall be deemed satisfied unless the Borrower has (or an affiliate of the Borrower has) the right to terminate its obligations under the Acquisition Agreement or decline to consummate the Acquisition (in each case, in accordance with the terms of the Acquisition Agreement) as a result of such breach and (b) the Specified Representations shall be true and correct in all material respects (except in the case of any Specified Representation which expressly relates to a given date or period, such representation and warranty shall be true and correct in all material respects as of the respective date or period, as the case may be). |
12. | The Lead Arranger shall have been afforded a period of at least 15 consecutive business days (ending no later than the business day immediately prior to the Closing Date) following delivery by the Borrower of information required for the Information Memorandum (other than portions thereof customarily provided by financing arrangers and limited, in the case of financial information, to the financial statements described in paragraph 6 above) (the “Marketing Information,” and such period, the “Marketing Period”) to seek to syndicate the Credit Facilities; provided that (i) November 27, 2015 shall not be considered a business day for the purposes of the Marketing Period and (ii) the Marketing Period shall either end on or prior to December 18, 2015 or, if the Marketing Period has not ended on or prior to December 18, 2015, then the Marketing Period shall commence no earlier than January 4, 2016; provided, that if the Borrower shall in good faith reasonably believe that the Marketing Information has been delivered, the Borrower may deliver to the Lead Arranger a written notice to that effect (stating when the Borrower believes the delivery of the Marketing Information to the Lead Arranger was completed), in which case the Borrower shall be deemed to have complied with such obligation to furnish the Marketing Information and the Lead Arranger shall be deemed to have received the Marketing Information, unless the Lead Arranger in good faith reasonably believes that the Borrower has not completed the delivery of such Marketing Information and, not later than 5:00 p.m. (New York time) two business days after the delivery of such notice by the Borrower, delivers a written notice to the |
C-3 |
Borrower to that effect (stating with specificity which such Marketing Information has not been delivered); provided, that notwithstanding the foregoing, the delivery of the Marketing Information shall be satisfied at any time at which (and so long as) the Lead Arranger shall have actually received the Marketing Information, regardless of whether or when any such notice is delivered by the Borrower.
C-4 |
ANNEX I to
EXHIBIT C
Form of Solvency Certificate
SOLVENCY CERTIFICATE
of
THE BORROWER
AND ITS SUBSIDIARIES
Pursuant to the Credit Agreement, the undersigned hereby certifies, solely in such undersigned’s capacity as [chief financial officer] of Microsemi Corporation (the “Borrower”), and not individually, as follows:
As of the date hereof, after giving effect to the consummation of the Transactions, including the making of the Loans under the Credit Agreement on the date hereof, and after giving effect to the application of the proceeds of such indebtedness:
a. | The fair value of the assets of the Borrower and its subsidiaries, on a consolidated basis, exceeds, on a consolidated basis, their debts and liabilities, subordinated, contingent or otherwise; |
b. | The present fair saleable value of the property of the Borrower and its subsidiaries, on a consolidated basis, is greater than the amount that will be required to pay the probable liability, on a consolidated basis, of their debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; |
c. | The Borrower and its subsidiaries, on a consolidated basis, are able to pay their debts and liabilities, subordinated, contingent or otherwise, as such liabilities become absolute and matured; and |
d. | The Borrower and its subsidiaries, on a consolidated basis, are not engaged in, and are not about to engage in, business for which they have unreasonably small capital. |
For purposes of this Solvency Certificate, the amount of any contingent liability at any time shall be computed as the amount that would reasonably be expected to become an actual and matured liability. Capitalized terms used but not otherwise defined herein shall have the meanings assigned to them in the Credit Agreement, as applicable.
[Signature Page Follows]
Annex I-C-1 |
IN WITNESS WHEREOF, the undersigned has executed this Solvency Certificate in such undersigned’s capacity as [chief financial officer] of the Borrower, on behalf of the Borrower, and not individually, as of the date first stated above.
MICROSEMI CORPORATION | ||
By: | ||
Name: | ||
Title: |
Annex I-C-2 |
Exhibit 10.2
EXECUTION VERSION
MORGAN STANLEY SENIOR FUNDING, INC.
1585 Broadway
New York, NY 10036
CONFIDENTIAL
November 5, 2015
Microsemi Corporation
One Enterprise
Aliso Viejo, CA 92656
Attention: | John Hohener |
Chief Financial Officer
The Bank of Tokyo-Mitsubishi UFJ, Ltd. (“BTMU”)
1251 Avenue of the Americas
New York, New York 10020
Deutsche Bank Securities Inc. (“DBSI”)
Deutsche Bank AG New York Branch (“DBNY”)
60 Wall Street
New York, NY 10005
Joinder Agreement to Commitment Letter
Ladies and Gentlemen:
Reference is hereby made to the Commitment Letter dated as of October 18, 2015 (the “Commitment Letter”), a copy of which is attached hereto as Annex A, from Morgan Stanley Senior Funding, Inc. (“Morgan Stanley”) addressed to Microsemi Corporation, a Delaware corporation. Capitalized terms used in this joinder letter agreement (this “Joinder Agreement”) but not defined herein shall have the meanings assigned to such terms in the Commitment Letter.
Each of BTMU and DBSI (each an “Additional Arranger”, and collectively, the “Additional Arrangers”) has advised Morgan Stanley that it desires to join the Commitment Letter as a joint lead arranger and bookrunner under the Commitment Letter.
1. Each of BTMU and DBNY (each an “Additional Initial Lender”) is pleased to advise Morgan Stanley of its commitment to provide 26.25% and 25.0%, respectively, of each of (a) the aggregate principal amount of the $350,000,000 Senior Secured Revolving Credit Facility, (b) the aggregate principal amount of the $375,000,000 Senior Secured Term Loan A Facility and (c) the aggregate principal amount of the $2,200,000,000 Senior Secured Term Loan B Facility (collectively, the “Assumed Commitments”), in each case, on a several and not joint basis, subject only, as applicable, to the satisfaction of the conditions set forth or referenced in Section 6 of the Commitment Letter and the commitments of Morgan Stanley under the Commitment Letter shall be reduced on a dollar-for-dollar basis by the aggregate amount of the Assumed Commitments of the Additional Arrangers.
2. Each of the parties hereto acknowledges and agrees that for all purposes, the Additional Arrangers shall have the right to act (and each Additional Arranger hereby undertakes and agrees to act) as a Commitment Party and an “Additional Arranger” (as referred to in the Commitment Letter) in connection with the Credit Facilities. Each of the Additional Initial Lenders and Morgan Stanley, acknowledges and agrees that for all purposes, the Additional Initial Lenders shall have the right to act (and each Additional Initial Lender hereby undertakes and agrees to act) as a Commitment Party and as an Initial Lender in connection with the Credit Facilities. It is hereby agreed and understood that notwithstanding anything to the contrary, Morgan Stanley will appear on the top left of the cover page of any marketing materials for the Credit Facilities, and will hold the roles and responsibilities conventionally understood to be associated with such name placement.
3. In consideration of the foregoing, notwithstanding anything to the contrary set forth in the Commitment Letter, to the extent paid to it, Morgan Stanley agrees to pay to each Additional Arranger a closing fee in an amount equal to (x) if the Acquisition shall have been approved by the board of directors and/or the stockholders or other equity holders of the Target prior to the commencement of an actual tender offer to acquire not less than a majority of the outstanding capital stock of the Target without the prior approval and consent of the board of directors and/or stockholder or other equityholders of the Target, 1.375% of the commitment of such Additional Arranger in respect of the Credit Facilities in effect on the date hereof, payable in full on the date of the consummation of the acquisition and the “Closing Date” (as referred to in the Commitment Letter) and (y) in all other cases, the sum of (i) 0.25% of the commitment of such Additional Arranger in respect of the Credit Facilities in effect on the date hereof, earned and payable on the earlier of the date that is 45 days after October 18, 2015 (the “Commitment Letter’s Execution Date”) (unless the Borrower has terminated the Commitment Letter prior to such date) (irrespective of whether the Closing Date occurs) and the Closing Date, (ii) 0.25% of the of the aggregate amount of the commitment of such Additional Arranger in respect of the Credit Facilities in effect on the date hereof, earned and payable on the earlier of the date that is 90 days after the Commitment Letter’s Execution Date (unless the Borrower has terminated the Commitment Letter prior to such date) (irrespective of whether the Closing Date occurs) and the Closing Date and (iii) 1.25% of the commitment of such Additional Arranger in respect of the Credit Facilities in effect on the date hereof, payable on, and subject to, the occurrence of, the Closing Date.
4. Each Additional Arranger hereby acknowledges that it has, independently and without reliance upon Morgan Stanley or any of Morgan Stanley’s affiliates, or any of Morgan Stanley’s officers, directors, employees, agents, advisors or representatives, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to join the Commitment Letter as set forth herein.
5. This Joinder Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which, when taken together, shall constitute one agreement. Delivery of an executed counterpart of a signature page of this Joinder Agreement by facsimile transmission or other electronic transmission (i.e., a “pdf” or “tiff”) shall be effective as delivery of a manually executed counterpart hereof.
6. SECTION 10 OF THE COMMITMENT LETTER IS HEREBY INCORPORATED HEREIN BY REFERENCE, MUTATIS MUTANDIS, AND SHALL APPLY HEREUNDER AS IF FULLY SET FORTH HEREIN.
7. Each party hereto agrees to maintain the confidentiality of this Joinder Agreement and the terms hereof, subject to the applicable confidentiality and disclosure provisions set forth in the Commitment Letter.
2 |
8. Without limiting the provisions of the last paragraph of this Joinder Agreement, each party hereto agrees that this Joinder Agreement shall remain in full force and effect so long as the Commitment Letter remains in full force and effect and will automatically terminate and be of no further force and effect, solely as and to the extent the Commitment Letter terminates in accordance with its terms. For the avoidance of doubt, the Additional Arranger shall have the benefit of and shall be subject to any and all provisions of the Commitment Letter that “survive” the expiration or termination of the Commitment Letter.
If you are in agreement with the foregoing, please sign and return to Morgan Stanley the enclosed copy of this Joinder Agreement by no later than 5:00 P.M. (New York time) on November 5, 2015, otherwise this Joinder Agreement shall expire at such time. This Joinder Agreement shall become effective and the undertaking of the parties thereunder shall become effective to the extent and in the manner provided hereby on the date the Additional Arranger delivers to Morgan Stanley an executed copy hereof.
[Remainder of this page intentionally left blank]
3 |
Very truly yours, | |||
MORGAN STANLEY SENIOR FUNDING, INC. | |||
By: | /s/Jonathan Rauen | ||
Name: | Jonathan Rauen | ||
Title: | Authorized Signatory |
[Joinder Agreement to Commitment Letter]
ACCEPTED AND AGREED
on November 5, 2015:
MICROSEMI CORPORATION
By: | /s/John Hohener | |
Name: John Hohener | ||
Title: CFO |
[Joinder Agreement to Commitment Letter]
ACCEPTED AND AGREED
on November 5, 2015:
THE BANK OF TOKYO-MITSUBISHI UFJ, LTD.,
as Additional Arranger and Initial Lender
By: | /s/Timothy P. Dilworth | |
Name: Timothy P. Dilworth | ||
Title: Managing Director |
[Joinder Agreement to Commitment Letter]
ACCEPTED AND AGREED | ||
on November 4, 2015: | ||
DEUTSCHE BANK SECURITIES INC., | ||
as Additional Arranger | ||
By: | /s/Ian Dorrington | |
Name: Ian Dorrington | ||
Title: Managing Director | ||
By: | /s/Christopher Blum | |
Name: Christopher Blum | ||
Title: Managing Director | ||
DEUTSCHE BANK AG NEW YORK BRANCH, | ||
as Initial Lender | ||
By: | /s/Ian Dorrington | |
Name: Ian Dorrington | ||
Title: Managing Director | ||
By: | /s/Christopher Blum | |
Name: Christopher Blum | ||
Title: Managing Director |
ANNEX A
[Commitment Letter]
See Exhibit 10.1 to the Current Report on Form 8-K
Exhibit 99.1
|
MICROSEMI FINANCIAL CONTACT: John W. Hohener Executive Vice President and CFO Phone: (949) 380-6100
MICROSEMI INVESTOR CONTACT: Robert C. Adams Vice President of Corporate Development Phone: (949) 380-6100 |
![]() |
PMC MEDIA CONTACT: Kim Mason Manager, Corporate Communications Phone: (604) 415-6239
PMC INVESTOR CONTACT: Joel Achramowicz Director, Investor Relations Phone: (408) 239-8630 |
Microsemi Corporation Enters Definitive Agreement to Acquire PMC-Sierra, Inc.
- | Creates significant shareholder value through powerful combination |
- | $100 million in annual cost synergies anticipated, with greater than $75 million expected to be realized in the first full quarter of combined operations |
- | Delivers immediate accretion with approximately $0.60 EPS accretion expected in first full year |
ALISO VIEJO, Calif. and SUNNYVALE, Calif.―Nov. 24, 2015―Microsemi Corporation (Nasdaq: MSCC), a leading provider of semiconductor solutions differentiated by power, security, reliability and performance, and PMC-Sierra, Inc. (PMC®) (Nasdaq: PMCS), a semiconductor and software solutions leader in storage, optical and mobile networks, today announced that they have entered into a definitive agreement under which Microsemi will acquire PMC for $9.22 in cash and 0.0771 of a share of Microsemi common stock for each share of PMC common stock through an exchange offer. The transaction is valued at approximately $2.5 billion and represents a 77.4 percent percent premium to the closing price of PMC’s stock as of Sept. 30, 2015.
“We are pleased PMC has accepted our compelling strategic offer, which clearly benefits shareholders of both Microsemi and PMC. We can now shift our focus to realizing the significant synergies identified during our comprehensive analysis,” said James J. Peterson, Microsemi’s chairman and CEO. “As we have previously stated, this acquisition will provide Microsemi with a leading position in high performance and scalable storage solutions, while also adding a complementary portfolio of high-value communications products. As we integrate the team and drive profitability, our combined company will benefit from increased scale, industry-leading margins, diversified market exposure, consolidated infrastructure and substantial cost savings.”
The transaction is expected to be immediately accretive to Microsemi’s non-GAAP EPS and free cash flow. Microsemi anticipates achieving more than $100 million in annual cost synergies with greater than $75 million of those expected to be realized in the first full quarter of combined operations. Microsemi currently estimates approximately $0.60 of non-GAAP EPS accretion in the first full year after closing the transaction.
Microsemi intends to fund the transaction and repay its existing credit facility with existing cash, $2.7 billion in new transaction debt and $0.6 billion in Microsemi common stock. Shareholders of Microsemi and PMC will own approximately 85 percent and 15 percent, respectively, of the combined entity post completion of the transaction.
Under the terms of the definitive acquisition agreement, a wholly-owned subsidiary of Microsemi will commence an exchange offer to acquire all of the outstanding shares of PMC common stock for $9.22 in cash and 0.0771 of a share of Microsemi common stock for each share of PMC common stock tendered. Upon satisfaction of the conditions to the exchange offer, and after the shares tendered in the exchange offer are accepted for payment, the agreement provides for the parties to effect, as promptly as practicable, a merger, which would not require a vote of PMC’s stockholders, and which would result in each share of PMC common stock not tendered in the exchange offer being converted into the right to receive $9.22 in cash and 0.0771 of a share of Microsemi common stock. The exchange offer is subject to customary conditions, including the tender of at least a majority of the outstanding shares of PMC’s common stock and certain regulatory approvals, including the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act, and is expected to close in the first quarter of calendar 2016. No approval of the stockholders of Microsemi is required in connection with the proposed transaction. Terms of the agreement were approved by the boards of directors of both Microsemi and PMC.
Stifel is acting as exclusive financial adviser to Microsemi, along with O’Melveny & Myers LLP which is serving as legal adviser. Morgan Stanley Senior Funding, Inc. is providing committed financing for the transaction to Microsemi.
Qatalyst Partners LP and Needham & Company, LLC are acting as financial advisors to PMC and Skadden, Arps, Slate, Meagher & Flom LLP is acting as PMC’s legal advisor.
About Microsemi
Microsemi Corporation (Nasdaq: MSCC) offers a comprehensive portfolio of semiconductor and system solutions for communications, defense & security, aerospace and industrial markets. Products include high-performance and radiation-hardened analog mixed-signal integrated circuits, FPGAs, SoCs and ASICs; power management products; timing and synchronization devices and precise time solutions, setting the world's standard for time; voice processing devices; RF solutions; discrete components; security technologies and scalable anti-tamper products; Ethernet solutions; Power-over-Ethernet ICs and midspans; as well as custom design capabilities and services. Microsemi is headquartered in Aliso Viejo, Calif., and has approximately 3,600 employees globally. For more information, visit www.microsemi.com.
About PMC
PMC (NASDAQ: PMCS) is the semiconductor and software solutions innovator transforming networks that connect, move and store big data. Building on a track record of technology leadership, PMC is driving innovation across storage, optical and mobile networks. PMC’s highly integrated solutions increase performance and enable next-generation services to accelerate the network transformation. For more information, visit www.pmcs.com. Follow PMC on Facebook, Twitter, LinkedIn and RSS.
Microsemi and the Microsemi logo are registered trademarks or service marks of Microsemi Corporation and/or its affiliates. Third-party trademarks and service marks mentioned herein are the property of their respective owners.
Cautionary Note Concerning Forward-Looking Statements
Certain statements made herein, including, for example, information regarding the proposed transaction between Microsemi and PMC, the expected timetable for completing the transaction, and the potential benefits of the transaction, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1965, Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. These forward-looking statements reflect the current analysis of existing information and are subject to various risks and uncertainties. As a result, caution must be exercised in relying on forward-looking statements. Due to known and unknown risks, our actual results may differ materially from our expectations or projections.
The following factors, among others, could cause actual results to differ materially from those described in these forward-looking statements: the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement; the outcome of any legal proceedings that could be instituted against PMC or its directors or Microsemi related to the merger agreement; the possibility that various conditions to the consummation of the Microsemi exchange offer and merger may not be satisfied or waived, including the receipt of all regulatory clearances related to the merger; the failure of Microsemi to obtain the necessary financing pursuant to the arrangements set forth in the debt commitment letters delivered pursuant to the merger agreement or otherwise; uncertainty as to how many shares of PMC common stock will be tendered into the Microsemi exchange offer; the risk that the Microsemi exchange offer and merger will not close within the anticipated time periods; risks related to the ultimate outcome and results of integrating the operations of Microsemi and PMC, the ultimate outcome of Microsemi’s operating strategy applied to PMC and the ultimate ability to realize synergies; the effects of the business combination on Microsemi and PMC, including on the combined company’s future financial condition, operating results, strategy and plans; risks that the proposed transaction disrupts current plans and operations, and potential difficulties in employee retention as a result of the merger; risks related to Microsemi’s ability to successfully implement its acquisition strategy or integrate other acquired companies; uncertainty as to the future profitability of businesses acquired by Microsemi, and delays in the realization of, or the failure to realize, any accretion from acquisition transactions by Microsemi; risks related to Microsemi’s reliance on government contracts for a significant portion of its sales, including impacts of any termination or renegotiation of such contracts, uncertainties of governmental appropriations and national defense policies and priorities and effects of any past or future government shutdowns; the risk of downturns in the highly cyclical semiconductor industry; the effects of local and national economic, credit and capital market conditions on the economy in general, and other risks and uncertainties described herein, as well as those risks and uncertainties discussed from time to time in our other reports and other public filings with the U.S. Securities and Exchange Commission (“SEC”), including, but not limited to, those detailed in PMC’s Annual Report on Form 10-K for the year ended December 27, 2014 and PMC’s most recent quarterly report filed with the SEC, and Microsemi’s Annual Report on Form 10-K for the year ended September 27, 2015 filed with the SEC. The forward-looking statements contained herein are made only as of the date hereof, and we undertake no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.
Additional Information and Where to Find It
This document relates to a pending business combination transaction between Microsemi and PMC. The exchange offer referenced in this document has not yet commenced. This document does not constitute an offer to sell or exchange, or the solicitation of an offer to buy or exchange, any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, sale or exchange would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. Microsemi will file a registration statement on Form S-4 related to the transaction with the SEC and may file amendments thereto. Microsemi and a wholly-owned subsidiary of Microsemi will file a tender offer statement on Schedule TO (including a prospectus/offer to exchange, a related letter of transmittal and other exchange offer documents) related to the transaction with the SEC and may file amendments thereto. PMC will file a recommendation statement on Schedule 14D-9 with the SEC and may file amendments thereto. PMC and Microsemi may also file other documents with the SEC regarding the transaction. This document is not a substitute for any registration
statement, Schedule TO, Schedule 14D-9 or any other document which PMC or Microsemi may file with the SEC in connection with the transaction. Investors and security holders are urged to read the registration statement, the Schedule TO (including the prospectus/offer to exchange, related letter of transmittal and other exchange offer documents), the recommendation statement on Schedule 14D-9 and the other relevant materials with respect to the transaction carefully and in their entirety when they become available before making any investment decision with respect to the transaction, because they will contain important information about the transaction.
Such materials (and all other offer documents filed with the SEC) will be available at no charge on the SEC’s Web site: www.sec.gov. In addition, PMC’s stockholders will be able to obtain free copies of such materials by contacting Joel Achramowicz at (408) 239-8630.
Sources: Microsemi Corporation and PMC-Sierra
FX4F%P4JSRQD1 "^O6@U'YUOXQU3.!%42+">VAV
M%NX)W7
V#%$0\*@(:=/FGF=)G_#_ %:80R-8AJ#WYY/M!A:O79^'S?8?
ML"?R[T@7O=^26-HQ[N:N;#]^)1;Z]'$(P2.X?2%C7)!,(=M/2$>U*908MRR(
MX<)D-Z#A182(',*-R)E$0J;E*/CJ;DXI;S12E1DD._&
M(UY2I=J?2D346S&;CM.=#BO4+G]U