BCOR 8-K
Grayscale Bitcoin Adopters ETF (BCOR)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED):
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (Commission File Number) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices, including zip code)
(Registrant’s telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| 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)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 1.01 | Entry into a Material Definitive Agreement. |
On September 9, 2023, Avantax, Inc., a Delaware corporation (the “Company”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Aretec Group, Inc., a Delaware corporation (“Parent”), and C2023 Sub Corp., a Delaware corporation and a wholly-owned subsidiary of Parent (“Acquisition Sub”). The Merger Agreement provides that, on the terms and subject to the conditions of the Merger Agreement, Acquisition Sub will merge with and into the Company (the “Merger”), with the Company continuing as the surviving corporation in the Merger and becoming a wholly-owned subsidiary of Parent. Parent and Acquisition Sub are affiliates of Cetera Financial Group, Inc.
The Company’s board of directors (the “Board”) (i) has unanimously determined and declared that the Merger Agreement and the consummation by the Company of the transactions (the “Transactions”) contemplated by the Merger Agreement, including the Merger, are advisable and in the best interests of the Company and its stockholders, and (ii) upon the terms and subject to the conditions of the Merger Agreement, has unanimously resolved to recommend that the Company’s stockholders vote to adopt the Merger Agreement at a special meeting of stockholders to be held for such purpose.
Merger Consideration
At the effective time of the Merger (the “Effective Time”), each share of the Company’s common stock (“Company Common Stock”) issued and outstanding immediately prior to the Effective Time (other than Excluded Shares and Dissenting Shares (each, as defined in the Merger Agreement)) will be canceled and converted into the right to receive $26.00 in cash (the “Merger Consideration”), without interest and less any required tax withholdings.
Treatment of Company Equity Awards, Company ESPP and Company Equity Plans
At the Effective Time, each option to purchase shares of Company Common Stock (other than any options granted under the Company ESPP) (a “Company Option”) (whether or not vested) that is outstanding immediately prior to the Effective Time will automatically vest (if unvested) and be cancelled and converted into the right to receive an amount in cash, without interest, equal to the product of (i) the excess, if any, of (A) the Merger Consideration over (B) the per-share exercise price for such Company Option multiplied by (ii) the total number of shares of Company Common Stock underlying such Company Option. However, if the exercise price per share of Company Common Stock of such Company Option is equal to or greater than the Merger Consideration, such Company Option will be cancelled at the Effective Time without any cash payment or other consideration being made in respect thereof.
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At the Effective Time, each outstanding restricted stock unit of the Company that vests solely on the basis of time (a “Company RSU”) (except any Company RSU that is granted on or after January 1, 2024 in accordance with the terms of the Merger Agreement (each, a “Permitted RSU”) granted to any non-employee financial professional) that is outstanding immediately prior to the Effective Time will, automatically be cancelled and converted into the right to receive an amount in cash, without interest, equal to the product of (i) the number of shares of Company Common Stock underlying such Company RSU (determined in the manner described below) multiplied by (ii) the Merger Consideration. The number of shares of Company Common Stock underlying a Company RSU for this purpose will be:
| · | for Company RSUs granted prior to the date of the Merger Agreement, equal to the total number of shares of Company Common Stock underlying such Company RSU and |
| · | for Permitted RSUs (except any Permitted RSUs granted to any non-employee financial professional), equal to the product of (A) the total number of shares of Company Common Stock underlying such Permitted RSU and (B) the quotient of the number of days actually worked between the date of grant of such Permitted RSU and the Effective Time divided by the total number of days in the vesting period for such Permitted RSUs, which vesting period will in no event be less than three years from the date of grant of such Permitted RSUs. |
Except as otherwise described below with respect to any Permitted RSU granted to any non-employee financial professional, any Company RSU (or any portion thereof) that does not vest in accordance with the above will be cancelled and terminated without consideration immediately prior to the Effective Time.
At the Effective Time, each outstanding performance stock unit of the Company that vests on the basis of time and the achievement of performance targets (a “Company PSU”) (except any Company PSU that is granted on or after January 1, 2024 in accordance with the terms of the Merger Agreement (each, a “Permitted PSU”) to any non-employee financial professional) that is outstanding immediately prior to the Effective Time will, automatically be cancelled and converted into the right to receive an amount in cash, without interest, equal to the product of (i) the number of shares of Company Common Stock underlying such Company PSU (determined in the manner described below) multiplied by (ii) the Merger Consideration. The number of shares of Company Common Stock underlying a Company PSU for this purpose will be:
| · | for Company PSUs (or portions thereof) granted prior to the date of the Merger Agreement for which the performance period has been completed prior to the Effective Time, based on the actual level of performance (as determined by the Board or a committee thereof prior to the Effective Time in good faith consistent with past practices) through the end of such performance period; |
| · | for Company PSUs (or portions thereof) granted prior to the date of the Merger Agreement for which the performance period has not expired as of the Effective Time, based on the greater of (i) the target level of performance, (ii) if the vesting of which is measured by reference to total shareholder return, based on the total shareholder return reflected by the Merger Consideration (and, as applicable, the total shareholder return of the comparator group as of a date within ten business days prior to the Effective Time) and (iii) if the vesting of which is measured by reference to EBITDA, based on the EBITDA measured as of the Effective Time (as determined by the Board (or an appropriate committee thereof)), in each case, determined by assuming shortened performance periods that end as of the Effective Time and otherwise in good faith consistent with past practices; and |
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| · | for Permitted PSUs (except any Permitted PSU granted to any non-employee financial professional), equal to the product of (i) the target number of shares of Company Common Stock underlying such Permitted PSU and (ii) the quotient of the number of days actually worked between the start of the performance period for such Permitted PSUs and the Effective Time divided by the total number of days in the performance period for such Permitted PSUs, which performance period will in no event be less than three years commencing with the 2024 performance year. |
Except as otherwise described below with respect to any Permitted PSU granted to any non-employee financial professional, any Company PSU (or any portion thereof) that does not vest in accordance with the above will be cancelled and terminated without consideration immediately prior to the Effective Time.
At the Effective Time, each Permitted RSU and each Permitted PSU, in each case granted to any non-employee financial professional, that is outstanding immediately prior to the Effective Time, will, automatically cease to represent a Permitted RSU or Permitted PSU denominated in shares of Company Common Stock and be converted into and become a right to receive an amount in cash, without interest, equal to the product of (i) the total number of shares of Company Common Stock underlying such Permitted RSU or, in the case of Permitted PSUs, the target number of shares of Company Common Stock, multiplied by (ii) the Merger Consideration (a “Replacement Cash Award”). However, each Replacement Cash Award will be subject to the same vesting and payment schedules as the Permitted RSU or Permitted PSU it replaces (other than performance-based vesting conditions). The vesting schedule applicable to the Permitted RSUs will in no event be less than three years from the date of grant of such Permitted RSUs, and in respect of the performance period applicable to the Permitted PSUs, no less than a three-year performance period commencing with the 2024 performance year (which as applied to a corresponding Replacement Cash Award will result in cliff vesting at the end of such three-year performance period), and in all cases the vesting of a Replacement Cash Award will be subject to the non-employee financial professional’s continuous performance of services for Parent (or an affiliate of Parent) through the applicable vesting date.
Prior to the Effective Time, the Company will terminate its equity incentive plans.
With respect to the Company’s employee stock purchase plan (the “Company ESPP”), (i) the current Offering Period (as defined in the Company ESPP) in effect as of the date of the Merger Agreement will be the final Offering Period (such period, the “Final Offering Period”) and no further Offering Period shall commence pursuant to the Company ESPP after the date of the Merger Agreement, (ii) each individual participating in the Final Offering Period on the date of the Merger Agreement will not be permitted to (A) increase his or her payroll contribution rate pursuant to the Company ESPP from the rate in effect on the date immediately preceding the date of the Merger Agreement or (B) make separate non-payroll contributions to the Company ESPP on or following the date of the Merger Agreement and (iii) no new participants will be permitted to start contributing under the Company ESPP on or after the date of the Merger Agreement other than pursuant to elections made prior to the date of the Merger Agreement. Effective as of immediately prior to the Effective Time, the Company will terminate the Company ESPP, and no further rights will be granted or exercised under the Company ESPP thereafter.
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Closing Conditions
Each party’s obligation to consummate the Merger is subject to customary closing conditions, including, without limitation, the adoption of the Merger Agreement by the affirmative vote of not less than 51% of the outstanding shares of Company Common Stock entitled to vote thereon at the meeting of the Company’s stockholders held for the purpose of voting upon the adoption of the Merger Agreement (the “Company Stockholder Approval”), the expiration or termination of the required waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, or the grant of early termination thereof, customary regulatory approvals and the absence of any law or order enacted, issued, promulgated, enforced or entered by any governmental authority restraining, enjoining, rendering illegal or otherwise prohibiting the Merger. Parent’s obligation to consummate the Merger is also subject to the absence of a Company Material Adverse Effect (as defined in the Merger Agreement) occurring after the date of the Merger Agreement that is continuing.
Debt Financing
Parent has obtained debt financing commitments for the Transactions, the proceeds of which are expected to be sufficient to fund all of the amounts required to be provided by Parent or Acquisition Sub on the closing date for the consummation of the Transactions, including the payment of the aggregate Merger Consideration payable for shares of Company Common Stock, the Debt Payoff Amount (as defined in the Merger Agreement), the aggregate amounts payable for Company Options, Company RSUs and Company PSUs under the Merger Agreement and all associated costs, fees and expenses related to the Transactions (including any fees, premiums and expenses related to the Transactions, including the debt financing and refinancing costs in connection therewith) (collectively, the “Funding Obligations”).
Pursuant to a debt commitment letter, dated September 9, 2023, the commitment parties party to that letter committed to provide Parent, on the closing date for the consummation of the Transactions, with debt financing of approximately $2,691.5 million to fund, in part, all of the Funding Obligations, on the terms and subject to the conditions therein.
Representations, Warranties and Covenants
The Merger Agreement contains customary representations, warranties and covenants of the Company, Parent and Acquisition Sub. From the date of the Merger Agreement until the earlier of the Effective Time or the termination of the Merger Agreement in accordance with its terms, the Company is required to, and is required to cause each of its subsidiaries to, (i) use commercially reasonable efforts to conduct its operations over which it has control in all material respects in the ordinary course of business, preserve intact its business in all material respects and continue to maintain, in all material respects, its assets, properties, rights and operations in accordance with present practice and (ii) refrain from taking certain specified actions without Parent’s consent. Under the Merger Agreement, each of the Company, Parent and Acquisition Sub has also agreed to (and cause certain of their affiliates to) use their respective reasonable best efforts to consummate and make effective the Transactions, including the Merger.
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Non-Solicitation; Change of the Company Recommendation
From the date of the Merger Agreement until the earlier of the Effective Time or termination of the Merger Agreement in accordance with its terms, the Company is subject to customary “no-shop” restrictions requiring, among other things, the Company not to, among other things, initiate, solicit, propose, knowingly encourage, knowingly facilitate or knowingly induce the making of any Competing Proposal (as defined in the Merger Agreement), including knowingly providing, furnishing or making available material non-public information relating to the Company or its subsidiaries or knowingly affording access to personnel of the Company or its subsidiaries in connection with a Competing Proposal. The Company may, however, prior to obtaining the Company Stockholder Approval, engage in negotiations or substantive discussions with, or furnish any information and other access to, a third party that has made a Competing Proposal that did not result from a material breach of the non-solicitation provisions of the Company’s “no-shop” restrictions and that the Board determines in good faith (after consultation with the Company’s outside legal counsel and outside financial advisors) either constitutes a Superior Proposal (as defined in the Merger Agreement) or could reasonably be expected to result in a Superior Proposal.
At any time prior to obtaining the Company Stockholder Approval, the Board (or any committee thereof) may, in certain circumstances, make an Adverse Recommendation Change (as defined in the Merger Agreement) and/or terminate the Merger Agreement to enter into a Superior Proposal, subject to complying with specified notice requirements to Parent and other conditions set forth in the Merger Agreement, including paying a termination fee to Parent in specified circumstances, as described below.
Termination
The Merger Agreement also provides for certain customary termination rights for both the Company and Parent, including the right of the Company to terminate the Merger Agreement prior to the Company obtaining the Company Stockholder Approval to accept a Superior Proposal, subject to certain conditions and obligations, including the payment of the Company Termination Fee (as defined below). In addition, and subject to certain limitations, the Merger Agreement can be terminated by either Parent or the Company if (i) the Merger is not consummated on or before June 9, 2024 (the “Termination Date”), (ii) any U.S. governmental authority issues or enforces any law or order or taken any other action permanently restraining, enjoining, rendering illegal or otherwise prohibiting the Merger and such law or order or other action becomes final and non-appealable or (iii) the Company Stockholder Approval is not obtained following a vote of the stockholders of the Company taken thereon. The Company also has the right to terminate the Merger Agreement if (i) all closing conditions have been satisfied or waived (subject to certain customary exceptions), (ii) the Company notifies Parent in writing of such satisfaction or waiver and that the Company is ready, willing and able to consummate the Merger and (iii) Parent fails to consummate the Merger as required under the Merger Agreement within two business days following the first date the closing should have occurred pursuant to the Merger Agreement. Parent also has the right to terminate the Merger Agreement at any time prior to the Company obtaining the Company Stockholder Approval if the Board makes an Adverse Recommendation Change.
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Termination Fees
The Company will be required to pay to Parent a termination fee equal to $32,338,491 (the “Company Termination Fee”) if the Merger Agreement is validly terminated:
| · | by (i) Parent or the Company, for failure to consummate the Merger by the Termination Date or failure to obtain the Company Stockholder Approval or (ii) Parent due to the Company’s breach or failure to perform any of its representations, warranties, covenants or agreements contained in the Merger Agreement that causes a condition to closing to not be satisfied, remains uncured and constitutes an Intentional Breach (as defined in the Merger Agreement) by the Company, and in the case of (i) or (ii), a third party has made to the Company or directly to the Company’s stockholders a Competing Proposal after the date of the Merger Agreement that at the time of the stockholders’ meeting has been publicly announced and has not been rejected or otherwise withdrawn or abandoned, and concurrently with or within 12 months after the date of such termination of the Merger Agreement, the Company or any of its subsidiaries consummates a transaction involving any Competing Proposal or enters into a definitive agreement providing for the consummation of a Competing Proposal and such Competing Proposal is subsequently consummated (with references to 20% in the definition of Competing Proposal being deemed references to 50% for purposes of this bullet point); |
| · | by the Company, if the Board (or a committee thereof) authorizes the Company to enter into a definitive agreement with respect to a Superior Proposal (as defined in the Merger Agreement); or |
| · | by Parent, as a result of the Board’s making an Adverse Recommendation Change. |
Further, Parent is required to pay to the Company a termination fee equal to $82,129,502 if:
| · | the Company terminates the Merger Agreement due to Parent’s breach or failure to perform any of its representations, warranties, covenants or agreement contained in the Merger Agreement, which would give rise to a failure of certain of the Company’s closing conditions and remains uncured by Parent; |
| · | the Company terminates the Merger Agreement due to Parent’s or Acquisition Sub’s failure to consummate the Merger under the circumstances described in the penultimate sentence of the paragraph under “Termination” above; or |
| · | the Merger Agreement is validly terminated by either the Company or Parent if the Merger has not occurred by the Termination Date (i) at the time when the Company had a right to terminate the Merger Agreement for the reasons specified above in this paragraph or (ii) if all of the mutual closing conditions and all of the Company’s closing conditions have been satisfied or waived (subject to certain customary exceptions). |
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The foregoing description of the Merger Agreement, the Merger and the other Transactions does not purport to be complete and is subject to, and qualified in its entirety by reference to, the full text of the Merger Agreement, which is filed as Exhibit 2.1 hereto and is incorporated herein by reference.
Other Matters
The Merger Agreement and the above descriptions have been included to provide stockholders with information regarding the terms of the Merger Agreement and are not intended to provide any other factual information about the parties to the Merger Agreement or their respective subsidiaries or affiliates. The representations, warranties, covenants and agreements contained in the Merger Agreement were made only for purposes of the Merger Agreement and as of specific dates set forth therein, are solely for the benefit of the parties to the Merger Agreement and are subject to important qualifications and limitations agreed to by the parties in connection with negotiating the Merger Agreement. 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 the Company’s public disclosures. In addition, certain representations and warranties were used for the purpose of allocating risk between the parties to the Merger Agreement, rather than establishing matters of fact. The representations and warranties may also be subject to a contractual standard of materiality different from what might be viewed as material to stockholders or the standards of materiality generally applicable to the Company and its reports and documents filed with the U.S. Securities and Exchange Commission (the “SEC”), and in some cases were qualified by confidential disclosures that were made by each party to the others, which disclosures are not reflected in the Merger Agreement. Stockholders 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 any party to the Merger Agreement.
| Item 5.02. | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
On September 9, 2023, the Compensation Committee of the Board approved an amendment to the Participation Agreement (the “Participation Agreement”) between the Company and Christopher W. Walters under the Company’s Executive Change of Control Severance Plan (the “Executive Severance Plan”), pursuant to which Mr. Walters, in exchange for consideration provided by the Company, including the payment of $100 within 30 days of the execution of the amendment, agreed to extend the period of any non-competition, non-solicitation, non-recruitment or similar provision under any Confidentiality and Non-Competition Agreement (as defined in the Executive Severance Plan) by and between Mr. Walters and the Company from a period of 24 months to a period of 30 months following Mr. Walters’s termination of employment with the Company if such termination of employment is a “qualifying termination” for purposes of the Executive Severance Plan. All other terms of the Participation Agreement and Mr. Walters’s participation in the Executive Severance Plan remain unchanged.
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| Item 8.01. | Other Events. |
On September 11, 2023, the Company and Parent issued a joint press release announcing the execution of the Merger Agreement. The full text of the press release is attached as Exhibit 99.1 hereto and is incorporated hereby reference.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
| Exhibit No. | Description | |
| 2.1* | Agreement and Plan of Merger, dated as of September 9, 2023, by and among Avantax, Inc., Aretec Group, Inc. and C2023 Sub Corp. | |
| 10.1 | First Amendment to Participation Agreement, dated as of September 9, 2023, between Avantax, Inc. and Christopher W. Walters | |
| 99.1 | Press Release dated September 11, 2023 | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* Schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company hereby undertakes to furnish supplemental copies of any of the omitted schedules or exhibits upon request by the SEC; provided that the Company may request confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, for any schedules or exhibits so furnished.
Additional Information Regarding the Merger and Where to Find It
This Current Report on Form 8-K relates to the proposed transaction (the “proposed transaction”) involving the Company, Parent and Acquisition Sub, whereby the Company would become a wholly-owned subsidiary of Parent. This Current Report on Form 8-K does not constitute an offer to sell or the solicitation of an offer to buy any securities or the solicitation of any vote or approval. The proposed transaction will be submitted to the stockholders of the Company for their consideration at a special meeting of the stockholders. In connection therewith, the Company intends to file a proxy statement and other relevant materials with the SEC, including a definitive proxy statement on Schedule 14A, which will be mailed or otherwise disseminated to the stockholders of the Company as of the record date established for voting on the proposed transaction. The Company may also file other relevant documents with the SEC regarding the proposed transaction. BEFORE MAKING ANY VOTING OR INVESTMENT DECISION WITH RESPECT TO THE PROPOSED TRANSACTION, INVESTORS AND SECURITY HOLDERS OF THE COMPANY ARE URGED TO READ THE DEFINITIVE PROXY STATEMENT REGARDING THE PROPOSED TRANSACTION (INCLUDING ANY AMENDMENTS OR SUPPLEMENTS THERETO) AND OTHER RELEVANT DOCUMENTS FILED OR TO BE FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. Investors and security holders may obtain free copies of the definitive proxy statement, any amendments or supplements thereto and other documents containing important information about the Company, once such documents are filed with the SEC, through the website maintained by the SEC at www.sec.gov. In addition, stockholders of the Company may obtain free copies of the documents filed with the SEC by directing a request through the Investor Relations portion of the Company’s website at https://investors.avantax.com or by mail to Avantax, Inc., 3200 Olympus Boulevard, Suite 100, Dallas, Texas 75019, Attention: Dee Littrell, Investor Relations.
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Participants in the Solicitation
The Company and its directors, its executive officers and certain other members of Company management and Company employees may, under the rules of the SEC, be deemed to be participants in the solicitation of proxies in connection with the proposed transaction. Information about the directors and executive officers of the Company is set forth in the Company’s definitive proxy statement on Schedule 14A for the 2023 annual meeting of the stockholders of the Company, filed with the SEC on April 3, 2023 and in subsequent documents filed with the SEC, each of which is (or, when filed will be) available free of charge from the sources indicated above. Other information regarding the participants in the solicitation of proxies from the stockholders of the Company and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the preliminary and definitive proxy statements and other relevant materials to be filed with the SEC regarding the proposed transaction when they become available.
Cautionary Statement Regarding Forward-Looking Statements
This Current Report on Form 8-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including, without limitation, statements regarding the anticipated timing of the consummation of the proposed transaction. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Forward-looking statements can also be identified by words such as “anticipates,” “believes,” “plans,” “expects,” “future,” “intends,” “may,” “will,” “would,” “could,” “should,” “estimates,” “predicts,” “potential,” “continues,” “target,” “outlook” and similar terms and expressions, but the absence of these words does not mean that the statement is not forward-looking. Actual results may differ significantly from management’s expectations due to various risks and uncertainties including, without limitation: (i) the risk that the proposed transaction may not be completed in a timely manner, or at all; (ii) the failure to satisfy the conditions to the consummation of the proposed transaction, including, without limitation, the receipt of stockholder and regulatory approvals; (iii) unanticipated difficulties or expenditures relating to the proposed transaction; (iv) the effect of the announcement or pendency of the proposed transaction on the plans, business relationships, operating results and operations; (v) potential difficulties retaining employees, financial professionals and clients as a result of the announcement and pendency of the proposed transaction; (vi) the response of employees, financial professionals and suppliers to the announcement of the proposed transaction; (vii) risks related to diverting management’s attention from the Company’s ongoing business operations; (viii) legal proceedings, including those that may be instituted against the Company, its board of directors, its executive officers or others following the announcement of the proposed transaction; and (ix) risks regarding the failure to obtain the necessary financing to complete the proposed transaction. In addition, a description of certain other factors that could affect the Company’s business, financial condition or results of operations is included in the Company’s most recent Annual Report on Form 10-K and most recent Quarterly Report on Form 10-Q filed with the SEC. Forward-looking statements reflect the Company’s good faith beliefs, assumptions and expectations but are not guarantees of future performance or events. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Current Report on Form 8-K. The Company undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date hereof, except as may be required by law.
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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.
| AVANTAX, INC. | |||
| (Registrant) | |||
| Date: September 11, 2023 | By: | /s/ Marc Mehlman | |
|
Name: Marc Mehlman Title: Chief Financial Officer and Treasurer | |||
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Exhibit 2.1
EXECUTION VERSION
AGREEMENT AND PLAN OF MERGER
by and among
ARETEC GROUP, INC.,
C2023 SUB CORP.
and
AVANTAX, INC.
Dated as of September 9, 2023
| Table of Contents | ||
| Page | ||
| Article I | ||
| DEFINITIONS | ||
| Section 1.1. | Definitions | 2 |
| Article II | ||
| THE MERGER | ||
| Section 2.1. | The Merger | 2 |
| Section 2.2. | The Closing | 2 |
| Section 2.3. | Effective Time | 3 |
| Section 2.4. | Certificate of Incorporation and Bylaws | 3 |
| Section 2.5. | Board of Directors | 3 |
| Section 2.6. | Officers | 3 |
| Article III | ||
| EFFECT OF THE MERGER ON CAPITAL STOCK; EXCHANGE OF CERTIFICATES | ||
| Section 3.1. | Effect on Securities | 3 |
| Section 3.2. | Payment for Securities; Exchange of Certificates | 5 |
| Section 3.3. | Company Equity Awards | 7 |
| Section 3.4. | Lost Certificates | 10 |
| Section 3.5. | Dissenting Shares | 11 |
| Section 3.6. | Transfers; No Further Ownership Rights | 11 |
| Article IV | ||
| REPRESENTATIONS AND WARRANTIES OF THE COMPANY | ||
| Section 4.1. | Organization and Qualification; Subsidiaries | 12 |
| Section 4.2. | Capitalization | 12 |
| Section 4.3. | Authority Relative to Agreement | 14 |
| Section 4.4. | No Conflict; Required Filings and Consents | 15 |
| Section 4.5. | Permits; Compliance with Laws | 16 |
| Section 4.6. | Company SEC Documents; Financial Statements | 19 |
| Section 4.7. | Information Supplied | 20 |
| Section 4.8. | Disclosure Controls and Procedures | 20 |
| Section 4.9. | Absence of Certain Changes or Events | 21 |
| Section 4.10. | No Undisclosed Liabilities | 21 |
| Section 4.11. | Litigation | 22 |
| Section 4.12. | Employee Benefit Plans | 22 |
| Section 4.13. | Labor Matters | 24 |
| Section 4.14. | Intellectual Property Rights; Data Protection | 26 |
| Section 4.15. | Taxes | 29 |
i
| Table of Contents | ||
| (continued) | ||
| Page | ||
| Section 4.16. | Material Contracts | 30 |
| Section 4.17. | Investment Adviser and Broker-Dealer Matters | 33 |
| Section 4.18. | Real Property; Environmental Matters | 39 |
| Section 4.19. | Vote Required | 41 |
| Section 4.20. | Brokers | 42 |
| Section 4.21. | Opinion of Financial Advisor | 42 |
| Section 4.22. | Insurance | 42 |
| Section 4.23. | Affiliate Transactions | 43 |
| Section 4.24. | Material Suppliers | 43 |
| Section 4.25. | Personal Property | 43 |
| Section 4.26. | COVID-19 | 43 |
| Section 4.27. | Takeover Statutes | 43 |
| Section 4.28. | Employee Agents | 43 |
| Section 4.29. | Third-Party Agents | 44 |
| Section 4.30. | Market Conduct | 44 |
| Section 4.31. | ERISA | 44 |
| Section 4.32. | No Other Representations or Warranties | 45 |
| Article V | ||
| REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION SUB | ||
| Section 5.1. | Organization and Qualification | 46 |
| Section 5.2. | Authority Relative to Agreement | 46 |
| Section 5.3. | No Conflict; Required Filings and Consents | 47 |
| Section 5.4. | Litigation | 48 |
| Section 5.5. | Investment Adviser and Broker-Dealer Matters | 48 |
| Section 5.6. | Absence of Certain Agreements | 49 |
| Section 5.7. | Information Supplied | 49 |
| Section 5.8. | Financing; Sufficient Funds | 49 |
| Section 5.9. | Capitalization of Acquisition Sub | 51 |
| Section 5.10. | Investment Intention | 51 |
| Section 5.11. | Brokers | 51 |
| Section 5.12. | Solvency | 52 |
| Section 5.13. | Share Ownership | 52 |
| Section 5.14. | Management Agreements | 52 |
| Section 5.15. | Financial Statements; Controls | 52 |
| Section 5.16. | Indebtedness | 53 |
| Section 5.17. | Acknowledgment of Disclaimer of Other Representations and Warranties | 53 |
| Article VI | ||
| COVENANTS AND AGREEMENTS | ||
| Section 6.1. | Conduct of Business by the Company Pending the Merger | 55 |
| Section 6.2. | Preparation of the Proxy Statement; Stockholders’ Meeting | 59 |
ii
| Table of Contents | ||
| (continued) | ||
| Page | ||
| Section 6.3. | Appropriate Action; Consents; Filings | 61 |
| Section 6.4. | Access to Information; Confidentiality | 64 |
| Section 6.5. | Non-Solicitation; Competing Proposals; Intervening Event | 65 |
| Section 6.6. | Directors’ and Officers’ Indemnification and Insurance | 71 |
| Section 6.7. | Notification of Certain Matters | 73 |
| Section 6.8. | Public Announcements | 74 |
| Section 6.9. | Employee Benefits | 75 |
| Section 6.10. | Conduct of Business by Parent Pending the Merger | 77 |
| Section 6.11. | Financing | 77 |
| Section 6.12. | Financing Cooperation | 80 |
| Section 6.13. | Repayment of Indebtedness | 84 |
| Section 6.14. | Acquisition Sub; Parent Affiliates | 84 |
| Section 6.15. | No Control of the Company’s Business | 84 |
| Section 6.16. | Rule 16b-3 Matters | 85 |
| Section 6.17. | Stock Exchange Matters | 85 |
| Section 6.18. | Advisory Client Consents | 85 |
| Section 6.19. | Stockholder Litigation | 86 |
| Section 6.20. | Takeover Laws | 86 |
| Article VII | ||
| CONDITIONS TO THE MERGER | ||
| Section 7.1. | Conditions to Obligations of Each Party to Effect the Merger | 86 |
| Section 7.2. | Conditions to Obligations of Parent and Acquisition Sub to Effect the Merger | 87 |
| Section 7.3. | Conditions to Obligations of the Company to Effect the Merger | 88 |
| Article VIII | ||
| TERMINATION, AMENDMENT AND WAIVER | ||
| Section 8.1. | Termination | 88 |
| Section 8.2. | Effect of Termination | 90 |
| Section 8.3. | Termination Fees; Expenses | 91 |
| Article IX | ||
| GENERAL PROVISIONS | ||
| Section 9.1. | Non-Survival of Representations, Warranties and Agreements | 93 |
| Section 9.2. | Notices | 93 |
| Section 9.3. | Interpretation; Certain Definitions | 94 |
| Section 9.4. | Severability | 96 |
| Section 9.5. | Assignment | 96 |
| Section 9.6. | Entire Agreement | 96 |
iii
| Table of Contents | ||
| (continued) | ||
| Page | ||
| Section 9.7. | No Third-Party Beneficiaries | 97 |
| Section 9.8. | Amendment | 97 |
| Section 9.9. | Extension; Waiver | 98 |
| Section 9.10. | Expenses; Transfer Taxes | 98 |
| Section 9.11. | Governing Law | 98 |
| Section 9.12. | Specific Performance | 99 |
| Section 9.13. | Consent to Jurisdiction | 100 |
| Section 9.14. | Counterparts | 100 |
| Section 9.15. | WAIVER OF JURY TRIAL | 101 |
| Section 9.16. | Debt Financing Sources | 101 |
iv
INDEX OF DEFINED TERMS
| 1017 Application | 63, A-1 |
| Acceptable Confidentiality Agreement | 67, A-1 |
| Acquisition Sub | 1, A-1 |
| Action | A-1 |
| Adverse Recommendation Change | 67, A-1 |
| Advisory Client | A-1 |
| Advisory Contract | A-1 |
| Affiliate | A-1 |
| Aggregate Merger Consideration | A-1 |
| Agreement | 1, A-1 |
| Alternative Financing | 79, A-1 |
| Anti-Bribery Laws | 17, A-1 |
| Antitrust Laws | A-1 |
| Applicable Documents | 82, A-1 |
| Bankruptcy and Equity Exception | 14, A-1 |
| Blue Sky Laws | A-2 |
| Book-Entry Evidence | 4, A-2 |
| Business Day | A-2 |
| CARES Act | A-2 |
| Certificate of Merger | 3, A-2 |
| Certificates | 4, A-2 |
| Closing | 2, A-2 |
| Closing Date | 2, A-2 |
| Code | A-2 |
| Company | 1, A-2 |
| Company Benefit Plan | A-2 |
| Company Board | 1, A-2 |
| Company Bylaws | 12, A-2 |
| Company Charter | 12, A-2 |
| Company Common Stock | 3, A-2 |
| Company Confidentiality Agreement | A-2 |
| Company Disclosure Letter | A-3 |
| Company Equity Awards | A-3 |
| Company Equity Plan | A-3 |
| Company ESPP | A-3 |
| Company IP | 26, A-3 |
| Company IT Assets | A-3 |
| Company Leases | 39, A-3 |
| Company Material Adverse Effect | A-3 |
| Company Material Contract | 30, A-4 |
| Company Option | A-4 |
| Company Option Consideration | 7, A-4 |
| Company Owned IP | 26, A-4 |
| Company Permits | 16, A-4 |
| Company PSU | A-4 |
v
| Company PSU Consideration | 8, A-5 |
| Company Recommendation | A-5 |
| Company Registered IP | 26, A-5 |
| Company Related Parties | 92, A-5 |
| Company RSU | A-5 |
| Company RSU Consideration | 7, A-5 |
| Company SEC Documents | 19, A-5 |
| Company Service Provider | A-5 |
| Company Stock Units | A-5 |
| Company Sublandlord Leases | 39, A-5 |
| Company Tenant Leases | 39, A-5 |
| Company Termination Fee | A-5 |
| Competing Proposal | 69, A-5 |
| Compliant | A-5 |
| Consent | 15, A-5 |
| Continuation Period | 74, A-5 |
| Continuing Employees | 74, A-6 |
| Contract | A-6 |
| control | A-6 |
| Copyrights | A-10 |
| Covered Person | A-6 |
| COVID-19 | A-6 |
| COVID-19 Laws | A-6 |
| COVID-19 Measures | A-6 |
| D&O Indemnified Parties | 71, A-6 |
| Data Protection Laws | A-6 |
| Debt Commitment Letter | 49, A-6 |
| Debt Fee Letters | 49, A-6 |
| Debt Financing | 49, A-6 |
| Debt Financing Definitive Documents | 78, A-6 |
| Debt Financing Sources | A-7 |
| Debt Payoff Amount | 84, A-7 |
| DGCL | 1, A-7 |
| Dissenting Shares | 10, A-7 |
| Domain Names | A-10 |
| Effect | 70, A-7 |
| Effective Time | 3, A-7 |
| Employee | A-7 |
| Employee Agent | 43, A-7 |
| Environmental Laws | A-7 |
| Environmental Permits | A-7 |
| ERISA | A-7 |
| ERISA Affiliate | A-7 |
| Exchange Act | A-7 |
| Exchange Fund | 5, A-7 |
| Excluded Information | A-8 |
vi
| Excluded Shares | 3, A-8 |
| Existing Credit Agreement | A-8 |
| Existing D&O Insurance Policies | 72, A-8 |
| Expenses | A-8 |
| Final Offering Period | 9, A-9 |
| Financial Advisor | A-9 |
| Financing Commitments | 49, A-9 |
| Financing Sources | A-9 |
| FINRA | A-9 |
| FINRA Approval | 63, A-9 |
| Funding Obligations | 50, A-9 |
| Funds | 50, A-9 |
| GAAP | A-9 |
| Governmental Authority | A-9 |
| Grant Date | 13, A-9 |
| Hazardous Substances | A-9 |
| HSR Act | A-10 |
| Insurance Carrier | A-10 |
| Insurance Producer | A-10 |
| Intellectual Property | A-10 |
| Intentional Breach | A-10 |
| Intervening Event | 70, A-10 |
| Investment Advisers Act | A-10 |
| IRS | A-10 |
| Knowledge | A-11 |
| Law | A-11 |
| Leased Real Property | A-11 |
| Lenders | A-11 |
| Lien | A-11 |
| Material Supplier | 31, A-11 |
| Maximum Amount | 72, A-11 |
| Merger | 1, A-11 |
| Merger Consideration | 4, A-11 |
| Money Laundering Laws | 18, A-11 |
| Multiemployer Plan | A-11 |
| NASDAQ | 15, A-11 |
| New Plans | 76, A-11 |
| Notice of Adverse Recommendation | 68, A-11 |
| Old Plans | 76, A-11 |
| Open Source Software | A-11 |
| Order | A-12 |
| Parent | 1, A-12 |
| Parent Audited Financial Statements | 52, A-12 |
| Parent Confidentiality Agreement | 63, A-12 |
| Parent Credit Agreement | A-12 |
| Parent Disclosure Letter | A-12 |
vii
| Parent Financial Statements | 52, A-12 |
| Parent Indenture | A-12 |
| Parent Material Adverse Effect | A-12 |
| Parent Organizational Documents | A-12 |
| Parent Related Parties | 92, A-12 |
| Parent Unaudited Financial Statements | 52, A-12 |
| Patents | A-10 |
| Paying Agent | 4, A-12 |
| Paying Agent Agreement | 5, A-12 |
| Payoff Letter | 84, A-12 |
| PCAOB | A-12 |
| Permitted Liens | A-12 |
| Permitted PSU | A-13 |
| Permitted RSU | A-13 |
| Person | A-13 |
| Personal Data | A-14 |
| Plan Client | 44, A-14 |
| Pre-Closing Period | 55, A-14 |
| Privacy Obligations | A-14 |
| Prohibited Actions | 78, A-14 |
| Proprietary Software | A-14 |
| Proxy Statement | 20, A-14 |
| QPAM Exemption | 44, A-14 |
| Registered Adviser | 33, A-14 |
| Registered Adviser Regulatory Filings | 33, A-14 |
| Registered Adviser Service Provider | A-14 |
| Registered Broker-Dealer | 34, A-14 |
| Regulation A Disqualifying Event | 38, A-14 |
| Regulation D Disqualifying Event | 38, A-14 |
| Regulatory Documents | A-14 |
| Release | A-14 |
| Remedial Action | 62, A-15 |
| Replacement Cash Award | 9, A-15 |
| Representatives | A-15 |
| Required Information | A-15 |
| Requisite Stockholder Approval | 41, A-15 |
| Reverse Termination Fee | A-15 |
| Sanctions | 18, A-15 |
| Sarbanes-Oxley Act | 17, A-15 |
| SEC | A-15 |
| Secretary | 3, A-15 |
| Securities Act | A-15 |
| Security Breach | 29, A-15 |
| Self-Regulating Authority | A-15 |
| Similar Law | 44, A-15 |
| Software | A-15 |
viii
| Solvent | 51, A-15 |
| Specified Date | 12, A-16 |
| Stockholders’ Meeting | 60, A-16 |
| Subsidiary | A-16 |
| Superior Proposal | 70, A-16 |
| Surviving Corporation | 2, A-16 |
| Tail Coverage | 72, A-16 |
| Takeover Laws | 43, A-16 |
| Tax | A-16 |
| Tax Returns | A-16 |
| Taxes | A-16 |
| TDI Consent | A-16 |
| Termination Date | 88, A-16 |
| Texas Department | A-16 |
| Third Party | A-16 |
| Third-Party Agent | A-16 |
| Trade Control Laws | 18, A-17 |
| Trade Secrets | A-10 |
| Trademarks | A-10 |
| Treasury Regulations | A-17 |
| VDR | 45, A-17 |
ix
THIS AGREEMENT AND PLAN OF MERGER, dated as of September 9, 2023 (this “Agreement”), is made by and among Aretec Group, Inc., a Delaware corporation (“Parent”), C2023 Sub Corp., a Delaware corporation and a direct, wholly owned Subsidiary of Parent (“Acquisition Sub”), and Avantax, Inc., a Delaware corporation (the “Company”).
W I T N E S E T H:
WHEREAS, the board of directors of the Company (the “Company Board”) has unanimously (a) approved and declared advisable the execution, delivery and performance of this Agreement, and subject to receiving the Requisite Stockholder Approval, the consummation by the Company of the transactions contemplated by this Agreement, including the merger of Acquisition Sub with and into the Company, pursuant to the Delaware General Corporation Law (the “DGCL”), upon the terms and subject to the conditions set forth in this Agreement (the “Merger”), (b) determined and declared that this Agreement and the consummation by the Company of the transactions contemplated by this Agreement, including the Merger, are advisable and in the best interests of the Company and its stockholders, (c) directed that this Agreement be submitted to the stockholders of the Company to be adopted and (d) upon the terms and subject to the conditions of this Agreement, resolved to recommend the adoption of this Agreement by the Company’s stockholders;
WHEREAS, the board of directors of Acquisition Sub has (a) determined and declared that this Agreement and the consummation by Acquisition Sub of the transactions contemplated by this Agreement, including the Merger, are advisable and in the best interests of Acquisition Sub and its sole stockholder, (b) approved and declared advisable the execution, delivery and performance of this Agreement and the consummation by Acquisition Sub of the transactions contemplated by this Agreement, including the Merger, (c) directed that this Agreement be submitted to the stockholder of Acquisition Sub to be adopted and (d) upon the terms and subject to the conditions of this Agreement, resolved to recommend adoption of this Agreement by the stockholder of Acquisition Sub;
WHEREAS, the board of directors (or equivalent) of Parent has (a) approved and declared advisable the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated by this Agreement, including the Merger, and (b) determined and declared that this Agreement and the consummation of the transactions contemplated by this Agreement are advisable and in the best interests of Parent and its stockholders; and
WHEREAS, each of Parent, Acquisition Sub and the Company desire to make certain representations, warranties, covenants and agreements in connection with the Merger and also to prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the foregoing and the representations, warranties, covenants and agreements in connection with the transactions contemplated by this Agreement, and subject to the conditions herein contained, and intending to be legally bound hereby, the parties hereto hereby agree as follows:
1
Article I
DEFINITIONS
Section 1.1. Definitions. Defined terms used in this Agreement have the respective meanings ascribed to them by definition in this Agreement or in Appendix A.
Article
II
THE MERGER
Section 2.1. The Merger. Upon the terms and subject to the conditions of this Agreement, and in accordance with the DGCL, at the Effective Time, Acquisition Sub shall be merged with and into the Company, whereupon the separate existence of Acquisition Sub shall cease, and the Company shall continue under the name “Avantax, Inc.” as the surviving corporation (the “Surviving Corporation”) and shall continue to be governed by the laws of the State of Delaware. At the election of Parent, which shall be made in writing and delivered to the Company no more than five (5) Business Days after the date on which the Company files the preliminary Proxy Statement with the SEC, Parent may designate a specific direct or indirect wholly owned subsidiary of Parent that is a Delaware corporation formed solely for the purpose of engaging in the transactions contemplated hereby, to be substituted for Acquisition Sub as a constituent corporation in the Merger; provided, that (a) Parent delivers to the Company with such notice, amendments to this Agreement and to any other documents necessary to effect such substitution, in form and substance acceptable to the Company and (b) such substitution does not (i) prevent, delay or impair the consummation of the transactions contemplated hereby, (ii) cause any condition set forth in Article VII to become incapable of being satisfied (unless duly waived by the party entitled to the benefits thereof), (iii) adversely affect the Company or any of its equity holders or otherwise impair the benefits expected to accrue to such equity holders pursuant to the transactions contemplated hereby or (iv) relieve Parent or Acquisition Sub of any its obligations hereunder. In such event, the parties hereto shall execute an appropriate amendment to this Agreement in order to reflect the foregoing.
Section 2.2. The Closing. Subject to the provisions of Article VII, the closing of the Merger (the “Closing”) shall take place at 9:00 a.m. (New York City time) on a date to be specified by the Company and Parent, but no later than the third (3rd) Business Day after the satisfaction or, to the extent not prohibited by Law, waiver of all of the conditions set forth in Article VII (other than those conditions that by their terms are to be satisfied at the Closing, but subject to the satisfaction or, to the extent not prohibited by Law, waiver of such conditions by the party hereto entitled to waive such conditions), and the Closing shall take place by the electronic exchange of signatures and documents, unless another time, date or place is agreed to in writing by the Company and Parent (such date on which the Closing occurs being the “Closing Date”); provided, that the Closing shall not occur prior to the earlier of (i) sixty (60) calendar days after the date of this Agreement and (ii) the date that is a date specified by Parent on no less than three (3) Business Days’ prior written notice to the Company.
2
(a) Concurrently with the Closing, each of the Company, Parent and Acquisition Sub shall cause a certificate of merger with respect to the Merger (the “Certificate of Merger”) to be executed, acknowledged, delivered to and filed with the Office of the Secretary of State of the State of Delaware (the “Secretary”) in such form as required by, and executed in accordance with, the DGCL. The Merger shall become effective on the date and time at which the Certificate of Merger has been filed by the Secretary (such date and time of filing, or such later time as may be agreed to by Parent, Acquisition Sub and the Company and set forth in the Certificate of Merger, being hereinafter referred to as the “Effective Time”).
(b) The Merger shall have the effects set forth in the applicable provisions of the DGCL, this Agreement and the Certificate of Merger. Without limiting the generality of the foregoing, from and after the Effective Time, the Surviving Corporation shall possess all properties, rights, privileges, powers and franchises of the Company and Acquisition Sub, and all of the claims, obligations, liabilities, debts and duties of the Company and Acquisition Sub shall become the claims, obligations, liabilities, debts and duties of the Surviving Corporation.
Section 2.4. Certificate of Incorporation and Bylaws. Subject to compliance with Section 6.6, at the Effective Time, the certificate of incorporation and bylaws of the Surviving Corporation shall be amended and restated to be identical to the certificate of incorporation and bylaws of Acquisition Sub, until thereafter amended in accordance with the applicable provisions of the certificate of incorporation and bylaws of the Surviving Corporation (as applicable) and the DGCL, except that (i) in each case, the name of the Surviving Corporation shall be Avantax, Inc. and (ii) the indemnity provisions shall be the same as those under the Company’s certificate of incorporation and bylaws, respectively, in each case as in effect immediately prior to the Effective Time.
Section 2.5. Board of Directors. The board of directors of the Surviving Corporation effective as of, and immediately following, the Effective Time shall consist of the members of the board of directors of Acquisition Sub as of immediately prior to the Effective Time, each to hold office in accordance with the applicable provisions of the certificate of incorporation and bylaws of the Surviving Corporation.
Section 2.6. Officers. From and after the Effective Time, the officers of Acquisition Sub as of immediately prior to the Effective Time shall be the officers of the Surviving Corporation, each to hold office in accordance with the applicable provisions of the certificate of incorporation and bylaws of the Surviving Corporation.
Article
III
EFFECT OF THE MERGER ON CAPITAL STOCK; EXCHANGE OF CERTIFICATES
Section 3.1. Effect on Securities. At the Effective Time (or such other time specified in this Section 3.1), by virtue of the Merger and without any action on the part of the Company, Parent, Acquisition Sub or any holder of any securities of the Company or Acquisition Sub or any other Person:
(a) Expiration or Cancellation of Company Securities. Each share of common stock, par value $0.0001 per share, of the Company (the “Company Common Stock”) held by the Company or owned of record by the Company or any Subsidiary of the Company (including shares held as treasury stock) and all shares of Company Common Stock held, directly or indirectly, by Parent or Acquisition Sub or any of their wholly-owned Subsidiaries (other than, in each case, shares of Company Common Stock held on behalf of a Third Party) (collectively, the “Excluded Shares”) immediately prior to the Effective Time shall automatically be cancelled and retired and shall cease to exist as issued or outstanding shares, and no consideration or payment shall be delivered in exchange therefor or in respect thereof.
3
(b) Conversion of Company Common Stock. Except as otherwise provided in this Agreement, each share of Company Common Stock issued and outstanding immediately prior to the Effective Time (other than any Excluded Shares and any Dissenting Shares) shall be converted into the right to receive $26.00 per share of Company Common Stock in cash (the “Merger Consideration”), without interest thereon and less any required Tax withholdings as provided in Section 3.2(g). Each share of Company Common Stock to be converted into the right to receive the Merger Consideration as provided in this Section 3.1(b) shall no longer be issued or outstanding and shall automatically be cancelled and shall cease to exist, and the holders of certificates (the “Certificates”) or book-entry evidence of shares of Company Common Stock (“Book-Entry Evidence”) which immediately prior to the Effective Time represented such shares of Company Common Stock (other than any shares of Company Common Stock cancelled pursuant to Section 3.1(a) and any Dissenting Shares) shall cease to have any rights with respect to such Company Common Stock other than the right to receive, upon surrender of such Certificates or Book-Entry Evidence in accordance with Section 3.2, the Merger Consideration without interest thereon and less any required Tax withholdings as provided in Section 3.2(g).
(c) Conversion of Acquisition Sub Capital Stock. At the Effective Time, by virtue of the Merger and without any action on the part of the holder thereof, each share of common stock, par value $0.01 per share, of Acquisition Sub issued and outstanding immediately prior to the Effective Time shall automatically be converted into and become one (1) fully paid, non-assessable share of common stock, par value $0.01 per share, of the Surviving Corporation and shall constitute the only issued or outstanding shares of capital stock of the Surviving Corporation. At the Effective Time, all certificates representing common stock of Acquisition Sub (if any) shall be deemed for all purposes to represent the number of shares of common stock of the Surviving Corporation into which they were converted in accordance with the immediately preceding sentence.
(d) Adjustments. Without limiting the other provisions of this Agreement, if at any time during the period between the date of this Agreement and the Effective Time, any change in the number of outstanding shares of Company Common Stock shall occur as a result of a reclassification, recapitalization, subdivision, stock split (including a reverse stock split) or similar event, or consolidation, combination, exchange or readjustment of shares, or any stock dividend or distribution with a record date during such period, the Merger Consideration shall be equitably adjusted to provide the same economic effect as contemplated by this Agreement prior to such event. Nothing in this Section 3.1(d) shall be construed to permit any party to take any action that is otherwise prohibited or restricted by any other provision of this Agreement.
4
Section 3.2. Payment for Securities; Exchange of Certificates.
(a) Designation of Paying Agent; Deposit of Exchange Fund. No later than five (5) days prior to the Effective Time, Parent shall, at its sole cost and expense, designate a reputable bank or trust company (the “Paying Agent”) that is organized and doing business under the laws of the United States, the identity and the terms of appointment of which to be reasonably acceptable to the Company, to act as paying agent for the payment of the Aggregate Merger Consideration, and shall enter into an agreement (the “Paying Agent Agreement”) relating to the Paying Agent’s responsibilities with respect thereto, in form and substance reasonably acceptable to the Company prior to the Effective Time. Prior to the filing of the Certificate of Merger, Parent shall deposit, or cause to be deposited, with the Paying Agent, cash constituting an amount equal to the Aggregate Merger Consideration (such Aggregate Merger Consideration as deposited with the Paying Agent, the “Exchange Fund”). Parent shall cause the Exchange Fund to be (i) held for the benefit of the holders of shares of Company Common Stock entitled to the Merger Consideration in accordance with Section 3.1(b) and (ii) applied promptly to making the payments pursuant to Section 3.1(b). The Exchange Fund shall not be used for any purpose other than to fund payments pursuant to this Section 3.2, except as expressly provided for in this Agreement. All amounts payable pursuant to Section 3.6 to a holder of Company Common Stock shall be paid to the Paying Agent for further distribution to each of the holders of Company Common Stock, or, after the Effective Time, at Parent’s election, to the Paying Agent or the Surviving Corporation, for further distribution, in each case, as provided in this Agreement and subject to Section 3.2(g) and Section 3.3(f).
(b) Procedures for Exchange.
(i) Certificates. As promptly as reasonably practicable following the Effective Time and in any event not later than the third (3rd) Business Day thereafter, the Surviving Corporation shall cause the Paying Agent to deliver to each holder of record of a Certificate that immediately prior to the Effective Time represented outstanding shares of Company Common Stock (A) a letter of transmittal, in customary form mutually agreed to by the Company and Parent prior to the Effective Time, which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon proper receipt of the Certificates (or affidavits of loss in lieu thereof in accordance with Section 3.4) by the Paying Agent and which shall be in the form and have such other provisions as Parent and the Company may reasonably specify and (B) instructions for use in effecting the surrender of the Certificates in exchange for the Merger Consideration into which the number of shares of Company Common Stock previously represented by such Certificate have been converted pursuant to this Agreement (which instructions shall be in the form and have such other provisions as Parent and the Company shall mutually agree prior to the Effective Time).
(ii) Book-Entry Evidence. As promptly as reasonably practicable following the Effective Time and in any event not later than the third (3rd) Business Day thereafter, the Surviving Corporation shall cause the Paying Agent to deliver to each holder of record of Book-Entry Evidence not held through The Depository Trust Company (and to deliver to The Depository Trust Company, in the case of holders of Book-Entry Evidence held through The Depository Trust Company) that immediately prior to the Effective Time represented outstanding shares of Company Common Stock (A) a letter of transmittal in customary form mutually agreed to by the Company and Parent prior to the Effective Time, and (B) instructions for returning such letter of transmittal in exchange for the right to receive the Merger Consideration into which the number of shares of Company Common Stock previously represented by such Book-Entry Evidence have been converted pursuant to this Agreement (which instructions shall be in the form and have such other provisions as Parent and the Company shall mutually agree prior to the Effective Time). Notwithstanding anything to the contrary contained in this Agreement, no holder of Book-Entry Evidence shall be required to deliver a Certificate or, in the case of holders of Book-Entry Evidence held through The Depository Trust Company, an executed letter of transmittal to the Paying Agent to receive the Merger Consideration that such holder is entitled to receive pursuant to Section 3.1(b).
5
(c) Timing of Exchange. Upon surrender of a Certificate (or affidavit of loss in lieu thereof in accordance with Section 3.4) or Book-Entry Evidence for cancellation to the Paying Agent, together with, in the case of Certificates and Book-Entry Evidence not held through The Depository Trust Company, a letter of transmittal as described in Section 3.2(b)(i) or Section 3.2(b)(ii), as applicable, duly completed and validly executed in accordance with the instructions thereto, or, in the case of Book-Entry Evidence held through The Depository Trust Company, receipt of an “agent’s message” by the Paying Agent, and such other customary evidence of surrender as the Paying Agent may reasonably require pursuant to such instructions, the holder of such Certificate or Book-Entry Evidence shall be entitled to receive in exchange therefor the Merger Consideration for each share of Company Common Stock formerly represented by such Certificate or Book-Entry Evidence, upon the later to occur of (i) the Effective Time or (ii) the Paying Agent’s receipt of such Certificate (or affidavit of loss in lieu thereof in accordance with Section 3.4) or Book-Entry Evidence, in accordance with the procedures in Section 3.2(b), as applicable, and the Certificate (or affidavits of loss in lieu thereof in accordance with Section 3.4) or Book-Entry Evidence or “agent’s message,” so surrendered shall be forthwith cancelled. The Paying Agent Agreement shall provide that the Paying Agent shall accept such Certificates (or affidavits of loss in lieu thereof in accordance with Section 3.4) or Book-Entry Evidence upon compliance with such reasonable terms and conditions as the Paying Agent may impose to effect an orderly exchange thereof in accordance with normal exchange practices. No interest shall be paid or accrued for the benefit of holders of the Certificates or Book-Entry Evidence on the Merger Consideration payable upon the surrender of the Certificates or Book-Entry Evidence.
(d) Termination of Exchange Fund. Any portion of the Exchange Fund which remains undistributed to the holders of the Certificates or Book-Entry Evidence for one (1) year after the Effective Time (including any interest received with respect thereto) shall be delivered to the Surviving Corporation, upon written demand, and any such holders prior to the Merger who have not theretofore complied with this Article III shall thereafter look only to the Surviving Corporation as a general creditor thereof for payment of their claims for Merger Consideration (without any interest thereon) in respect thereof (other than Dissenting Shares and Excluded Shares), subject to abandoned property, escheat or similar Law.
(e) No Liability. None of Parent, Acquisition Sub, the Company, the Surviving Corporation or the Paying Agent shall be liable to any Person in respect of any cash held in the Exchange Fund delivered to a public official pursuant to any applicable abandoned property, escheat or similar Law. Any portion of the Exchange Fund which remains undistributed to the holders of Certificates or Book-Entry Evidence immediately prior to such date on which the Exchange Fund would otherwise escheat to, or become the property of, any Governmental Authority, shall, to the extent permissible by applicable Law, become the property of the Surviving Corporation, free and clear of all claims or interest of any Person previously entitled thereto.
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(f) Investment of Exchange Fund. The Paying Agent Agreement shall provide that the Paying Agent shall invest any cash included in the Exchange Fund as directed by Parent or, after the Effective Time, the Surviving Corporation; provided that (i) no such investment shall relieve Parent or the Paying Agent from making the payments required by this Article III, and following any losses (or any diminishment of the Exchange Fund for any other reason below the level required to make prompt cash payment in full of the aggregate funds required to be paid pursuant to the terms hereof) Parent shall promptly provide additional funds to the Paying Agent for the benefit of the holders of Company Common Stock in the amount of such losses, (ii) no such investment shall have maturities that could prevent or delay payments to be made pursuant to this Agreement and (iii) such investments shall be in short-term obligations of the United States of America with maturities of no more than thirty (30) days or guaranteed by the United States of America and backed by the full faith and credit of the United States of America or in commercial paper obligations rated A-1 or P-1 or better by Moody’s Investors Services, Inc. or Standard & Poor’s Corporation, respectively. Any interest and other income resulting from such investments shall be promptly paid to Parent.
(g) Withholding. Parent, the Surviving Corporation or the Paying Agent, as applicable, shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement such amounts as it is required to deduct and withhold with respect to the making of such payment under applicable Law. To the extent that amounts are so withheld and paid over to or deposited with the relevant Governmental Authority, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which such deduction and withholding was made.
Section 3.3. Company Equity Awards.
(a) Company Options. Prior to the Effective Time, the Company Board (or an appropriate committee thereof) shall adopt resolutions providing that, at the Effective Time, each Company Option (whether or not vested) that is outstanding immediately prior to the Effective Time shall, automatically and without any required action on the part of the holder thereof, vest (if unvested) and be cancelled and converted into the right to receive an amount in cash, without interest, equal to the product of (i) the excess, if any, of (A) the Merger Consideration over (B) the per-share exercise price for such Company Option multiplied by (ii) the total number of shares of Company Common Stock underlying such Company Option (the “Company Option Consideration”); provided that if the exercise price per share of Company Common Stock of such Company Option is equal to or greater than the Merger Consideration, such Company Option shall be cancelled at the Effective Time without any cash payment or other consideration being made in respect thereof.
(b) Treatment of Company RSUs. Prior to the Effective Time, the Company Board (or an appropriate committee thereof) shall adopt resolutions providing that, at the Effective Time, each Company RSU (except any Permitted RSU granted to any non-employee financial professional) that is outstanding immediately prior to the Effective Time shall, automatically and without any required action on the part of the holder thereof, be cancelled and converted into the right to receive an amount in cash, without interest, equal to the product of (i) the total number of shares of Company Common Stock underlying such Company RSU (determined in the manner described below) multiplied by (ii) the Merger Consideration (the “Company RSU Consideration”). For purposes of this Section 3.3(b), the number of shares of Company Common Stock underlying a Company RSU shall be determined (1) for Company RSUs granted prior to the date hereof, equal to the total number of shares of Company Common Stock underlying such Company RSU and (2) for Permitted RSUs (except any Permitted RSU granted to any non-employee financial professional), equal to the product of (A) the total number of shares of Company Common Stock underlying such Permitted RSU and (B) the quotient of the number of days actually worked between the date of grant of such Permitted RSUs and the Effective Time divided by the total number of days in the vesting period for such Permitted RSUs, which vesting period shall in no event be less than three (3) years from the date of grant of such Permitted RSUs. Except as otherwise provided in Section 3.3(d), for any Company RSU that does not vest in accordance with this Section 3.3(b), if any, such Company RSU shall be cancelled and terminated without consideration immediately prior to the Effective Time.
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(c) Treatment of Company PSUs. Prior to the Effective Time, the Company Board (or an appropriate committee thereof) shall adopt resolutions providing that, at the Effective Time, each Company PSU (except any Permitted PSU granted to any non-employee financial professional) that is outstanding immediately prior to the Effective Time shall, automatically and without any required action on the part of the holder thereof, be cancelled and converted into the right to receive an amount in cash, without interest, equal to the product of (i) the number of shares of Company Common Stock underlying such Company PSU (determined in the manner described below) multiplied by (ii) the Merger Consideration (the “Company PSU Consideration”). For purposes of this Section 3.3(c), the number of shares of Company Common Stock underlying a Company PSU shall be determined (1) for Company PSUs (or portions thereof) granted prior to the date hereof for which the performance period has been completed prior to the Effective Time, based on the actual level of performance (as determined by the Company Board or a committee thereof prior to the Effective Time in good faith consistent with past practices) through the end of such performance period, (2) for any Company PSU (or portion thereof) granted prior to the date hereof in respect of which the performance period has not expired as of the Effective Time, based on the greater of (x) the target level of performance, (y) if the vesting of which is measured by reference to total shareholder return, based on the total shareholder return reflected by the Merger Consideration (and, as applicable, the total shareholder return of the comparator group as of a date within ten (10) Business Days prior to the Effective Time) and (z) if the vesting of which is measured by reference to EBITDA, based on the EBITDA measured as of the Effective Time (as determined by the Company Board (or an appropriate committee thereof)), in each case, determined by assuming shortened performance periods that end as of the Effective Time and otherwise in good faith consistent with past practices, (3) for Permitted PSUs (except any Permitted PSU granted to any non-employee financial professional), equal to the product of (x) the target number of shares of Company Common Stock underlying such Permitted PSU and (y) the quotient of the number of days actually worked between the start of the performance period for such Permitted PSUs and the Effective Time divided by the total number of days in the performance period for such Permitted PSUs, which performance period shall in no event be less than three (3) years commencing with the 2024 performance year, and (4) except as otherwise provided in Section 3.3(d), for any Company PSU that does not vest in accordance with the foregoing clause (1), (2) or (3), if any, such Company PSU shall be cancelled and terminated without consideration immediately prior to the Effective Time. The Company will deliver to Parent its determination of the performance and documentation supporting the basis of such determinations no later than three (3) Business Days prior to the Effective Time.
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(d) Treatment of Permitted RSUs and Permitted PSUs to Non-Employee Financial Professionals. Prior to the Effective Time, the Company Board (or an appropriate committee thereof) shall adopt resolutions providing that, at the Effective Time, each Permitted RSU and each Permitted PSU, in each case granted to any non-employee financial professional, that is outstanding immediately prior to the Effective Time, shall, automatically and without any required action on the part of the holder thereof, cease to represent a Permitted RSU or Permitted PSU denominated in shares of Company Common Stock and be converted into and will become a right to receive an amount in cash, without interest, equal to the product of (i) the total number of shares of Company Common Stock underlying such Permitted RSU or, in the case of Permitted PSUs, the target number of shares of Company Common Stock, multiplied by (ii) the Merger Consideration (a “Replacement Cash Award”); provided, that each Replacement Cash Award shall be subject to the same vesting and payment schedules as the Permitted RSU or Permitted PSU it replaces (other than performance-based vesting conditions), which, in respect of the vesting schedule applicable to the Permitted RSUs, shall in no event be less than three (3) years from the date of grant of such Permitted RSUs, and in respect of the performance period applicable to the Permitted PSUs, no less than a three (3) year performance period commencing with the 2024 performance year (which as applied to a corresponding Replacement Cash Award shall result in cliff vesting at the end of such three (3) year performance period), and in all cases the vesting of a Replacement Cash Award shall be subject to the non-employee financial professional’s continuous performance of services for Parent (or an Affiliate of Parent) through the applicable vesting date.
(e) Treatment of Company ESPP. As soon as practicable following the date of this Agreement, the Company shall take all action, and the Company Board (or an appropriate committee thereof) shall adopt resolutions, including amending the Company ESPP, if necessary, providing that (i) the current Offering Period (as defined in the Company ESPP) in effect as of the date hereof shall be the final Offering Period (such period, the “Final Offering Period”) and no further Offering Period shall commence pursuant to the Company ESPP after the date of this Agreement, (ii) each individual participating in the Final Offering Period on the date of this Agreement shall not be permitted to (A) increase his or her payroll contribution rate pursuant to the Company ESPP from the rate in effect on the date immediately preceding the date hereof or (B) make separate non-payroll contributions to the Company ESPP on or following the date of this Agreement and (iii) no new participants shall be permitted to start contributing under the Company ESPP on or after the date hereof other than pursuant to elections made prior to the date hereof. In furtherance of the foregoing, the Company shall take all actions that may be necessary to (x) cause the Final Offering Period, to the extent that it would otherwise be outstanding at the Effective Time, to be terminated no later than seven (7) Business Days prior to the date on which the Effective Time occurs; (y) make any pro rata adjustments that may be necessary to reflect the Final Offering Period, but otherwise treat the Final Offering Period as a fully effective and completed Offering Period for all purposes pursuant to the Company ESPP; and (z) cause the exercise (as of no later than seven (7) Business Days prior to the date on which the Effective Time occurs) of each outstanding purchase right pursuant to the Company ESPP. On such exercise date, the Company shall apply the funds credited as of such date pursuant to the Company ESPP within each participant’s payroll withholding account to the purchase of whole shares of Company Common Stock in accordance with the terms of the Company ESPP, and such shares of Company Common Stock shall be entitled to the Merger Consideration in accordance with Section 3.1(b). The Company shall take all action, and the Company Board (or an appropriate committee thereof) shall adopt resolutions, to terminate the Company ESPP effective as of immediately prior to the Effective Time and to provide that no further rights shall be granted or exercised under the Company ESPP thereafter.
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(f) Delivery of Company Equity Award Consideration; Withholding; Section 409A. Parent shall cause the Surviving Corporation to pay (including, to the extent applicable, through the payroll system of the Surviving Corporation) to each holder of a Company Equity Award the Company Option Consideration, Company RSU Consideration and Company PSU Consideration, as applicable, less any required withholding Taxes and without interest, within five (5) Business Days following the Effective Time, subject to any requirements under applicable Law. Notwithstanding anything herein to the contrary, with respect to any Company Equity Award that constitutes nonqualified deferred compensation subject to Section 409A of the Code and that the Company determines prior to the Effective Time is not eligible to be terminated in accordance with Treasury Regulation Section 1.409A-3(j)(4)(ix)(B), such payment will be made at the earliest time permitted under the applicable Company Equity Plan that will not trigger a Tax or penalty under Section 409A of the Code.
(g) Corporate Action. Prior to the Effective Time, the Company shall take all actions necessary (including adopting such resolutions of the Company Board (or any committee of the Company Board) and providing any required notices in connection therewith) to effectuate the treatment of the Company Equity Awards and the Company ESPP contemplated by this Section 3.3, and to terminate each of the Company Equity Plans and to ensure that, as of the Effective Time, no Person shall have any right under any Company Benefit Plan (including each of the Company Equity Plans) to payments with respect to any Company Common Stock except for the right to receive the payments, if any, contemplated in this Section 3.3.
Section 3.4. Lost Certificates. If any Certificate has been lost, stolen or destroyed, then upon the making of an affidavit, in form and substance reasonably acceptable to Parent and the Company, of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if reasonably required by the Surviving Corporation, the posting by such Person of a bond, in such reasonable form and customary amount as the Surviving Corporation may direct, as indemnity against any claim that may be made against it with respect to such Certificate, the Paying Agent will issue in exchange for such lost, stolen or destroyed Certificate, the Merger Consideration to which the holder thereof is entitled pursuant to this Article III.
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Section 3.5. Dissenting Shares. Notwithstanding anything to the contrary herein, shares of Company Common Stock issued and outstanding immediately prior to the Effective Time and held by a holder who is entitled to, and has properly exercised and perfected his, her or its demand for, appraisal rights in compliance with Section 262 of the DGCL (the “Dissenting Shares”) shall not be converted into the right to receive the Merger Consideration, but the holders of such Dissenting Shares shall be entitled to receive such consideration as may be determined to be due to such holder pursuant to Section 262 of the DGCL; provided, however, that if any such holder fails to perfect or shall have effectively withdrawn or loses such holder’s right to appraisal and payment under Section 262 of the DGCL (whether occurring before, at or after the Effective Time), such holder’s shares of Company Common Stock shall thereupon be deemed to have been converted as of the Effective Time into the right to receive the Merger Consideration, without any interest thereon and less any required tax withholdings as provided in Section 3.2(g), in accordance with Section 3.1(b), and such shares shall not be deemed to be Dissenting Shares. The Company shall give Parent (a) prompt notice of any demands for appraisal filed pursuant to Section 262 of the DGCL received by the Company, withdrawals of such demands and any other instruments served or delivered in connection with such demands pursuant to Section 262 of the DGCL and received by the Company, and (b) the opportunity and right to participate in all negotiations and proceedings with respect to demands made pursuant to Section 262 of the DGCL. Prior to the Effective Time, the Company shall not, except with the prior written consent of Parent (such consent not to be unreasonably withheld, conditioned or delayed), (i) make any payment with respect to any such demand, (ii) offer to settle or settle any such demand or (iii) waive any failure to timely deliver a written demand for appraisal or timely take any other action to perfect appraisal rights in accordance with the DGCL.
Section 3.6. Transfers; No Further Ownership Rights. From and after the Effective Time, the stock transfer books of the Company shall be closed, and there shall be no further registration of transfers on the stock transfer books of the Company of shares of Company Common Stock that were outstanding immediately prior to the Effective Time. If Certificates (or affidavits of loss in lieu thereof in accordance with Section 3.4) or Book-Entry Evidence are presented to the Surviving Corporation, Parent or Paying Agent for transfer following the Effective Time, they shall be cancelled against delivery of the applicable Merger Consideration as provided for in Section 3.1(b) for each share of Company Common Stock formerly represented by such Certificates or Book-Entry Evidence. In the event of a transfer of ownership of shares of Company Common Stock that is not registered in the transfer records of the Company, payment may be made to a Person other than the Person in whose name the Certificate so surrendered is registered, if such Certificate shall be properly endorsed or otherwise be in proper form for transfer and the Person requesting such payment shall pay any transfer or other Taxes required by reason of the payment to a Person other than the registered holder of such Certificate or establish to the satisfaction of Parent that such Tax has been paid or is not applicable, in addition to any other procedures or requirements of the Paying Agent. Payment of the Merger Consideration in accordance with the terms of this Article III, and, if applicable, any unclaimed dividends upon the surrender of Certificates or Book-Entry Evidence, shall be deemed to have been paid in full satisfaction of all rights pertaining to the shares of Company Common Stock formerly represented by such Certificates or Book-Entry Evidence.
Article IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except (i) as disclosed in the Company Disclosure Letter (subject to Section 9.3(b) and the disclaimers and limitations set forth in the cover page thereto) or (ii) in the Company SEC Documents filed or furnished by the Company prior to the date of this Agreement and after January 1, 2022 (other than (x) any disclosure set forth under the headings “Risk Factors” or “Forward-Looking Statements” that are both non-specific and cautionary (other than any historical or factual matters disclosed in such sections) or appear solely under such headings, or (y) any forward-looking statements, or other similar statements that are similarly predictive or forward-looking and non-specific in nature, contained in such Company SEC Documents), the Company hereby represents and warrants to Parent and Acquisition Sub as follows:
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Section 4.1. Organization and Qualification; Subsidiaries.
(a) Each of the Company and its Subsidiaries is a corporation, partnership or other entity duly organized, validly existing and (to the extent applicable) in good standing under the laws of the jurisdiction of its incorporation or organization and has the requisite corporate or other legal entity power and authority to conduct its business as it is now being conducted, except where the failure to be so organized or existing or to be in good standing or to have such power and authority as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. Each of the Company and its Subsidiaries is duly qualified or licensed to do business and (to the extent applicable) is in good standing in each jurisdiction in which the nature of the business conducted by it makes such qualification or licensing necessary, except where the failure to be so duly qualified or licensed and (to the extent applicable) in good standing as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. Accurate and complete copies of the Company’s restated certificate of incorporation (as amended) (the “Company Charter”) and amended and restated bylaws (the “Company Bylaws”), as in effect as of the date of this Agreement, with all amendments thereto to the date of this Agreement, are included in the Company SEC Documents.
(b) Section 4.1(b) of the Company Disclosure Letter accurately and completely sets forth each Subsidiary of the Company, its name, place of incorporation or formation, and the record ownership, in each case, as of the date of this Agreement of all capital stock or other equity interests issued thereby. Copies of the organizational documents of each Subsidiary of the Company, with all amendments thereto to the date of this Agreement, have been made available to Parent or its Representatives, and such copies are accurate and complete as of the date of this Agreement. A list of the directors and officers (or its equivalent) of each Subsidiary of the Company as of the date of this Agreement has been made available to Parent.
(a) As of the close of business on September 8, 2023 (the “Specified Date”), (i) the authorized capital stock of the Company consisted of (A) 900,000,000 shares of Company Common Stock, 36,768,314 of which were issued and outstanding and (B) 15,000,000 shares of preferred stock, par value $0.0001 per share (none of which were issued and outstanding), (ii) Company Options to purchase an aggregate of 1,646,989 shares of Company Common Stock were outstanding with a weighted average exercise price of $17.96, (iii) 2,134,233 shares of Company Common Stock were subject to outstanding Company Stock Units (with Company PSUs measured at the target level of performance), including cash-settled Company RSUs, (iv) 604,887 shares of Company Common Stock were reserved for issuance pursuant to the Company ESPP and (v) aggregate payroll contributions of $791,718.33 have been received by the Company for the current Offering Period pursuant to the Company ESPP. The issued and outstanding shares of Company Common Stock have been duly authorized and validly issued and are fully paid and nonassessable.
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(b) As of the close of business on the Specified Date, other than as set forth above in Section 4.2(a), there are no existing and outstanding (A) options, warrants, calls, preemptive rights, rights of first refusal, first offer, subscriptions or other rights, convertible securities, agreements or commitments of any character to which the Company is a party obligating the Company to issue, transfer or sell any shares of capital stock, restricted stock units, phantom units or other equity interests in the Company or securities convertible into or exchangeable for such shares or equity interests in the Company, (B) contractual obligations of the Company to repurchase, redeem or otherwise acquire any capital stock of the Company or (C) voting trusts, stockholders agreements or similar agreements to which the Company is a party with respect to the voting or transfer of the capital stock of the Company. From the close of business on the Specified Date, the Company has not issued any shares of Company Common Stock or other class of equity security (other than shares of Company Common Stock in respect of (x) Company Equity Awards in effect on the Specified Date or (y) outstanding purchase rights pursuant to the Company ESPP or as permitted by Section 6.1(C) of this Agreement).
(c) All of the outstanding shares of capital stock or equivalent equity interests of each of the Company’s Subsidiaries, as applicable, are validly issued, fully paid and nonassessable (to the extent applicable). The Company, directly or indirectly, owns, beneficially and of record, and has valid and marketable title to all of the shares of capital stock or equivalent equity interests of each Subsidiary of the Company, free and clear of all Liens other than Liens resulting from applicable U.S. federal or state securities Laws and Permitted Liens. As of the date hereof, there are no existing and outstanding (A) options, warrants, calls, preemptive rights, rights of first refusal, first offer, subscriptions or other rights, convertible securities, agreements or commitments of any character obligating the Company or such Subsidiary to issue, transfer or sell any shares of capital stock or other equity interests in such Subsidiary or securities convertible into or exchangeable for such shares or equity interests in such Subsidiary or (B) contractual or other obligations of any Subsidiary of the Company to repurchase, redeem, retire or otherwise acquire any capital stock or equivalent equity interests of any Subsidiary of the Company.
(d) Section 4.2(d) of the Company Disclosure Letter sets forth a correct and complete list of each holder of an outstanding Company Equity Award as of the Specified Date, which schedule shows for each Company Equity Award, as applicable, the date such Company Equity Award was granted, the number of shares of Company Common Stock subject to such Company Equity Award (and for Company Stock Units the number of shares of Company Common Stock assuming both target and maximum attainment of the applicable performance criteria), the applicable exercise price of each Company Equity Award that is a Company Option, whether such Company Option is intended to qualify as an incentive stock option under Section 422 of the Code, and for each holder who is not a current employee of the Company or any of its Subsidiaries whether such Person has ever been an employee of the Company or any of its Subsidiaries. With respect to each Company Equity Award, (i) each such grant was duly authorized no later than the date on which the issuance of such grant was by its terms effective (the “Grant Date”) by all necessary corporate action, (ii) each such grant was made in compliance in all material respects with all applicable Laws (including all applicable securities Laws) and all of the material terms and conditions of the applicable Company Equity Plan, (iii) each Company Option has an exercise price that is equal or greater than the fair market value of the underlying Company Common Stock on the applicable Grant Date and (iv) each such grant was properly accounted for in all material respects in accordance with GAAP in the financial statements (including the related notes) of the Company. All Company Equity Awards are evidenced by award agreements in the forms materially consistent with forms previously made available to Parent. There are no commitments in any offer letter, Contract, Company Benefit Plan or otherwise that contemplate a grant of or right to purchase or receive restricted stock units, phantom units or other equity that are not reflected in the grants set forth on Section 4.2(d) of the Company Disclosure Letter or are not otherwise forfeited or expired, except in respect of the Permitted RSUs and Permitted PSUs (if any).
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(e) The Company does not have outstanding any bonds, debentures, notes or other similar obligations the holders of which have the right to vote (or that are convertible into or exercisable for securities having the right to vote) with the stockholders of the Company on any matter.
(f) Neither the Company nor any of its Subsidiaries owns, directly or indirectly, 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.
(g) The issued and outstanding shares of Company Common Stock were issued in compliance in all material respects with the Company Charter, Company Bylaws and all applicable U.S. federal and state securities Laws.
Section 4.3. Authority Relative to Agreement.
(a) The Company has all necessary corporate power and authority to execute and deliver this Agreement and perform its obligations hereunder and, subject to obtaining the Requisite Stockholder Approval and assuming the accuracy of the representations and warranties in Section 5.13, to consummate the transactions contemplated hereby, including the Merger. The execution, delivery and performance of this Agreement by the Company, and the consummation by the Company of the transactions contemplated by this Agreement, have been duly and validly authorized by all necessary corporate action by the Company, and except for the Requisite Stockholder Approval and assuming the accuracy of the representations and warranties in Section 5.17, no other corporate action on the part of the Company is necessary to authorize the execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated by this Agreement. This Agreement has been duly executed and delivered by the Company and, assuming due authorization, execution and delivery of this Agreement by the other parties hereto, constitutes a legal, 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, moratorium or other similar Laws, now or hereafter in effect, affecting creditors’ rights and remedies generally and (ii) the remedies 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 (the “Bankruptcy and Equity Exception”).
(b) The Company Board, at a meeting duly called and held, by unanimous vote, has (i) approved and declared advisable the execution, delivery and performance of this Agreement and, subject to receiving the Requisite Stockholder Approval, the consummation by the Company of the transactions contemplated by this Agreement, including the Merger, upon the terms and subject to the conditions set forth in this Agreement, (ii) determined and declared that this Agreement and the consummation by the Company of the transactions contemplated by this Agreement, including the Merger, are advisable and in the best interests of the Company and its stockholders, (iii) directed that this Agreement be submitted to the stockholders of the Company to be adopted and (iv) subject to the terms and conditions of this Agreement, resolved to make the Company Recommendation (provided that any change, modification or rescission of such recommendation by the Company Board in accordance with Section 6.5 shall not be a breach of the representation in clause (iv)).
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Section 4.4. No Conflict; Required Filings and Consents.
(a) Assuming the accuracy of the representations and warranties contained in Section 5.13, neither the execution and delivery of this Agreement by the Company nor the consummation by the Company of the transactions contemplated hereby or the performance by the Company of its obligations hereunder will (i) subject to obtaining the Requisite Stockholder Approval, violate any provision of the Company Charter or the Company Bylaws or, in any material respect, any of the organizational documents of the Subsidiaries of the Company, (ii) assuming that the Consents, registrations, declarations, filings and notices referred to in Section 4.4(b) have been obtained or made, as applicable, any applicable waiting periods referred to therein have expired and any condition precedent to any such Consent has been satisfied, conflict with or violate any Law applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected or (iii) assuming that the Consents, registrations, declarations, filings and notices referred to in Section 4.4(b) have been obtained or made, as applicable, result in the creation or imposition of any Lien (other than any Permitted Lien) upon any of the assets, properties or rights of either of the Company or any of its Subsidiaries or result in or give to others any rights of cancellation, modification, amendment, acceleration, revocation or suspension of any of the Company Permits, or (iv) result in any breach of, or constitute a default (with or without notice or lapse of time, or both) under, or give rise to any right of termination, acceleration, modification, amendment or cancellation of, loss of rights or benefits under or require any notice to or consent of any counterparty under, any Company Material Contract or material Company Permit, other than, in the case of clauses (ii), (iii) and (iv), any such conflicts, violations, Liens, breaches, defaults or rights of termination, acceleration, cancellation, revocation, suspension, modification, amendment, loss of rights or benefits or requirement of any notice or consent as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.
(b) Assuming the accuracy of the representations and warranties contained in Section 5.5, no consent, approval, license, permit, Order or authorization (a “Consent”) of, or registration, declaration or filing with, or notice to, any Governmental Authority is required to be obtained or made by or with respect to the Company or any of its Subsidiaries in connection with the execution, delivery and performance of this Agreement or the consummation of the transactions contemplated hereby, other than (i) compliance with the applicable requirements of the Securities Act and the Exchange Act, including the filing with the SEC of the Proxy Statement in preliminary and definitive forms and the applicable requirements of and filings with the SEC under the Exchange Act, (ii) the filing of the Certificate of Merger with the Secretary and, to the extent applicable, appropriate documents with the relevant authorities of the other jurisdictions in which the Company or any of its Subsidiaries is qualified to do business, (iii) applicable requirements under any applicable international, federal or state securities Laws or “Blue Sky Laws”, (iv) such filings as may be required in connection with the Taxes described in Section 9.10, (v) filings as may be required under the rules and regulations of NASDAQ Global Select Market (“NASDAQ”), (vi) such other items required solely by reason of the participation of Parent or Acquisition Sub in the transactions contemplated by this Agreement, including by reason of the identity of Parent or any of its Affiliates, or Parent’s assets, revenues or turnover in any particular jurisdiction, (vii) compliance with and filings or notifications under the HSR Act or other Antitrust Laws, including the filing of a premerger notification and report form under the HSR Act and the receipt, termination or expiration, as applicable, of waivers, Consents, waiting periods or agreements required under the HSR Act or any other applicable Antitrust Laws, (viii) the FINRA Approval and any Consents, waivers, filings, notifications and registrations in connection with the FINRA Approval or with any applicable state securities Laws pertaining to a change in ownership or control of any Subsidiary of the Company that is a Registered Broker-Dealer, (ix) the Advisory Client consents contemplated by Section 6.18, (x) approvals of, or notice filings required by, applicable state insurance regulators with respect to a change in ownership or control of each Subsidiary of the Company that is licensed as an insurance agent, broker, producer or other applicable insurance-related license designation under applicable state Laws (including the TDI Consent) and (xi) such other Consents, registrations, declarations, filings or notices the failure of which to be obtained or made as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.
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Section 4.5. Permits; Compliance with Laws.
(a) The Company and its Subsidiaries are, and at all times since January 1, 2020 has been, in possession of all franchises, grants, registrations, licenses, easements, variances, exceptions, Consents and certificates necessary for the Company and its Subsidiaries to own, lease and operate their properties and assets and to carry on their business as it is being conducted as of the date of this Agreement (the “Company Permits”), in each case, to the extent material to (x) the Company and its Subsidiaries, taken as a whole, or (y) any Registered Adviser or Registered Broker-Dealer, and all such Company Permits are valid, in full force and effect and no suspension or cancellation of any such Company Permit is pending or, to the Knowledge of the Company, threatened, and no event has occurred or circumstances exists that would reasonably be expected (with or without due notice or lapse of time or both) to, individually or in the aggregate, constitute or result in a violation of, or a failure to comply in any material respect with, any requirements of any such Company Permit, or result in the (or give rise to any right of) revocation, withdrawal, suspension, modification, cancellation, impairment, forfeiture, non-renewal, limitation or termination thereof, except, in each case, where the failure to be in possession of or be in full force and effect, or the violation, failure to comply, revocation, withdrawal, suspension, modification, cancellation, impairment, forfeiture, non-renewal, limitation or termination of, any such Company Permits as would not, individually or in the aggregate, reasonably be expected to be material and adverse to the Company and its Subsidiaries, taken as a whole. All material Company Permits as of the date hereof are listed on Section 4.5(a) of the Company Disclosure Letter, including the type of Company Permit, the Company Permit number, the jurisdiction issuing such Company Permit and the expiration date of such Company Permit. The Company Permits are sufficient and adequate in all material respects to permit the continued lawful conduct of the business of the Company and its Subsidiaries as presently conducted, and none of the operations of the Company or its Subsidiaries is being conducted in a manner that violates, any of the terms or conditions under which any Company Permit was granted, except for such violations or failures to be sufficient or adequate that would not be, and would not reasonably be expected to be, individually or in the aggregate, material to the Company and its Subsidiaries, taken as a whole. No petition, action, investigation, notice of violation or apparent liability, notice of forfeiture, order to show cause, complaint, or proceeding seeking to revoke, reconsider the grant of, cancel, suspend, or modify any of the Company Permits is pending or, to the Knowledge of the Company, threatened before any Governmental Authority except as would not, or would not reasonably be expected to, be material and adverse to the Company and its Subsidiaries, taken as a whole. No written notices have been received by and no claims have been filed or, to the Knowledge of the Company, are pending against the Company or its Subsidiaries alleging a failure to hold any requisite Company Permit, except as would not, or would not reasonably be expected to, be material and adverse to the Company and its Subsidiaries, taken as a whole.
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(b) Except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, (i) none of the Company or any of its Subsidiaries is, nor since January 1, 2020 has been, in default or violation of any Law applicable to the Company or any of its Subsidiaries and (ii) since January 1, 2020, the Company and its Subsidiaries have otherwise conducted their respective businesses in accordance with all applicable Laws. Except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, since January 1, 2020, none of the Company or its Subsidiaries has received any written or, to the Knowledge of the Company, oral notice from any Governmental Authority of any violation (or any investigation with respect thereto) of any such Law by the Company, its Subsidiaries or any Person affiliated or associated with, or subject to supervision by the Company or any of its Subsidiaries, and none of the Company or its Subsidiaries is in default with respect to any order, writ, judgment, award, injunction or decree of Governmental Authority, applicable to any of its assets, properties or operations. Except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, no investigation by any Governmental Authority regarding a violation of any applicable Law by the Company, any of its Subsidiaries or any Person affiliated or associated with, or subject to supervision by, the Company or its Subsidiaries is pending or, to the Knowledge of the Company, threatened.
(c) The Company is in compliance in all material respects with (i) the applicable provisions of the Sarbanes-Oxley Act of 2002 and the related rules and regulations promulgated under such act or the Exchange Act (the “Sarbanes-Oxley Act”) and (ii) the applicable listing and corporate governance rules and regulations of NASDAQ. Except as permitted by the Exchange Act, including Sections 13(k)(2) and (3), since January 1, 2020, neither the Company nor any of its Subsidiaries has made, arranged or modified personal loans to any executive officer or director of the Company.
(d) Except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, the businesses of each of the Company and each of its Subsidiaries are being, and since January 1, 2020 have been, conducted in compliance with the U.S. Foreign Corrupt Practices Act 1977 and any other applicable anti-bribery laws, rules or regulations in other jurisdictions (together, the “Anti-Bribery Laws”). Except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, since January 1, 2020, the Company and its Subsidiaries have maintained accurate books and records and established sufficient internal controls and procedures reasonably designed to ensure compliance with the Anti-Bribery Laws. There are no internal investigations or, to the Knowledge of the Company, pending governmental or other regulatory investigations or proceedings, in each case, regarding any action or any allegation of any action described in this Section 4.5(d). Except as would not, individually or in the aggregate, reasonably be expected to be material and adverse to the Company and its Subsidiaries, taken as a whole, since January 1, 2020, neither the Company nor its Subsidiaries, nor any of their respective directors or officers or, to the Knowledge of the Company, employees, agents or individual independent contractors (in each case, when acting on behalf of the Company or a Subsidiary of the Company) has directly or indirectly offered, paid, promised, or authorized the payment, promising, or offering of any money, gift, or other thing of value, regardless of form, (i) corruptly, to any U.S. government official or foreign official (as such term is defined in applicable Anti-Bribery Laws), or to any person while knowing or having reason to know that such person had or would offer, pay, promise, or authorize the payment, promising or offering of any money, gift, or other thing of value to any U.S. government official or foreign official (as such term is defined in the Anti-Bribery Laws), or (ii) to any prospective or actual customer or employee or agent of any business counterparty to induce or reward the improper performance of the recipient’s function or the breach of a duty owed by the recipient to his or her employer or principal.
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(e) Except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, the operations of the Company and its Subsidiaries are, and since January 1, 2020 have been, conducted in compliance with applicable financial recordkeeping, reporting and internal control requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money laundering statutes, the rules and regulations thereunder and any related or similar rules or regulations, issued, administered or enforced by any Governmental Authority of a jurisdiction where the Company or its Subsidiaries operate (collectively, the “Money Laundering Laws”). Except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, no action, claim, suit or proceeding by or before any Governmental Authority involving the Company or any of its Subsidiaries with respect to the Money Laundering Laws is pending or, to the Knowledge of the Company, threatened, nor, to the Knowledge of the Company, is any investigation by or before any Governmental Authority involving the Company or any of its Subsidiaries with respect to the Money Laundering Laws pending or threatened.
(f) None of the Company, its Subsidiaries, or their respective directors or officers or, to the Knowledge of the Company, the employees or individual independent contractors (other than non-employee financial professionals) (in each case, when acting on behalf of the Company or a Subsidiary of the Company) is, or is owned or controlled by one or more Persons that are, (i) the subject of any sanctions administered or enforced by the U.S. Treasury Department’s Office of Foreign Assets Control, the U.S. State Department, the United Nations Security Council, the European Union, His Majesty’s Treasury, or other relevant sanctions authority (“Sanctions”), or (ii) located, organized, or resident in a country or region which is the subject of Sanctions.
(g) Except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, the businesses of each of the Company and its Subsidiaries are being, and since January 1, 2020 have been, conducted in compliance in all respects with all applicable Sanctions or export and import control Laws imposed by any Governmental Authority of a jurisdiction where the Company or its Subsidiaries operate (collectively, “Trade Control Laws”). To the Knowledge of the Company, as of the date hereof, no investigation, review, audit or inquiry by any Governmental Authority with respect to any such Trade Control Laws is pending or threatened. The Company maintains in effect and enforces policies and procedures reasonably designed to ensure compliance by the Company, its Subsidiaries, and its respective managing directors or officers or, to the Knowledge of the Company, employees or individual independent contractors (other than non-employee financial professionals) (in each case, when acting on behalf of the Company or a Subsidiary of the Company) with Trade Control Laws applicable to such Persons, including with respect to compliance with applicable “know your customer” and anti-money laundering rules and regulations.
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(h) Except as would not, individually or in the aggregate, reasonably be expected to be material to the Company and its Subsidiaries, taken as a whole, (i) to the extent required by applicable Law, the Company or its Subsidiaries have valid and effective appointments from each Insurance Carrier for which it offers, produces or sells insurance products or services or otherwise acts as an agent; and (ii) no grounds exist that would reasonably be expected to result in any such appointments being revoked, limited, rescinded or terminated. The names of all licensed natural persons who may exercise authority and perform the duties under the licenses of the Company and its Subsidiaries has been provided to each Governmental Authority to the extent required by applicable Law.
Section 4.6. Company SEC Documents; Financial Statements.
(a) Since January 1, 2020, the Company has filed with or furnished to (as applicable) the SEC all material forms, documents and reports required to be filed or furnished prior to such date by it with the SEC (such documents and any other documents filed or furnished by the Company with or to the SEC since January 1, 2020, as have been supplemented, modified or amended since the time of filing or furnishment, collectively, the “Company SEC Documents”). As of their respective dates, or, if supplemented, modified or amended, as of the date of the last such amendment, supplement or modification, the Company SEC Documents complied in all material respects with the requirements of the Securities Act, the Exchange Act and the Sarbanes-Oxley Act, as the case may be, and the applicable rules and regulations promulgated thereunder, and none of the Company SEC Documents at the time it was filed (or, if amended, supplemented or modified as of the date of the last amendment, supplement or modification) contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, or are to be made, not misleading.
(b) The audited consolidated financial statements and unaudited consolidated interim financial statements of the Company and the consolidated Subsidiaries of the Company (including in each case all related notes thereto) included in, or incorporated by reference into, the Company SEC Documents (i) fairly present in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries as of the respective dates thereof and its consolidated statements of operations, and consolidated statements of cash flows for the respective periods then ended (except as may be indicated in the notes thereto or, in the case of unaudited interim consolidated financial statements, for normal year-end audit adjustments that were not or will not be material in amount or effect), (ii) complied, as of the filing date of the applicable Company SEC Documents, as to form in all material respects with the published rules and regulations of the SEC with respect thereto, (iii) were prepared in conformity with GAAP (as in effect in the United States on the date of such financial statements) applied on a consistent basis during the periods involved (except as may be indicated therein or in the notes thereto, except, in the case of unaudited statements), as permitted by SEC rules and regulations, (iv) are in accordance, in all material respects, with the books and records of the Company and its consolidated Subsidiaries and (v) comply in all material respects with the applicable accounting requirements and with the rules and regulations of the SEC, the Exchange Act, the Securities Act and the DGCL.
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(c) As of the date of this Agreement, there are no outstanding or unresolved comments in comment letters received by the Company or any of its Subsidiaries from the SEC, FINRA, any other similar Governmental Authority or their respective staffs. To the Knowledge of the Company, as of the date hereof, none of the Company SEC Documents or any other documents filed or furnished by the Company with or to FINRA or any other similar Governmental Authority since January 1, 2020, as have been supplemented, modified or amended since the time of filing or furnishment, collectively are the subject of ongoing SEC, FINRA or other similar Governmental Authority review, outstanding SEC, FINRA or other similar Governmental Authority comment or outstanding SEC, FINRA or other similar Governmental Authority investigation. There has been no material correspondence between the SEC, FINRA or any other similar Governmental Authority on the one hand, and the Company and any of its Subsidiaries, on the other hand, occurring since January 1, 2020 on or prior to the date hereof that is not available to the public on the SEC’s Electronic Data Gathering and Retrieval database.
Section 4.7. Information Supplied. None of the information supplied or to be supplied by or on behalf of the Company or any of its Subsidiaries expressly for inclusion or incorporation by reference in the proxy statement relating to the adoption by the stockholders of the Company of this Agreement (together with any amendments or supplements thereto, the “Proxy Statement”), will, at the date the Proxy Statement is first mailed to the stockholders of the Company and at the time of the Stockholders’ Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they are made, not misleading, except that no representation or warranty is made by the Company with regard to statements made therein based on information supplied by or on behalf of Parent or Acquisition Sub (or any of their Affiliates) for inclusion therein.
Section 4.8. Disclosure Controls and Procedures. The Company has designed and maintains a system of “disclosure controls and procedures” and “internal control over financial reporting” (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) intended to provide reasonable assurances regarding the reliability of financial reporting for the Company and its consolidated Subsidiaries. The Company has designed disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) intended to provide reasonable assurance that material information required to be disclosed by the Company in the reports that it files or furnishes under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that is accumulated and communicated to the Company’s management as approximate to allow timely decisions regarding required disclosure. To the Knowledge of the Company, the Company has disclosed, based on its most recent evaluation of the Company’s internal control over financial reporting prior to the date hereof, to the Company’s auditors and the audit committee of the Company Board (a) any significant deficiencies and material weaknesses in the design or operation of its internal controls over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that are reasonably likely to adversely affect in any material respect the Company’s ability to record, process, summarize and report financial information and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.
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Section 4.9. Absence of Certain Changes or Events. From June 30, 2023, except with respect to (a) the process conducted by the Company to consider strategic alternatives, including the sale of the Company and the negotiation, execution and delivery of this Agreement and (b) COVID-19 Measures, (i) to the date hereof, the businesses of the Company and its Subsidiaries have been conducted in all material respects in the ordinary course of business consistent with past practice and the Company has not taken (or failed to take) any action that if taken (or failed to be taken) after the date of this Agreement without the consent of Parent would constitute a violation of Section 6.1(A), Section 6.1(F), Section 6.1(G), Section 6.1(H), Section 6.1(J), Section 6.1(K), Section 6.1(L), Section 6.1(P) or Section 6.1(R), (ii) there has not been any Company Material Adverse Effect and (iii) to the date hereof, there has not been any termination of employment by the chief executive officer of the Company, or any other executive officer of the Company.
Section 4.10. No Undisclosed Liabilities. Except (a) as reflected, disclosed or reserved against in the Company’s consolidated balance sheet as of June 30, 2023 included in the Company SEC Documents or referred to in the notes thereto, (b) for liabilities or obligations incurred in the ordinary course of business since June 30, 2023 (none of which is a liability for breach of Contract, breach of warranty, tort, infringement, violation of Law, misappropriation or that relates to any cause of action, claim or lawsuit), (c) for liabilities or obligations incurred in connection with this Agreement, the transactions contemplated hereby, the process conducted by the Company to consider strategic alternatives, including the sale of the Company and the negotiation, execution and delivery of this Agreement, (d) for liabilities or obligations as would not, individually or in the aggregate, be material and adverse to the Company and its Subsidiaries, taken as a whole, or the Registered Broker-Dealer, or (e) as expressly set forth in Section 4.10 of the Company Disclosure Letter, as of the date hereof, the Company and its Subsidiaries do not have any liabilities or obligations of any nature, whether or not accrued, contingent or otherwise. Neither the Company nor any of its Subsidiaries is a party to, or has any commitment to become a party to, nor entered into non-binding letters of intent that remain executory with respect to, any joint venture, off-balance sheet partnership or any similar Contract, including any contract or arrangement between or among the Company and any of its Subsidiaries, on the one hand, and any unconsolidated Affiliate, providing for structured finance, special purpose or limited purpose entity or Person, on the other hand, or any “off-balance sheet arrangements” (as defined in Item 303(a) of Regulation S-K of the Securities Act), in each case, where the result, purpose or effect of such contract is to avoid disclosure of any material transaction involving, or material liabilities of, the Company or any of its Subsidiaries in the consolidated financial statements of the Company included in the Company SEC Documents (including all related notes and schedules thereto).
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Section 4.11. Litigation. Since January 1, 2020, there has not been any, Action pending to which the Company or any of its Subsidiaries is a party, or, to the Knowledge of the Company, threatened against the Company, any of its Subsidiaries or any current or former director, manager or officer of the Company or any of its Subsidiaries, in each case in his or her capacity as such, nor is there, nor has there been since January 1, 2020, any Order of any Governmental Authority outstanding against, or, to the Knowledge of the Company, investigation pending or threatened in writing (or, to the Knowledge of the Company, orally) by any Governmental Authority involving, the Company, any of its Subsidiaries or any current or former director, manager or officer of the Company or any of its Subsidiaries, in each case in his or her capacity as such and except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. As of the date hereof, there is no Action pending or, to the Knowledge of the Company, threatened seeking to prevent, enjoin, modify, materially prevent, delay or challenge the Merger or any of the other transactions contemplated by this Agreement or the ability of the Company to fully perform its covenants and obligations pursuant to this Agreement.
Section 4.12. Employee Benefit Plans.
(a) Section 4.12(a) of the Company Disclosure Letter sets forth a true and complete list, as of the date hereof, of each material Company Benefit Plan (which list may reference a form of such Company Benefit Plan). The Company has made available to Parent a true and complete copy of each material Company Benefit Plan and all amendments and supplements thereto (or where no such copies are available, a written description of the material terms of such Company Benefit Plan), and a true and complete copy of the following items (in each case, only if applicable) with respect to such Company Benefit Plans, in each case through the date hereof: (i) each trust document, insurance Contract or other funding arrangement, (ii) each summary plan description and summary of material modifications, (iii) the two most recently filed annual reports on IRS Form 5500, and, for the avoidance of doubt, all schedules and financial statements thereto, (iv) the most recently received IRS determination letter or IRS opinion letter, (v) the most recently prepared actuarial reports, (vi) all material or non-routine correspondence to or from any Governmental Authority sent or received in the last three (3) years with respect thereto, and (vii) the most recent results of all required compliance testing.
(b) (i) Each of the Company Benefit Plans (including any related trusts) has been established, maintained, operated and administered in all material respects in accordance with its terms and in compliance in all material respects with applicable Laws, (ii) no proceeding (other than routine claims for benefits) is pending against or involves or, to the Knowledge of the Company, is threatened against or expected to involve, any Company Benefit Plan, the assets of any Company Benefit Plan, or, to the Knowledge of the Company, fiduciaries of any Company Benefit Plan (in their capacity as such) that, in each case, would reasonably be expected to result in material liability to the Company before any court or arbitrator or any Governmental Authority, and no Company Benefit Plan is presently under audit or examination (nor has written notice been received of a potential audit or examination) by any Governmental Authority, (iii) all material payments required to be paid prior to the date of this Agreement by the Company or any of its Subsidiaries pursuant to the terms of a Company Benefit Plan or by applicable Law (including, all contributions and insurance premiums) with respect to all current or prior periods have been made or provided for by the Company or its Subsidiaries in all material respects in accordance with the provisions of such Company Benefit Plan, applicable Law or GAAP and (iv) no non-exempt “prohibited transaction,” within the meaning of Section 4975 of the Code and Section 406 of ERISA, has occurred or is reasonably expected to occur with respect to a Company Benefit Plan that would reasonably be expected to result in material liability to the Company.
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(c) (i) Each Company Benefit Plan intended to be qualified under Section 401(a) of the Code has either received a favorable determination letter from the IRS with respect to each such Company Benefit Plan as to its qualified status under the Code, or with respect to a prototype Company Benefit Plan, the prototype sponsor has received a favorable IRS opinion letter, and (ii) to the Knowledge of the Company, no event has occurred since the most recent determination or opinion letter relating to any such Company Benefit Plan that would reasonably be expected to adversely affect or result in the loss of the tax qualification of such Company Benefit Plan or cause the imposition of any material liability, penalty, or Tax under ERISA or the Code. No stock or other securities issued by the Company or any of its Subsidiaries forms (or has since January 1, 2020 formed) any part of the assets of any Company Benefit Plan that is intended to qualify under Section 401(a) of the Code. With respect to any Company Benefit Plan, neither the Company nor any of its Subsidiaries would reasonably be expected to be subject either to a material civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or a material Tax imposed pursuant to Section 4975 or 4976 of the Code.
(d) Neither the Company nor any of its ERISA Affiliates sponsors, maintains, administers or contributes to, has any obligation to contribute to or has within the previous six (6) years sponsored, maintained, administered or contributed to (or had any obligation to contribute to within the previous six (6) years), and no Company Benefit Plan is (i) a plan subject to Title IV of ERISA, Section 302 of ERISA or Section 412 of the Code; (ii) a Multiemployer Plan; or (iii) a “multiple employer plan” (within the meaning of Section 210 of ERISA or Section 413(c) of the Code). No Company Benefit Plan is, and within the past six (6) years the Company has not sponsored, maintained, administered or contributed to, a “multiple employer welfare arrangement” (as such term is defined in Section 3(40) of ERISA). Neither the Company nor any ERISA Affiliate has made or suffered a “complete withdrawal” or a “partial withdrawal,” as such terms are respectively defined in Sections 4203 and 4205 of ERISA, from a Multiemployer Plan (or any liability resulting therefrom has been satisfied in full).
(e) Neither the execution or delivery of this Agreement nor the consummation of the Merger (either alone or in combination with another event) would reasonably be expected to (i) except as expressly provided in this Agreement, entitle any Company Service Provider to any payment, (ii) increase the amount or value of any benefit or compensation payable or required to be provided under any Company Benefit Plan to any Company Service Provider, (iii) except as expressly provided in this Agreement, accelerate the time of any payment or vesting of amounts due to any director, employee, individual consultant or independent contractor of the Company or any of its Subsidiaries or accelerate the time of any funding (whether to a trust or otherwise) of compensation or benefits in respect of any of the Company Benefit Plans, (iv) except as expressly provided in this Agreement, cause the Company or any of its Subsidiaries to transfer or set aside any assets or fund any benefit or compensation under any Company Benefit Plan, or (v) limit or restrict the right to merge, terminate, amend, supplement or otherwise modify or transfer the assets of any Company Benefit Plan on or following the Effective Time.
(f) None of the Company nor any of its ERISA Affiliates has any material obligations for and no Company Benefit Plan provides retiree or post-termination health, disability, life insurance or other welfare benefits to any individual (other than (i) for continuation coverage required to be provided pursuant to Section 4980B of the Code, Part 6 of Subtitle B of Title I of ERISA or applicable state Law or (ii) with respect to coverage that continues through the end of the month in which a termination of employment occurs).
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(g) Each Company Benefit Plan that is a “nonqualified deferred compensation plan” (within the meaning of Section 409A of the Code) is in all material respects in documentary compliance with, and has been operated and administered in all material respects in compliance with Section 409A of the Code.
(h) Neither the execution or delivery of this Agreement nor the consummation of the Merger would, either individually or in combination with another event, result in the payment of any amount to any “disqualified individual” (as defined in Section 280G of the Code) that would, individually or in combination with any other such payment, constitute an “excess parachute payment” as defined in Section 280G(b)(1) of the Code. No Company Benefit Plan provides any Company Service Provider with the right to a gross up for any excise or additional Taxes incurred pursuant to Section 409A or Section 4999 of the Code.
(i) Neither the Company nor any of its Subsidiaries has incurred or could reasonably be expected to incur any material penalty or Tax (whether or not assessed) under Section 4980H or Section 4980D of the Code related to the applicable requirements of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010.
(a) Neither the Company nor any of its Subsidiaries is a party to or otherwise bound by any works council or collective bargaining agreement or other agreement with a labor union, or similar employee or labor organization applicable to any Company Service Provider. Additionally, (i) there are no material labor related strikes, walkouts, slowdowns, disputes or other work stoppages or lockouts pending or, to the Knowledge of the Company, threatened against or affecting the Company or any of its Subsidiaries, and, since January 1, 2020, neither the Company nor any of its Subsidiaries has experienced any such labor related strike, walkout, slowdown, dispute or other work stoppage or lockout, (ii) the Company has not received written notice of any material unfair labor practice charge or complaint that is pending before any applicable Governmental Authority against the Company or any of its Subsidiaries, and (iii) since January 1, 2020 there have been no material Actions against the Company or any of its Subsidiaries pending before any applicable Governmental Authority responsible for the prevention of unlawful employment practices. To the Knowledge of the Company, as of the date of this Agreement, there is no pending organizing campaign or proceedings of any labor union, works council or similar employee or labor organization and no labor union or works council has made a pending written demand for recognition or certification, in each case, with respect to any employees of the Company or any of its Subsidiaries.
(b) The Company and its Subsidiaries are, and since January 1, 2020 have been in compliance in all material respects with all applicable Laws relating to Company Service Providers and employment or engagement of labor and the termination thereof, including all applicable Laws relating to wages, hours, overtime, collective bargaining, employment discrimination, including in connection with terminations of employment or otherwise, civil rights, safety and health, workers’ compensation, pay equity, classification of employees and independent contractors, and the collection and payment of withholding or social security Taxes. The Company and each of its Subsidiaries is, and since January 1, 2020 has been, in compliance in all material respects with all requirements required by applicable Law or regulation relating to the employment of foreign citizens, including all requirements of Form I-9 Employment Eligibility Verification. The Company and its Subsidiaries are, and since January 1, 2020 have been, in compliance in all material respects with all applicable Laws that require overtime to be paid to any Company Service Provider, and no Person has, since January 1, 2020, brought or, to the Knowledge of the Company, threatened to bring an Action for unpaid compensation or employee benefits, including overtime amounts.
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(c) Neither the Company nor any of its Subsidiaries is delinquent in payment to any Company Service Provider for any wages, fees, salaries, commissions, bonuses, or other direct compensation for service performed by them or amounts required to be reimbursed to such Company Service Provider, to the extent such amounts are due and owing, or in payments owed upon any termination of such Company Service Provider’s employment or engagement.
(d) To the Knowledge of the Company, no current Company Service Provider is bound by any contract (including licenses, covenants or commitments of any nature) or subject to any judgment, decree or order of any Governmental Authority that would materially interfere with the use of such Company Service Provider’s best efforts to promote the interests of the Company and its Subsidiaries, that would materially conflict with the Company and its Subsidiaries’ business as currently conducted or that would prohibit the Company and its Subsidiaries from employing such Person, except as would not be material to the Company and its Subsidiaries, taken as a whole.
(e) To the Knowledge of the Company, no current officer of the Company or any of its Subsidiaries, has prior to the date hereof notified the Company of an intent to terminate his, her or their employment or engagement with the Company or any of its Subsidiaries.
(f) Except as would not be material to the Company and its Subsidiaries, taken as a whole, any Company Service Provider who is not, or was not since January 1, 2020, treated as an employee for federal income Tax purposes by the Company and its Subsidiaries is not, and was not, as applicable, an employee under applicable Laws or for any purpose, including for Tax withholding purposes or Company Benefit Plan purposes, and neither the Company nor any of its Subsidiaries has any liability by reason of any Company Service Provider, in any capacity, being improperly excluded from participating in any Company Benefit Plan. Except as would not be material to the Company and its Subsidiaries, taken as a whole, (i) each employee of the Company and its Subsidiaries has been properly classified by the Company and its Subsidiaries as “exempt” or “non-exempt” under applicable Law, (ii) there are no, and since January 1, 2020, there have not been any, pending, or, to the Knowledge of the Company, threatened Actions (including any litigation, class action suit, or regulatory investigation) against the Company or any of its Subsidiaries with respect to the classification or misclassification of Company Service Providers and (iii) neither the Company nor any of its Subsidiaries has incurred any obligation or liability under the Worker Adjustment and Retraining Notification Act or any similar state or local Law that remains unsatisfied.
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(g) Since January 1, 2020, (i) the Company has investigated all allegations of workplace harassment or discrimination which have been (A) made against any executive officer of the Company or any member of the Company Board, in each case in his or her capacity as such and (B) reported to the Company or any of its Subsidiaries or of which the Company or any of its Subsidiaries are aware, and the Company and its Subsidiaries have taken reasonable corrective actions with respect to such allegations that the Company and its Subsidiaries have reasonably deemed meritorious, and (ii) none of the Company and its Subsidiaries have entered into any settlement agreement related to allegations of workplace harassment or discrimination with any Company Service Provider. No such allegations of harassment or discrimination would reasonably be expected to result in any material loss to the Company and its Subsidiaries, taken as a whole, and no such allegations have been made that, if known to the public, would reasonably be expected to bring the Company or any of its Subsidiaries into material disrepute.
Section 4.14. Intellectual Property Rights; Data Protection.
(a) The Company and its wholly-owned Subsidiaries exclusively own all right, title and interest in and to, or have valid and enforceable licenses to use or otherwise have the valid right to use, all material Intellectual Property used in, held for use in or necessary to conduct the business of the Company and its Subsidiaries as currently conducted (the “Company IP”), in each case, free and clear of all Liens (other than Permitted Liens). Section 4.14(a) of the Company Disclosure Letter sets forth a true, accurate and complete list, as of the date hereof, of (i) all Patents, Trademarks, Copyrights and Domain Names registered, issued or applied for with a Governmental Authority or domain name registrar, in each case, owned or purported to be owned by the Company or any of its Subsidiaries (collectively, the “Company Registered IP”) and (ii) all material Proprietary Software. All material Company Registered IP is subsisting, valid and enforceable. All registration, maintenance and renewal fees currently due in connection with the material Company Registered IP have been paid and all documents, recordations and certificates in connection with such Company Registered IP currently required to be filed have been filed with the relevant patent, copyright, trademark, or other authorities in the United States or foreign jurisdictions, as the case may be, for the purposes of prosecuting and maintaining Company Registered IP and recording the Company’s and its Subsidiaries’ ownership interests therein.
(b) Neither the Company nor any of its Subsidiaries has received, since January 1, 2020, any material charge, complaint, claim, demand, or notice challenging the validity, ownership, use or enforceability of any Intellectual Property owned or purported to be owned by the Company or any of its Subsidiaries (the “Company Owned IP”). There are no material pending charges, complaints, claims, demands or notices challenging the validity, ownership, use or enforceability of any Company Owned IP. All material Company IP will be available for use by the Company and its Subsidiaries, as applicable, on substantially similar terms and conditions immediately following the Closing without the payment of any additional amounts or considerations that would not have been due absent the Closing.
(c) The conduct of the business of the Company and its Subsidiaries as currently conducted and as previously conducted in the past six (6) years does not infringe, dilute, misappropriate or otherwise violate, and has not infringed, diluted, misappropriated or otherwise violated any Intellectual Property of any other Person. Neither the Company nor any of its Subsidiaries has received since January 1, 2020 any material written charge, complaint, claim, demand or notice alleging any such infringement, dilution, misappropriation or other violation by the Company or any of its Subsidiaries or challenging the validity or enforceability of any material Company Owned IP, and there are no pending charges, complaints, claims, demands or notices alleging the foregoing. To the Knowledge of the Company, since January 1, 2020, no Person has infringed, misappropriated or otherwise violated any material Company Owned IP.
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(d) None of the material Proprietary Software that is licensed or made available by the Company or its Subsidiaries to any Person other than the Company and its Subsidiaries uses, incorporates or is based upon any Open Source Software in such a manner that: (i) conditions the use or distribution of any such Proprietary Software on the disclosure of any source code for any portion of such Proprietary Software; (ii) conditions the use or distribution of such Proprietary Software on the granting to any Person of (A) the right to make derivative works or other modifications to such Proprietary Software or any other Company Owned IP, or (B) a license under such Proprietary Software or any other Company Owned IP; (iii) conditions the use or distribution of such Proprietary Software on such Proprietary Software or any other Company Owned IP being made subject to the terms and conditions of any Open Source Software License; (iv) requires the Company or its Subsidiaries to grant to any Person any rights or immunities under any Company Owned IP; or (v) imposes any other material limitation, restriction or condition on the right of the Company or its Subsidiaries with respect to its use or distribution of any Proprietary Software or other Company Owned IP. Except as would not, individually or in the aggregate, reasonably be expected to be material and adverse to the Company and its Subsidiaries, taken as a whole, the Company and each of its Subsidiaries are and have since January 1, 2020 been in compliance with the terms and conditions of all licenses for the Open Source Software used in its business. Since January 1, 2020, neither the Company nor any of its Subsidiaries has received a written notice or request from any Person alleging that the Company is required to disclose, distribute or license the Proprietary Software pursuant to an Open Source Software license, or alleging material noncompliance with an Open Source Software License.
(e) The Company or one of its wholly owned Subsidiaries is in actual possession of, and has exclusive control over, the source code for all material Proprietary Software. No material source code for any Company Owned IP has been accessed, disclosed, delivered, licensed or made available to any escrow agent or other third Person who was not, as of the time thereof, an employee, consultant or contractor of the Company or its Subsidiaries in connection with their performance of services for the Company or its Subsidiaries and who was subject to obligations of confidentiality. Neither the Company nor any of its Subsidiaries is a party to any agreement granting to any Person a license, option or right with respect to any such source code. 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, result in the delivery, license or disclosure of any material source code for any Company Owned IP, including the execution of this Agreement and the consummation of the transactions contemplated hereby. There has been no material unauthorized theft, reverse engineering, decompiling, disassembling or other unauthorized disclosure of or access to any source code to any material Proprietary Software.
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(f) The Company and its Subsidiaries have taken commercially reasonable security measures to protect the secrecy, confidentiality and value of all the Trade Secrets or other material confidential information of the Company and its Subsidiaries (or held in the possession of the Company or any of its Subsidiaries). Each of the Company and its Subsidiaries either: (i) has entered into binding, valid and enforceable, written contracts with each of its current and former employees, founders, consultants and contractors who is or was involved in or has contributed to the invention, creation, or development of any material Company Owned IP whereby such employee, consultant, founder or contractor presently, irrevocably and effectively assigns to the Company or any of its Subsidiaries all of such Person’s right, title and interest in and to such Intellectual Property; or (ii) has received an assignment of such Company Owned IP from such current and former employees by operation of law as “works made for hire” for the Company or any of its Subsidiaries. None of the Company’s or any of its Subsidiaries’ current and former employees, consultants, founders or contractors are in breach thereof or have any right, title or interest in any material Company IP. No employee, contractor, or consultant of the Company or any Subsidiary has misappropriated any material Trade Secrets or other material confidential information of any other Person in the course of the performance of his or her duties as an employee, contractor, or consultant of the Company or any Subsidiary.
(g) Except as would not, individually or in the aggregate, reasonably be expected to be material and adverse to the Company and its Subsidiaries, taken as a whole, the Company and its Subsidiaries have implemented and maintained commercially reasonable measures with respect to technical, administrative and physical safeguards to preserve and protect the confidentiality, availability, security and integrity of the Company IT Assets. Since January 1, 2020, there has been no material unauthorized access, use, intrusion, breach of security, failure, breakdown, performance reduction, or other adverse event affecting any Proprietary Software or Company IT Assets, that has caused or would reasonably be expected to cause any: (i) material disruption of or interruption in or to the use of such Proprietary Software or Company IT Assets or the conduct of the business; (ii) material loss, destruction, damage, or harm of or to the Company or its Subsidiaries or to the Company’s or any of its Subsidiaries’ operations, personnel, property, or other assets; or (iii) material liability of any kind to the Company or its Subsidiaries.
(h) No (i) funding, facilities or personnel of any Governmental Authority or (ii) funding, facilities or personnel of a university, college or other educational institution or research center was used in the development of any material Company Owned IP. None of the Company or any of its Subsidiaries is, nor has ever been, a member or promoter of, or a contributor to, any industry standards body or any similar organization that could reasonably be expected to require the Company or any Subsidiary to grant or offer to any Person or other third party any license or right to any material Company Owned IP.
(i) The Company and its Subsidiaries have implemented and maintain, and have maintained, commercially reasonable technical, administrative and physical safeguards and security measures, materially compliant with applicable Law and Privacy Obligations, to (i) preserve and protect the confidentiality, availability, security and integrity of the Personal Data collected or processed by or on behalf the Company and its Subsidiaries, and (ii) identify material internal and organizational risks to the confidentiality, availability, security, and integrity of the Company IT Assets and Personal Data collected or processed by or on behalf of the Company and its Subsidiaries.
(j) The Company and its Subsidiaries have at all times since January 1, 2020 materially complied, and are in material compliance, with all Privacy Obligations. Since January 1, 2020, (i) there have been no material claims pending or, to the Knowledge of the Company, threatened against the Company or its Subsidiaries alleging a violation of any Privacy Obligations (including related to any fines or other sanctions), (ii) there has been no material unauthorized access to, or material unauthorized acquisition, use, modification, destruction or disclosure, or any loss or theft, of Personal Data collected or processed by or on behalf of the Company, its Subsidiaries or third Persons acting on their behalf for which notification is required under applicable Privacy Obligations (a “Security Breach”), and (iii) neither the Company nor any of its Subsidiaries has notified or been required to notify any Person of any Security Breach.
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(k) The execution, delivery, and performance of this Agreement shall not cause, constitute, or result in a material breach or violation of any Privacy Obligation or other standard terms of service entered into by users of the Company’s or its Subsidiaries’ service(s).
(a) (i) The Company and each of its Subsidiaries have filed all Tax Returns required to be filed by any of them material to the Company and its Subsidiaries, taken as a whole; (ii) each of such filed Tax Returns (taking into account all amendments thereto) is complete and accurate in all material respects; and (iii) all Taxes material to the Company and its Subsidiaries, taken as a whole (whether or not shown to be due on such Tax Returns) have been timely paid in full, except for Taxes being contested in good faith and for which adequate reserves in accordance with GAAP have been provided on the Company’s consolidated financial statements.
(b) (i) Neither the Company nor any of its Subsidiaries has received written notice of any audit, examination or other Action from any taxing authority in respect of liabilities for Taxes of the Company or any of its Subsidiaries material to the Company and its Subsidiaries, taken as a whole, which have not been fully paid or settled; (ii) there are no material Liens for Taxes on any of the assets of the Company or any of its Subsidiaries other than Permitted Liens; and (iii) with respect to any tax years open for audit as of the date hereof, neither the Company nor any of its Subsidiaries has granted any waiver of any statute of limitations with respect to, or any extension of a period for the assessment of, any Tax material to the Company and its Subsidiaries, taken as a whole.
(c) Neither the Company nor any of its Subsidiaries has engaged in any “listed transaction” as defined in Treasury Regulations Section 1.6011-4(b)(2) or Treasury Regulations Section 301.6111-2(b)(2) in any tax year for which the statute of limitations has not expired.
(d) None of the Company and its Subsidiaries has any material liability for Taxes of any other Person (other than the Company and its Subsidiaries) under Treasury Regulations Section 1.1502-6 (or any similar provision of state, local or foreign Law) or as a transferee or successor.
(e) None of the Company and its Subsidiaries is party to or is bound by any material tax sharing, allocation, indemnification or similar agreement or arrangement other than (x) any such agreement or arrangement solely between the Company or its Subsidiaries and (y) provisions contained in leases, credit agreements, employment agreements, commercial agreements and other agreements entered into in the ordinary course of business and not primarily relating to Taxes.
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(f) None of the Company and its Subsidiaries has constituted either a “distributing corporation” or a “controlled corporation” within the meaning of Section 355(a)(1)(A) of the Code in a distribution intended to qualify as tax-free pursuant to Section 355(a)(1) of the Code in the past two (2) years.
(g) Since January 1, 2020, no written claim has been made by a taxing authority in a jurisdiction where the Company or any of its Subsidiaries does not file income or franchise Tax Returns material to the Company and its Subsidiaries, taken as a whole that the Company or any such Subsidiary is or may be subject to income or franchise taxation by, or required to file any income or franchise Tax Return in, that jurisdiction.
(h) Neither the Company nor any of its Subsidiaries has failed to withhold, collect, or timely remit any Taxes material to the Company and its Subsidiaries, taken as a whole required to have been withheld, collected and remitted with respect to any payments to a vendor, employee, independent contractor, creditor, stockholder or any other Person.
Section 4.16. Material Contracts.
(a) Section 4.16(a) of the Company Disclosure Letter sets forth a list, as of the date hereof, of each Company Material Contract, except for any Contract (including amendment thereto) filed or required to be filed as an exhibit to the Company SEC Documents (all of which shall be deemed to have been made available to Parent). For purposes of this Agreement, “Company Material Contract” means any Contract (other than any Company Benefit Plan or Contract solely between the Company and any of its Subsidiaries or among any of its Subsidiaries) to which the Company or any of its Subsidiaries is a party or their respective properties or assets are bound, except for this Agreement, that:
(i) constitutes a “material contract” (as such term is defined in item 601(b)(10) of Regulation S-K of the SEC);
(ii) is a joint venture, alliance or partnership agreement that is material to the operation of the Company and its Subsidiaries, taken as whole;
(iii) is a loan, guarantee of indebtedness for borrowed money or credit agreement, note, mortgage, security agreement, pledge or indenture in respect of indebtedness for borrowed money or other binding commitment for borrowed money (other than those related to trade payables arising in the ordinary course of business);
(iv) is an acquisition agreement, asset purchase agreement, stock purchase agreement or other similar agreement (other than agreements to purchase or acquire inventory in the ordinary course of business) directly or indirectly (by merger or otherwise), of assets or equity interests of or to another Person pursuant to which (A) the Company or any Subsidiary of the Company is required to pay target actual or target contingent consideration (including assumption of debt and assuming target achievement of any earnout obligation) after the date hereof in excess of $2,000,000 individually or which has continuing or target contingent obligations that would reasonably be expected to be in excess of $2,000,000 or (B) any other Person has the right to acquire any assets of the Company or any of its Subsidiaries (or any interests therein) after the date of this Agreement;
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(v) is a Contract entered into outside the ordinary course of business that involves future expenditures, commitments or receipts by the Company or any of its Subsidiaries in excess of $2,500,000 individually or $7,500,000 in the aggregate, in each case, in any one-year period that cannot be terminated on less than ninety (90) days’ notice without material payment or penalty;
(vi) is one of the top ten (10) supplier Contracts, measured by dollar volume of purchases, of the Company and its Subsidiaries (taken as a whole) for the twelve-month period ended June 30, 2023 (excluding any (A) any suppliers to businesses of the Company or any of its Subsidiaries that were primarily related to the divestiture of TaxAct Holdings, Inc., by the Company during the twelve-month period ended June 30, 2023 and (B) any professional, insurance, payroll service provider or any other similar provider of services to the Company or any of its Subsidiaries) (any such supplier, a “Material Supplier”);
(vii) is a Contract with any third-party provider of investment advisory or sub-advisory services for the Company or its Subsidiaries’ investment advisory programs under the Investment Advisers Act in excess of $2,000,000;
(viii) except in the ordinary course of business and as would not be material to the Company or its applicable Subsidiary that is party to such agreement, is a Contract (A) for any prime brokerage, (B) that is a custody agreement or (C) providing for any similar services;
(ix) is a Contract providing for the obligation to extend funds or make an investment in any Person, in each case, in excess of $1,000,000;
(x) except in the ordinary course of business and as would not be material to the Company or its applicable Subsidiary that is party to such agreement, is a Contract that prohibits the Company or any of its Subsidiaries from (A) engaging or competing in any material line of business, in any geographical location or with any Person, (B) selling any products or services of or to any other Person in any geographic region, (C) soliciting any clients or customers for any purpose, (D) soliciting for hire Persons for employment or consultancy or (E) engaging any independent contractors;
(xi) except in the ordinary course of business and as would not be material to the Company or its applicable Subsidiary that is party to such agreement, is a Contract that (A) grants “most favored nation” status or is a “requirements” Contract, (B) provides for the purchase of goods or services exclusively from any Third Party or (C) grants a right of first refusal or first offer or similar right to a Third Party;
(xii) is a Contract (or series of similar Contracts) creating a capital lease obligation annually in excess of $1,000,000;
(xiii) is a Contract (or series of similar Contracts) (other than capital leases) requiring capital expenditures (other than capital lease obligations) in excess of $2,000,000 individually or $7,500,000 in the aggregate (excluding any acquisition costs or similar obligations incurred by the Company or any of its Subsidiaries);
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(xiv) is a Contract limiting or restricting the ability of either of the Company or its Subsidiaries to make distributions or declare or pay dividends in respect of its capital stock or equity interests, as the case may be;
(xv) is a Company Lease;
(xvi) is a Contract with an Affiliate;
(xvii) is a Contract with a Governmental Authority (other than a Company Permit);
(xviii) is a Contract pursuant to which the Company or any of its Subsidiaries (A) transfers a right of obligation to provide insurance underwriting services to a third party, (B) engages a third party to supervise and administer an insurance program, or (C) engages any third party to provide business or claims administration services with respect to any insurance Contract or investment management services;
(xix) is a Contract pursuant to which the Company or any of its Subsidiaries grants or is granted a license or other right to any material Intellectual Property (other than Contracts (A) in which grants of Intellectual Property are incidental to such Contracts, (B) granting non-exclusive licenses or rights to customers in the ordinary course of business according to the Company’s standard terms or (C) granting rights to use commercially available, off-the-shelf, non-customized software pursuant to shrink wrap, click through or similar nonexclusive licenses on standard non-discriminatory terms and not sublicensed by the Company or its Subsidiaries with an annual fee less than $1,000,000);
(xx) is a settlement or similar Contract with respect to any Action involving payments by the Company or its Subsidiaries after the Closing in excess of $2,000,000 in the aggregate or any injunctive or similar equitable obligations that impose material restrictions on the Company or any of its Subsidiaries; or
(xxi) except for compensation, indemnification, employment or other arms-length ordinary course of business arrangements, is a Contract between the Company or any of its Subsidiaries, on the one hand, and any Affiliate (including any director or officer) thereof, but not including any wholly owned Subsidiary of the Company, on the other hand, that would be required to be disclosed pursuant to Item 404 of Regulation S-K promulgated by the SEC in the Company’s Form 10-K or proxy statement pertaining to an annual meeting of stockholders.
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(b) Each of the Company and its Subsidiaries has performed all material obligations required to be performed by it to date under, and is not in breach of or default or delinquent under the terms of any Company Material Contract where such breach, default or delinquency would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. To the Knowledge of the Company, no other party to any Company Material Contract is in breach or default in respect thereof, and no event has occurred which, with due notice or lapse of time or both, would, individually or in the aggregate, constitute such a default except as would not have a Company Material Adverse Effect. Each Company Material Contract is in full force and effect and is a valid and binding obligation of the Company or its applicable Subsidiary and, to the Knowledge of the Company, the other parties thereto, except such as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, subject to the Bankruptcy and Equity Exception. The Company has made available to Parent a true, correct and complete copy of each Company Material Contract required to be listed on Section 4.16(a) of the Company Disclosure Letter, together with all amendments, or other changes thereto. None of the Company or any of its Subsidiaries and, to the knowledge of the Company, no other party to any such Company Material Contract has, since January 1, 2023 through the date hereof, provided or received any written (or, to the Knowledge of the Company, oral) notice of a decision or intention to terminate, cancel, fail to renew, materially modify the terms or reduce services under any Company Material Contract.
Section 4.17. Investment Adviser and Broker-Dealer Matters.
(a) Since January 1, 2020, each of the Company and its Subsidiaries have filed (after giving effect to any extensions) all material Regulatory Documents that were required to be filed with any Governmental Authority. No material deficiencies have been asserted by any Governmental Authority with respect to any Regulatory Documents filed by the Company with such Governmental Authorities that have not been resolved, to the Knowledge of the Company, to the satisfaction of the applicable Governmental Authority.
(b) Each of the Subsidiaries of the Company that are required to be registered with the SEC as an investment adviser under the Investment Advisers Act is, and has been at all times since January 1, 2020, so registered (each, a “Registered Adviser”) and each of the Subsidiaries of the Company that are required to be registered, licensed or qualified as an investment adviser under the Laws of any state or other jurisdiction (other than the Investment Advisers Act) is, and has been at all times since January 1, 2020, so registered, licensed or qualified to the extent required by applicable Law during such period to be so registered, licensed or qualified. Except for registration under the Investment Advisers Act and the states in which the Subsidiaries of the Company that are required to be registered, licensed or qualified as an investment adviser set forth on Section 4.17(b) of the Company Disclosure Letter or the registration of certain investment adviser representatives of the Company, and except as would not, individually or in the aggregate, reasonably be expected to be material and adverse to the Company and its Subsidiaries, taken as a whole, or any of the Registered Advisers individually, neither the Company nor any of its Subsidiaries, officers or employees is, or is required (as the case may be) to register or file a notice as a federally registered investment adviser, or is required to be, registered, licensed, qualified or appointed as an investment adviser, investment adviser representative with the SEC or other Governmental Authority in connection with the services performed by that Person on behalf of the Company and has not been subject to liability by reason of any failure to be so registered, licensed or qualified.
(c) Each Registered Adviser has filed a registration statement on Form ADV and those other authorizations or notice filings set forth on Section 4.17(b) of the Company Disclosure Letter required under applicable Law (the “Registered Adviser Regulatory Filings”). Such Registered Adviser Regulatory Filings were prepared, in all material respects, in accordance with applicable Law and did not, when filed (or, with respect to Form ADV Part 2B or its equivalent, as of its date), contain any untrue statement of a material fact or omit to state a material fact necessary to make statements in them not misleading in light of the circumstances under which they were made, and the Registered Adviser Regulatory Filings have been at all times when in effect (and as of the Closing Date will be) true and correct in all material respects and not materially misleading and will not as of the Closing Date contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements in them not misleading in light of the circumstances under which they were made. The Company has made available to Parent true and complete copies of the Form ADV (including Parts 2A, 2B and 3 thereof) of each Registered Adviser since January 1, 2020 through the date hereof, to the extent such Registered Adviser Regulatory Filings are not publicly available.
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(d) The Company has made available to Parent copies of all material written correspondence between the Company or a Registered Adviser and the SEC, any state regulatory authority or other Governmental Authority since January 1, 2020 through the date hereof, and all audit or inspection reports received by the Company or a Registered Adviser relating to any examination, audit, investigation or inquiry by the SEC, a state regulatory authority or other Governmental Authority with respect to a Registered Adviser’s compliance with applicable Law. No Registered Adviser, nor any of its managers, directors, officers or, to the Knowledge to the Company, employees (in their capacities as such on behalf of the Registered Adviser) or any “person associated with an investment adviser” (as defined in the Investment Advisers Act) in respect of any Registered Adviser, has since January 1, 2020 been enjoined, indicted, convicted or made the subject of any investigations (excluding routine examinations by any Governmental Authority), disciplinary proceedings, consent decrees or administrative orders or other litigation on account of a violation of applicable Law, in each case relating to the business of the Registered Adviser and except as would not be material to the Company and its Subsidiaries, taken as a whole, or any of the Registered Advisers individually.
(e) Each of the Subsidiaries of the Company that are required to be registered with the SEC as a broker-dealer under the Exchange Act is so registered (each, a “Registered Broker-Dealer”) and is also a member of FINRA and each of the Subsidiaries of the Company that are required to be registered, licensed or qualified as a broker-dealer under the Laws of any state or other jurisdiction is so registered, licensed or qualified, and in compliance with its FINRA Membership Agreement, and in good standing of FINRA, except where the failure to be so registered, licensed or qualified or in compliance or good standing would not, individually or in the aggregate, reasonably be expected to be material and adverse to the Company and its Subsidiaries, taken as a whole. The Company has made available to Parent a true and complete copy of the Uniform Application for Broker-Dealer Registration on Form BD, as in effect on the date hereof, and to the Knowledge of the Company each such Form BD is in compliance in all material respects with the applicable requirements of the Exchange Act and applicable Law. Except as would not, individually or in the aggregate, reasonably be expected to be material and adverse to the Company and its Subsidiaries, taken as a whole, or the Registered Broker-Dealer, neither the Company nor any of its Subsidiaries, officers or employees is, or required to be, registered, licensed, qualified or appointed as an solicitor, broker-dealer, registered representative, municipal securities broker, municipal securities advisor, commodity pool operator or futures commission merchant with the SEC or other Governmental Authority in connection with the services performed by that Person on behalf of the Company and has not been subject to liability by reason of any failure to be so registered, licensed or qualified.
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(f) Each of the Subsidiaries of the Company that are required to be registered, licensed or qualified with a Governmental Authority as an insurance agency, broker or producer is so registered, except where the failure to be so registered, licensed or qualified would not, individually or in the aggregate, reasonably be expected to be material and adverse to the Company and its Subsidiaries, taken as a whole, or the Registered Broker-Dealer.
(g) Each Registered Broker-Dealer is in compliance, and has been at all times since January 1, 2020 in compliance in all material respects, with the applicable net capital requirements under the Exchange Act and applicable Law.
(h) No Registered Adviser or Registered Adviser Service Provider is relying on any exemptive orders, “no-action” letters or similar exemptions or regulatory relief, nor are any requested or pending as of the date hereof.
(i) Each Registered Adviser has a written investment advisory agreement pursuant to which it provides investment advisory or sub-advisory services to each Advisory Client. Each Advisory Contract is (i) a valid and legally binding agreement, enforceable against the respective Registered Adviser, and to the Knowledge of the Company, each other party thereto, subject to limitations imposed by applicable Laws and applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting the rights and remedies of creditors generally and to general principles of equity, (ii) in full force and effect as of the date hereof, (iii) in all material respects consistent with a form of Advisory Contract set forth on Section 4.17(i) of the Company Disclosure Letter, and (iv) in compliance in all material respects with applicable Laws.
(j) No Registered Adviser is in material default in the observance or the performance of any material term or obligation to be performed by it under any Advisory Contract. No account of an Advisory Client is in material violation of an investment policy or guideline for which violation the respective Registered Adviser is responsible. There are no agreements by a Registered Adviser to rebate or reduce fees or expenses or to reimburse any or all fees of, or to reduce or rebate a performance allocation or provide preferential rights, preferential or “most favored client” treatment for, any such Advisory Client, except as would not be material and adverse to the Company and its Subsidiaries, taken as a whole, or any of the Registered Advisers individually. There are no written agreements pursuant to which a Registered Adviser is or may be obligated to pay to any Person a finder’s, referral, placement or solicitation fee, compensation or fee with respect to assets of any Advisory Client. There are no third-party financial advisors, including any sponsor of a wrap program, for whom a Registered Adviser has agreed in writing to provide investment advisory services in connection with the provision of investment advisory services, by the Registered Adviser or such third party, to any Advisory Client.
(k) As of the date hereof, except as would not be material and adverse to the Company and its Subsidiaries, taken as a whole, or any of the Registered Advisers individually, no Registered Adviser has received any written (or to the Knowledge of the Company, oral) notice that any Advisory Client (or a person that has discretionary authority over such Person’s assets) is (i) terminating or planning to terminate its relationship with the Registered Adviser, (ii) proposing a material reduction in any fee rate under any Advisory Contract or (iii) planning to withdraw its assets under management with the Registered Adviser by more than twenty-five percent (25%) from the date of notification. To the Knowledge of the Company, no Financial Advisor has, since January 1, 2020, provided any written (or to the Knowledge of the Company, oral) notice to the Company or any of its Subsidiaries of a decision or intention to terminate its affiliation with the Company or any of its Subsidiaries, except as would not be material and adverse to the Company and its Subsidiaries, taken as a whole, or any of the Registered Advisers individually.
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(l) Each “associated person” (as defined under the by-laws of FINRA and the Exchange Act) of a Registered Broker-Dealer, employee or independent contractor of the Company and its Subsidiaries who is required to be registered, licensed or qualified with any Governmental Authority as an investment adviser representative, registered principal or registered representative or in any other capacity to perform his or her material job functions is so registered, licensed or qualified, except where the failure to be so registered, licensed or qualified would not, individually or in the aggregate, reasonably be expected to be material and adverse to the Company and its Subsidiaries, taken as a whole, or the Registered Broker-Dealer, and, since January 1, 2020, have been in full force and effect since the date of such registration, license or qualification was initially required, except as would not, individually or in the aggregate, reasonably be expected to be material and adverse to the Company and its Subsidiaries, taken as a whole, or the Registered Broker-Dealer.
(m) The Company and its Subsidiaries have established written compliance and supervisory policies and procedures reasonably designed to be in compliance with Laws, including with respect to all advisors and clients, except where the failure to establish such policies and procedures and be in compliance would not, individually or in the aggregate, reasonably be expected to be material and adverse to the Company and its Subsidiaries, taken as a whole. The Company and its Subsidiaries and, to the Knowledge of the Company, the employees and independent contractors of the Company and its Subsidiaries and “associated person” (as defined under the by-laws of FINRA and the Exchange Act) of a Registered Broker-Dealer are in compliance with such policies and procedures, except where the failure to be in compliance would not, individually or in the aggregate, reasonably be expected to be material and adverse to the Company and its Subsidiaries, taken as a whole.
(n) Each Registered Adviser has (i) adopted a formal code of ethics in compliance in all material respects with Rule 204A-1 promulgated under the Investment Advisers Act; (ii) adopted and implemented a written policy on insider trading in compliance in all material respects with Section 204A of the Investment Advisers Act; (iii) adopted and implemented written policies and procedures with respect to proxy voting in compliance in all material respects with Rule 206(4)-6 promulgated under the Investment Advisers Act; (iv) adopted and implemented written policies and procedures with respect to and in compliance in all material respects with Rule 206(4)-5 promulgated under the Investment Advisers Act and (v) adopted and implemented written policies and procedures reasonably designed to prevent violations of the Investment Advisers Act and the rules promulgated thereunder (and, as required, other applicable Law) in compliance in all material respects with Rule 206(4)-7 under the Investment Advisers Act. Each Registered Adviser has given or made available to Parent true and correct copies of such policies and procedures as existing on the date hereof, as well as copies or summaries of all annual reviews of such policies and procedures provided to the managing directors or other governing body of the Company since January 1, 2020. Since January 1, 2020, except as reported and documented in accordance with the compliance policies and procedures of a Registered Adviser, as the case may be, to the Knowledge of the Company, there have been no material violations of such policies and procedures (or any similar policies and procedures in effect prior to the effective dates of the above provisions, rules and regulations) by a Registered Adviser or any Registered Adviser Service Providers or any other supervised persons or access persons of a Registered Adviser. Each Registered Adviser has designated and approved a chief compliance officer in accordance with Rule 206(4)-7 under the Investment Advisers Act.
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(o) Neither the Registered Advisers nor, to the Knowledge of the Company, any “person associated with an investment adviser” (as defined in the Investment Advisers Act) in respect of any Registered Adviser are ineligible pursuant to Rule 262 of Regulation A under the Securities Act, Rule 506(d) of the Securities Act or Section 203(e) or 203(f) of the Investment Advisers Act to serve as an investment adviser or as a “person associated with an investment adviser,” except for any such ineligibility as would not, individually or in the aggregate, reasonably be expected to be material and adverse to the Company and its Subsidiaries, taken as a whole. Neither the Registered Broker-Dealer nor, to the Knowledge of the Company, any “person associated with a broker or dealer” (as defined under the by-laws of FINRA and the Exchange Act) in respect of any Registered Broker-Dealer are subject to a “statutory disqualification” (as such term is defined in the Exchange Act). Neither the Company nor any Subsidiary is subject to a written finding by a Governmental Authority that would be a basis for censure, suspension or revocation of the registration of, or any material limitations on the activities, functions or operations of, any of the Company or its Subsidiaries as a broker-dealer, municipal securities dealer, government securities broker or government securities dealer under Section 15, Section 15B or Section 15C of the Exchange Act or any limitation on serving in any of the capacities specified in Section 9(a) or 9(b) of the Investment Company Act of 1940. There is no Action pending or, to the Knowledge of the Company, threatened that would reasonably be expected to result in the Company, any Subsidiary, any “person associated with an investment adviser” (as defined in the Investment Advisers Act) in respect of any Registered Adviser, or Registered Broker-Dealer or any “associated person” (as defined in the Exchange Act or by-laws of FINRA) thereof becoming ineligible to act in such capacity.
(p) Neither the Company nor any of its Subsidiaries nor, to the Knowledge of the Company, any officer, director, employee or “associated persons” (as such term is defined in the Exchange Act and the rules and bylaws of FINRA) of the Company or any of its Subsidiaries is, as of the date of this Agreement, subject to any Order that permanently enjoins such Person from engaging in or continuing to conduct or practice in connection with any activity involving or in connection with the activities of the Company and its Subsidiaries as now conducted that has not been disclosed on Form BD, Form U-4 or otherwise required to be disclosed with any Governmental Authority.
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(q) None of the Company or any of its Subsidiaries has received, since January 1, 2020, any written notification or written communication (or, to the Knowledge of the Company, any other communication) from any Governmental Authority (i) threatening to revoke any license, franchise, seat on any exchange or Company Permit relating to the business primarily conducted by any Registered Adviser or Registered Broker-Dealer (nor, to the Knowledge of the Company, do any grounds exist on the date hereof which would be reasonably likely to result in any of the foregoing), (ii) requiring or requesting any of them (including any of the Companies’ or the Subsidiaries’ directors or controlling persons) to enter into a cease and desist order, agreement or memorandum of understanding (or requiring the board of directors thereof to adopt any resolution or policy) or (iii) restricting or disqualifying them from engaging in their activities, or of any “person associated” (as defined in the Exchange Act or the FINRA by-laws) with the Company or any of its Subsidiaries (except for restrictions generally imposed by rule, regulation or administrative policy on brokers or dealers generally) (in each case, except as otherwise made available to Parent prior to the date hereof).
(r) Neither the Company nor any of its Subsidiaries are (i) a commodity pool operator, futures commission merchant, commodity trading advisor, introducing broker, insurance agent, transfer agent, bank or real estate broker within the meaning of any applicable Law; (ii) required to be registered, licensed or qualified as a commodity pool operator, futures commission merchant, commodity trading advisor, introducing broker, bank, insurance agent, transfer agent or real estate broker under any applicable Law; or (iii) subject to any liability or disability by reason of any failure to be so registered, licensed or qualified if required by applicable Law. Neither the Company nor any of its Subsidiaries has received written notice of any proceeding concerning any failure to obtain any commodity pool operator, futures commission merchant, commodity trading advisor, introducing broker, insurance agent, transfer agent, bank or real estate broker registration, license or qualification.
(s) Neither the Registered Advisers nor any “person associated with an investment adviser” (as defined in the Investment Advisers Act) in respect of any Registered Adviser are ineligible, nor is there any Action pending or, to the Knowledge of the Company, threatened by any Governmental Authority that would result in the ineligibility of a Registered Adviser, pursuant to Section 203(e) or 203(f) of the Investment Advisers Act to serve as an investment adviser or as a “person associated with an investment adviser,” nor is any such Person subject to any other disqualification that would be a basis for censure, limitations on the activities, functions or operations of or suspension or revocation of any registration or license, by any Governmental Authority. None of the Company or any Persons associated with the Company specified in Section 506 of Regulation D under the Securities Act are subject to any of the “bad actor” disqualifications described in Rule 506(d) under the Securities Act (a “Regulation D Disqualifying Event”), and there is no action pending against any such Person that would reasonably be expected to result in a Regulation D Disqualifying Event. None of the Company or any Persons associated with the Company specified in Rule 262 under the Securities Act is subject to any of the disqualifications described in Rule 262(a) under the Securities Act (a “Regulation A Disqualifying Event”), and there is no Action pending against any such Person that would reasonably be expected to result in a Regulation A Disqualifying Event. Neither the Registered Broker-Dealer nor, to the Knowledge of the Company, any “person associated with a broker or dealer” in respect of any Registered Broker-Dealer are subject to a “statutory disqualification” (as such terms are defined in the Exchange Act), except for any such disqualifications as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.
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(t) Since January 1, 2020, no Registered Adviser nor, to the Knowledge of the Company, any “covered associate” thereof (as that term is defined in Rule 206(4)-5 under the Investment Advisers Act) has (i) received compensation from any Governmental Authority, (ii) provided payment to any Person to solicit a Governmental Authority for investment advisory services or (iii) coordinated or solicited any Person or political action committee to make any contribution or payment, in each case, to the extent such activities are prohibited by Rule 206(4)-5 under the Investment Advisers Act and as such terms are defined therein, and, in each case, except as would not have a Company Material Adverse Effect. No Registered Adviser is prohibited pursuant to Rule 206(4)-5 under the Investment Advisers Act from receiving compensation from clients that are Governmental Authorities.
(u) Since January 1, 2020, all marketing, advertising and distribution materials, disclosures and practices used, filed or distributed by the Company, the Registered Advisers or their Affiliates, in connection with marketing the Company’s and Registered Advisers’ services and otherwise operating the Company and Registered Advisers have complied in all material respects with applicable Law, and all such marketing, advertising and distribution materials and disclosures have not contained any untrue statement of a material fact or omit to state a material fact necessary to make the statements in them not misleading in light of the circumstances under which they were made.
Section 4.18. Real Property; Environmental Matters.
(a) Owned Real Property. The Company does not own any real property.
(b) Leased Real Property.
(i) Section 4.18(b)(i) of the Company Disclosure Letter sets forth a description as of the date hereof of all material leases, subleases, licenses or occupancy agreements (together with all amendments, guarantees and modifications thereto) pursuant to which the Company or any of its Subsidiaries has a leasehold, subleasehold or license interest in any real property (the “Company Tenant Leases”).
(ii) Section 4.18(b)(ii) of the Company Disclosure Letter sets forth a description as of the date hereof of all material subleases (together with all amendments, guarantees and modifications thereto) pursuant to which the Company or any of its Subsidiaries has subleased to any Person the right to use or occupy any Leased Real Property (the “Company Sublandlord Leases”, together with the Company Tenant Leases, collectively, the “Company Leases”).
(iii) In respect of each Company Tenant Lease, except as would not, individually or in the aggregate, reasonably be expected to materially interfere with the operations of the Company and its Subsidiaries, the Company or the applicable Subsidiary party thereto holds a valid and existing leasehold, subleasehold or license interest, free and clear of all Liens, except for Permitted Liens. Except for any Company Sublandlord Leases, the Company or one of its Subsidiaries has exclusive possession of each Leased Real Property. To the Knowledge of the Company, no tenant under a Company Sublandlord Lease has assigned its interest in such Company Sublandlord Lease or further sublet or licensed the space demised pursuant to such Company Sublandlord Lease, or otherwise granted any Person the right to use such space, except as would not, individually or in the aggregate, reasonably be expected to materially interfere with the operations of the Company and its Subsidiaries.
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(iv) Except as would not, individually or in the aggregate, reasonably be expected to be material and adverse to the Company and its Subsidiaries, taken as a whole, (A) no Company Tenant Lease is subject to any defenses, setoffs or counterclaims, and no material obligations of any landlord, sublandlord or licensor thereunder are delinquent, (B) the Company Tenant Leases are not subject to any ground lease, mortgage, deed of trust or other superior Lien or interests (including, for the avoidance of doubt, any present or future right to occupy any portion of the Leased Real Property) that would entitle the holder thereof to interfere with or disturb the tenant’s use and enjoyment of the Leased Real Property or the exercise of the tenant’s rights under the Company Tenant Leases so long as the tenant is not in default under the applicable Company Tenant Lease, (C) no options available to the Company or any Subsidiary under any of the Company Leases have been exercised other than pursuant to a writing included in the Company Leases and (D) except for any Company Sublandlord Leases, the Company’s and its Subsidiaries’ possession and quiet enjoyment of the Leased Real Property under the Company Tenant Leases has not been disturbed, and to the Knowledge of the Company, there are no disputes with respect to the Company Tenant Leases that would entitle the holder thereof to interfere with or disturb the tenant’s use and enjoyment of the Leased Real Property or the exercise of the tenant’s rights under the Company Tenant Leases.
(v) Except as would not, individually or in the aggregate, reasonably be expected to be material and adverse to the Company and its Subsidiaries, taken as a whole, the Leased Real Property is being used in the operation of the business of the Company or its Subsidiaries, as applicable, as currently conducted and is suitable for same, and no other real property other than the Leased Real Property is being used or occupied by the Company or its Subsidiaries, or is otherwise required to operate the business of the Company or its Subsidiaries as currently conducted.
(vi) Except as would not, individually or in the aggregate, reasonably be expected to be material to the Company and its Subsidiaries, taken as a whole, (A) there is currently no ongoing construction work in, on, or about any Leased Real Property other than normal, immaterial maintenance and repairs being performed in the ordinary course of business and (B) there are no leasing commissions due from the Company or any of its Subsidiaries with respect to any Leased Real Property that remain outstanding or unpaid.
(vii) Except as would not, individually or in the aggregate, reasonably be expected to be material and adverse to the Company and its Subsidiaries, taken as a whole, neither the Company nor any of its Subsidiaries has since January 1, 2020 received notice of any (A) violation of any zoning, subdivision, or other applicable Laws related to the Leased Real Property or the occupancy thereof or (B) special assessment against any portion of the Leased Real Property.
(viii) Except as would not, individually or in the aggregate, reasonably be expected to be material and adverse to the Company and its Subsidiaries, taken as a whole, all buildings, structures, improvements, fixtures, building systems and equipment, and all components thereof, included in the Leased Real Property (A) are structurally sound, in reasonable condition and repair, normal wear and tear excepted, are free from material and patent defects, are suitable for the purposes for which they are currently being used and for the operation of the business of the Company or its Subsidiaries, as applicable, and have been maintained in accordance with normal industry practice and (B) comply with all applicable Laws, including those pertaining to health and safety, zoning, building and construction requirements and the disabled.
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(c) Except as would not, individually or in the aggregate, reasonably be expected to be material and adverse to the Company and its Subsidiaries, taken as a whole, neither the Company nor any of its Subsidiaries has since January 1, 2020 received any written communication from, or given any written communication to, any other party to a Company Lease to which the Company or a Subsidiary of the Company is a party, alleging that the Company or any of its Subsidiaries or such other party, as the case may be, is in default under such lease.
(d) Except as would not, individually or in the aggregate, reasonably be expected to be material and adverse to the Company and its Subsidiaries, taken as a whole:
(i) the Company and each of its Subsidiaries is, and since January 1, 2020 has been, in compliance with all applicable Environmental Laws in all material respects (including possessing and complying with all material Environmental Permits required for the conduct of its operations as currently conducted);
(ii) there are no Actions pending or, to the Knowledge of the Company, threatened against the Company or any Subsidiary of the Company and since January 1, 2020, none of the Company or any of its Subsidiaries has received any written notice, in either case, alleging that the Company or such Subsidiary of the Company is in violation of, or liable under, any Environmental Law and which notice or Action remains unresolved;
(iii) to the Knowledge of the Company, there have been no past or present actions, activities, circumstances, conditions, events or incidents, including the Release, presence or disposal of any Hazardous Substances at, on or under the Leased Real Property that would reasonably be expected to result in liability under Environmental Laws on the part of the Company or any Subsidiary of the Company;
(iv) as of the date of this Agreement, neither the Company nor any of its Subsidiaries is a party or subject to any Order pursuant to Environmental Law; and
(v) neither the Company nor any of its Subsidiaries has provided an indemnity with respect to, expressly assumed or undertaken any liability, including any corrective, investigatory or remedial obligation of any other Person relating to any Environmental Laws.
Section 4.19. Vote Required. Assuming the accuracy of the representations contained in Section 5.13, the adoption of this Agreement by the affirmative vote of not less than fifty-one percent (51%) of the outstanding shares of Company Common Stock entitled to vote thereon at the Stockholders’ Meeting (the “Requisite Stockholder Approval”) is the only approval of holders of securities of the Company that is required in connection with the consummation of any of the transactions contemplated hereby.
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Section 4.20. Brokers. Except for PJT Partners LP, no broker, finder, investment banker, financial advisor, consultant or intermediary is entitled to any investment banking, brokerage, finder’s or similar fee or commission in connection with the Merger or any of the other transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Company or any of its Subsidiaries.
Section 4.21. Opinion of Financial Advisor. The Company Board has received the opinion of PJT Partners LP to the effect that, as of the date of such opinion, and based upon and subject to, among other things, the assumptions made, procedure followed, matters considered and conditions, qualifications and limitations on the review undertaken by PJT Partners LP in connection with the opinion, the Merger Consideration to be received pursuant to, and in accordance with, the terms of this Agreement by the holders of shares of Company Common Stock is fair, from a financial point of view. The Company shall, following the execution of this Agreement by all parties, furnish a written copy of such opinion to Parent for informational purposes only and on a non-reliance basis.
Section 4.22. Insurance. Section 4.22 of the Company Disclosure Letter contains a true, complete and correct list of the material insurance policies (other than any insurance policy maintained in connection with a Company Benefit Plan) maintained by the Company and any of its Subsidiaries in effect as of the date of this Agreement, together with the name of the policyholder and each covered insured, the coverage allowance, the expiration date and the annual premium of such policies. Except as would not, individually or in the aggregate, reasonably be expected to be material and adverse to the Company and its Subsidiaries, taken as a whole, (a) each such insurance policy is in full force and effect and all premiums due thereon have been paid in full, (b) the Company has not received a written (or, to the Knowledge of the Company, oral) notice of cancellation or default, termination, denial of coverage or non-renewal of, premium increase outside the ordinary course of business with respect to, or material alterations of coverage under, any such insurance policy from the insurer(s) of such insurance policy since January 1, 2020, (c) to the Knowledge of the Company, no event has occurred or is reasonably expected to occur that (with or without due notice or lapse of time or both) would constitute such a material breach or default under any such insurance policy, (d) there are no, and since January 1, 2020, there have been no, material pending or asserted claims against any insurance policy as to which (i) any insurer has denied liability, (ii) coverage has been disallowed or (iii) the policy limit under such insurance policy has been exhausted or materially reduced, and (e) to the Knowledge of the Company, there are no policies as to which coverage has been questioned, denied or disputed by the underwriters of such insurance policies or in respect of which such underwriters have reserved their rights, other than ordinary course reservations of rights.
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Section 4.23. Affiliate Transactions. There are no transactions, agreements, arrangements or understandings between the Company or any of its Subsidiaries, on the one hand, and any director or executive officer of the Company or any of the Company’s Subsidiaries or any Affiliate of the Company, any Person owning 5% or more of the Company Common Stock or any entity in which any such Person has a direct or indirect material interest, on the other hand, that would be required to be disclosed under Item 404 of Regulation S-K under the Securities Act other than ordinary course of business employment arrangements and similar employee arrangements and compensation and benefits arrangements or as otherwise disclosed in the Company SEC Documents.
Section 4.24. Material Suppliers. Except as would not be material to the Company and its Subsidiaries, taken as a whole, since January 1, 2023 through the date hereof, no Material Supplier has terminated, suspended, cancelled or materially and adversely modified or, to the Knowledge of the Company, threatened in writing to terminate, suspend, cancel or materially and adversely modify, its business relationship with the Company or any of its Subsidiaries in connection with, or the terms of a Company Material Contract. To the Knowledge of the Company, there are no unresolved material claims or disputes pending between the Company or any of its Subsidiaries, on the one hand, and any Material Supplier, on the other hand.
Section 4.25. Personal Property. The Company or one of its wholly-owned Subsidiaries owns and has good and marketable title to, or holds valid leasehold interests in or valid contractual rights to use, all equipment, properties, assets and other rights that do not constitute real property or Intellectual Property and that are material to the business of the Company and its Subsidiaries, taken as a whole, in each case free and clear of all Liens, other than Permitted Liens, and are in good condition (ordinary wear and tear excepted) and fit for the purpose for which they are currently used. Such equipment, properties, assets and other rights that do not constitute real property or Intellectual Property are reasonably sufficient, in all material respects, to conduct the business of the Company as currently conducted.
Section 4.26. COVID-19. Neither the Company nor any of its Subsidiaries has participated in any COVID-19-related programs or sought benefits, borrowings or relief thereunder or under any COVID-19 Law. Any borrowings of the Company or any of its Subsidiaries under any COVID-19 Laws were made in compliance with such COVID-19 Laws, have been repaid or forgiven in full with no further liability to the Company or any of its Subsidiaries in accordance with such COVID-19 Laws and each submission made to any Governmental Authority in respect of such borrowings, repayment or forgiveness was true, correct and complete.
Section 4.27. Takeover Statutes. Assuming the accuracy of the representations and warranties contained in Section 5.13, the Company Board has taken such actions as are necessary such that the restrictions imposed on business combinations by Section 203 of the DGCL are inapplicable to this Agreement and no “fair price,” “moratorium,” “control share acquisition” or other takeover or anti-takeover statute or similar federal or state Law (collectively, “Takeover Laws”) is applicable to this Agreement, the Merger or any other transactions contemplated by this Agreement.
Section 4.28. Employee Agents. To the Knowledge of the Company, each Employee or officer of the Company or any of its Subsidiaries acting as an Insurance Producer on behalf of the Company or any Subsidiary of the Company (each, an “Employee Agent”) is, and at all times since January 1, 2020 during which such Employee or officer has acted as an Insurance Producer on behalf of the Company or any of its Subsidiaries, has been, duly registered with or licensed by the appropriate Governmental Authority in jurisdictions requiring such registration or license where such Employee Agent conducts or has conducted business as an Insurance Producer on behalf of the Company or such Subsidiary, except where the failure to do so would not, individually or in the aggregate, reasonably be expected to be material to the Company and its Subsidiaries, taken as a whole. Section 4.28 of the Company Disclosure Letter sets forth a true and complete list of the Employee Agents of the Company and its Subsidiaries as of the date hereof. To the Knowledge of the Company, since January 1, 2020, no Employee Agent has been in violation in any material respect of any Law applicable to the brokering, writing, sale or production of the business of the Company and its Subsidiaries, and, to the Knowledge of the Company, since January 1, 2020, none of the Employee Agents has finally been denied any application for any license, registration or other Governmental Authority authorization necessary to act as an Insurance Producer on behalf of the Company and its Subsidiaries. To the Knowledge of the Company, since January 1, 2020 through the date hereof, there has not been a proceeding and there is no proceeding pending or, to the Knowledge of the Company, threatened to suspend, revoke or limit any license or registration of any Employee Agent that would be material to the Company and its Subsidiaries, taken as a whole.
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Section 4.29. Third-Party Agents. Except as would not, individually or in the aggregate, reasonably be expected to be material and adverse to the Company and its Subsidiaries, taken as a whole, each Third-Party Agent of the Company is duly registered with or licensed by the appropriate Governmental Authority in jurisdictions requiring such registration or license where each such Third-Party Agent conducts or has conducted business as an Insurance Producer on behalf of the Company or its Subsidiaries. To the Knowledge of the Company, there has not been a proceeding and there is no proceeding pending or threatened, to suspend, revoke or limit any license or registration of any such Third-Party Agent.
Section 4.30. Market Conduct. No Employee of the Company or any of its Subsidiaries receives any material payment for his or her own account from any customer or client of the Company or its Subsidiaries in connection with their respective business, except for commissions paid by the Company or any of its Subsidiaries to such Employee.
(a) Each of the Company and its Subsidiaries that provides services to a Person that is (i) an employee benefit plan as defined in Section 3(3) of ERISA that is subject to Title I of ERISA, (ii) a plan as defined in and subject to Section 4975 of the Code, (iii) an employee benefit plan that is subject to U.S. federal, state, local, or non-U.S. law or regulation substantially similar to Title I of ERISA or Section 4975 of the Code (“Similar Law”), or (iv) an entity whose underlying assets are deemed to constitute the assets of such an employee benefit plan or plan for purposes of Title I of ERISA, Section 4975 of the Code, or Similar Law (each such Person described in the foregoing clauses (i)-(iv) hereinafter referred to as a “Plan Client”) is in compliance in all material respects with the applicable requirements of Title I of ERISA, Section 4975 of the Code, and Similar Law, as applicable.
(b) Each of the Company and its Subsidiaries, in each case that has the power to acquire, manage or dispose of the assets of a Plan Client that is subject to Title I of ERISA or Section 4975 of the Code, meets the definition of a qualified professional asset manager set forth in Section VI(a) of Prohibited Transaction Class Exemption 84-14, as amended (the “QPAM Exemption”), and is not disqualified from relying on the QPAM Exemption for transactions negotiated on behalf of a Plan Client that is subject to Title I of ERISA or Section 4975 of the Code due to the application of Section I(g) of the QPAM Exemption.
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(c) None of the Company or its Subsidiaries is unable to serve in a capacity described in Section 411(a) of ERISA by reason of Section 411 of ERISA. Since January 1, 2020, none of the Company or its Subsidiaries has engaged in or caused any Plan Client to engage in any transaction that is or is reasonably likely to be a non-exempt prohibited transaction under Section 406 of ERISA, Section 4975 of the Code, or Similar Law.
(d) None of the Company or its Subsidiaries has received written (or, to the Knowledge of the Company, oral) notice that it is currently, or since January 1, 2020 has been, subject to investigation by the U.S. Department of Labor for matters relating to ERISA.
Section 4.32. No Other Representations or Warranties.
(a) Except for the representations and warranties expressly set forth in this Article IV or any certificate of the Company delivered hereunder, neither the Company nor any other Person on behalf of the Company makes, or has made (and the Company, on behalf of itself, each of the Company’s Subsidiaries hereby disclaims), any express or implied representation or warranty with respect to the Company or any of the Company’s Subsidiaries or with respect to the accuracy or completeness of any information provided, or made available, to Parent, Acquisition Sub or any of their Affiliates or Representatives, including with respect to their business, operations, assets, liabilities, conditions (financial or otherwise), prospects or otherwise in connection with this Agreement, the Merger or the other transactions contemplated by this Agreement, and Parent and Acquisition Sub and their respective Representatives and Affiliates are not relying on, and waive any claim based on reliance on, any representation, warranty or other information of the Company, any of the Company’s Subsidiaries or any other Person except for those expressly set forth in this Article IV or any certificate of the Company delivered hereunder. Except for the representations and warranties expressly set forth in this Article IV or any certificate of the Company delivered hereunder, none of the Company, any of the Company’s Subsidiaries or any other Person makes (and the Company, on behalf of itself, each of the Company’s Subsidiaries, and their respective Affiliates and Representatives, hereby disclaims) any express or implied representation or warranty (including as to completeness or accuracy) to Parent or Acquisition Sub with respect to, and none of the Company, the Company’s Subsidiaries or any other Person shall be subject to, any liability to Parent, Acquisition Sub or any other Person resulting from, the Company, the Company’s Subsidiaries or their respective Representatives providing or making available to Parent, Acquisition Sub or any of their Affiliates or their respective Representatives, or resulting from the omission of, any estimate, projection, prediction, forecast, data, financial information, memorandum, presentation or any other materials or information, including any materials or information made available to Parent or its Representatives or Affiliates in connection with presentations by the Company’s management or information made available on any electronic data room for “Project Ultimate” and maintained by the Company for purposes of the Merger and the other transactions contemplated by this Agreement, including the electronic data room hosted by Datasite LLC under the title Ultimate (collectively, the “VDR”).
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(b) Except for the representations and warranties contained in Article V, any certificate delivered hereunder by Parent or Acquisition Sub or the Financing Commitments, the Company acknowledges and agrees that (i) none of Parent, Parent’s Subsidiaries (including Acquisition Sub) or any other Person on behalf of Parent makes, or has made, any express or implied representation or warranty with respect to Parent or Acquisition Sub, including with respect to their business, operations, assets, liabilities, conditions (financial or otherwise), prospects or otherwise in connection with this Agreement, the Merger or the other transactions contemplated by this Agreement and the Company is not relying on any representation, warranty or other information of any Person except for those expressly set forth herein, in any certificate delivered hereunder by Parent or Acquisition Sub or in the Financing Commitments and (ii) no Person has been authorized by Parent, Parent’s Subsidiaries (including Acquisition Sub) or any other Person on behalf of Parent to make any representation or warranty relating to Parent or Acquisition Sub or their respective business or otherwise in connection with this Agreement and Merger, and if made, such representation or warranty shall not be relied upon by the Company as having been authorized by either such entity.
Article
V
REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION SUB
Except as disclosed in the Parent Disclosure Letter (subject to Section 9.3(b)), Parent and Acquisition Sub hereby jointly and severally represent and warrant to the Company as follows:
Section 5.1. Organization and Qualification. Each of Parent and Acquisition Sub is a corporation, partnership or other entity duly organized, validly existing and (to the extent applicable) in good standing under the laws of the jurisdiction of its incorporation or organization and has the requisite corporate or other legal entity power and authority to conduct its business as it is now being conducted, except where the failure to be so organized or existing or to be in good standing or to have such power and authority as would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect. Each of Parent and Acquisition Sub is duly qualified or licensed to do business and (to the extent applicable) is in good standing in each jurisdiction in which the nature of the business conducted by it makes such qualification or licensing necessary, except where the failure to be so duly qualified or licensed and (to the extent applicable) in good standing as would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect. Parent has made available to the Company a copy of the Parent Organizational Documents, as currently in effect, and neither Parent nor Acquisition Sub is in violation of any provision of such documents applicable to it, except as would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect.
Section 5.2. Authority Relative to Agreement.
(a) Each of Parent and Acquisition Sub has all necessary entity power and authority to execute and deliver this Agreement and perform its obligations hereunder and to consummate the transactions contemplated hereby, including the Merger. The execution, delivery and performance of this Agreement by Parent and Acquisition Sub, and the consummation by Parent and Acquisition Sub of the transactions contemplated by this Agreement, have been duly and validly authorized by all necessary entity action by Parent and Acquisition Sub, and no other legal entity action on the part of Parent and Acquisition Sub is necessary to authorize the execution, delivery and performance of this Agreement by Parent and Acquisition Sub and the consummation by Parent and Acquisition Sub of the transactions contemplated by this Agreement. This Agreement has been duly executed and delivered by Parent and Acquisition Sub and, assuming due authorization, execution and delivery of this Agreement by the other party hereto, constitutes a legal, valid and binding obligation of Parent and Acquisition Sub, enforceable against Parent and Acquisition Sub in accordance with its terms, subject to the Bankruptcy and Equity Exception.
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(b) The board of directors (or equivalent) of Parent, at a meeting duly called and held, has (i) determined that the transactions contemplated by this Agreement are advisable and in the best interests of Parent and its stockholders and (ii) approved and declared advisable the execution, delivery and performance of this Agreement and the consummation by Parent of the transactions contemplated by this Agreement, including the Merger, upon the terms and subject to the conditions set forth herein, in each case, by resolutions duly adopted, which resolutions have not been subsequently rescinded, withdrawn or modified in a manner adverse to the Company. No vote of, or consent by, the holders of any class or series of capital stock of Parent is necessary to authorize the execution, delivery and performance by Parent of this Agreement and the consummation of the transactions contemplated by this Agreement, including the Merger, or otherwise required by the certificate of incorporation or bylaws (or equivalent organizational documents) of Parent, applicable Law (including any stockholder approval provisions under the rules of any applicable securities exchange) or any Governmental Authority.
(c) The board of directors of Acquisition Sub, at a meeting duly called and held, has (i) determined that this Agreement and the transactions contemplated by this Agreement, including the Merger, are advisable and in the best interests of Acquisition Sub and its sole stockholder, (ii) approved and declared advisable the execution, delivery and performance of this Agreement and, subject to the adoption of this Agreement by Parent in its capacity as the sole stockholder of Acquisition Sub, the consummation by Acquisition Sub of the transactions contemplated by this Agreement, including the Merger, upon the terms and subject to the conditions set forth herein, (iii) directed that this Agreement be submitted to the sole stockholder of Acquisition Sub to be adopted and (iv) resolved to recommend adoption of this Agreement by the sole stockholder of Acquisition Sub, in each case, by resolutions duly adopted, which resolutions have not been subsequently rescinded, withdrawn or modified in a manner adverse to the Company.
Section 5.3. No Conflict; Required Filings and Consents.
(a) Neither the execution and delivery of this Agreement by Parent and Acquisition Sub nor the consummation by Parent and Acquisition Sub of the transactions contemplated hereby will (i) violate any provision of Parent’s, Acquisition Sub’s or any of their respective Subsidiaries’ certificate of incorporation or bylaws (or equivalent organizational documents), (ii) assuming that the Consents, registrations, declarations, filings and notices referred to in Section 5.3(b) have been obtained or made, as applicable, any applicable waiting periods referred to therein have expired and any condition precedent to any such Consent has been satisfied, conflict with or violate any Law applicable to Parent or any of its Subsidiaries (including Acquisition Sub) or by which any property or asset of Parent or any of its Subsidiaries (including Acquisition Sub) is bound or affected or (iii) result in any breach of, or constitute a default (with or without notice or lapse of time, or both) under, or give rise to any right of termination, acceleration or cancellation of, any Contract to which Parent or any of its Subsidiaries (including Acquisition Sub) is a party, or by which any of their respective properties or assets is bound, other than, in the case of clauses (ii) and (iii), any such conflicts, violations, breaches, defaults or rights of termination, acceleration or cancellation as would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect.
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(b) No Consent of, or registration, declaration or filing with, or notice to, any Governmental Authority is required to be obtained or made by or with respect to Parent or any of its Subsidiaries (including Acquisition Sub) in connection with the execution, delivery and performance of this Agreement or the consummation of the transactions contemplated hereby, other than (i) compliance with the applicable requirements of the Securities Act and the Exchange Act, including the filing with the SEC of the Proxy Statement in preliminary and definitive forms and the applicable requirements of and filings with the SEC under the Exchange Act, (ii) the filing of the Certificate of Merger with the Secretary, (iii) applicable requirements under any applicable international, federal or state securities Laws or “Blue Sky Laws”, (iv) such filings as may be required in connection with the Taxes described in Section 9.10, (v) such other items required solely by reason of the participation of the Company as expressly listed in clauses (v), (viii), (ix) and (x) of Section 4.4(b), (vi) compliance with and filings or notifications under the HSR Act or other Antitrust Laws, including the filing of a premerger notification and report form under the HSR Act and the receipt, termination or expiration, as applicable of waivers, Consents, waiting periods or agreements required under the HSR Act or any other applicable Antitrust Laws, approvals of, or notice filings required by, applicable state insurance regulators with respect to a change in ownership or control of each Subsidiary of the Company that is licensed as an insurance agent, broker, producer or other applicable insurance related license designation under applicable state Laws (including the TDI Consent), and (vii) such other Consents, registrations, declarations, filings or notices the failure of which to be obtained or made that would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect.
Section 5.4. Litigation. As of the date hereof, there is no Action pending or, to the Knowledge of Parent, threatened against Parent or any of its Affiliates that would, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect, nor is there any Order of any Governmental Authority outstanding against, or, to the Knowledge of Parent, investigation by any Governmental Authority involving, Parent or any of its Affiliates that would, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect. As of the date hereof, there is no Action pending or, to the Knowledge of Parent, threatened against Parent or any of its Affiliates seeking to prevent, enjoin, hinder, modify, delay or challenge the Merger or any of the other transactions contemplated by this Agreement.
Section 5.5. Investment Adviser and Broker-Dealer Matters. Neither Parent or any of its Affiliates nor, to the Knowledge of Parent, any “person associated with an investment adviser” (as defined in the Investment Advisers Act) in respect of any of Parent or its Affiliates is (a) ineligible pursuant to Section 203(e) or 203(f) of the Investment Advisers Act to serve as an investment adviser or as a “person associated with an investment adviser,” except for any such ineligibility as would not, individually or in the aggregate, reasonably be expected to be prevent or materially delay or impede the consummation of the transactions contemplated by this Agreement, (b) is subject to a “statutory disqualification” (as such term is defined in the Exchange Act) or (c) subject to a written finding by a Governmental Authority that would be a basis for censure, limitations on the activities, functions or operations, or suspension or revocation of the registration of any of Parent or its Subsidiaries as a broker-dealer, municipal securities dealer, government securities broker or government securities dealer under Section 15, Section 15B or Section 15C of the Exchange Act or which would be the basis for any limitation on serving in any of the capacities specified in Section 9(a) or 9(b) of the Investment Company Act of 1940. There is no investigation pending or, to the Knowledge of Parent, threatened in writing against any of Parent, Acquisition Sub or any of their respective Affiliates or any of their respective “associated persons” that is reasonably likely to result in any such Person being deemed ineligible as described in the foregoing clause (a), subject to a statutory disqualification as described in the foregoing clause (b) or subject to a finding as described in the foregoing clause (c).
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Section 5.6. Absence of Certain Agreements. Neither Parent nor any of its Affiliates (including Acquisition Sub) has entered into any Contract, arrangement or understanding (in each case, whether oral or written), or authorized, committed or agreed to enter into any Contract, arrangement or understanding (in each case, whether oral or written), pursuant to which: (a) any stockholder of the Company would be entitled to receive consideration of a different amount or nature than the Merger Consideration or pursuant to which any stockholder of the Company (i) agrees to vote to adopt this Agreement or the Merger or (ii) agrees to vote against any Superior Proposal or (b) any Third Party has agreed to provide, directly or indirectly, equity capital to Parent or the Company to finance in whole or in part the Merger.
Section 5.7. Information Supplied. None of the information supplied or to be supplied by or on behalf of Parent or any of its Affiliates (including Acquisition Sub) expressly for inclusion or incorporation by reference in the Proxy Statement will, at the date the Proxy Statement is first mailed to the stockholders of the Company and at the time of the Stockholders’ Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they are made, not misleading, except that no representation or warranty is made by Parent or Acquisition Sub with regard to statements made therein based on information supplied by or on behalf of the Company (or any of its Affiliates) for inclusion therein.
Section 5.8. Financing; Sufficient Funds.
(a) Parent has delivered to the Company a true, correct and complete copy of the executed debt commitment letter, dated as of the date hereof, from the Debt Financing Sources party thereto, together with the true, correct and complete copies of any related executed fee letters (the “Debt Fee Letters”) (provided that, solely with respect to any such Debt Fee Letters, the amounts, economic, financial, dollar and ratio terms (including related dates), “flex” terms and securities demand provisions (none of which affects availability, timing, conditionality, enforceability, termination or aggregate principal amount of such financing), in each case, may be redacted in a customary manner) (collectively, including all exhibits, schedules, amendments, supplements, modifications and annexes thereto, the “Debt Commitment Letter” or the “Financing Commitments”), pursuant to which, and subject to the terms and conditions thereof, the Debt Financing Sources party thereto have committed to lend the aggregate amount of debt financing set forth therein to Acquisition Sub for the purpose of, among other things, funding the transactions contemplated by this Agreement (including any debt securities contemplated to be issued in lieu of any bridge commitments thereunder, and together with any alternative debt financing pursuant to Section 6.11(d), the “Debt Financing”).
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(b) As of the date hereof, the Financing Commitments (i) are in full force and effect, (ii) have not been restated, modified, amended or supplemented in any respect or waived and, to the Knowledge of Parent with respect to any of the Debt Financing Sources only, no such restatement, modification, amendment, supplement or waiver is contemplated, and (iii) have not been withdrawn, reduced, rescinded, amended, restated, otherwise modified or repudiated in any respect or terminated and, to the Knowledge of Parent with respect to any of the Debt Financing Sources only, no such withdrawal, reduction, rescission, amendment, restatement, other modification, repudiation or termination is contemplated. The Financing Commitments, in the forms so delivered, constitute legal, valid and binding obligations of Parent and Acquisition Sub, as applicable, and, to the Knowledge of Parent, the other parties thereto and are enforceable in accordance with their respective terms against Parent and Acquisition Sub and, to the Knowledge of Parent, against each of the other parties thereto, subject to the Bankruptcy and Equity Exception. There are no side letters or other Contracts to which Parent, any Affiliate thereof or Acquisition Sub is a party relating to the Debt Financing that would reasonably be expected to adversely affect (x) the ability of Parent or Acquisition Sub to satisfy any of the conditions to the Debt Financing applicable to it and within its control, or (y) the availability, timing, conditionality, enforceability, termination or aggregate principal amount of the Debt Financing. As of the date hereof, assuming satisfaction of the conditions set forth in Section 7.1 and Section 7.2, no event has occurred or circumstance exists which, with or without notice, lapse of time or both, would or would reasonably be expected to constitute or result in a default under or breach on the part of Parent or Acquisition Sub, or, to the Knowledge of Parent, on the part of any other party, under the Financing Commitments. As of the date hereof, Parent has no reason to believe (both before and after giving effect to any “flex” and securities demand provisions contained in the Debt Commitment Letter) that it will be unable to satisfy on a timely basis, and in any event, not later than the Closing, any condition of the Financing Commitments required to be satisfied by it or that the full amounts committed pursuant to the Financing Commitments will not be available on the Closing Date if the terms or conditions to be satisfied by it contained in the Financing Commitments are satisfied. Parent and Acquisition Sub have fully paid any and all commitment fees or other fees required by the Financing Commitments to be paid on or before the date of this Agreement. Assuming satisfaction of the conditions set forth in Section 7.1 and Section 7.2, the aggregate proceeds from the Debt Financing will be sufficient to (1) fund all of the amounts required to be provided by Parent or Acquisition Sub on the Closing Date for the consummation of the transactions contemplated hereby, including the payment of the Aggregate Merger Consideration, the Debt Payoff Amount and all amounts payable pursuant to Section 3.3 and (2) fund the payment of all associated costs and Expenses of the Merger (including any fees (including original issue discount), premiums and expenses related to the transactions contemplated hereby, including the Debt Financing and refinancing costs in connection therewith) (such obligations specified in clauses (1) and (2), collectively, the “Funding Obligations” and such sufficient proceeds, the “Funds”). There are no conditions precedent or other contingencies related to the funding of the full net proceeds (or any portion) of the Debt Financing at or prior to the Closing, other than as expressly set forth in the Financing Commitments as in effect on the date hereof. Notwithstanding anything contained in this Agreement to the contrary, Parent and Acquisition Sub acknowledge and agree that their respective obligations to consummate the transactions contemplated by this Agreement are not conditioned in any manner whatsoever upon obtaining the Funds to satisfy the Funding Obligations.
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Section 5.9. Capitalization of Acquisition Sub. The authorized share capital of Acquisition Sub consists of 1,000 shares, par value $0.01 per share, one (1) of which is validly issued and outstanding. All of the issued and outstanding share capital of Acquisition Sub is, and at the Effective Time will be, owned by Parent. Acquisition Sub was formed solely for the purpose of engaging in the transactions contemplated hereby, and it 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 and the Merger and other transactions contemplated by this Agreement.
Section 5.10. Investment Intention. Parent is acquiring through the Merger the shares of capital stock of the Surviving Corporation for its own account, for investment purposes only and not with a view to the distribution (as such term is used in Section 2(11) of the Securities Act) thereof. Parent understands that the shares of capital stock of the Surviving Corporation will not be registered under the Securities Act or any Blue Sky Laws and cannot be sold unless subsequently registered under the Securities Act, any applicable Blue Sky Laws or pursuant to an exemption from any such registration.
Section 5.11. Brokers. No broker, finder, investment banker, consultant or intermediary is entitled to any investment banking, brokerage, finder’s or similar fee or commission in connection with the Merger or any of the other transactions contemplated by this Agreement based upon arrangements made by or on behalf of Parent, Acquisition Sub or any of their respective Subsidiaries or Affiliates.
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Section 5.12. Solvency. Neither Parent nor Acquisition Sub is entering into the transactions contemplated by this Agreement with the actual intent to hinder, delay or defraud either present or future creditors of Parent, Acquisition Sub or any of their respective Subsidiaries (which, for purposes of this Section 5.12, shall include the Company and its Subsidiaries). Each of Parent and Acquisition Sub is Solvent as of the date hereof, and, assuming that (a) the representation and warranties set forth in Section 4.2(a) and Section 4.2(b) are true and correct in all material respects and (b) the Company has complied with its material obligations under Section 6.1(C) and Section 6.1(H) in all material respects, each of Parent and the Surviving Corporation will, after giving effect to all of the transactions contemplated by this Agreement, including the Debt Financing, any Alternative Financing and the Funding Obligations, be Solvent at and immediately after the Effective Time. As used in this Section 5.12, the term “Solvent” means, with respect to a particular date, that on such date, (i) Parent and Acquisition Sub, and, after the Merger, Parent and the Surviving Corporation and its Subsidiaries, are able to pay their respective indebtedness and other liabilities, contingent or otherwise, as the indebtedness and other liabilities become due in the ordinary course of business, (ii) each of Parent and Acquisition Sub and, after the Merger, Parent and the Surviving Corporation and its Subsidiaries, have total assets not less than the sum of such entity’s liabilities plus the amount that would be needed, if the corporation were to be dissolved at the time of a distribution, to satisfy the preferential rights upon dissolution of stockholders whose preferential rights on dissolution are superior to those receiving the distribution and (iii) each of Parent and Acquisition Sub and, after the Merger, Parent and the Surviving Corporation and its Subsidiaries has sufficient capital and liquidity with which to conduct its business. For purposes of this Section 5.12, (A) the amount of any contingent liabilities at any time shall be computed as the amount that, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability, (B) “debt” means any liability on a claim and (C) “claim” means any (1) right to payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured, and (2) any right to an equitable remedy for breach of performance if such breach gives rise to a payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured or unsecured.
Section 5.13. Share Ownership. None of Parent, Acquisition Sub or any of their respective “affiliates” or “associates” is, or at any time during the last three (3) years has been, an “interested stockholder” of the Company, in each case as defined in Section 203 of the DGCL. Neither Parent nor Acquisition Sub nor any of their respective affiliates beneficially owns (within the meaning of Section 13 of the Exchange Act and the rules and regulations promulgated thereunder or is entitled to a contractual right to beneficially own (whether or not subject to the passage of time or other contingencies)), as of the date of this Agreement, or will at any time prior to the Closing Date beneficially own (or, except pursuant to this Agreement, be entitled to a contractual right to beneficially own (whether or not subject to the passage of time or other contingencies)), any shares of Company Common Stock or other securities convertible into, exchangeable for or exercisable for shares of Company Common Stock or any securities of any Subsidiary of the Company, or is a party as of the date of this Agreement, or will at any time prior to the Closing Date become a party, to any Contract, arrangement or understanding (other than this Agreement) for the purpose of acquiring, holding, voting or disposing of any shares of Company Common Stock or other securities convertible into, exchangeable for or exercisable for shares of Company Common Stock or any securities of any Subsidiary of the Company.
Section 5.14. Management Agreements. Other than this Agreement, there are no Contracts, undertakings, commitments, agreements or obligations or understandings between Parent or Acquisition Sub or any of their Affiliates, on the one hand, and any member of the Company’s management or the Company Board, on the other hand, relating in any way to the Company (including relating to compensation and retention of the Company’s management), the transactions contemplated by this Agreement or the operations of the Company after the Effective Time.
Section 5.15. Financial Statements; Controls.
(a) Section 5.15(a) of the Parent Disclosure Letter contains the audited, consolidated financial statements of Parent and its consolidated Subsidiaries consisting of the audited consolidated statements of financial condition of Parent and its consolidated Subsidiaries as of December 31, 2022 and December 31, 2021 and the related audited consolidated statements of operations, stockholder’s equity and cash flows for the years then ended, together with the notes to such financial statements (the “Parent Audited Financial Statements”), and Section 5.15(b) of the Parent Disclosure Letter contains the unaudited, consolidated financial statements of Parent and its consolidated Subsidiaries consisting of the unaudited consolidated statements of financial condition as of June 30, 2023 and June 30, 2022 of Parent and its consolidated Subsidiaries and the related unaudited consolidated statements of operations, stockholder’s equity and cash flows for the three (3)-month and six (6)-month periods then ended, including any notes thereto (the “Parent Unaudited Financial Statements” and together with the Parent Audited Financial Statements, the “Parent Financial Statements”). The Parent Audited Financial Statements and the Parent Unaudited Financial Statements fairly present in all material respects (to the Knowledge of Parent) the financial condition of Parent and its Subsidiaries on a consolidated basis as of the dates thereof and their results of operations for the periods covered thereby in accordance with GAAP consistently applied throughout the periods covered thereby, except as otherwise expressly noted therein and subject, in the case of the Parent Unaudited Financial Statements, to normal year-end adjustments and the absence of footnotes.
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(b) Based on Parent’s most recent evaluation of its internal control over financial reporting prior to the date hereof, (i) there are no material weaknesses in the design or operation of Parent’s internal controls over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that are reasonably likely to adversely affect in any material respect Parent’s ability to record, process, summarize and report financial information and (ii) to the Knowledge of Parent, there is no fraud, whether or not material, that involves management or other employees who have a significant role in Parent’s internal control over financial reporting.
Section 5.16. Indebtedness. True and correct copies of the Parent Credit Agreement, the Parent Indenture and the form of notes issued under the Parent Indenture, and all amendments to each of them, have been provided to the Company prior to the date of this Agreement. As of the date hereof, (a) no Event of Default under the Parent Credit Agreement or the Parent Indenture (as such terms are defined in the Parent Credit Agreement and Parent Indenture, as applicable) has occurred and is continuing and (b) Parent has made an “LCT Election” under each of the Parent Credit Agreement and the Parent Indenture (as such terms are defined in the Parent Credit Agreement and Parent Indenture, as applicable).
Section 5.17. Acknowledgment of Disclaimer of Other Representations and Warranties.
(a) Each of Parent and Acquisition Sub acknowledges that it and its Representatives and applicable Affiliates (i) have received full and complete access to (A) such books and records, facilities, properties, premises, equipment, Contracts and other properties and assets of the Company and its Subsidiaries which they and their Representatives and such Affiliates have desired or requested to see or review and (B) the VDR, (ii) have had the opportunity to meet with the officers and employees of the Company and its Subsidiaries and to discuss the business and assets of the Company and its Subsidiaries and (iii) have had an adequate opportunity to make such legal, factual and other inquiries and investigation as they deem necessary, desirable or appropriate with respect to the Company and each of its Subsidiaries.
(b) Except for the representations and warranties expressly set forth in this Article V and the Financing Commitments, neither Parent nor Acquisition Sub nor any other Person on behalf of Parent or Acquisition Sub makes (and Parent, on behalf of itself, its Subsidiaries, and their respective Affiliates and Representatives, hereby disclaims) and the Company has not relied on, any express or implied representation or warranty with respect to Parent, Acquisition Sub, its Subsidiaries or any of their respective businesses, operations, properties, assets, liabilities or otherwise in connection with this Agreement, the Merger or the other transactions contemplated hereby, including as to the accuracy or completeness of any information.
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(c) Except for the representations and warranties expressly set forth in Article IV, each of Parent and Acquisition Sub acknowledges and agrees that (i) none of the Company, the Company’s Subsidiaries or any other Person on behalf of the Company or any of the Company’s Subsidiaries makes, or has made, any express or implied representation or warranty with respect to the Company or any of the Company’s Subsidiaries or with respect to the accuracy or completeness of any information provided, or made available, to Parent, Acquisition Sub or any of their Affiliates or Representatives, including with respect to the Company and its Subsidiaries respective businesses, operations, assets, liabilities, conditions (financial or otherwise), prospects or otherwise in connection with this Agreement, the Merger or the other transactions contemplated by this Agreement, and Parent and Acquisition Sub and their respective Representatives and Affiliates are not relying on, and waive any claim based on reliance on, any representation, warranty or other information of the Company or any Person except for those expressly set forth in Article IV and (ii) no Person has been authorized by the Company, the Company’s Subsidiaries or any other Person on behalf of the Company to make any representation or warranty relating to the Company, its Subsidiaries or their respective businesses or otherwise in connection with this Agreement, the Merger or the other transactions contemplated hereby, and if made, such representation or warranty shall not be relied upon by Parent or Acquisition Sub as having been authorized by such entity. Without limiting the generality of the foregoing, Parent and Acquisition Sub acknowledge and agree that, except for the representations and warranties expressly set forth in Article IV, none of the Company, any of the Company’s Subsidiaries or any other Person has made a representation or warranty (including as to accuracy or completeness) to Parent or Acquisition Sub with respect to, and none of the Company, any of the Company’s Subsidiaries or any other Person shall be subject to any liability to Parent, Acquisition Sub or any other Person resulting from, the Company or any of the Company’s Subsidiaries or their respective Representatives or Affiliates providing, or making available, to Parent, Acquisition Sub or any of their Affiliates or their respective Representatives, or resulting from the omission of, any estimate, projection, prediction, forecast, data, financial information, memorandum, presentation or any other materials or information, including any materials or information made available to Parent or its Representatives or Affiliates in connection with presentations by the Company’s management or in the VDR. Parent and Acquisition Sub acknowledge that there are uncertainties inherent in attempting to make estimates, projections, budgets, pipeline reports and other forecasts and plans, that they are familiar with such uncertainties and that each of Parent and Acquisition Sub is taking full responsibility for making its own evaluation of the adequacy and accuracy of all estimates, projections, budgets, pipeline reports and other forecasts and plans so furnished to it, including the reasonableness of the assumptions disclosed to Parent underlying such estimates, projections, budgets, pipeline reports and other forecasts and plans. Each of Parent and Acquisition Sub acknowledges that it has conducted, to its satisfaction, its own independent investigation of the condition (financial or otherwise), operations, assets and business of the Company and its Subsidiaries and, in making its determination to proceed with the Merger and the other transactions contemplated by this Agreement, each of Parent and Acquisition Sub has relied solely on the results of its own independent investigation and the representations and warranties set forth in Article IV.
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Article
VI
COVENANTS AND AGREEMENTS
Section 6.1. Conduct of Business by the Company Pending the Merger. The Company covenants and agrees that, between the date of this Agreement and the earlier of the Effective Time and the date, if any, on which this Agreement is terminated pursuant to Section 8.1 (the “Pre-Closing Period”), except as (a) may be required by Law, any Governmental Authority or the rules or regulations of NASDAQ, (b) the Company determines, in its reasonable discretion, may be necessary or advisable in accordance with the COVID-19 Measures or otherwise in response to the health and safety consequences of COVID-19 or any other pandemic, epidemic or disease outbreak (provided that, in connection with any such action taken in accordance with this clause (b), the Company shall promptly notify in writing Parent prior to the taking of any such action, and to the extent any such action would otherwise require the written consent of Parent pursuant to clause (v), the Company shall, to the extent reasonably practicable, consult with Parent as to any such action and take into consideration the reasonable concerns of Parent and consider in good faith the reasonable suggestions of Parent with respect to such action), (c) may be consented to in writing (email being sufficient) by Parent (which consent shall not be unreasonably withheld, conditioned or delayed), (d) may be required, contemplated or permitted pursuant to this Agreement or (e) set forth in Section 6.1 of the Company Disclosure Letter, (i) the Company will, and will cause each of its Subsidiaries to, use commercially reasonable efforts to conduct its operations over which it has control in all material respects in the ordinary course of business; (ii) use its commercially reasonable efforts to, and shall cause its Subsidiaries to use their commercially reasonable efforts to, preserve intact its business in all material respects (provided, however, that no action by the Company or any of its Subsidiaries, as applicable, with respect to matters specifically addressed by any provision of clause (v) shall be deemed a breach of this clause (ii) unless such action would constitute a breach of such provision of clause (v)); (iii) in connection with customary integration planning, use its reasonable best efforts to cooperate with Parent and its representatives to identify any Contracts, including any Contracts with suppliers or Company Leases, that will not be necessary (in the sole discretion of Parent) following the Closing (provided, that any termination or other modification of such Contracts shall not occur until the Closing); (iv) use its commercially reasonable efforts to, and shall cause its Subsidiaries to use their commercially reasonable efforts to, continue to maintain, in all material respects, its assets, properties, rights and operations in accordance with present practice; and (v) the Company shall not, and shall not permit any of its Subsidiaries to:
(A) amend or otherwise change (other than immaterial or ministerial changes) the Company Charter or the Company Bylaws or amend or otherwise change in any material respect any equivalent organizational or governing documents of any of its Subsidiaries;
(B) adjust, split, combine, reclassify, redeem, repurchase or otherwise acquire or amend the terms of any capital stock or other equity interests of the Company or any of its Subsidiaries (other than repurchases or retention of shares of Company Common Stock in connection with the exercise, vesting or settlement of Company Equity Awards);
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(C) issue, reissue, sell, pledge, dispose, encumber or grant any shares of capital stock or other equity interests in the Company or any of its Subsidiaries, or any options, warrants, convertible securities or other rights of any kind to acquire any shares of capital stock or equity interests of the Company or any of its Subsidiaries, other than (1) transactions among the Company and its wholly owned Subsidiaries or between or among the Company’s wholly owned Subsidiaries, (2) issuances of shares of Company Common Stock upon the exercise, vesting or settlement of Company Equity Awards that are outstanding as of the date hereof, (3) the Permitted RSUs or Permitted PSUs, in each case, in accordance with the terms of this Agreement and Section 6.1(C) of the Company Disclosure Letter, or (4) encumbrances or pledges of shares of capital stock or other equity interests of the Company or any of its Subsidiaries to the extent constituting Permitted Liens or in compliance with Section 6.1(H);
(D) authorize, declare, set aside, pay or make any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to the capital stock or other equity interests of the Company or any of its Subsidiaries, other than as between the Company and any of its wholly owned Subsidiaries or between or among any of its wholly owned Subsidiaries;
(E) except as required under the terms of a Company Benefit Plan in effect on the date hereof and set forth on Section 4.12(a) of the Company Disclosure Letter or as permitted pursuant to Section 6.1(C), (1) increase the annual base salary, wage rate, target annual bonus or any other compensation payable, or to become payable, to any Company Service Provider, except in connection with any increase to the annual base salary or wage rate to officers or employees of the Company or any of its Subsidiaries whose annual base salary is less than $175,000 as of the date hereof, made in the ordinary course of business after January 1, 2024 (including in connection with promotions), provided that the aggregate amount of such increases shall not exceed four percent (4%) of the aggregate base salaries or wage rate of such officers and employees as of the date hereof, (2) grant to any Company Service Provider any right of severance or termination pay or other termination benefit, or enter into any employment or individualized severance agreement with any Company Service Provider; (3) enter into any collective bargaining agreement with any labor union; (4) establish, adopt, enter into or materially amend any Company Benefit Plan (or any arrangement which if in existence as of the date hereof would constitute a Company Benefit Plan) (other than in conjunction with annual renewals of Company Benefit Plans that provide health or welfare benefits, which do not materially increase the costs of maintaining such plans); (5) take any action to accelerate the vesting or lapsing of restrictions or payment, or fund the payment of compensation or benefits, under any Company Benefit Plan; (6) change, in any material respect, the manner in which contributions to any Company Benefit Plans are made or the basis on which such contributions are determined, except as may be required by GAAP, (7) forgive any loans or issue any loans to any Company Service Providers (other than routine travel advances issued in the ordinary course of business and except as otherwise permitted by Section 6.1(Q)); (8) hire any Company Service Provider other than in the ordinary course of business with respect to individuals whose annual base compensation is less than $175,000 or (9) terminate the employment or engagement of (A) any current Company Service Provider whose annual base salary or fee is greater than $175,000 other than for “cause,” or (B) any current Company Service Provider whose annual base salary or fee is equal to or less than $175,000 other than in the ordinary course of business;
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(F) acquire (including by merger, consolidation, or acquisition of stock or assets), except in respect of any merger, consolidation, business combination among the Company and its wholly owned Subsidiaries or among the Company’s wholly owned Subsidiaries, any material equity interest in or business of any Person, except with respect to acquisitions pursuant to agreements in effect prior to the execution of this Agreement and set forth on Section 6.1(F) of the Company Disclosure Letter;
(G) sell, lease, assign, sublease, mortgage, pledge or otherwise encumber or dispose of any assets of the Company or its Subsidiaries that are material to the Company and its Subsidiaries taken as a whole, except (1) in the ordinary course of business, (2) any mortgages, pledges or encumbrances as are required under the loan documents governing the Existing Credit Agreement, (3) in connection with any transactions permitted pursuant to Section 6.1(J), (4) sales or dispositions solely between or among the Company and any of its wholly owned Subsidiaries or between or among any of its wholly owned Subsidiaries, (5) for properties or assets not currently used in the business of the Company or any of its Subsidiaries or (6) Permitted Liens;
(H) incur any indebtedness for borrowed money, issue any debt securities, or assume or guarantee any such indebtedness for any Person (other than a wholly-owned Subsidiary of the Company) for borrowed money, except for indebtedness incurred (1) under the Existing Credit Agreement or incurred to replace, restate, renew, extend, refinance or refund any existing indebtedness of the Company or its Subsidiaries, whether term or revolving indebtedness, on terms and conditions not inconsistent with prevailing market conditions for substantially similar credit facilities at such time, as it may have been amended, restated, amended and restated, replaced, refinanced, modified or supplemented in accordance with this Section 6.1(H) (provided, that the Company shall not be permitted to increase the borrowing capacity existing as of the date of this Agreement under any such facility without Parent’s prior written consent (not to be unreasonably withheld, conditioned or delayed)), (2) pursuant to other Contracts in effect on the date hereof that are set forth on Section 6.1(H) of the Company Disclosure Letter, (3) between or among the Company or any of its wholly-owned Subsidiaries or between or among any of its wholly-owned Subsidiaries, (4) which is to be repaid prior to the Closing, (5) in connection with transactions permitted pursuant to Section 6.1(F), or (6) for any guarantee by the Company of indebtedness of any of its wholly-owned Subsidiaries or any guarantee by any wholly-owned Subsidiaries of the Company of indebtedness of the Company or any of its Subsidiaries;
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(I) modify, amend (including any automatic renewals of) or consent to the termination of (other than at its stated expiration date) any Company Material Contract which cannot be terminated without penalty upon notice of ninety (90) days or less other than in the ordinary course of business, or except as otherwise expressly permitted by this Section 6.1 (including Section 6.1(H)), enter into or terminate any Contract which, had it been in existence on the date hereof, would be a Company Material Contract;
(J) (1) sell, assign, transfer, license, abandon, cancel, permit to lapse or be dedicated to the public domain, pledge, encumber, fail to renew, maintain or pursue filed applications for or otherwise dispose of any Company Owned IP to any Person other than the Company or any of its Subsidiaries, other than (A) the expiration of such Company Owned IP at the end of its maximum statutory term, (B) non-exclusive grants to customers or suppliers in their capacity(ies) as such (x) in the ordinary course of business or (y) pursuant to any Company Material Contract, (C) the grant of non-exclusive licenses in the ordinary course of business or (D) Permitted Liens, or (2) disclose to any Person any non-public material Company Owned IP or Trade Secrets, other than (A) to the Company or any of its Subsidiaries or (B) pursuant to a valid and binding confidentiality agreement or other binding obligation of confidentiality that the Company or a Subsidiary of the Company entered into in the ordinary course of business;
(K) make any change to its methods of accounting in effect at January 1, 2023, except (1) as required by GAAP (or any interpretation thereof), Regulation S-X of the Exchange Act or a Governmental Authority or Self-Regulating Authority (including the Financial Accounting Standards Board or any similar organization), (2) as required or recommended by PCAOB or the Company’s auditors in connection with an audit or review of the Company’s financial statements, (3) to permit the audit of the Company’s financial statements in compliance with GAAP, (4) as required by a change in applicable Law or any Governmental Authority of competent jurisdiction or (5) as disclosed in the Company SEC Documents on or prior to the date hereof;
(L) dissolve, wind-up or liquidate (or adopt or enter into a plan of complete or partial liquidation or dissolution or voluntarily file for bankruptcy or any similar proceeding), merge, consolidate, restructure, recapitalize or reorganize the Company or any Subsidiary of the Company, other than (1) the Merger, (2) any internal corporate reorganizations of the Company’s wholly-owned Subsidiaries in the ordinary course of business or (3) in connection with any disposition permitted by Section 6.1(G);
(M) settle or compromise any material Action other than (1) settlements or compromises of Actions where the amount paid (less the amount otherwise covered by insurance) in settlement or compromise, in each case, does not exceed, on an individual basis, the amount set forth in Section 6.1(M) of the Company Disclosure Letter or (2) any Action with respect to which an insurer or other Third Party (but neither the Company nor any of its Subsidiaries) has the right to control the decision to compromise or settle such Action or the Company is contractually obligated not to unreasonably delay, condition or withhold its consent to such Third Party’s decision to compromise or settle such Action;
(N) enter into any Contract or commitment (or series of similar Contracts or commitments) that would require capital expenditures in excess of $1,000,000 individually and $3,000,000 in the aggregate, other than (1) any capital expenditure (or series of related capital expenditures) consistent in all material respects with the Company’s annual capital expenditure budget or forecast, in each case for the periods following the date of this Agreement and as provided to Parent prior to the date of this Agreement, (2) with respect to capitalized data or capitalized internal labor in the ordinary course of business or (3) capital expenditures pursuant to Contracts in effect prior to the date of this Agreement;
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(O) fail to use commercially reasonable efforts to keep in full force and effect insurance comparable in amount and scope to coverage currently maintained;
(P) lend any amount to any Person in excess of $500,000 individually and $2,000,000 in the aggregate (other than, in each case, between or among the Company and any of its wholly owned Subsidiaries or between or among the Subsidiaries of the Company);
(Q) provide any trade credit or make similar loans and advances to employees, financial professionals and suppliers in excess of $3,000,000 in the aggregate;
(R) except to the extent that any of the following would not reasonably be expected to be materially adverse to the Company and its Subsidiaries, taken as a whole, make or change any Tax election, change an annual accounting period with respect to Taxes, file any amended Tax Return, enter into any closing agreement, settle any Tax claim or assessment relating to the Company or any of its Subsidiaries, or surrender any right to claim a refund of Taxes; or
(S) enter into any Contract to do any of the foregoing.
Section 6.2. Preparation of the Proxy Statement; Stockholders’ Meeting.
(a) As promptly as reasonably practicable after the date hereof (and the Company will use its reasonable best efforts to cause to occur within thirty (30) calendar days after the execution of this Agreement), (i) the Company shall prepare the Proxy Statement and, subject to receipt from Parent and Acquisition Sub of the information and assistance described in clause (ii) below, cause to be filed with the SEC the preliminary Proxy Statement; and (ii) Parent and Acquisition Sub shall promptly furnish to the Company all information concerning themselves and their Affiliates that is reasonably requested or required to be included in the Proxy Statement and shall promptly provide such other assistance in connection with the preparation and filing of the Proxy Statement as may be reasonably requested by the Company from time to time. Except to the extent prohibited by Law, the Company shall (A) promptly notify Parent in writing upon the receipt of any comments from the SEC or the staff of the SEC or any request from the SEC or the staff of the SEC for amendments or supplements, in each case with respect to the Proxy Statement, and (B) provide Parent and Acquisition Sub promptly with copies of all correspondence or descriptions of any material updates or material oral communications between the Company and its Representatives, on the one hand, and the SEC or the staff of the SEC, on the other hand, with respect to the Proxy Statement or the transactions contemplated by this Agreement. The Company shall use reasonable best efforts (with the assistance of, and after consultation with, Parent as provided by this Section 6.2(a)) to respond as promptly as reasonably practicable to any comments of the SEC or the staff of the SEC with respect to the Proxy Statement. Prior to filing or disseminating the Proxy Statement (or any amendment or supplement thereto, other than filings under the Exchange Act that are either not related to this Agreement or that relate to a Competing Proposal or are otherwise permitted to be made under Section 6.8 without review by Parent) or responding to any comments of the SEC (or the staff of the SEC) with respect thereto, to the extent reasonably practicable after such filing, the Company shall consult with Parent and provide Parent a reasonable opportunity to review and to propose comments, and shall consider in good faith all additions, deletions or changes reasonably proposed by Parent in good faith, on such document or response, except, in each case, to the extent prohibited by Law.
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(b) If, at any time prior to the Stockholders’ Meeting, any information relating to the Company, Parent, Acquisition Sub or any of their respective Affiliates, officers or directors, is discovered by the Company, Parent or Acquisition Sub which should be set forth in an amendment or supplement to the Proxy Statement so that the Proxy Statement (or any amendment or supplement thereto) would not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading, the party that discovers such information shall promptly notify the other parties thereof. Following such notification, the Company and Parent shall prepare an appropriate amendment or supplement containing such information, and the Company shall, as promptly as reasonably practicable, file with the SEC and, to the extent the Company determines it is required by applicable Law, disseminate to the Company’s stockholders, such amendment or supplement.
(c) Subject to applicable Law, the Company shall, as promptly as practicable (and in any event within five (5) calendar days) following the earlier of (i) the date on which the SEC confirms that it has no further comments on the Proxy Statement, and (ii) ten (10) calendar days after the initial filing of the Proxy Statement to the extent the SEC indicates it will not be reviewing the Proxy Statement, (A) establish (within ten (10) Business Days after such date) a record date for and give notice of a meeting of its stockholders, for the purpose of voting upon the adoption of this Agreement (the “Stockholders’ Meeting”), (B) promptly following the filing of the definitive Proxy Statement, cause the Proxy Statement to be furnished to the Company’s stockholders as of the record date established for the Stockholders’ Meeting, and (C) duly call, convene and hold the Stockholders’ Meeting; provided that, except as permitted by the following proviso, the Stockholders’ Meeting shall in no event be scheduled for later than the forty-fifth (45th) day following the first mailing of the Proxy Statement to the Company’s stockholders; provided, further, that the Company may, at its option (and shall in the case of clause (2) below upon the reasonable and timely request by Parent), postpone or adjourn the Stockholders’ Meeting and may change the record date thereof to the extent required by applicable Law or the Company’s organizational documents (1) for the absence of a quorum necessary to conduct the business of the Stockholders’ Meeting, (2) to the extent as may be necessary or advisable, in the judgment of the Company Board, to allow reasonable additional time for any supplemental or amended disclosure which the Company has determined in good faith is necessary under applicable Law and for such supplemental or amended disclosure to be disseminated and reviewed by the Company’s stockholders prior to the Stockholders’ Meeting, or (3) to allow additional solicitation of votes or proxies in order to obtain the Requisite Stockholder Approval. The Proxy Statement shall include the Company Recommendation, except to the extent there has been an Adverse Recommendation Change in accordance with Section 6.5. In connection with the Stockholders’ Meeting, unless there has been an Adverse Recommendation Change pursuant to Section 6.5, the Company shall use its reasonable best efforts to solicit proxies in favor of the Requisite Stockholder Approval and to obtain the Requisite Stockholder Approval. Parent and Acquisition Sub shall vote all shares of Company Common Stock (if any) held by them in favor of the adoption of this Agreement.
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Section 6.3. Appropriate Action; Consents; Filings.
(a) In accordance with the terms and subject to the terms and conditions of this Agreement (including Section 6.5), the parties hereto will (and will cause their controlled Affiliates) (and, in the case of Parent, any direct or indirect corporate parent) to) use their respective reasonable best efforts to consummate and make effective the transactions contemplated hereby and to cause the conditions to the Merger set forth in Article VII to be satisfied as expeditiously as practicable (and in any event at least five (5) Business Days prior to the Termination Date), including using reasonable best efforts to accomplish the following: (i) the obtaining of all necessary actions or non-actions and Consents from Governmental Authorities necessary in connection with the consummation of the transactions contemplated by this Agreement, including the Merger, and the making of all necessary registrations and filings (including filings with Governmental Authorities, if any) and the taking of all reasonable steps as may be necessary to obtain an approval from, or to avoid any Action by, any Governmental Authority necessary in connection with the consummation of the transactions contemplated by this Agreement, including the Merger, (ii) the obtaining of all other necessary Consents or waivers from Third Parties (provided that the Company shall not be required to make or agree to make any payment or accept any material conditions, amendments or obligations with respect thereto), (iii) the contesting and defending of any Actions, whether judicial or administrative, challenging this Agreement or the consummation of the transactions contemplated hereby, including the Merger, including seeking to have any stay or temporary restraining order entered by any court or other Governmental Authority vacated or reversed and (iv) the execution and delivery of any additional instruments reasonably necessary to consummate the Merger and any other transactions to be performed or consummated by such party in accordance with the terms of this Agreement and to carry out fully the purposes of this Agreement. Each of the parties hereto shall promptly and cause its Affiliates to promptly (and, in the case of filings required under the HSR Act, in no event later than ten (10) Business Days following the date hereof) (A) make and not withdraw (without the Company’s prior written consent) its filings under the HSR Act with respect to the transactions contemplated hereby, including the Merger, (B) use its respective reasonable best efforts to comply as promptly as practicable with any request under the HSR Act for additional information (including responding to any “second request”), documents or other materials received by such party from the U.S. Federal Trade Commission, the Antitrust Division of the U.S. Department of Justice or any other Governmental Authority under any Antitrust Laws in respect of any such filings with respect to the transactions contemplated hereby, including the Merger, and (C) act in good faith and reasonably cooperate with the other parties hereto in connection with any such filings (including, if requested by the other parties hereto, to accept all reasonable additions, deletions or changes suggested by the other parties hereto in connection therewith) and in connection with resolving any investigation or other inquiry of such agency or other Governmental Authority under any Antitrust Laws. In taking the foregoing actions, each of the Company, Parent and Acquisition Sub shall act reasonably and as promptly as practicable. Notwithstanding anything in this Agreement to the contrary, obtaining any Consents or waivers from any Third Party pursuant to Section 6.3(a)(ii) above or otherwise shall not be a condition to the obligations of any party to consummate the Merger. No party hereto nor any of their respective Affiliates shall be required to offer, or make, any payment or concession (financial or otherwise) under this Section 6.3 that is not contingent on the Closing occurring.
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(b) Without limiting anything in this Section 6.3 and notwithstanding any limitations in Section 6.3(a) or elsewhere in this Agreement, Parent and Acquisition Sub agree to (and shall cause each of its Subsidiaries to) promptly take any and all steps necessary or reasonably advisable or as may be required by any Governmental Authority to avoid or eliminate each and every impediment and obtain all Consents (including under any Antitrust Laws) that may be required by any Governmental Authority so as to enable the parties to consummate the transactions contemplated by this Agreement, including the Merger, as expeditiously as possible (and in any event at least five (5) Business Days prior to the Termination Date), including committing to and effecting, by consent decree, hold separate order, trust or otherwise, (i) selling, divesting, licensing or otherwise disposing of, or holding separate and agreeing to sell, divest, license or otherwise dispose of, any assets of the Company or its Subsidiaries or of Parent or Acquisition Sub or their respective Subsidiaries, (ii) terminating, amending or assigning existing relationships and contractual rights and obligations, (iii) requiring Parent or Acquisition Sub or the Company or any of their respective Subsidiaries to grant any right or commercial or other accommodation to, or enter into any material commercial contractual or other commercial relationship with, any Third Party and (iv) imposing limitations on Parent or Acquisition Sub or the Company or any of their respective Subsidiaries with respect to how they own, retain, conduct or operate all or any portion of their respective businesses or assets (each, a “Remedial Action”); provided, that this Section 6.3(b) shall not require Parent or any of its Subsidiaries to take any Remedial Actions, that individually or in the aggregate, would reasonably be expected to have a material and adverse effect on either (A) Parent and its Subsidiaries, taken as a whole, or (B) the Company and its Subsidiaries, taken as a whole, in each case as determined in the reasonable judgment of Parent.
(c) Each of the parties hereto will (and will cause its Affiliates to) furnish to the other such necessary information and reasonable assistance as the other may reasonably request in connection with the preparation of any required governmental filings or submissions and will reasonably cooperate in good faith in responding to any inquiry from a Governmental Authority, including (i) promptly informing the other parties hereto of such inquiry, (ii) consulting in advance before making any presentations or submissions to a Governmental Authority, (iii) giving the other parties hereto the opportunity to attend and participate in any substantive meetings or discussions with any Governmental Authority, to the extent not prohibited by such Governmental Authority and (iv) supplying each other with copies of all material correspondence, filings or communications between either party and any Governmental Authority with respect to this Agreement. Notwithstanding anything to the contrary contained in this Agreement, Parent shall consult with the Company and consider in good faith the views of the Company in connection with all material communications with any Governmental Authority and strategy regarding the Antitrust Laws. The Company and Parent, in their respective sole and absolute discretion, may designate any competitively sensitive material as “Outside Counsel Only Material” such that such materials and the information contained therein shall be given only to the outside counsel of the recipient and will not be disclosed to employees, officers or directors of the recipient unless express permission is obtained in advance from the source of the materials or its legal counsel.
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(d) Without limiting the generality of Section 6.3(a), the Company shall cause to be made (including by its Subsidiaries), as promptly as practicable following the date hereof (but in any event, within fifteen (15) Business Days), (i) the filing required to obtain the TDI Consent, and (ii) an application or applications to FINRA pursuant to FINRA Rule 1017(a)(4) (the “1017 Application”) for approval of the change in ownership and control of the Registered Broker-Dealer resulting from the consummation of the transactions contemplated hereby (“FINRA Approval”) with the request to FINRA that it be reviewed on a “Fast Track” basis, and Parent shall promptly provide or cause to be provided to the Company all information reasonably requested by the Company as is necessary to effect such application(s) for FINRA Approval. Parent acknowledges and agrees that, notwithstanding anything in this Agreement to the contrary, the Company shall not be obligated to take, and, during the Pre-Closing Period, Parent shall refrain from taking or proposing to take, any action that could reasonably be expected to give rise to any requirement for an application to FINRA pursuant to FINRA Rule 1017(a)(5) for approval of any material change in business operations of any Registered Broker-Dealer in connection with the transactions contemplated hereby that would reasonably be expected to materially delay the Closing. Prior to making any submission to FINRA or any other Governmental Authority, the Company shall, to the extent reasonably practicable, consult with Parent and provide Parent a reasonable opportunity to review and to propose comments and shall consider in good faith all additions, deletions or changes reasonably proposed by Parent in good faith, except, in each case, to the extent prohibited by Law Prior to making any submission to any Governmental Authority, Parent shall, to the extent reasonably practicable, consult with the Company and provide the Company a reasonable opportunity to review and to propose comments and shall consider in good faith all additions, deletions or changes reasonably proposed by the Company in good faith, except, in each case, to the extent prohibited by Law. Parent, the Company and their respective Affiliates shall also provide the other party or the other party’s counsel the opportunity to participate in any discussions with FINRA concerning the 1017 Application or any other Governmental Authority concerning the transactions contemplated hereby. The provisions of Section 6.3(b) shall apply to all filings and correspondence with FINRA relating to the transactions contemplated hereby, including the Merger, mutatis mutandis.
(e) During the Pre-Closing Period, Parent and Acquisition Sub shall not (and shall cause their respective Affiliates not to) take or permit any action that would result in any of the representations or warranties in Section 5.5 to become untrue or inaccurate at any time (as though made as of such time in a manner which would be reasonably expected to materially delay the Closing).
(f) This Section 6.3 shall not apply to (i) the obtaining of Advisory Client consents, which shall be governed exclusively by Section 6.18, (ii) the obligations of Parent and Acquisition Sub to obtain financing, which shall be exclusively governed by Section 6.11, or (iii) the obligations of the Company to cooperate with such financing, which shall be exclusively governed by Section 6.12. Notwithstanding anything to the contrary in the foregoing, nothing in this Section 6.3 shall restrict or limit the ability of the Company and its Representatives to take actions in accordance with Section 6.5 or Section 8.1.
(g) All non-public or other confidential information provided by Parent or any of its Affiliates pursuant to this Section 6.3 shall be kept confidential in accordance with that certain Confidentiality and Non-Disclosure Agreement, dated as of September 3, 2023 (the “Parent Confidentiality Agreement”), by and between Parent and the Company.
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Section 6.4. Access to Information; Confidentiality.
(a) The Company shall (and shall cause each of its Subsidiaries to) afford to Parent and its Representatives reasonable access, at Parent’s sole cost and expense, in a manner not disruptive in any material respect to the operations of the Company and its Subsidiaries, during normal business hours and upon reasonable advance written notice submitted in accordance with this Section 6.4, throughout the Pre-Closing Period, to the management personnel, 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 Parent and its Representatives all information (to the extent not publicly available) concerning the business, properties and personnel of the Company and its Subsidiaries as may reasonably be requested, including any financial statements, other financial data and monthly financial statements within the possession of the Company, to the extent related to any reasonable business purpose in connection with the consummation of the transactions contemplated by this Agreement; provided, however, that nothing herein shall require the Company or any of its Subsidiaries or their respective Representatives to disclose any information to Parent or Acquisition Sub to the extent such disclosure would, as determined in the reasonable judgment of the Company, (i) cause significant competitive harm to the Company or its Subsidiaries if the transactions contemplated by this Agreement are not consummated, (ii) breach, contravene or violate applicable Law (including the HSR Act or any other Antitrust Law) or any COVID-19 Measures or the provisions of any Company Material Contract, (iii) jeopardize any attorney-client or other legal privilege (provided that the Company will inform Parent of the general nature of the document or information being withheld and use its reasonable best efforts to allow for such access or disclosure in a manner that does not result in a loss of such privilege), (iv) disclose or provide access to any personnel records relating to medical histories (provided, that the Company will use its reasonable best efforts to allow for access or disclosure of the document in which such document appears, including by redacting the prohibited information) or (v) jeopardize the health and safety of any employee of the Company or any of its Subsidiaries, in light of COVID-19 or any COVID-19 Measures; provided, further, that nothing herein shall authorize Parent or its Representatives to undertake any environmental testing involving sampling of soil, groundwater, air or other environmental medium or similar invasive techniques at any of the properties owned, operated or leased by the Company or its Subsidiaries. During any visit to the business or property sites of the Company or any of its Subsidiaries, each of Parent and Acquisition Sub shall, and shall cause their respective Representatives accessing such business or property sites to, comply with all applicable Laws and all of the Company’s and its Subsidiaries’ safety and security procedures, and to use reasonable best efforts to minimize any interference with the Company’s and its Subsidiaries’ business operations in connection with any such access. All requests for information made pursuant to this Section 6.4 shall be directed to the Persons designated by the Company in writing as authorized to receive such requests.
(b) Notwithstanding anything herein to the contrary, the Company shall not be required to provide access or make any disclosure to Parent pursuant to this Section 6.4 to the extent that such access or information is reasonably pertinent to any pending or threatened Action where the Company or any of its Affiliates, on the one hand, and Parent or any of its Affiliates, on the other hand, are, or are reasonably expected to be, adverse parties.
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(c) No investigation or access permitted pursuant to this Section 6.4 shall affect or be deemed to modify any representation or warranty made by the Company hereunder. Parent agrees that it will not, and will cause its Representatives and Affiliates (including Acquisition Sub) not to, use any information obtained pursuant to this Section 6.4 for any competitive or other purpose unrelated to the consummation of the transactions contemplated by this Agreement (which transactions, for the avoidance of doubt, shall include the Debt Financing). Parent shall, and shall cause each of its Subsidiaries and its and their respective Representatives (and any other person subject to or bound by the terms of the Company Confidentiality Agreement) to, hold all information provided or furnished pursuant to this Section 6.4 confidential in accordance with the terms of the Company Confidentiality Agreement. The Company Confidentiality Agreement shall apply with respect to information furnished by the Company, its Subsidiaries and the Company’s officers, employees and other Representatives hereunder and, if this Agreement is terminated prior to the Effective Time, the Company Confidentiality Agreement shall remain in full force and effect in accordance with its terms prior to giving effect to the execution of this Agreement.
(d) During the Pre-Closing Period, except as expressly permitted herein, Parent shall not, and shall cause its Affiliates (including Acquisition Sub) and their respective employees, directors, officers, agents and Representatives not to, contact or communicate (or encourage others to contact or communicate or assist others in contacting or communicating) with, directly or indirectly, any Covered Person.
Section 6.5. Non-Solicitation; Competing Proposals; Intervening Event.
(a) Except as otherwise permitted by this Section 6.5, the Company shall, and shall cause its Subsidiaries and direct the Company’s directors, officers, members of senior management, investment bankers and legal counsel to cease any existing solicitation of, or discussions or negotiations with, any Third Party that may be ongoing as of the execution of this Agreement relating to any Competing Proposal or any inquiry or request that would reasonably be expected to lead to a Competing Proposal, and the Company shall promptly request that each Third Party that has previously executed a confidentiality agreement promptly return to the Company or destroy all non-public information previously furnished or made available to such Third Party or any of its Representatives by or on behalf of the Company or its Representatives in accordance with the terms of such confidentiality agreement. Except as otherwise permitted by this Agreement, during the Pre-Closing Period, the Company shall not, and shall cause its Subsidiaries and direct the Company’s directors, officers, members of senior management, investment bankers and legal counsel not to, directly or indirectly, (A) initiate, solicit, propose, knowingly encourage or knowingly facilitate or knowingly induce the making of any Competing Proposal (including by (x) providing, furnishing or making available (in each case, knowingly) to any Person any material non-public information relating to the Company, any of its Subsidiaries or their respective businesses, properties or assets or (y) knowingly affording access to any personnel of the Company or its Subsidiaries to any Person (or its Representatives), in each case, in connection with a Competing Proposal made by such Person), (B) continue, enter into, engage in or otherwise participate in negotiations or discussions with (it being understood that the Company may inform Persons of the provisions contained in this Section 6.5), or knowingly furnish any material nonpublic information to, any Third Party relating to a Competing Proposal or any inquiry or request made by such Third Party that would reasonably be expected to lead to a Competing Proposal (or inquiries, offers or proposals made by such third party that would reasonably be expected to lead to a Competing Proposal), including the entry into any definitive agreement with any Third Party making a Competing Proposal (other than an Acceptable Confidentiality
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Agreement in accordance with this Section 6.5) (x) to consummate any Competing Proposal, (y) to approve or endorse any Competing Proposal or (z) in connection with any Competing Proposal that by its terms requires the Company to abandon, terminate or fail to consummate the Merger; (C) grant a waiver, amendment or release (to the extent not automatically waived, amended or released upon announcement of, or entering into, this Agreement) under any pre-existing “standstill” or other similar provision, each of which the Company shall, and shall cause its Subsidiaries to, enforce; or (D) agree or resolve to take, or take, any of the actions prohibited by clauses (A), (B) or (C) of this sentence. The Company shall promptly (and in any event within forty-eight (48) hours) inform the directors, officers, members of senior management, investment bankers and legal counsel of the Company of the Company’s obligations under this Section 6.5. Notwithstanding anything to the contrary contained in this Agreement, (x) the Company shall be permitted to grant a waiver of or terminate (to the extent not automatically waived or terminated upon the announcement of, or entry into, this Agreement) any pre-existing “standstill”, confidentiality or other similar provision of any Third Party with respect to the Company or any of its Subsidiaries to allow such Third Party to make a Competing Proposal if the Company Board (or any committee thereof) determines in good faith (after consultation with its outside legal counsel and financial advisors) that failure to so waive or terminate would reasonably be expected to be inconsistent with the Company’s directors’ fiduciary duties under applicable Law and (y) if the Company receives any inquiry, expression of interest, proposal or offer that constitutes, or could reasonably be expected to lead to, a Competing Proposal from any Third Party, the Company and the Company’s directors, officers, members of senior management, investment bankers and counsel may communicate with such Person to clarify the terms and conditions thereof so as to determine whether such inquiry, expression of interest, proposal, offer or Competing Proposal constitutes or could reasonably be expected to lead to a Superior Proposal. Any violation of this Section 6.5(a) by a Representative of the Company acting at the direction of any director, officer, member of senior management, investment banker or legal counsel of the Company shall be deemed to be a breach of this Section 6.5(a) by the Company.
(b) As promptly as reasonably practicable, and in any event within forty-eight (48) hours, after receipt by the Company or any of its Representatives of any Competing Proposal or any inquiry or request that would reasonably be expected to lead to any Competing Proposal, the Company shall deliver to Parent a written notice setting forth the material terms and conditions of any such Competing Proposal, inquiry or request, including the identity of the Person making such Competing Proposal, inquiry or request. The Company shall provide to Parent copies of any written documentation material to understanding such Competing Proposal which is received by the Company or its Subsidiaries or the Company’s directors, officers, members of senior management, investment bankers or outside counsel from the Third Party (or from any Affiliates or Representatives of such Third Party) making such Competing Proposal, inquiry or request. The Company shall keep Parent reasonably informed of any material development, amendment or modification to any such Competing Proposal, inquiry or request as promptly as is reasonably practicable (but in any event no later than two (2) Business Days) following the Company’s receipt in writing of such material development, amendment or modification.
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(c) Notwithstanding anything to the contrary contained in this Agreement, at any time after the date hereof and prior to the earlier of receipt of the Requisite Stockholder Approval and the termination of this Agreement in accordance with its terms, in the event that the Company receives a Competing Proposal from any Person that did not result from a material breach of Section 6.5(a), the Company Board (or any committee thereof) and the Company and their respective Representatives may engage in negotiations or substantive discussions with, or furnish any information and other access to, any Person making such Competing Proposal and its Representatives or potential sources of financing and may otherwise take the actions contemplated by clauses (A) through (C) of Section 6.5(a) (other than the entry into an agreement prohibited by clause (B)), if the Company Board (or any committee thereof) determines in good faith (after consultation with the Company’s outside legal counsel and outside financial advisors) that such Competing Proposal either constitutes a Superior Proposal or could reasonably be expected to result in a Superior Proposal; provided that (i) prior to furnishing any material nonpublic information concerning the Company or its Subsidiaries, the Company receives from such Person, to the extent such Person is not already subject to a confidentiality agreement with the Company, an executed confidentiality agreement with such Person containing confidentiality terms that are not materially less favorable in the aggregate to the Company than those contained in the Company Confidentiality Agreement (unless the Company offers to amend the Company Confidentiality Agreement to reflect such more favorable terms) and such confidentiality agreement does not contain provisions which prohibit the Company from providing any information to Parent in accordance with this Section 6.5 or that otherwise prohibits the Company from complying with the provisions of this Agreement, including this Section 6.5, it being understood that such confidentiality agreement need not contain a standstill provision or otherwise restrict the making, or amendment, of a Competing Proposal (and related communications) to the Company or the Company Board (such confidentiality agreement, an “Acceptable Confidentiality Agreement”) and (ii) any such material nonpublic information so furnished in writing shall be promptly (and in any event within forty-eight (48) hours) made available to Parent to the extent it was not previously made available to Parent or any of its Representatives.
(d) Except as otherwise provided in Section 6.5(e) or Section 6.5(f), the Company Board shall not (and no committee thereof shall) (i) withdraw, withhold, qualify, amend or modify, or propose publicly to withdraw, withhold, qualify, amend or modify, in a manner adverse to Parent or Acquisition Sub, the Company Recommendation or (ii) adopt, approve, declare advisable or recommend, or propose publicly to adopt, approve, declare advisable or recommend, to the Company’s stockholders any Competing Proposal (any such action described in clause (i) or (ii) being referred to as an “Adverse Recommendation Change”).
(e) Notwithstanding anything in this Agreement to the contrary, at any time prior to receipt of the Requisite Stockholder Approval, the Company Board (or any committee thereof) may make an Adverse Recommendation Change and authorize, adopt or approve a Competing Proposal and, with respect to such Competing Proposal constituting a Superior Proposal, cause or permit the Company to enter into a definitive agreement with respect to such Superior Proposal substantially concurrently with the termination of this Agreement pursuant to Section 8.1(c)(ii), if:
(i) a Competing Proposal (that did not result from a material breach of Section 6.5(a)) is made to the Company by a Third Party;
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(ii) the Company Board (or committee thereof) determines in good faith (after consultation with the Company’s outside legal counsel and outside financial advisor) that (A) such Competing Proposal constitutes a Superior Proposal and (B) the failure to take such action with respect to such Competing Proposal would reasonably be expected to be inconsistent with the directors’ fiduciary duties under applicable Law (it being agreed that such determination by the Company Board (or a committee thereof) under clause (A) or (B) above shall not, in itself, constitute an Adverse Recommendation Change);
(iii) the Company provides Parent at least three (3) Business Days’ prior written notice of the intention of the Company Board (or any committee thereof) to make an Adverse Recommendation Change (a “Notice of Adverse Recommendation”) in response to such Competing Proposal (it being understood and agreed that any material amendment to the terms of the applicable Competing Proposal shall require a new notice but a shorter two (2) Business Day period), which notice shall include the material terms and conditions of such Competing Proposal, including the identity of the Person making such Superior Proposal and a copy of any proposed definitive agreement(s) relating to such Superior Proposal (it being agreed that neither the delivery of a Notice of Adverse Recommendation by the Company, nor any public announcement that the Company Board (or any committee thereof) has delivered such notice, shall, in itself, constitute an Adverse Recommendation Change);
(iv) upon the request by Parent, the Company has negotiated, and directed any of its applicable Representatives to negotiate, in good faith, with Parent and its Representatives during the foregoing three (3) Business Day period (or subsequent two (2) Business Day period) with respect to any adjustments to the terms and conditions of this Agreement and the Financing Commitments proposed in writing by Parent in written response thereto prior to the expiration of such three (3) Business Day-period; and
(v) after taking into account any adjustments to the terms and conditions of this Agreement and the Financing Commitments proposed in writing by Parent pursuant to clause (iv) above, the Company Board (or any committee thereof) has determined in good faith, after consultation with the Company’s outside legal counsel and outside financial advisors, that (A) such Competing Proposal continues to constitute a Superior Proposal and (B) the failure to take such action with respect to such Competing Proposal would reasonably be expected to be inconsistent with the directors’ fiduciary duties under applicable Law, even if such changes proposed in writing by Parent were to be given effect; provided, that any material amendment to the terms of such Competing Proposal (whether or not in response to any changes proposed in writing by Parent pursuant to clause (iv) above) shall require a new Notice of Adverse Recommendation and an additional two (2) Business Day period from the date of such notice during which the terms of clause (iv) above and this clause (v) shall apply mutatis mutandis (other than the number of days).
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(f) Notwithstanding anything in this Agreement to the contrary, other than in connection with a Competing Proposal (which shall be subject to Section 6.5(e)), at any time before the Requisite Stockholder Approval is obtained, the Company Board (or any committee thereof) may make an Adverse Recommendation Change (and nothing in this Agreement shall prohibit or restrict the Company Board (or any committee thereof) from effecting an Adverse Recommendation Change), if the Company Board (or committee thereof) determines in good faith (after consultation with the Company’s outside legal counsel and outside financial advisor) that an Intervening Event has occurred and the failure to make an Adverse Recommendation Change in response to such Intervening Event would reasonably be expected to be inconsistent with the directors’ fiduciary duties under applicable Law (it being agreed that such determination by the Company Board (or a committee thereof) shall not, in itself, constitute an Adverse Recommendation Change); provided, that (i) the Company Board (or committee thereof) provides to Parent a Notice of Adverse Recommendation in response to such Intervening Event, which Notice of Adverse Recommendation shall describe such Intervening Event in reasonable detail (it being agreed that neither the delivery of the Notice of Adverse Recommendation by the Company nor any public announcement that the Company Board (or any committee thereof) has delivered such notice shall, in itself, constitute an Adverse Recommendation Change); (ii) if requested by Parent, during the four (4) Business Day-period immediately after delivery of the Notice of Adverse Recommendation, the Company and its Representatives negotiate in good faith with Parent and its Representatives relating to adjustments to the terms and conditions hereof and the Financing Commitments proposed in writing by Parent in written response thereto and (iii) at the end of such four (4) Business Day-period and taking into account any changes to the terms hereof and the Financing Commitments proposed in writing by Parent, the Company Board (or any committee thereof) determines in good faith (after consultation with the Company’s outside legal counsel and outside financial advisor) that the failure to make such an Adverse Recommendation Change in response to such Intervening Event would be inconsistent with the directors’ fiduciary duties under applicable Law, even if such changes proposed in writing by Parent were to be given effect.
(g) Nothing in this Agreement shall restrict the Company or the Company Board (or any committee thereof) from (i) taking or disclosing a position contemplated by Rule 14d-9, Rule 14e-2(a) or Item 1012(a) of Regulation M-A promulgated under the Exchange Act or (ii) otherwise making disclosure (including regarding the business, financial condition or results of operations of the Company and its Subsidiaries) to the stockholders of the Company to comply with applicable Law so long as any such compliance reaffirms its recommendation of the transactions contemplated by this Agreement, except to the extent such action is permitted by Section 6.5(b) (it being agreed that a “stop, look and listen” communication by the Company Board (or committee thereof) to the Company’s stockholders as contemplated under the Exchange Act or a factually accurate public statement by the Company that describes the Company’s receipt of a Competing Proposal and the operation of this Agreement with respect thereto shall be permitted and shall not be deemed to be an Adverse Recommendation Change or give rise to a Parent termination right pursuant to Section 8.1(d)(ii)).
(h) For purposes of this Agreement:
(i) “Competing Proposal” shall mean any proposal or offer made by any Person (other than Parent, Acquisition Sub or any of their respective Affiliates) or group of Persons as defined in Section 13(d)(3) of the Exchange Act (A) to purchase or otherwise acquire, directly or indirectly, in one transaction or a series of transactions, (x) beneficial ownership (as defined under Section 13(d) of the Exchange Act) of more than twenty percent (20%) of any class of equity securities of the Company pursuant to a merger, reorganization, recapitalization, consolidation or other business combination, sale of shares of capital stock, tender offer, exchange offer or similar transaction or (y) any one or more assets or businesses of the Company and its Subsidiaries that constitute more than twenty percent (20%) of the assets (based on the fair market value thereof as determined by the Company Board (or any committee thereof) in good faith), revenue or net income (as measured in accordance with GAAP) of the Company and its Subsidiaries, taken as a whole, or (B) with respect to any merger, consolidation, business combination, recapitalization, reorganization, liquidation, dissolution or other transaction involving the Company or its Subsidiaries pursuant to which any Person or group of Persons would have beneficial ownership (as defined under Section 13(d) of the Exchange Act) of securities representing more than twenty percent (20%) of the total outstanding equity securities of the Company after giving effect to the consummation of such transaction.
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(ii) “Superior Proposal” shall mean a Competing Proposal (with all references to “twenty percent (20%)” increased to “fifty percent (50%)”) made by a Third Party on terms that the Company Board (or any committee thereof) determines in good faith, after consultation with the Company’s outside legal counsel and outside financial advisor and considering such factors as the Company Board (or any committee thereof) considers to be appropriate (including the conditionality and the timing and likelihood of consummation of such proposal), that, if consummated, would result in a transaction or series of related transactions that is more favorable to the Company’s stockholders than the transactions contemplated by this Agreement, taking into account all terms and conditions of such transaction (including any changes to the terms of this Agreement committed to by Parent to the Company in writing in response to such Competing Proposal under the provisions of Section 6.5(e) and including after taking into account any applicable Company Termination Fee and financial terms and the anticipated timing and prospects for completion of such transaction, including the prospects for obtaining regulatory approvals and financing).
(iii) “Intervening Event” shall mean any change, event, effect, circumstance, development or state of facts (each, an “Effect”) that, individually or in the aggregate, is material to the business or operations of the Company and its Subsidiaries, taken as a whole, that was not known or reasonably foreseeable to or by the Company Board prior to the Company’s execution and delivery of this Agreement (or if known, the consequences of which were not known or reasonably foreseeable to the Company Board as of the date of this Agreement), which Effect or state of facts becomes known (or the consequences become known) to or by the Company Board after the Company’s execution and delivery of this Agreement and prior to obtaining the Requisite Stockholder Approval; provided, however, that, in no event shall any of the following be an Intervening Event or be taken into account in determining whether an Intervening Event has occurred: (A) the receipt, existence or terms of a Competing Proposal, (B) any change, in itself, in the trading price or trading volume of Company Common Stock or (C) any failure, in itself, by the Company to meet, or the exceeding by the Company of, internal or published estimates or forecasts of revenues, earnings or other financial metrics (provided, that, with respect to the foregoing clauses (B) and (C), the underlying reasons for such change, failure or excess may constitute an Intervening Event and may be taken into account in determining whether an Intervening Event has occurred).
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Section 6.6. Directors’ and Officers’ Indemnification and Insurance.
(a) Parent and Acquisition Sub agree that all rights to exculpation, indemnification, contribution and advancement of expenses for facts, events, acts or omissions occurring at or prior to the Effective Time, whether asserted or claimed prior to, at or after the Effective Time (including any matters arising in connection with this Agreement or the transactions contemplated hereby and whether or not asserted before the Effective Time), now existing in favor of the current or former directors, officers or employees of (or in a comparable role with) the Company or any of its Subsidiaries or any other individual serving at the request of the Company or any of its Subsidiaries as a director or officer of (or in a comparable role with) another Person (the “D&O Indemnified Parties”), as the case may be, shall survive the Merger and shall continue in full force and effect in accordance with their terms (it being agreed that after the Effective Time such rights shall be mandatory rather than permissive, if applicable), and Parent shall, and shall cause the Surviving Corporation and its Subsidiaries to, perform such obligations thereunder. Parent shall cause the certificate of incorporation, bylaws or other organizational documents of the Surviving Corporation and its Subsidiaries to contain provisions with respect to exculpation, indemnification, contribution, advancement of expenses and limitation of director, officer or employee (or comparable) liability that are no less favorable to the D&O Indemnified Parties with respect to the period prior to the Effective Time than those set forth in the Company’s and its Subsidiaries’ organizational documents as in effect immediately prior to the Effective Time, which provisions thereafter shall not, for a period of at least six (6) years from the Effective Time, be amended, repealed or otherwise modified in any manner that would adversely affect the rights thereunder of the D&O Indemnified Parties.
(b) Without limiting the foregoing, Parent shall (and Parent shall cause the Surviving Corporation to) (i) indemnify, defend and hold harmless each D&O Indemnified Party with respect to all facts, events, acts or omissions by them in their capacities as such at any time prior to and including the Effective Time (including any matters arising in connection with this Agreement or the transactions contemplated hereby and whether or not asserted before the Effective Time), to the fullest extent that the Company or its Subsidiaries would be permitted by applicable Law; and (ii) pay in advance of the final disposition of any Action against any D&O Indemnified Party the fees and expenses (including reasonable attorneys’ fees) incurred in connection therewith by such D&O Indemnified Party upon receipt, if required by the DGCL, the Surviving Corporation’s organizational documents or any applicable indemnification agreement, of a written undertaking by him or her or on his or her behalf to repay the amount paid or reimbursed if it is ultimately determined by a final non-appealable judgment of a court of competent jurisdiction that such D&O Indemnified Party is not permitted to be indemnified under applicable Law. Notwithstanding anything to the contrary contained in this Section 6.6(b) or elsewhere in this Agreement, Parent shall not (and Parent shall cause the Surviving Corporation not to) settle or compromise or consent to the entry of any judgment or otherwise seek termination with respect to any Action, unless such settlement, compromise, consent or termination includes an unconditional release of all of the D&O Indemnified Parties covered by such Action from all liability arising out of such Action.
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(c) For at least six (6) years after the Effective Time, (i) Parent shall, and shall cause the Surviving Corporation and its Subsidiaries to, maintain in full force and effect the coverage provided by the existing directors’ and officers’ liability insurance, employment practices liability insurance and fiduciary liability insurance in effect as of immediately prior to the Effective Time and maintained by the Company or any of its Subsidiaries, as applicable (collectively, the “Existing D&O Insurance Policies”), or provide substitute policies (with insurance carriers having an A.M. Best financial strength rating of least an “A”) for the Company and the D&O Indemnified Parties who are currently covered by such Existing D&O Insurance Policies, in either case, with limits and on terms and conditions no less advantageous to the D&O Indemnified Parties than the Existing D&O Insurance Policies, covering claims arising from facts, events, acts or omissions that occurred at or prior to the Effective Time, including the transactions contemplated hereby and (ii) Parent shall not, and shall not permit the Surviving Corporation or its other Subsidiaries to, take any action that would prejudice the rights of, or otherwise impede recovery by, the beneficiaries of any such insurance, whether in respect of claims arising before or after the Effective Time (unless such beneficiary is not entitled to such recovery as a result of a final, non-appealable judicial determination under such insurance as a result of such beneficiary’s conduct). In lieu of such insurance, prior to the Effective Time, the Company (or, at the election of Parent, the Surviving Corporation) may purchase prepaid, non-cancellable six (6)-year “tail” directors’ and officers’ liability insurance, employment practices liability insurance and fiduciary liability insurance (“Tail Coverage”), effective as of the Effective Time, with limits and on terms and conditions no less advantageous to the D&O Indemnified Parties than the Existing D&O Insurance Policies, covering claims arising from facts, events, acts or omissions that occurred at or prior to the Effective Time, including the transactions contemplated hereby (provided, that the aggregate annual premium for such “tail” insurance shall not, without the prior consent of Parent, exceed three-hundred percent (300%) of the aggregate annual premium paid for the Existing D&O Insurance Policies (the “Maximum Amount”); provided, further that if such insurance is not available or the annual premium for such insurance exceeds the Maximum Amount, then such Tail Coverage shall be the best coverage available for a cost not exceeding the Maximum Amount), and Parent shall cause the Surviving Corporation (or its applicable Subsidiaries) to maintain such Tail Coverage in full force and effect, without any modification, and continue to honor the obligations thereunder, in which event Parent shall cease to have any obligations under the first sentence of this Section 6.6(c). Any placement, replacement, cancellation, renewal, or extension of the Existing D&O Insurance Policies, including such Tail Coverage, required under this Section 6.6 (i) shall be negotiated, placed and finally bound by the insurance brokers selected and engaged by Parent, and (ii) such insurance brokers shall be designated as the “broker of record.” The Company and its insurance brokers shall reasonably cooperate and assist the newly appointed broker of record in connection with any such placement, replacement, cancellation, renewal, extension, or Tail Coverage required under this Section 6.6.
(d) In the event that Parent, the Surviving Corporation, any of the Company’s Subsidiaries or any of their successors or assigns shall (i) consolidate with or merge or amalgamate into any other Person and shall not be the continuing or surviving company or entity of such consolidation, merger or amalgamation or (ii) transfer all or substantially all of its properties and assets to any Person, then, and in each such case, Parent shall cause proper provision to be made so that the successor and assign of Parent, the Surviving Corporation, any such Subsidiary or all or substantially all of its or their properties and assets, as the case may be, assumes the obligations set forth in this Section 6.6.
(e) The D&O Indemnified Parties are third-party beneficiaries of this Section 6.6. The provisions of this Section 6.6 shall survive the Merger and are intended to be for the benefit of, and enforceable by, each D&O Indemnified Party and his or her successors, heirs or representatives. Parent and the Surviving Corporation shall pay all reasonable expenses, including reasonable attorneys’ fees, that may be incurred by any D&O Indemnified Party in enforcing its indemnity and other rights under this Section 6.6 to the same extent and under the same conditions and procedures (and subject to the same conditions, including with respect to the advancement of expenses) as such D&O Indemnified Party is entitled on the date of this Agreement under or in respect of the organizational documents of the Company (or the corresponding organizational documents of any Subsidiary of the Company). The rights of each D&O Indemnified Party hereunder shall be in addition to, and not in limitation of, any other applicable rights such D&O Indemnified Party may have under the respective organizational documents of the Company or any of its Subsidiaries or the Surviving Corporation, any other indemnification arrangement, applicable Law or otherwise.
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(f) Notwithstanding anything herein to the contrary, if any claim (whether arising before, at or after the Effective Time) is made against any of the D&O Indemnified Parties on or prior to the sixth (6th) anniversary of the Effective Time, the provisions of this Section 6.6 shall continue in effect until the final disposition of such claim. The provisions of this Section 6.6 shall not be amended in a manner that is adverse to any D&O Indemnified Party (including such D&O Indemnified Party’s successors, assigns and heirs, as applicable) without the consent of the D&O Indemnified Party (including the successors, assigns and heirs, as applicable) affected thereby.
Section 6.7. Notification of Certain Matters. During the Pre-Closing Period, the Company shall give prompt notice to Parent, and Parent shall give prompt notice to the Company, of (a) any written notice received by such party from any Person alleging that the Consent of such Person is or may be required in connection with the Merger or the other transactions contemplated by this Agreement, if the subject matter of such communication or the failure of such party to obtain such Consent could reasonably be expected to be material to the Company, the Surviving Corporation or Parent, (b) any Action commenced against, relating to or involving or otherwise affecting such party or any of its Subsidiaries which relates to this Agreement or the transactions contemplated by this Agreement (including the Merger) or (c) the existence of any event or circumstance that would reasonably be expected to cause any condition to the obligations of any party hereto to effect the transactions contemplated by this Agreement not to be satisfied prior to the Termination Date. This Section 6.7 shall not apply to (i) Antitrust Laws or the process for obtaining FINRA Approval, each of which is governed by Section 6.3, (ii) notification procedures relating to a Competing Proposal, which are governed by Section 6.5, or (iii) stockholder related Actions, which are governed by Section 6.19. Any such notice pursuant to this Section 6.7 shall not affect any representation, warranty, covenant or agreement contained in this Agreement and any failure to make such notice (in and of itself) shall not be taken into account in determining whether the conditions set forth in Article VII have been satisfied or give rise to any right of termination set forth in Article VIII.
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Section 6.8. Public Announcements. Except as otherwise contemplated by Section 6.5 or in connection with any dispute among the parties hereto regarding this Agreement, the Company, Parent and Acquisition Sub shall consult with each other before issuing any press release or otherwise making any public statements with respect to this Agreement or the transactions contemplated hereby, and none of the parties hereto shall, and each of the parties hereto shall cause its Affiliates and Representatives acting on its behalf not to, issue any such press release or make any public statement prior to obtaining the written (email being sufficient) consent of the other parties hereto (which consent shall not be unreasonably withheld, conditioned or delayed); provided, that the restrictions set forth in this Section 6.8 (including any obligation to obtain advance consent) shall not apply to any press release, public statement or other announcement issued or made, or proposed to be issued or made, by the Company or its Representatives (a) in connection with a Competing Proposal, Superior Proposal, Adverse Recommendation Change or Intervening Event, (b) as may be required by Law, Order, fiduciary duties of the Company Board or obligations pursuant to applicable stock exchange rule or any listing agreement (and in such event, to the extent permitted by Law, such party shall use its reasonable best efforts to allow each other party reasonable time to comment on such release or statement) or (c) that is consistent in all material respects with public disclosures or prior communications previously consented to by Parent in accordance with this Section 6.8 or otherwise made consistent with this Section 6.8, including investor conference calls, filings with the SEC, Q&As or other publicly disclosed documents, in each case, to the extent such disclosure is still accurate. In addition, the Company may, without Parent’s or Acquisition Sub’s consent, communicate to its employees, customers, suppliers, consultants and any other Covered Persons, and nothing in this Section 6.8 shall limit such communications by the Company and its Representatives; provided that such communication is consistent with prior communications of the Company or any communications plan previously agreed to by Parent and the Company in which case such communications may be made consistent with such plan. The initial press release concerning this Agreement and the transactions contemplated hereby shall be a joint release in the form mutually agreed by the Company and Parent. For the avoidance of doubt, any public filings providing notice to or seeking Consent from any Governmental Authority made pursuant to Section 6.3 shall be governed by Section 6.3 and not this Section 6.8. Nothing in this Section 6.8 shall restrict or prohibit Parent or any of its Subsidiaries or Affiliates from making any disclosure, announcement or other communication as may be required by Law or Order (and in such event, Parent or such Subsidiary or Affiliate shall use its reasonable best efforts to allow the Company reasonable time to comment on such release or statement). If, in connection with a marketing effort contemplated by the Debt Commitment Letter, Parent reasonably requests (reasonably in advance of any requested filing) that the Company file a report on Form 8-K pursuant to the Exchange Act that contains material nonpublic information regarding the Company and its Subsidiaries or their business, which information is necessary or customary to include in such an offering memorandum or other marketing materials for the Debt Financing and Parent reasonably determines (and the Company does not unreasonably object) to include in an offering memorandum or other marketing materials for the Debt Financing, unless the Company reasonably objects (including because the Company determines, in good faith, that the disclosure of such information would be detrimental to the Company and its Subsidiaries), then the Company shall file such report on Form 8-K.
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Section 6.9. Employee Benefits.
(a) Employees of the Company or its Subsidiaries immediately prior to the Effective Time who remain employees of Parent, the Surviving Corporation or any of their Affiliates following the Effective Time are hereinafter referred to as the “Continuing Employees”. For the period commencing at the Effective Time and ending one year after the Effective Time (such period, the “Continuation Period”), or such shorter period during which the Continuing Employee remains in continued employment with the Company or its Subsidiaries, Parent shall, or shall cause the Surviving Corporation or any of their respective Affiliates to, provide for each Continuing Employee (i) at least the same base salary and wage rate provided to such Continuing Employee immediately prior to the Effective Time, (ii) target short-term cash bonus opportunities that are substantially comparable in the aggregate to the target short-term cash bonus opportunities provided to such Continuing Employee by the Company and its Subsidiaries immediately prior to the Effective Time (for the avoidance of doubt, in each case, excluding one time or special non-ordinary incentive compensation opportunities payable in connection with, or a result of, the transactions contemplated by this Agreement, and equity, equity-based, retention, long-term incentive compensation, retention, and non-qualified deferred compensation), and (iii) tax-qualified retirement and group welfare benefits (excluding equity, equity-based, retention and long-term incentive compensation, non-qualitied deferred compensation, retiree health or welfare and defined benefit pension benefits) that are substantially comparable in the aggregate to either, at Parent’s discretion, (x) those provided to such Continuing Employee by the Company and its Subsidiaries immediately prior to the Effective Time or (y) those provided to similarly-situated employees of Parent and its Subsidiaries from time to time. Without limiting the generality of the foregoing, during the Continuation Period, Parent shall provide, or shall cause the Surviving Corporation or any of their respective Affiliates to provide, severance payments and benefits to each eligible Continuing Employee whose employment is terminated by the Surviving Corporation or any of its respective Affiliates without “cause” (as reasonably determined by Parent or its Affiliates) during such period that are substantially comparable to the severance payments and benefits that such Continuing Employee would have been eligible to receive, if any, upon a termination of employment without “cause” under the severance plan, policy, practice or arrangement sponsored or maintained by the Company or any of its Subsidiaries and set forth on Section 6.9(a) of the Company Disclosure Letter in accordance with the terms of such arrangement as in effect on the date hereof; provided that such Continuing Employees may be required to execute a release of claims in a form provided or approved by Parent in connection with such Continuing Employees’ receipt of such severance payments and benefits.
(b) Parent hereby acknowledges that consummation of the Merger will constitute a “change in control” (or similar term) of the Company under the terms of the Company Benefit Plans, as applicable. Parent shall provide, or shall cause the Surviving Corporation or any of its Affiliates to provide, each Continuing Employee who participates in the Company’s annual cash incentive program for the 2023 calendar year a payment (if unpaid prior to the Effective Time) no less than that due with respect to such Continuing Employee’s annual bonus under such program in accordance with the terms thereof determined based on actual achievement of target performance goals for the 2023 calendar year as determined by the Company Board (prior to Closing, provided that if discretion is required for any determination, such discretion will be exercised after disclosing the issue to be determined to Parent and considering Parent’s feedback thereon in good faith), and pro-rated to reflect the period of time between January 1, 2023 and the Closing Date, with such payment to be made at the same time annual bonuses would normally be paid during the 2024 calendar year based on the historical practice of the Company (or earlier to the extent required by Law upon a Continuing Employee’s involuntary termination of employment), and subject to the terms of such annual cash incentive program for the 2023 calendar year.
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(c) For all purposes where length of service is relevant under any health or welfare benefit, paid time off, severance or qualified retirement plan, policy, practice or arrangement of Parent (other than retiree health or welfare or defined benefit pension plans), the Surviving Corporation or any of their respective Subsidiaries providing benefits to any Continuing Employees after the Effective Time (collectively, the “New Plans”), Parent shall use commercially reasonable efforts to cause the Continuing Employees who are eligible participants under such New Plans to receive credit for service with the Company and its Subsidiaries (and any respective predecessors) to the same extent such service credit was granted under the corresponding Old Plan, except (1) to the extent any such service credit would result in the duplication of benefits, (2) for benefit accrual under defined benefit pension plans, (3) for purposes of qualifying for subsidized early retirement benefits, or (4) for purposes of any equity-incentive plan or nonqualified deferred compensation plan. In addition and without limiting the generality of the foregoing, Parent shall use commercially reasonable efforts to cause: (i) each Continuing Employee to be immediately eligible to participate, without any waiting time or satisfaction of any other eligibility requirements, in any and all New Plans to the extent that (A) coverage under such New Plan replaces coverage under a Company Benefit Plan in which such Continuing Employee participated immediately before the Effective Time (collectively, the “Old Plans”) and (B) such Continuing Employee has satisfied all waiting time and other eligibility requirements under the Old Plan being replaced by the New Plan and (ii) for purposes of each New Plan providing medical, dental, pharmaceutical, vision or other welfare benefits to any Continuing Employee, Parent shall use commercially reasonable efforts to cause (A) all pre-existing condition exclusions and actively-at-work requirements of such New Plan to be waived for such Continuing Employee and his or her covered dependents to the extent such conditions were inapplicable or waived under the comparable Old Plan and (B) any expenses incurred by any Continuing Employee and his or her covered dependents during the portion of the plan year of the Old Plan ending on the date such Continuing Employee’s participation in the corresponding New Plan begins to be taken into account under such New Plan for purposes of satisfying all deductible, coinsurance and maximum out-of-pocket requirements applicable to such Continuing Employee and his or her covered dependents for the applicable plan year as if such amounts had been paid in accordance with such New Plan (in each case, except for benefit accruals under defined benefit pension plans, for purposes of qualifying for subsidized early retirement benefits or to the extent it would result in a duplication of benefits). For the avoidance of doubt, any service referred to in this Section 6.9(c) shall not be recognized for purposes of any equity plans of Parent or any of its Affiliates.
(d) Prior to making any written communications to the Continuing Employees pertaining to compensation or benefits matters that are affected by the transactions contemplated by this Agreement, the Company shall provide Parent with a copy of the intended communication, Parent shall have a reasonable period of time to review and comment on the communication, and the Company shall incorporate any reasonable comments received from Parent (or its counsel) (if any are received during such reasonable period of time (which in all events shall not be less than three (3) Business Days after receipt from the Company)) in good faith.
(e) Upon Parent’s reasonable request from time to time prior to Closing, the Company shall, within a reasonable period of time following receipt of such request (but in no event more than three (3) Business Days following such request), provide Parent with the then-most recent calculations relating to Section 280G of the Code and the transactions contemplated by this Agreement, and copies of any reasonable back-up information relating to such calculations, including any non-compete valuations.
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(f) Notwithstanding anything in this Section 6.9 to the contrary, nothing in this Agreement, whether express or implied, shall (i) be treated as an amendment or other modification of any Company Benefit Plan, New Plan or any other employee benefit plans of the Company or Parent, (ii) prevent Parent, the Surviving Corporation or any of their Affiliates from amending or terminating any of their benefit plans or, after the Effective Time, any Company Benefit Plan in accordance with its terms, (iii) require Parent, the Surviving Corporation or any of their Affiliates, after the Effective Time, to continue to employ any Continuing Employee for any period of time, or (iv) create any third-party beneficiary rights in any director, officer, employee or individual Person, including any present or former employee, officer, director or individual independent contractor of the Company or any of its Subsidiaries (including any beneficiary or dependent of such individual).
Section 6.10. Conduct of Business by Parent Pending the Merger. Parent and Acquisition Sub covenant and agree with the Company that during the Pre-Closing Period, Parent and Acquisition Sub shall not amend or otherwise change any of the organizational documents of Acquisition Sub, except as may be agreed in writing by the Company and except for any amendments or changes as would not reasonably be expected to prevent, delay or impair the ability of Parent and Acquisition Sub to consummate the Merger and the other transactions contemplated by this Agreement.
(a) Each of Parent and Acquisition Sub shall use reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary to: (i) comply with and maintain in full force and effect the Financing Commitments in accordance with the terms and subject to the conditions thereof, (ii) negotiate, enter into and deliver (and cause its controlled Affiliates to negotiate, enter into and deliver) definitive agreements with respect to the Debt Financing (which, with respect to the bridge facility documentation, shall not be required until reasonably necessary in connection with the funding of the Debt Financing) on the terms and conditions set forth in the Financing Commitments (including any “flex” and securities demand provisions applicable to the Debt Financing), (iii) satisfy, on a timely basis, all conditions to the availability of the Debt Financing to the extent within Parent’s or Acquisition Sub’s or their respective Affiliates’ control and applicable to Parent or Acquisition Sub, (iv) consummate the Debt Financing in an amount necessary, together with cash and cash equivalents of Parent and its Subsidiaries, to satisfy the Funding Obligations at or prior to the Closing, (v) enforce their rights under the Financing Commitments and the definitive agreements related to the Debt Financing, and (vi) otherwise keep the Company reasonably informed of the status of its efforts to arrange the Debt Financing.
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(b) Neither Parent nor its controlled Affiliates shall agree to or permit any amendments, supplements, replacements or other modifications to, obtain any replacement of, or grant any waivers of, any condition, remedy or other provision under the Debt Financing (other than to effect any “flex” or securities demand provisions set forth in the Debt Commitment Letter) without the prior written consent of the Company if such amendments, supplements, replacements, waivers or modifications would reasonably be expected to (i) reduce the aggregate amount of the Debt Financing or the net cash proceeds available from the Debt Financing (including, in each case, by changing the amount of fees or other amounts to be paid (including original issue discount) with respect to the Debt Financing) below an amount necessary to satisfy the Funding Obligations, (ii) impose new or additional conditions or contingencies to the Debt Financing or otherwise expand, amend or modify any of the conditions or contingencies to the Debt Financing or (iii) otherwise expand, amend, waive or modify any provisions of, or remedies under, the Debt Commitment Letter in a manner that would reasonably be expected to (x) prevent or delay the funding of the Debt Financing (or the satisfaction of the conditions to the Debt Financing) at the Closing or impair the ability of Parent to consummate the Merger and the other transactions contemplated by this Agreement or (y) adversely impact the ability of Parent to enforce its rights against the Debt Financing Sources or any of the other parties to the Financing Commitments or the definitive agreements with respect thereto (the foregoing clauses (i) through (iii), the “Prohibited Actions”). For the avoidance of doubt, subject to compliance with the other provisions of this Section 6.11 and so long as such amendment, supplement, replacement or other modification is not accompanied by changes that would constitute a Prohibited Action, Parent may, without the consent of the Company, (1) amend, supplement or otherwise modify the Debt Commitment Letter to add lenders, lead arrangers, bookrunners, syndication agents or other Debt Financing Sources that have not executed the Debt Commitment Letter as of the date hereof and to grant to such Debt Financing Sources such approval rights as are customarily granted to additional lenders, lead arrangers, bookrunners, syndication agents or similar entities, (2) amend the definitive agreements with respect to the Debt Financing to give effect to any “flex” terms contained in the Debt Commitment Letter, (3) amend titles, allocations and fee sharing arrangements with respect to existing and additional Debt Financing Sources and (4) increase the amount of the Debt Financing. Parent shall not permit, release or consent to the withdrawal, termination, repudiation or rescission of the Financing Commitments or any definitive agreement with respect to the Debt Financing and shall not release or consent to the termination of the obligations of any Debt Financing Source, in each case, if the effect thereof would be to cause the Debt Financing to be below an amount necessary to satisfy the Funding Obligations, in each case, without the prior written consent of the Company. For purposes of this Agreement, references to “Debt Financing” shall include the financing contemplated by the Debt Commitment Letter, as hereafter amended, supplemented, replaced or modified, to the extent such amendment, supplementation, replacement or modification is not prohibited by this Section 6.11(b), and references to “Debt Commitment Letter”, “Debt Financing Sources” or “Debt Financing” shall include such documents (including any indenture, amendment or other document or instrument entered into after the date hereof solely to effect the Debt Financing but excluding the Parent Credit Agreement and the Parent Indenture and any amendment to either of the foregoing that is not entered into for the purpose of effecting the Debt Financing, the “Debt Financing Definitive Documents”) (or commitments or financing sources, as applicable), as hereafter amended, modified, supplemented or replaced, to the extent not prohibited by this Section 6.11(b). In the event Parent or Acquisition Sub enters into an amendment, supplement, replacement or modification not prohibited by this Section 6.11(b), it shall, promptly thereafter, but in any event within two (2) Business Days, provide fully executed copies of such amendment, supplement, replacement or modification to the Company (and, in the case of any amendment, supplement, replacement or modification of any fee letter(s), with such fee letter(s) permitted to be redacted in the same manner contemplated by Section 5.8(a)).
(c) In no event shall Parent or Acquisition Sub or any of their Affiliates prohibit or seek to prohibit any bank or investment bank or other potential provider of debt or equity financing, including the Lenders, from providing or seeking to provide financing or financial advisory services to any Person in connection with a transaction relating to the Company or its Subsidiaries or in connection with the Merger or the other transactions contemplated hereby.
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(d) In the event (i) all or any portion of the Debt Financing necessary to satisfy the Funding Obligations becomes or would reasonably be expected to become unavailable in the manner or from the sources contemplated by the Debt Commitment Letter (including any “flex” and securities demand provisions applicable thereto), (ii) Parent or Acquisition Sub becomes aware of any event or circumstance that would reasonably be expected to make the full amounts or any portion of the Debt Financing unavailable on the terms and conditions contemplated in the Debt Commitment Letter or (iii) any definitive agreement with respect to the Debt Financing shall expire or be withdrawn, terminated, repudiated or rescinded, in whole or in part, for any reason and as a result the Funding Obligations will not be satisfied at or prior to Closing, Parent and Acquisition Sub shall, within two (2) Business Days after the occurrence of such event, notify the Company in writing thereof and promptly after the occurrence of such event, use reasonable best efforts to arrange and obtain alternative financing to the extent available (after taking into consideration the amount of the Debt Financing that is available and the available cash and cash equivalents of Parent and its Subsidiaries) from the same or alternative financial institutions in an amount sufficient to enable Parent and Acquisition Sub to consummate the transactions contemplated by this Agreement in accordance with the terms of this Agreement, which alternative financing does not contain any conditions or terms that would reasonably be expected to prevent, delay or impair the ability of Parent and Acquisition Sub to obtain the Debt Financing or consummate the transactions contemplated hereby as compared to the conditions and other terms set forth in the Debt Commitment Letter as of the date hereof (as amended in accordance with Section 6.11(b)), taking into account any flex provisions thereof as promptly as practicable following the occurrence of such event (the “Alternative Financing”). For purposes of this Agreement, references to “Debt Financing” shall include the financing contemplated by any Alternative Financing to the extent permitted by this Section 6.11(d), and references to “Debt Commitment Letter”, “Debt Financing Sources”, or “Debt Financing” shall include such documents (including the Debt Financing Definitive Documents) (or commitments or financing sources, as applicable) in connection with any Alternative Financing to the extent permitted by this Section 6.11(d).
(e) Each of Parent and Acquisition Sub expressly acknowledges and agrees that neither the availability, the terms nor the obtaining of the Debt Financing, nor the completion of any issuance of securities contemplated by the Debt Commitment Letter, is in any manner a condition to the Merger, the Closing or the obligations of Parent and Acquisition Sub to consummate the transactions contemplated hereby, and reaffirms its obligation to consummate the Merger and the other transactions contemplated by this Agreement irrespective and independently of the availability of the Debt Financing, or the completion of any such issuance, subject to the applicable conditions set forth in Section 7.1 and Section 7.2.
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(f) Parent and Acquisition Sub shall (i) furnish the Company with executed copies of the definitive financing documents for the Debt Financing (but, in the case of any fee letter or amendment thereto, subject to the redaction of such fee letter in a manner consistent with Section 5.8(a)), (ii) give the Company prompt written notice of any (A) material breach or default or any event that, with or without notice, lapse of time or both, would (or would reasonably be expected to) give rise to any material default or breach by any party to the Debt Commitment Letter of which Parent or Acquisition Sub has Knowledge, including the receipt of any written notice or other written communication from any Debt Financing Source with respect to any material breach or default (or alleged material breach or default) by any party to the Debt Commitment Letter, (B) material dispute or disagreement between or among any parties to the Debt Commitment Letter (but excluding ordinary course negotiations between the parties to the Debt Commitment Letter) or (C) withdrawal, repudiation or termination of the Debt Commitment Letter or threatened in writing withdrawal, repudiation or termination thereof, and (iii) notify the Company promptly (and in any event within two (2) Business Days) in writing if for any reason Parent or Acquisition Sub no longer believes in good faith that it will be able to obtain all or any portion of the Debt Financing necessary to satisfy the Funding Obligations on the terms described in the Debt Commitment Letter (including any “flex” and securities demand provisions applicable to the Debt Financing). As soon as reasonably practicable, but in any event within three (3) Business Days following the date the Company delivers to Parent a written request, Parent shall provide any information reasonably requested by the Company in writing relating to any circumstance referred to in the immediately preceding sentence.
Section 6.12. Financing Cooperation.
(a) From the date of this Agreement through the earlier of the Closing and the termination of this Agreement, the Company shall use reasonable best efforts to, and shall cause its Subsidiaries to use their reasonable best efforts to, subject to Parent’s reimbursement obligations set forth in Section 6.12(d), provide customary cooperation as reasonably requested by Parent or Acquisition Sub to assist Parent and Acquisition Sub in connection with the arrangement of any Debt Financing for purposes of consummating the Merger or as is otherwise reasonably requested by Parent or Acquisition Sub in connection to Parent’s efforts to obtain the Debt Financing. Such cooperation shall include using reasonable best efforts to:
(i) furnish, or cause to be furnished to, Parent, Acquisition Sub and its Debt Financing Sources (x) the Required Information that is Compliant, (y) within (18) Business Days after the relevant quarter, customary “flash” or “recent development” financial information (which may be provided in a reasonable range or estimate and may be provided on a non-GAAP basis) for any fiscal quarter ending after the date hereof and prior to the Closing and (z) such other financial and other pertinent historical information pertaining to the Company and its Subsidiaries reasonably necessary for inclusion in confidential information memoranda and/or an offering memorandum for private placements of non-convertible high-yield debt securities in a Rule 144A-for-life offering customarily included in marketing materials for financings similar to the Debt Financing, as reasonably requested by Parent; provided, that neither the Company nor any of its Subsidiaries shall be required to provide any such information pursuant to this subclause (z) that is not reasonably available to the Company under its current reporting systems, that the Company is not reasonably able to produce without undue burden or expense at such time or to the extent that the provision thereof would violate any Law, or any obligation of confidentiality binding upon, or waive any privilege that may be asserted by the Company or its Subsidiaries of any of the foregoing unless any such information would be required to ensure that the information provided pursuant to this subclause (z) would not contain any untrue statement of a material fact or omit a material fact required to be stated therein or necessary to make the statements therein, in light of circumstances under which they were made, not misleading;
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(ii) provide Parent with all historical financial information as it pertains to the Company and its Subsidiaries necessary for Parent to prepare the pro forma financial statements required by paragraph 5 of Exhibit D of the Debt Commitment Letter; provided, that neither the Company nor any of its Subsidiaries or representatives shall be required to provide any information or assistance relating to (A) the proposed debt and equity capitalization that is required for such pro forma financial information or assumed interest rates and fees and expenses relating to such debt and equity capitalization, (B) any post-Closing or pro forma cost savings, synergies, capitalization, ownership or other pro forma adjustments desired to be incorporated into any information used in connection with the Debt Financing, or (C) any adjustments that are not related to the acquisition of the Company and its Subsidiaries;
(iii) prepare for and participate in (through management with appropriate seniority and expertise) a reasonable number of lender meetings, presentations, road shows, lender presentations, customary marketing and due diligence sessions related thereto, rating agency meetings and other customary syndication activities in connection with the Debt Financing, in each case, (x) upon reasonable advance notice, during normal business hours and at mutually agreed times and (y) solely with respect to information relating to the Company (to the extent related to its business) and its Subsidiaries.
(iv) assist Parent and the Debt Financing Sources (and, in the case of clause (y) below, notwithstanding if such information otherwise constitutes Excluded Information) in Parent’s preparation of (x) any materials for rating agency presentations and the preparation of any offering documents, private placement memoranda, bank information memoranda and similar documents customarily required in connection with the Debt Financing and providing reasonable cooperation with the due diligence efforts of the Debt Financing Sources, in each case, to the extent reasonable and customary and (y) customary reconciliations of any non-GAAP metrics to the nearest GAAP metrics and customary high-level guarantor/non-guarantor financial metrics, in each case of the type customarily included in an offering memorandum for private placements of non-convertible high-yield debt securities in a Rule 144A-for-life offering;
(v) direct the independent auditors of the Company to assist and cooperate with Parent in connection with the Debt Financing, including by (A) providing consent to offering memoranda that include or incorporate the Company’s consolidated financial information and their reports thereon and letters to provide “comfort” customary for senior high-yield debt securities (including customary “negative assurance” comfort) with respect to financial information relating to the Company and its Subsidiaries and (B) attending a reasonable number of accounting due diligence sessions in connection with the Debt Financing;
(vi) ensure (x) that an officer of the Company executes prior to the Closing customary “authorization” letters (including customary representations with respect to the absence of material non-public information in the public-side versions of documents and the absence of material misstatements or omissions, so long as the Company has been provided with drafts of such documents within a reasonable period of time prior to the requested execution of the letter to which such representations relate) in connection with bank information memoranda authorizing the distribution of information to prospective lenders and (y) the delivery of customary CFO and similar certificates and certificates with respect to certain financial information in the offering documents to the extent not otherwise covered by letters to provide “comfort” described above, in each case, with respect to financial information customarily covered in such certificates;
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(vii) deliver at least four (4) Business Days prior to the Closing Date information and documentation related to the Company and its Subsidiaries required and reasonably requested in writing by Parent or Acquisition Sub at least eight (8) Business Days prior to the Closing Date with respect to compliance under applicable “know your customer” and anti-money laundering rules and regulations, including the USA PATRIOT Act, to the extent required by the Debt Commitment Letter;
(viii) solely with respect to the Company and its Subsidiaries, facilitate the pledging of, granting a security interest in and obtaining, perfection of any Liens on, collateral required in connection with the Debt Financing, in each case to the extent reasonably requested by Parent; and
(ix) provide other customary cooperation with respect to any portion of the Debt Financing, in each case as may be reasonably requested by Parent.
(b) The cooperation and other obligations contemplated by Section 6.12(a) shall not (A) require any action that would (or would reasonably be expected to) (i) cause any representation or warranty in this Agreement to be breached or (ii) cause any condition to Closing to fail to be satisfied or otherwise cause any breach of this Agreement, (B) require the Company or any of its Subsidiaries or their respective Representatives to (i) other than with respect to the authorization letter and CFO and similar certificates contemplated by Section 6.12(a)(vi) and the “know-your-customer” information referred to in Section 6.12(a)(vii) (provided that such customary authorization letters (or the bank information memoranda in which such letters are included) shall include customary language that exculpates the Company, each of its Subsidiaries and their respective Representatives and Affiliates from any liability in connection with the unauthorized use by the recipients thereof of the information set forth in any such bank confidential information memoranda or similar memoranda or report distributed in connection therewith) (such documents, the “Applicable Documents”), execute, deliver, enter into, approve or perform any agreement, commitment, document or instrument, or modification of any agreement, commitment, document or instrument, (ii) deliver or cause the delivery of any legal opinions or reliance letters or any certificate as to solvency or any other certificate in connection with the Debt Financing (excluding the Applicable Documents), (iii) adopt any resolutions, execute any consents or otherwise take any corporate or similar action or deliver any certificate (other than the Applicable Documents), in connection to the Debt Financing or the incurrence of indebtedness thereby or (iv) pay any commitment or other similar fee, incur or reimburse any costs or expenses or incur any liability or obligation of any kind or give any indemnities prior to the Closing in connection with the Debt Financing that is not subject to Parent’s reimbursement obligation set forth in Section 6.12(d), (C) require the Company or any of its Subsidiaries or their respective Affiliates and Representatives to deliver any certificate or take any action pursuant to Section 6.12(a) if doing so would reasonably be expected to cause any director, officer or employee or stockholder of the Company or such Subsidiary, Affiliate or Representative to incur personal liability, (D) require the Company or any of its Subsidiaries to provide, or cause to be provided, any information the disclosure of which is prohibited or restricted under a Company Material Contract, (E) require the Company or any of its Subsidiaries to take any action that will conflict with or violate its organizational documents or any Laws (in any material respects) or result in a violation or breach of, or default under, any Company Material Contract (in any material respects), (F) unreasonably interfere with the ongoing operations of the Company and its Subsidiaries or (G) prepare or deliver any Excluded Information or any financial statements other than the Required Information; it being understood that under no circumstances shall the Company and its Subsidiaries be required to provide pro forma financial information, projections or other pro forma adjustments, all of which shall be the responsibility of Parent and Acquisition Sub; provided that, with respect to (D) and (E), the Company will inform Parent of the general nature of the document or information being withheld and use its reasonable best efforts to allow for such access or disclosure in a manner that does not result in a loss of such Company Material Contract.
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(c) All non-public or other confidential information provided by the Company to Parent or its Affiliates pursuant to this Section 6.12 shall be (i) kept confidential in accordance with the Company Confidentiality Agreement or (ii) subject to the other customary confidentiality undertakings for transactions of the type of the Debt Financing.
(d) On the Closing Date or promptly following the termination of this Agreement, Parent shall reimburse the Company for any reasonable and documented out-of-pocket expenses and costs (including reasonable and documented outside attorneys’ fees and disbursements) incurred in connection with the Company’s or its Affiliates’ or Representatives’ obligations under this Section 6.12; provided, that Parent shall not be required to reimburse the Company for costs and expenses with respect to financial statements, financial information or other materials prepared prior to the date hereof or, after the date hereof, that the Company already prepared or was being prepared by the Company in the ordinary course of business notwithstanding this Section 6.12. Parent shall indemnify and hold harmless the Company, its Affiliates and their respective Representatives from and against any and all liabilities, losses, damages, claims, costs, expenses (including reasonable and documented outside attorneys’ fees and disbursements), interest, awards, judgments and penalties suffered or incurred by any of them as a result of, or in connection with, (i) such cooperation, (ii) the Debt Financing, (iii) any information used in connection with the Debt Financing (other than information included in filings made by the Company with the SEC under Form 10-K, Form 10-Q or Form 8-K) and (iv) any action taken by any of them at the request of Parent or Acquisition Sub pursuant to this Section 6.12 or otherwise in accordance with this Section 6.12, except, in each case, to the extent such liabilities, losses, damages, claims, costs, expenses, interest, awards, judgments, and penalties arose from the fraud, gross negligence or willful misconduct by of the Company, its Affiliates or any of their respective Representatives, as determined in a final, non-appealable judgment of a court of competent jurisdiction. The Company hereby consents to the customary use of the Company’s and its Subsidiaries’ logos in connection with the Debt Financing; provided that such logos are used in a manner that is not intended to or reasonably likely to harm or disparage the Company or its Subsidiaries or the reputation or goodwill of the Company or its Subsidiaries.
(e) Notwithstanding anything herein to the contrary, the condition set forth in Section 7.2(b), as it applies in respect of the Company’s obligations under this Section 6.12, shall be deemed satisfied unless Parent and Acquisition Sub fail to obtain the Debt Financing, and such failure was the direct result of the Company’s Intentional Breach of its obligations under this Section 6.12.
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Section 6.13. Repayment of Indebtedness. In connection with, and conditioned upon the Effective Time, Parent shall (or shall cause an Affiliate of Parent to) provide to the agents under the Existing Credit Agreement specified in the Payoff Letter immediately available funds in an amount equal to the Debt Payoff Amount no later than the Effective Time and in accordance with the Payoff Letter. The Company shall not later than the date that is two (2) Business Days prior to the Closing Date, provide Parent with a customary payoff letter (the “Payoff Letter”) from the agents on behalf of the financial institutions or other lenders party to the Existing Credit Agreement, which Payoff Letter (x) need not be executed by such agents until the Closing Date and (y) shall set forth the aggregate amount required to satisfy in full all such indebtedness of the Company or any of its Subsidiaries (including the pledge or deposit of cash collateral or issuance of backstop letters of credit in respect of the Company’s or any of its Subsidiaries’ existing letters of credit) to be discharged at the Closing, including accrued interest thereon and all fees and other obligations (including penalties or other charges or amounts that become payable thereunder as a result of the prepayment thereunder or the consummation of the transactions contemplated at the Closing or that may become due and payable at the Effective Time) of the Company or any of its Subsidiaries thereunder (the “Debt Payoff Amount”), together with payoff instructions for making such payment on the Closing Date and shall cause all Liens, guarantees and other obligations arising under the Existing Credit Agreement and related to the Debt Payoff Amount to be terminated upon receipt of the Debt Payoff Amount in accordance with the Payoff Letter.
Section 6.14. Acquisition Sub; Parent Affiliates.
(a) During the Pre-Closing Period, Parent shall take all actions necessary to (i) cause Acquisition Sub and any other applicable Affiliates of Parent to perform their respective obligations under this Agreement and (ii) ensure that, prior to the Effective Time, Acquisition Sub shall not engage in any activity, conduct any business, incur or guarantee any indebtedness or make any investments, other than as specifically contemplated by this Agreement or in furtherance of the transactions contemplated by this Agreement and the Debt Financing. Any Consent or waiver by Parent under this Agreement shall be deemed to also be a Consent or waiver by Acquisition Sub.
(b) Parent hereby guarantees the due, prompt and faithful payment, performance and discharge by Acquisition Sub of, and the compliance by Acquisition Sub with, all of the covenants, agreements, obligations and undertakings of Acquisition Sub under this Agreement in accordance with the terms of this Agreement, and covenants and agrees to take all actions necessary or advisable to ensure such payment, performance and discharge by Acquisition Sub hereunder. Parent shall, immediately following the execution and delivery of this Agreement, approve this Agreement in its capacity as sole stockholder of Acquisition Sub in accordance with applicable Law and the certificate of incorporation and bylaws of Acquisition Sub.
Section 6.15. No Control of the Company’s Business. Nothing contained in this Agreement is intended to give Parent, Acquisition Sub or any of their respective Affiliates, directly or indirectly, the right to control or direct the Company’s or its Subsidiaries’ operations prior to the Effective Time. Prior to the Effective Time, the Company shall exercise, consistent with the terms and conditions of this Agreement, including Section 6.1, complete control and supervision over its and its Subsidiaries’ operations.
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Section 6.16. Rule 16b-3 Matters. Notwithstanding anything in this Agreement to the contrary, prior to the Effective Time, the Company may take such further actions, if any, as may be reasonably necessary or appropriate to ensure that the dispositions of equity securities of the Company (including any derivative securities) pursuant to the transactions contemplated by this Agreement by any officer or director of the Company who is subject to Section 16 of the Exchange Act are exempt under Rule 16b-3 promulgated under the Exchange Act.
Section 6.17. Stock Exchange Matters. Prior to the Effective Time, the Company will cooperate with Parent and use its reasonable best efforts to take, or cause to be taken, all actions and do all things reasonably necessary, proper or advisable on its part under applicable laws, rules and policies of NASDAQ to enable (a) the delisting of the Company Common Stock from NASDAQ and the termination of trading of the Company Common Stock as soon as practicable after the Effective Time and (b) the deregistration of the Company Common Stock under the Exchange Act as soon as practicable after the Effective Time; provided that such delisting and termination shall not be effective until after the Effective Time.
Section 6.18. Advisory Client Consents. The Company shall cause the Registered Advisers to notify, as promptly as practicable, following the date hereof, their respective Advisory Clients in writing of the transactions contemplated by this Agreement and use their respective commercially reasonable efforts to seek the consent of each such Advisory Client, in accordance with the requirements of its Advisory Contract and Law, to the deemed “assignment” (as defined in the Investment Advisers Act) of such Advisory Contract resulting from the change in ownership of the applicable Registered Adviser(s) upon the consummation of the transactions contemplated hereby (it being understood that, except to the extent the applicable Advisory Contract or Law requires affirmative or written consent to such assignment, the implied or “negative” consent of the applicable Advisory Client to such assignment shall be deemed sufficient upon the expiration of the greater of any applicable time period set forth in the applicable Advisory Contract or the consent notice (which shall reflect a time period of at least sixty (60) days)). For the avoidance of doubt, under no circumstances shall the Company or any of its Subsidiaries be required to make any payment or provide any other benefit to any Advisory Client to obtain such Advisory Client’s consent, and the failure to obtain any such consent shall not, individually or in the aggregate, constitute the failure to satisfy any condition to the obligation of any party hereto to consummate the transactions contemplated by this Agreement under Article VII. Parent shall cooperate with the Company and its Subsidiaries in connection with the obtaining of Advisory Client consents as contemplated by this Section 6.18; provided, that prior to any distribution of any form of Advisory Client consent, the Company will provide Parent the opportunity to review and comment upon, any such materials, and the Company will revise such materials to reflect any reasonable comments that Parent timely provides.
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Section 6.19. Stockholder Litigation. During the Pre-Closing Period, the Company shall (a) control the defense and settlement of any stockholder-related Action against the Company or its Subsidiaries or their respective officers, directors or other Representatives, in their capacity as such, relating to the Merger or any of the other transactions contemplated by this Agreement and (b) to the extent practicable under the circumstances, keep Parent reasonably informed with respect to any material developments regarding the defense of any Action brought by stockholders of the Company against the Company or its directors, officers or other Representatives arising out of or relating to the transactions contemplated by this Agreement after the date of this Agreement; provided, that, during the Pre-Closing Period, the Company shall not, except with the prior written consent of Parent (such consent not to be unreasonably withheld, delayed or conditioned), offer to settle or settle or compromise any such stockholder litigation where the amount paid in settlement or compromise, in each case, would be in excess of the dollar limits in the Company’s existing directors’ and officers’ liability insurance policy.
Section 6.20. Takeover Laws. Each of the parties hereto shall use all reasonable efforts (a) to take all action necessary so that no Takeover Law is or becomes applicable to restrict or prohibit this Agreement, the Merger or the other transactions contemplated by this Agreement and (b) if any Takeover Law is or becomes applicable to this Agreement, the Merger or any of the other transactions contemplated by this Agreement, to take all action necessary so that the Merger and the other transactions contemplated hereby may be consummated as promptly as practicable on the terms contemplated by this Agreement and otherwise to eliminate or minimize (to the greatest extent possible) the effects of such Takeover Law on this Agreement, the Merger and the other transactions contemplated by this Agreement.
Article
VII
CONDITIONS TO THE MERGER
Section 7.1. Conditions to Obligations of Each Party to Effect the Merger. The respective obligations of each party to consummate the Merger are subject to the satisfaction or (to the extent not prohibited by Law) waiver by the Company, Parent and Acquisition Sub at or prior to the Effective Time of the following conditions:
(a) the Requisite Stockholder Approval shall have been obtained;
(b) the FINRA Approval shall have been obtained; provided, that notwithstanding the foregoing, the FINRA Approval shall not be required at or prior to the Effective Time if (i) thirty (30) calendar days have elapsed after FINRA has declared in writing (.pdf or email being sufficient) the 1017 Application filing “substantially complete” and such 1017 Application shall not have been rejected by FINRA; (ii) in connection with the execution, delivery and performance of this Agreement and the consummation of the Merger, the Registered Broker-Dealer shall have notified FINRA following the 1017 Application being declared by FINRA as “substantially complete” and at least ten (10) Business Days prior to the Effective Time that the parties hereto intend to consummate the Merger pursuant to FINRA Rule 1017(c)(1) prior to the conclusion of FINRA’s review and written approval of the 1017 Application; and (iii) FINRA shall not have advised the parties hereto in writing or orally that (A) they are prohibited from consummating the Merger without the FINRA Approval (and FINRA did not thereafter also advise the parties in writing that such prohibition is no longer in effect) or (B) FINRA expects to disapprove the 1017 Application or grant the 1017 Application only if one or more material restrictions are imposed on the Company or the Registered Broker-Dealer or Parent or any of its Subsidiaries;
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(c) any waiting period (or any extension thereof, including any agreement with any Governmental Authority to delay consummation of the Merger that was entered into by the parties hereto in accordance with the terms of this Agreement) applicable to the consummation of the Merger under the HSR Act shall have expired or been terminated or early termination thereof shall have been granted; and
(d) no Governmental Authority of the United States shall have, after the date hereof, enacted, issued, promulgated, enforced or entered any Law or Order which is then in effect and has the effect of restraining, enjoining, rendering illegal or otherwise prohibiting consummation of the Merger.
Section 7.2. Conditions to Obligations of Parent and Acquisition Sub to Effect the Merger. The obligations of Parent and Acquisition Sub to effect the Merger are, in addition to the conditions set forth in Section 7.1, further subject to the satisfaction or (to the extent not prohibited by Law) waiver by Parent at or prior to the Effective Time of the following conditions:
(a) each of the representations and warranties of the Company contained in this Agreement, without giving effect to any materiality or Company Material Adverse Effect qualifications therein (other than the qualifications in the representations and warranties described in clauses (i), (ii) or (iii) below), shall be true and correct as of the date hereof and as of the Closing Date, as though made on and as of such time (except to the extent such representations and warranties are expressly made as of a specific date, in which case such representations and warranties shall be so true and correct as of such specific date only), except for such failures to be true and correct as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect; provided, however, that the representations and warranties contained in (i) Section 4.1(a) (Organization and Qualification; Subsidiaries), Section 4.3(a) (Authority Relative to Agreement), Section 4.19 (Vote Required) and Section 4.20 (Brokers) shall be true and correct in all material respects, in each case, both when made as of the date hereof and as of the Closing Date as though made on and as of such time (except to the extent such representations and warranties are expressly made as of a specific date, in which case such representations and warranties shall be so true and correct as of such specific date only), (ii) Section 4.2(a) and Section 4.2(b) (Capitalization) shall be true and correct in all respects (except for such inaccuracies as are de minimis in the aggregate) both when made and at and as of the Closing Date as though made on and as of such time (except to the extent such representations and warranties are expressly made as of a specific date, in which case such representations and warranties shall be so true and correct as of such specific date only), and (iii) Section 4.3(b) (Authority Relative to Agreement) and Section 4.9(b)(ii) (Absence of Certain Changes or Events) shall be true and correct in all respects both when made as of the date hereof and as of the Closing Date as though made on and as of such date (except to the extent such representations and warranties are expressly made as of a specific date, in which case such representations and warranties shall be so true and correct as of such specific date only);
(b) the Company shall have performed and complied in all material respects with its obligations, covenants and agreements required under this Agreement to be performed or complied with on or prior to the Closing Date;
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(c) since the date of this Agreement, no Company Material Adverse Effect shall have occurred and be continuing; and
(d) the Company shall have delivered a certificate to Parent, dated as of the Closing Date and duly executed by a senior executive officer (or similar authorized person) of the Company, certifying to the effect that the conditions set forth in Section 7.2(a), Section 7.2(b) and Section 7.2(c) have been satisfied.
Section 7.3. Conditions to Obligations of the Company to Effect the Merger. The obligation of the Company to effect the Merger is, in addition to the conditions set forth in Section 7.1, further subject to the satisfaction or (to the extent not prohibited by Law) waiver by the Company at or prior to the Effective Time of the following conditions:
(a) each of the representations and warranties of Parent and Acquisition Sub contained in this Agreement shall be true and correct in all material respects at and as of the date hereof and as of the Closing Date as though made on and as of the date hereof and on and as of the Closing Date (except to the extent such representations and warranties expressly relate to another date in which case such representations and warranties shall be true and correct in all material respects on and as of such other date);
(b) Parent and Acquisition Sub shall have performed and complied in all material respects with their respective obligations, covenants and agreements required under this Agreement to be performed or complied with on or prior to the Closing Date; and
(c) Parent shall have delivered a certificate to the Company, dated as of the Closing Date and duly executed by a senior executive officer of Parent, certifying to the effect that the conditions set forth in Section 7.3(a) and Section 7.3(b) have been satisfied.
Article
VIII
TERMINATION, AMENDMENT AND WAIVER
Section 8.1. Termination. Notwithstanding anything contained in this Agreement to the contrary, this Agreement may be terminated at any time prior to the Effective Time, whether before or after the Requisite Stockholder Approval is obtained (except as otherwise expressly noted), as follows:
(a) by mutual written consent of each of Parent and the Company; or
(b) by either Parent or the Company, if:
(i) the Merger shall not have been consummated on or before 5:00 p.m. (New York City time) on June 9, 2024 (the “Termination Date”); provided, however, that the right to terminate this Agreement pursuant to this Section 8.1(b)(i) shall not be available to any party hereto if the failure of such party, and in the case of Parent, including the failure of Acquisition Sub, to perform or comply with any of its obligations contained in this Agreement has been the proximate cause of, or primarily resulted in, the failure of the Closing to have occurred on or before such date;
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(ii) prior to the Effective Time, any Governmental Authority of the United States shall have, after the date hereof, enacted, issued, promulgated, enforced or entered any Law or Order or taken any other action permanently restraining, enjoining, rendering illegal or otherwise prohibiting the Merger, and such Law or Order or other action shall have become final and non-appealable; provided, however, that the party seeking to terminate this Agreement pursuant to this Section 8.1(b)(ii) shall have complied with its obligations pursuant to Section 6.3 before asserting the right to terminate this Agreement under this Section 8.1(b)(ii); provided, further, that the right to terminate this Agreement under this Section 8.1(b)(ii) shall not be available to a party if the issuance of any such Law or Order or taking of such action after the date hereof was primarily due to the failure of such party, and in the case of Parent, including the failure of Acquisition Sub, to perform any of its obligations under this Agreement; or
(iii) the Requisite Stockholder Approval shall not have been obtained at the Stockholders’ Meeting duly convened therefor or at any adjournment or postponement thereof at which this Agreement has been voted upon; or
(c) by the Company, if:
(i) Parent or Acquisition Sub shall have breached or failed to perform any of its representations, warranties, covenants or agreements set forth in this Agreement, which breach or failure to perform (A) would give rise to the failure of any condition set forth in Section 7.3(a) or Section 7.3(b) to be satisfied, (B) has been identified by the Company in a written notice delivered to Parent; and (C) is not capable of being cured, or is not cured, by Parent or Acquisition Sub on or before the earlier of (x) the date that is three (3) Business Days prior to the Termination Date and (y) the date that is thirty (30) calendar days following the Company’s delivery of written notice to Parent or Acquisition Sub, as applicable, of such breach; provided, however, that the Company shall not have the right to terminate this Agreement pursuant to this Section 8.1(c)(i) if the Company shall have breached, or failed to perform, any of its representations, warranties, covenants or agreements contained in this Agreement, in any case, such that such breach or failure to perform is the proximate cause of the failure of a condition contained in Section 7.2(a) or Section 7.2(b) not to be satisfied;
(ii) prior to receipt of the Requisite Stockholder Approval, (A) the Company Board (or a committee thereof) shall have authorized the Company to enter into a definitive agreement with respect to a Superior Proposal, (B) the Company shall have complied with Section 6.5(e) in respect of such Superior Proposal and (C) substantially concurrently with and as a condition to such termination, the Company shall have paid (or caused to be paid) to Parent or its designee the Company Termination Fee as specified in Section 8.3(a)(ii); or
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(iii) (A) all the conditions set forth in Section 7.1 and Section 7.2 shall have been satisfied (other than those conditions (x) the failure of which to be satisfied is attributable primarily to a breach or failure to perform by Parent or Acquisition Sub of its representations, warranties, covenants or agreements hereunder or (y) that by their terms are to be satisfied at the Closing, so long as such conditions in this clause (y) are at the time of termination capable of being satisfied as if such time were the Closing or (to the extent not prohibited by Law) waiver by the party hereto entitled to waive such conditions), (B) Parent and Acquisition Sub shall have failed to deposit the cash for the Exchange Fund in accordance with Section 3.2 and deposit the cash payable pursuant to Section 3.3 in accordance with Section 3.3(f), and consummate the Merger within two (2) Business Days following the first date the Closing should have occurred pursuant to Section 2.2, and (C) the Company shall have notified Parent in writing that all of the conditions set forth in Article VII have been satisfied or, with respect to the conditions set forth in Section 7.3, waived (or would be satisfied or waived if the Closing were to occur on the date of such notice) and it stands ready, willing and able to consummate the Closing at such time; or
(d) by Parent, if:
(i) the Company shall have breached or failed to perform any of its representations, warranties, covenants or agreements set forth in this Agreement, which breach or failure to perform (A) would give rise to the failure of any condition set forth in Section 7.2(a) or Section 7.2(b) to be satisfied, (B) has been identified by Parent in a written notice delivered to the Company and (C) is not capable of being cured, or is not cured, by the Company on or before the earlier of (x) the date that is three (3) Business Days prior to the Termination Date and (y) the date that is thirty (30) calendar days following Parent’s delivery of written notice to the Company of such breach; provided, however, that Parent shall not have the right to terminate this Agreement pursuant to this Section 8.1(d)(i) if Parent or Acquisition Sub has breached, or failed to perform, any of its representations, warranties, covenants or agreements in this Agreement, in any case, such that such breach or failure to perform is the proximate cause of the failure of a condition contained in Section 7.3(a) or Section 7.3(b) not to be satisfied; or
(ii) at any time prior to obtaining the Requisite Stockholder Approval, the Company Board shall have made an Adverse Recommendation Change; provided that Parent’s right to terminate this Agreement pursuant to this Section 8.1(d)(ii) shall expire upon the Requisite Stockholder Approval having been obtained.
Section 8.2. Effect of Termination. In the event that this Agreement is validly terminated by either the Company or Parent and the Merger is abandoned pursuant to Section 8.1, written notice thereof shall be given to the other party or parties hereto, specifying the provisions hereof pursuant to which such termination is made, and this Agreement shall forthwith become null and void and of no effect without liability on the part of any party hereto (or any of its Affiliates or Representatives), and all rights and obligations of each party hereto shall cease; provided, however, that, no such termination shall relieve any party hereto of any liability, costs, expenses (including attorney’s fees) or damages of any kind, all which shall be deemed in such event to be damages of such party, to the extent such termination results from, or the failure of the Closing was contributed by, any fraud or any Intentional Breach of this Agreement prior to such termination, in which case, except as otherwise provided in Section 8.3, the aggrieved party shall be entitled to all remedies available at law or in equity; provided, further, that the Company Confidentiality Agreement, the Parent Confidentiality Agreement, expense reimbursement and indemnification obligations contained in Section 6.11 (Financing) and Section 6.12 (Financing Cooperation), the representations and warranties set forth in Section 4.32 and Section 5.17, the obligations under the penultimate sentence of Section 6.4(a) (Access to Information; Confidentiality), and the provisions of Section 6.8 (Public Announcements), this Section 8.2 (Effect of Termination), Section 8.3 (Termination Fees; Expenses) and Article IX shall survive any termination of this Agreement pursuant to Section 8.1 in accordance with their respective terms.
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Section 8.3. Termination Fees; Expenses.
(a) In the event that:
(i) (A) a Third Party has made to the Company or directly to the Company’s stockholders a Competing Proposal after the date of this Agreement, (B) this Agreement is subsequently validly terminated by (x) the Company or Parent pursuant to Section 8.1(b)(i) or Section 8.1(b)(iii) or (y) by Parent pursuant to Section 8.1(d)(i) as a result of an Intentional Breach under this Agreement by the Company and at the time of the Stockholders’ Meeting such Competing Proposal has been publicly announced after the date of this Agreement and has not been rejected or otherwise withdrawn or abandoned, and (C) concurrently with or within twelve (12) months after the date of such termination of this Agreement, the Company or any of its Subsidiaries consummates a transaction involving any Competing Proposal or enters into a definitive agreement providing for the consummation of a Competing Proposal and such Competing Proposal is subsequently consummated (whether such consummation pursuant to such definitive agreement occurs during or subsequent to such twelve (12) month period); provided, however, that for purposes of this Section 8.3(a)(i), the references to “twenty percent (20%)” in the definition of Competing Proposal shall be deemed to be references to “fifty percent (50%)”;
(ii) this Agreement is validly terminated by the Company pursuant to Section 8.1(c)(ii); or
(iii) this Agreement is validly terminated by Parent pursuant to Section 8.1(d)(ii);
then the Company shall (A) in the case of clause (i) above, no later than two (2) Business Days following the date of the consummation of such transaction involving a Competing Proposal, (B) in the case of clause (ii) above, prior to or substantially concurrently with such termination, and (C) in the case of clause (iii) above, no later than two (2) Business Days after the date of such termination, pay, or cause to be paid, by wire transfer of immediately available funds, at the direction of Parent, the Company Termination Fee (it being understood that in no event shall the Company be required to pay the Company Termination Fee on more than one occasion).
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(b) In the event this Agreement is terminated by (i) the Company pursuant to Section 8.1(c)(i) or Section 8.1(c)(iii) or (ii) the Company or Parent pursuant to Section 8.1(b)(i) (A) at a time when the Company had the right to terminate this Agreement pursuant to Section 8.1(c)(i) or Section 8.1(c)(iii) or (B) if all of the conditions in Section 7.1 and Section 7.2 have been waived or satisfied (other than (1) those conditions that are capable of being satisfied by the Termination Date or (2) those conditions that are not satisfied in part because of a breach of this Agreement by Parent or Acquisition Sub), then in each case, without giving effect to any notice or cure provisions with respect thereto, Parent shall, in the case of termination by (x) Parent, simultaneously with such termination, or (y) the Company, no later than two (2) Business Days after the date of such termination, in the case of clause (x) and (y) above, pay, or cause to be paid, by wire transfer of immediately available funds, at the direction of the Company, the Reverse Termination Fee (it being understood that in no event shall Parent be required to pay the Reverse Termination Fee on more than one occasion).
(c) Notwithstanding anything to the contrary set forth in this Agreement, but subject to the Company’s rights set forth in Section 8.2, Section 8.3(e) and Section 9.12, the Company’s receipt in full of the Reverse Termination Fee pursuant to Section 8.3(b), together with any payments pursuant to Section 6.11 and Section 6.12, in circumstances where the Reverse Termination Fee is owed pursuant to Section 8.3(b) shall constitute the sole and exclusive monetary remedy of the Company and its Subsidiaries against Parent, Acquisition Sub, the Debt Financing Sources or any of their respective direct or indirect, former, current or future general or limited partners, stockholders, members, managers, directors, officers, employees, agents, Affiliates or assignees of any of the foregoing (collectively, the “Parent Related Parties”) for all losses and damages suffered as a result of the failure of the transactions contemplated by this Agreement to be consummated or for a breach or failure to perform hereunder or otherwise, and upon payment of such amount, none of the Parent Related Parties shall have any further liability or obligation relating to or arising out of this Agreement or the transactions contemplated by this Agreement (except that Parent shall also be obligated with respect to the Company’s rights set forth in Section 8.2, Section 8.3(e) and Section 9.12).
(d) Notwithstanding anything to the contrary set forth in this Agreement, but subject to Parent’s rights set forth in Section 8.2, Section 8.3(e) and Section 9.12, Parent’s receipt in full of the Company Termination Fee pursuant to Section 8.3(a), in circumstances where the Company Termination Fee is owed pursuant to Section 8.3(a) shall constitute the sole and exclusive monetary remedy of Parent and Acquisition Sub against the Company and its Subsidiaries and any of their respective direct or indirect, former, current or future general or limited partners, stockholders, members, managers, directors, officers, employees, agents, Affiliates or assignees of any of the foregoing (collectively, the “Company Related Parties”) for all losses and damages suffered by any Parent Related Party as a result of the failure of the transactions contemplated by this Agreement to be consummated or for a breach or failure to perform hereunder or otherwise, and upon payment of such amount, none of the Company Related Parties shall have any further liability or obligation relating to or arising out of this Agreement or the transactions contemplated by this Agreement (except that the Company shall also be obligated with respect to Parent’s and Acquisition Sub’s rights set forth in Section 8.2, Section 8.3(e) and Section 9.12).
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(e) Each of the parties hereto acknowledges that (i) the agreements contained in this Section 8.3 are an integral part of the transactions contemplated by this Agreement, (ii) each of the Company Termination Fee and the Reverse Termination Fee is not a penalty, but is liquidated damages, in a reasonable amount that will compensate the Company or Parent, as the case may be, in the circumstances in which such fee is payable, for the efforts and resources expended and opportunities foregone while negotiating this Agreement and in reliance on this Agreement and on the expectation of the consummation of the transactions contemplated hereby, which amount would otherwise be impossible to calculate with precision, and (iii) without these agreements, the parties hereto would not enter into this Agreement. Accordingly, if the Company or Parent, as the case may be, fails to pay promptly any amounts due pursuant to this Section 8.3 and, in order to obtain such payment, either Parent or the Company, as the case may be, commences a suit that results in a judgment against the other party for the payment of any amount set forth in this Section 8.3, such paying party shall pay the other party its reasonable costs and expenses (including legal fees and expenses) in connection with any action, including the filing of any lawsuit or other legal action taken to collect payment, together with interest on such amount at the annual rate of two percent (2%) plus the prime rate as published in The Wall Street Journal in effect on the date such payment was required to be made through the date such payment was actually received, or such lesser rate as is the maximum permitted by applicable Law. Notwithstanding anything in this Agreement to the contrary, the parties acknowledge and agree that nothing in this Section 8.3 shall be deemed to affect their respective rights under Section 9.12 in order to specifically enforce this Agreement.
Article
IX
GENERAL PROVISIONS
Section 9.1. Non-Survival of Representations, Warranties and Agreements. The representations, warranties, covenants and agreements in this Agreement and any instrument delivered pursuant to this Agreement by any Person shall terminate at the Effective Time or, except as provided in Section 8.2, upon the termination of this Agreement pursuant to Section 8.1, as the case may be, except that this Section 9.1 shall not limit any covenant or agreement of the parties hereto which by its terms contemplates performance after the Effective Time or after termination of this Agreement, including those contained in Section 6.6 and Section 6.9.
Section 9.2. Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given (a) when delivered if delivered in person or when sent if sent by email (provided that read receipt or delivery confirmation of receipt of the email or telephonic confirmation of email is obtained), (b) on the fifth Business Day after dispatch by registered or certified mail or (c) on the next Business Day if transmitted by national overnight courier) by hand delivery, by prepaid overnight courier (providing written proof of delivery) or by electronic mail, addressed as follows:
if to Parent or Acquisition Sub:
| Cetera Financial Group, Inc. | ||
| 200 North Pacific Coast Highway, Suite 1200 | ||
| El Segundo, California 90245 | ||
| Email: | [email protected] | |
| Attention: | Chief Legal Officer | |
with a copy (which shall not constitute notice) to:
| Willkie Farr & Gallagher LLP | |
| 787 Seventh Avenue |
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| New York, New York 10019 | ||
| Email: | [email protected] | |
| [email protected] | ||
| [email protected] | ||
| Attention: | Jeffrey R. Poss | |
| Manuel A. Miranda | ||
| Thomas Sharkey | ||
if to the Company:
| Avantax, Inc. | ||
| 3200 Olympus Boulevard, Suite 100 | ||
| Dallas, Texas 75019 | ||
| Email: | [email protected] | |
| Attention: | Chief Legal Officer | |
with a copy (which shall not constitute notice) to:
| Haynes and Boone, LLP | ||
| 675 15th Street, Suite 2200 | ||
| Denver, Colorado 80202 | ||
| Email: | [email protected] | |
| [email protected] | ||
| Attention: | Daniel P. Malone, Jr. | |
| Tom Tippetts | ||
| Sidley Austin LLP | ||
| One South Dearborn | ||
| Chicago, Illinois 60603 | ||
| Email: | [email protected] | |
| [email protected] | ||
| Attention: | Beth E. Berg | |
| Scott R. Williams | ||
or to such other address or electronic mail address for a party as shall be specified in a notice given in accordance with this Section 9.2. For purposes of clarity, any notice required to be provided to Acquisition Sub shall be deemed provided when made to Parent, subject to compliance with the other procedures set forth in this Section 9.2.
Section 9.3. Interpretation; Certain Definitions.
(a) The parties hereto have participated jointly in the negotiation and drafting of this Agreement, which each party acknowledges is the result of extensive negotiations between the parties. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto, 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.
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(b) Disclosure of any fact, circumstance or information in any section of the Company Disclosure Letter or Parent Disclosure Letter shall be deemed to be disclosure of such fact, circumstance or information with respect to any other section of the Company Disclosure Letter or Parent Disclosure Letter, respectively, if it is reasonably apparent on its face that such disclosure relates to any such other section. The inclusion of any item in the Company Disclosure Letter or Parent Disclosure Letter shall not be deemed to be an acknowledgment, in and of itself, that the information is required to be disclosed or admission or evidence of materiality of such item, nor shall it establish any standard of materiality for any purpose whatsoever.
(c) The words “hereof,” “herein,” “hereby,” “hereunder” and “herewith” and words of similar import shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The use of the word “or” shall not be exclusive. The word “extent” in the phrase “to the extent” shall mean the degree to which a subject or other thing extends, and such phrase shall not mean simply “if”. References to articles, sections, clauses, paragraphs, exhibits, annexes and schedules are to the articles, sections, clauses and paragraphs of, and exhibits, annexes and schedules to, this Agreement, unless otherwise specified, and the table of contents and headings in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words “include,” “includes” or “including” (and words of similar meaning) are used in this Agreement, they 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, words denoting natural persons shall be deemed to include business entities and vice versa and references to a Person are also to its permitted successors and assigns. The phrases “the date of this Agreement” and “the date hereof” and terms or phrases of similar import shall be deemed to refer to the date set forth in the Preamble, unless the context requires otherwise. References to any statute or Law shall be deemed to refer to such statute or Law as amended from time to time and to any rules or regulations promulgated thereunder (provided that for purposes of any representations and warranties contained in this Agreement that are made as of a specific date or dates, references to any statute shall be deemed to refer to such statute, as amended, and to any rules or regulations promulgated thereunder, in each case, as of such date or dates). Terms defined in the text of this Agreement have such meaning throughout this Agreement, unless otherwise indicated in this Agreement, and all terms defined in this Agreement shall have the meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein. All references to “dollars” or “$” refer to currency of the United States of America. All references to “U.S.” or the “United States” are to the United States of America, including its territories and possessions. Any reference to “days” means calendar days unless Business Days are expressly specified. When calculating the period of time before which, within which or following which any act is to be done or step taken pursuant to this Agreement, the date that is the reference date in calculating such period shall be excluded and if the last day of such period is not a Business Day, the period shall end on the next succeeding Business Day. Unless otherwise specified, the words “made available to,” “delivered to” or “disclosed to” Parent or Acquisition Sub (or words of similar import) includes the documents (x) posted to (and not removed from) the VDR or otherwise provided to Parent or its Representatives in response to a due diligence request from Parent or its Representatives or otherwise at least four (4) hours prior to the execution of this Agreement or (y) included as an exhibit to the Company SEC Documents filed with, or furnished to, the SEC by the Company prior to the date of this Agreement. Notwithstanding anything in this Agreement to the contrary, the parties hereto agree that the Debt Financing is the responsibility of Parent and Acquisition Sub and not the Company or any Subsidiary of the Company and that (i) the Company makes no representations or warranties relating to the Debt Financing (including whether the Company has authorized the Debt Financing or whether any of the transactions contemplated by the Debt Financing conflict with or violate any obligation of the Company or any Subsidiary of the Company or Contract to which the Company or any Subsidiary of the Company is a party), (ii) except for Section 6.12, none of the covenants of the Company in this Agreement require the Company to take any action relating to the Debt Financing and (iii) for purposes of the representations and warranties and covenants and obligations of the Company hereunder, the transactions contemplated by this Agreement shall not include the Debt Financing. Reference to “other party hereto” or “other parties hereto” when derived from the Company shall mean Parent and Acquisition Sub and shall mean the Company when derived from either Parent or Acquisition Sub.
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Section 9.4. Severability. If any term, provision, covenant or restriction of this Agreement or the application thereof to any Person or circumstance 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, so long as the economic and legal substance of the transactions contemplated by this Agreement is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties hereto as closely as possible in a mutually acceptable manner in order that the Merger be consummated as originally contemplated to the fullest extent possible. Notwithstanding the foregoing, the parties hereto intend that the remedies and limitations thereon contained in Section 8.3(c), Section 8.3(d) and Section 8.3(e) be construed as an integral provision of this Agreement and that such remedies and limitations shall not be severable in any manner that increases a party’s liability or obligations hereunder or under the Financing Commitments.
Section 9.5. Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned or delegated, in whole or in part, by any of the parties hereto (whether by operation of Law or otherwise) without the prior written consent of the other parties; provided, that Parent may assign all of its rights, but not its duties, under this Agreement or any related documents to any Debt Financing Source (including any collateral agent or trustee for the Debt Financing Sources) as collateral security, but any such assignment shall not relieve Parent of its obligations under this Agreement and the Company shall have no obligation to pursue remedies against any assignee of Parent before proceeding against Parent for any breach of its obligations hereunder. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties hereto and their respective permitted successors and assigns. Any attempted assignment in violation of this Section 9.5 shall be null and void.
Section 9.6. Entire Agreement. This Agreement (including the exhibits, annexes and appendices hereto) constitutes, together with the Company Confidentiality Agreement, the Parent Confidentiality Agreement, the Company Disclosure Letter and the Parent Disclosure Letter, the entire agreement, and supersedes all other prior agreements and understandings, both written and oral, among the parties hereto, or any of them, with respect to the subject matter hereof.
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Section 9.7. No Third-Party Beneficiaries. Parent, Acquisition Sub and the Company hereby agree that their respective representations, warranties and covenants set forth in this Agreement are solely for the benefit of the other parties to this Agreement and are not intended to and shall not confer upon any Person other than the parties hereto any rights or remedies hereunder (including the right to rely upon the representations and warranties set forth in this Agreement), except for (a) Article III, which, after the Closing, shall be for the benefit of any Person entitled to payment thereunder, (b) Section 6.6 (Directors’ and Officers’ Indemnification and Insurance), which, after the Effective Time, shall be for the benefit of each D&O Indemnified Party, such D&O Indemnified Party’s heirs, executors or administrators and each D&O Indemnified Party’s representatives, (c) with respect to Section 8.3 (Termination Fees; Expenses), Section 9.4 (Severability), Section 9.5 (Assignment), this Section 9.7 (No Third-Party Beneficiaries), Section 9.8 (Amendments), Section 9.11 (Governing Law), Section 9.13 (Consent to Jurisdiction), Section 9.15 (Waiver of Jury Trial), and Section 9.16 (Debt Financing Sources), the Debt Financing Sources, (d) with respect to Section 8.3, the Parent Related Parties and the Company Related Parties, respectively, as it relates to the provisions specifically attributable to such Persons, (e) the rights of Affiliates and Representatives of the Company to indemnification under Section 6.11 (Financing) and Section 6.12 (Financing Cooperation), and (f) the rights of the securityholders of the Company to pursue claims for damages, liabilities, costs, expenses and other relief, including equitable relief, for a breach by Parent or Acquisition Sub of its obligations under this Agreement, each of whom is identified in clauses (a) through (f) above shall be an express third-party beneficiary of this Agreement in accordance with such clauses and the provisions referenced therein; provided, that (i) the Persons named in clause (a) or (b) of this sentence shall be entitled to enforce their rights under this Agreement and (ii) the rights granted pursuant to clause (f) of this sentence shall be enforceable on behalf of the securityholders of the Company only by the Company, in its sole and absolute discretion, and any amounts received by the Company in connection therewith may be retained by the Company. The parties further agree that the rights of third-party beneficiaries under clauses (a) and (b) of the preceding sentence shall not arise unless and until the Effective Time occurs. The representations and warranties in this Agreement are the product of negotiations among the parties hereto and are for the sole benefit of the parties hereto. Any inaccuracies in such representations and warranties may be subject to waiver by the parties hereto in accordance with Section 9.9 without notice or liability to any other Person. In some instances, the representations and warranties in this Agreement may represent an allocation among the parties hereto of risks associated with particular matters regardless of the knowledge of any of the parties hereto. Consequently, Persons other than the parties hereto may not rely upon the representations and warranties in this Agreement as characterizations of actual facts or circumstances as of the date of this Agreement or as of any other date.
Section 9.8. Amendment. This Agreement may be amended by mutual agreement of the Company and Parent at any time before or after receipt of the Requisite Stockholder Approval; provided, however, that (i) after the Requisite Stockholder Approval has been obtained, there shall not be any amendment that by Law or in accordance with the rules of any stock exchange requires further approval by the stockholders of the Company without such further approval of such stockholders; (ii) any amendment to this Section 9.8 or Section 8.3, Section 9.4, Section 9.5, Section 9.7, Section 9.11, Section 9.13, Section 9.15 or Section 9.16 or any defined term used therein (or any other provisions of this Agreement to the extent that such amendment would modify the substance of any of the foregoing Sections or any defined terms used therein), in each case to the extent such amendment would adversely affect the rights of a Debt Financing Source under such Section, shall also be approved by such Debt Financing Source that is a party to the Debt Commitment Letter; and (iii) no amendment shall be made to this Agreement after the Effective Time. Subject to the foregoing, this Agreement may not be amended except by an instrument in writing signed by each of the parties hereto.
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Section 9.9. Extension; Waiver. At any time prior to the Effective Time, subject to applicable Law, any party hereto may (a) extend the time for the performance for its benefit of any obligation or other act of any other party hereto, (b) waive any breach or inaccuracy in the representations and warranties made to it by another party contained herein or in any document delivered pursuant hereto and (c) waive compliance with any agreement or condition for its benefit contained herein; provided, however, that after obtaining the Requisite Stockholder Approval, there shall be no amendment of or waiver under this Agreement that would require the further approval of the stockholders of the Company under the DGCL without such approval having first been obtained. Any such extension or waiver shall only be valid if set forth in an instrument in writing signed by the party or parties to be bound thereby. Notwithstanding the foregoing, no failure or delay by the Company, Parent or Acquisition Sub in exercising any right hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise of any other right hereunder. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party.
Section 9.10. Expenses; Transfer Taxes. Except as expressly set forth herein (including the following sentence), all Expenses incurred in connection with this Agreement and the transactions contemplated by this Agreement shall be paid by the party incurring such Expenses, whether or not such transactions are consummated; provided that Parent shall pay all costs and Expenses in connection with the filings of the notification and report forms under any Antitrust Laws, and any other notices, filings or similar actions to obtain any other Consent of any Governmental Authority, in each case, in connection with the transactions contemplated by this Agreement. Parent shall timely and duly pay all (a) transfer, stamp and documentary Taxes or fees and (b) sales, use, gains, real property transfer and other similar Taxes or fees arising out of or in connection with entering into and carrying out this Agreement.
(a) This Agreement and all Actions (whether based on contract, tort or otherwise) arising out of or relating to this Agreement or the actions of Parent, Acquisition Sub or the Company in the negotiation, administration, performance and enforcement 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.
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(b) Notwithstanding anything to the contrary contained in this Agreement, each of the parties hereto: (i) agrees that it will not bring or support any Person in any Action before any Governmental Authority of any kind or description, whether at law or in equity, whether in contract or in tort or otherwise, against any of the Debt Financing Sources in any way relating to this Agreement or any of the transactions contemplated by this Agreement, including any dispute arising out of or relating in any way to the Debt Financing or the performance thereof or the financings contemplated thereby, in any forum other than the United States Federal and New York State courts located in New York County, State of New York and (ii) agrees that, except as specifically set forth in the Debt Commitment Letter, all claims or causes of action (whether at law, in equity, in contract, in tort or otherwise) against any of the Debt Financing Sources in any way relating to this Agreement, the Debt Financing or the performance thereof or the financings contemplated thereby, shall be exclusively governed by, and construed in accordance with, the laws of the State of New York, without giving effect to any choice or conflict of law provision or rule (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.
Section 9.12. Specific Performance.
(a) The parties hereto acknowledge and agree that irreparable damage for which monetary damages, even if available, would not be an adequate remedy, would occur in the event that the parties hereto do not perform the provisions of this Agreement (including failing to take such actions as are required of it hereunder to consummate this Agreement) in accordance with its specified terms or otherwise breach such provisions. Accordingly, the parties hereto acknowledge and agree that the parties hereto shall be entitled to an injunction, specific performance and other equitable relief to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof (including the right of a party hereto to cause the other parties hereto to consummate the Merger and the other transactions contemplated by this Agreement), in addition to any other remedy to which they are entitled at law or in equity. Notwithstanding anything to the contrary herein, it is explicitly agreed that the Company shall only be entitled to specific performance of Parent or Acquisition Sub’s obligations to consummate the transactions contemplated by this Agreement, including funding the Funding Obligations, only in the event that (i) all of the conditions set forth in Section 7.1 and Section 7.2 (other than those conditions that by their terms are to be satisfied at the Closing, but subject to the satisfaction or, if permissible, waiver of such conditions by the party entitled to waive such conditions) have been satisfied (or waived), (ii) the Financing Commitments have been funded or will be funded at the Closing if Parent and Acquisition Sub consummated the transactions hereby and funded the applicable amounts, (iii) the Company shall have irrevocably confirmed to Parent in writing that all of the conditions set forth in Article VII have been satisfied or, with respect to the conditions set forth in Section 7.3, waived (or would be satisfied or waived if the Closing were to occur on the date of such notice) and it stands ready, willing and able to consummate the Closing at such time and (iv) Parent fails to consummate the transactions contemplated by this Agreement within three (3) Business Days after the delivery of such confirmation and the Company was prepared to take such actions required of it hereunder to cause the Closing to occur on the date such confirmation was delivered and each day during such three (3) Business Day period. Each of the parties hereto agrees that it will not oppose the granting of an injunction, specific performance and other equitable relief on the basis that any other party has an adequate remedy at law or that any award of specific performance is not an appropriate remedy for any reason at law or in equity. Any party seeking an injunction or any other equitable relief to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement shall not be required to show proof of actual damages or provide any bond or other security in connection with any such Order. Notwithstanding anything else to the contrary in this Agreement, under no circumstances shall the Company be permitted or entitled to receive both an injunction, grant of specific performance or other equitable relief providing for the consummation of the Debt Financing or the Merger pursuant to this Section 9.12 and the payment of the Reverse Termination Fee or any monetary damages (other than enforcement costs (including attorney’s fees and costs)) (subject in any case to the limitations set forth in Article VIII).
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(b) Each of the parties hereto agrees that nothing set forth in this Agreement shall require a party to institute any Action for (or limit a party’s right to institute any Action for) specific performance under this Section 9.12 prior, or as a condition, to exercising any termination right under Article VIII (and pursuing damages after such termination), nor shall the commencement of any Action seeking remedies pursuant to this Section 9.12 or anything set forth in this Section 9.12 restrict or limit a party’s right to terminate this Agreement in accordance with the terms of Article VIII or pursue any other remedies under this Agreement that may be available then or thereafter.
Section 9.13. Consent to Jurisdiction.
(a) Each of the parties hereto hereby (a) expressly and irrevocably submits to the exclusive personal jurisdiction of the state courts of the Delaware Court of Chancery, any other court of the State of Delaware or any federal court sitting in the State of Delaware, in the event any dispute arises out of this Agreement or the transactions contemplated hereby, (b) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, (c) agrees that it will not bring any Action relating to this Agreement or the transactions contemplated hereby in any court other than the Delaware Court of Chancery, any other court of the State of Delaware or any federal court sitting in the State of Delaware, (d) 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 Action arising out of or relating to this Agreement and (e) agrees that each of the other parties hereto shall have the right to bring any Action for enforcement of a judgment entered by the state courts of the Delaware Court of Chancery, any other court of the State of Delaware or any federal court sitting in the State of Delaware. Each of Parent, Acquisition Sub and the Company agrees that a final judgment in any Action shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law. The parties hereto hereby further agree that New York state or United States Federal courts sitting in New York County, State of New York shall have exclusive jurisdiction over any Action (whether at law, in equity, in contract, in tort or otherwise) brought against any Debt Financing Source in connection with the transactions contemplated under this Agreement.
(b) Each party irrevocably consents to the service of process outside the territorial jurisdiction of the courts referred to in Section 9.13(a) in any such Action by mailing copies thereof by registered or certified United States mail, postage prepaid, return receipt requested, to its address as specified in or pursuant to Section 9.2. 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 9.14. Counterparts. This Agreement may be executed in multiple counterparts, all of which shall together be considered one and the same agreement. Delivery of an executed signature page to this Agreement by electronic transmission shall be as effective as delivery of a manually signed counterpart of this Agreement.
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Section 9.15. WAIVER OF JURY TRIAL. EACH OF PARENT, ACQUISITION SUB, THE COMPANY AND ITS AFFILIATES HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHT TO TRIAL BY JURY IN ANY ACTION (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE MERGER, ANY OF THE OTHER TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE ACTIONS OF PARENT, ACQUISITION SUB, THE COMPANY OR ITS AFFILIATES IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT THEREOF (INCLUDING THE DEBT FINANCING, THE DEBT COMMITMENT LETTER AND THE TRANSACTIONS CONTEMPLATED THEREBY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH PARTY WOULD NOT, IN THE EVENT OF ANY ACTION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVER AND CERTIFICATIONS IN THIS SECTION 9.15.
Section 9.16. Debt Financing Sources. Notwithstanding anything in this Agreement to the contrary, each of the parties on behalf of itself and each of its Affiliates hereby agrees that none of the Debt Financing Sources will have any liability to any of the Company, the Company’s Subsidiaries or their respective Affiliates relating to or arising out of this Agreement, the Debt Financing, the Debt Commitment Letter, or any of the transactions or agreements contemplated hereby or thereby or the performance of any services thereunder and that none of the Company, the Company’s Subsidiaries or any of their respective Affiliates shall bring or support any legal action (including any action, cause of action, claim, cross-claim or third party claim of any kind or description, whether in Law or in equity, whether in contract or in tort or otherwise), against any of the Debt Financing Sources relating to or in any way arising out of this Agreement, the Debt Financing, the Debt Commitment Letter or any of the transactions contemplated hereby or thereby or the performance of any services thereunder. For the avoidance of doubt, nothing in this Section 9.16 shall in any way limit or qualify the rights and obligations of the Debt Financing Sources and the other parties to the Debt Commitment Letter or the Debt Financing (or the definitive documents entered into pursuant thereto) to each other thereunder or in connection therewith.
[Remainder of page intentionally left blank; signature page follows.]
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IN WITNESS WHEREOF, Parent, Acquisition Sub and the Company have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.
| ARETEC GROUP, INC. | ||
| By: |
/s/ Mike Durbin | |
| Name: Mike Durbin | ||
| Title: CEO | ||
| C2023 SUB CORP. | ||
| By: |
/s/ Mike Durbin | |
| Name: Mike Durbin | ||
| Title: CEO | ||
[Signature Page to Agreement and Plan of Merger]
| AVANTAX, INC. | ||
| By: |
/s/ Christopher W. Walters | |
| Name: Christopher W. Walters | ||
| Title: Chief Executive Officer | ||
[Signature Page to Agreement and Plan of Merger]
Appendix A
As used in this Agreement, the following terms shall have the following meanings:
“1017 Application” shall have the meaning set forth in Section 6.3(d).
“Acceptable Confidentiality Agreement” shall have the meaning set forth in Section 6.5(c).
“Acquisition Sub” shall have the meaning set forth in the Preamble.
“Action” shall mean any claim, order, demand, action, suit, arbitration, litigation, administrative hearing, enforcement proceeding, audit, investigation, subpoena, hearing, inquiry or other similar proceeding, at law or in equity, by or before any Governmental Authority, arbitral body or mediator.
“Adverse Recommendation Change” shall have the meaning set forth in Section 6.5(d).
“Advisory Client” shall mean any Person to which any Registered Adviser provides investment advisory or sub-advisory services pursuant to an Advisory Contract.
“Advisory Contract” shall mean any Contract pursuant to which a Registered Adviser provides investment advisory or sub-advisory services.
“Affiliate” shall have the meaning set forth in Rule 12b-2 of the Exchange Act; provided, however, that no portfolio company (as such term is commonly understood in the private equity industry) of an investment fund controlling or under common control with Parent shall be considered an Affiliate of Parent.
“Aggregate Merger Consideration” shall mean the product of (x) the number of shares of Company Common Stock issued and outstanding (other than those shares cancelled pursuant to Section 3.1(a)) immediately prior to the Effective Time multiplied by (y) the Merger Consideration.
“Agreement” shall have the meaning set forth in the Preamble.
“Alternative Financing” shall have the meaning set forth in Section 6.11(d).
“Anti-Bribery Laws” shall have the meaning set forth in Section 4.5(d).
“Antitrust Laws” shall mean the Sherman Act of 1890; the Clayton Act of 1914; the Federal Trade Commission Act of 1914; the HSR Act, and all other federal, state, foreign or supranational Laws or Orders in effect from time to time that are designed or intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade or lessening of competition through merger or acquisition.
“Applicable Documents” shall have the meaning set forth in Section 6.12(b).
“Bankruptcy and Equity Exception” shall have the meaning set forth in Section 4.3(a).
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“Blue Sky Laws” shall mean state securities or “blue sky” laws.
“Book-Entry Evidence” shall have the meaning set forth in Section 3.1(b).
“Business Day” shall mean any day other than a Saturday, Sunday or a day on which all banking institutions in New York, New York or Governmental Authorities in the State of Delaware are authorized or obligated by Law or executive order to close.
“CARES Act” shall mean the Coronavirus Aid, Relief, and Economic Security Act (including any changes in state or local law that are analogous to provisions of the CARES Act or adopted to conform to the CARES Act) and any legislative or regulatory guidance issued pursuant thereto.
“Certificate of Merger” shall have the meaning set forth in Section 2.3(a).
“Certificates” shall have the meaning set forth in Section 3.1(b).
“Closing” shall have the meaning set forth in Section 2.2.
“Closing Date” shall have the meaning set forth in Section 2.2.
“Code” shall mean the Internal Revenue Code of 1986.
“Company” shall have the meaning set forth in the Preamble.
“Company Benefit Plan” shall mean (a) each “employee benefit plan” (within the meaning of Section 3(3) of ERISA, whether or not subject to ERISA), and (b) each other employment, individual consulting, bonus, stock option, stock purchase or other equity-based, benefit, incentive compensation, profit sharing, savings, retirement, disability, insurance, incentive, vacation, incentive, deferred compensation, severance, separation, termination, retention, change of control, employee loan, and other similar fringe, welfare or other employee benefit plans, programs, agreements, contracts, policies or arrangements (whether or not in writing and including any related forms of award agreements), and Company Equity Award, in each case, (i) which is currently sponsored, maintained, contributed to, or required to be contributed to by the Company or its Subsidiaries or (ii) with respect to which the Company or any of its Subsidiaries is a party or has or may have any liability (but not including any Multiemployer Plan).
“Company Board” shall have the meaning set forth in the Recitals.
“Company Bylaws” shall have the meaning set forth in Section 4.1.
“Company Charter” shall have the meaning set forth in Section 4.1.
“Company Common Stock” shall have the meaning set forth in Section 3.1(a).
“Company Confidentiality Agreement” shall mean the Non-Disclosure Agreement, dated as of June 7, 2023, by and between Cetera Financial Group, Inc. and the Company.
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“Company Disclosure Letter” shall mean the disclosure letter delivered by the Company to Parent concurrently with the execution of this Agreement, including the documents attached thereto.
“Company Equity Awards” shall mean, collectively, (i) Company Options and (ii) Company Stock Units.
“Company Equity Plan” shall mean, collectively, the Company’s Restated 1996 Flexible Stock Incentive Plan; the Company’s 2015 Incentive Plan as Amended and Restated; the Company’s 2016 Equity Inducement Plan; and the Company’s 2018 Long-Term Incentive Plan, in each case as amended or amended and restated from time to time.
“Company ESPP” means the Company’s 2016 Employee Stock Purchase Plan, as amended or amended and restated from time to time.
“Company IP” shall have the meaning set forth in Section 4.14(a).
“Company IT Assets” means the computer systems, software and software platforms, hardware, electronic data processing and telecommunications networks, databases, websites, servers, routers, hubs, switches, circuits, networks, data communications lines and all other information technology infrastructure and equipment, including any ancillary equipment, network and telecommunications equipment and outsourced systems and processes, including associated user manuals and other related documents, in each case, that are owned, licensed, leased or used by the Company or any of its Subsidiaries.
“Company Leases” shall have the meaning set forth in Section 4.18(b)(ii).
“Company Material Adverse Effect” shall mean any Effect which, individually or in the aggregate, has a material adverse effect on the business, financial condition, or continuing results of operations of the Company and its Subsidiaries, taken as a whole; provided, however, that Effects which, directly or indirectly, to the extent they relate to or result from the following, shall be excluded from the determination of Company Material Adverse Effect: (i) any Effect generally affecting any of the industries, businesses or markets in which the Company or its Subsidiaries operate; (ii) any development or change in any Law or GAAP (or changes in authoritative interpretations of any Law or GAAP) and, to the extent relevant to the business of the Company and its Subsidiaries, in any legal or binding regulatory requirement or condition or the regulatory enforcement environment issued by a Governmental Authority; (iii) general economic, regulatory or political conditions (or changes therein) or conditions (or changes therein or disruptions thereof) in the U.S. or global economy or financial, credit, banking, securities, debt or other capital markets (including changes in interest or currency exchange rates and any suspension of trading in securities generally on NASDAQ); (iv) any acts of God, natural disasters, force majeure events, terrorism, sabotage, armed hostilities, civil unrest, declared or undeclared acts of war (whether or not declared), epidemics, pandemics or disease outbreaks (including, for the avoidance of doubt, COVID-19, any COVID-19 Measures, or effects thereof), or any escalation or worsening of any of the foregoing; (v) the negotiation, execution, announcement, consummation, existence or pendency of this Agreement or the transactions contemplated hereby, including by reason of (A) the identity of Parent, Acquisition Sub or any of their respective Affiliates, (B) any communication
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by Parent or its Affiliates regarding the plans or intentions of Parent with respect to the conduct of the business or the operations or strategy of the Company or any of its Subsidiaries following the Effective Time, (C) the failure to obtain any Consents of a Third Party in connection with the transactions contemplated by this Agreement and (D) the impact of any of the foregoing on any relationships (contractual or otherwise) with customers, suppliers, landlords, vendors, collaboration or joint venture partners, employees, Financial Advisors or other financial professionals or regulators or any other Covered Person (it being understood and agreed that this clause (v) shall not apply with respect to any breach of the representations and warranties in Section 4.4(a) of this Agreement that are intended to address the consequences of the execution, announcement, consummation or existence of this Agreement), (vi) any action taken that is required by the terms of this Agreement or with the consent or at the direction of Parent or Acquisition Sub (or any action not taken as a result of the failure of Parent to consent to any action requiring Parent’s consent), (vii) any changes in the market price or trading volume of the Company Common Stock, any failure by the Company or its Subsidiaries to meet internal, analysts’ or other earnings estimates or financial projections or forecasts for any period, any changes in credit ratings and any changes in any analysts’ recommendations or ratings with respect to the Company or any of its Subsidiaries (provided, that the facts or occurrences giving rise to or contributing to such changes or failure referenced in this clause (vii) that are not otherwise excluded from the definition of “Company Material Adverse Effect” may be taken into account in determining whether there has been a Company Material Adverse Effect), (viii) any matter described in the Company Disclosure Letter or reflected in the Company SEC Documents or the consolidated financial statements included therein, in each case, in reasonable detail (other than any disclosures set forth under the headings “Risk Factors” or “Forward-Looking Statements” that are both non-specific and cautionary in nature (but, in each case, only to the extent the material adverse effect in question is readily apparent on its face based on the substance and content of such disclosure)) and (ix) any Action threatened or initiated by stockholders of the Company against the Company, any of its Subsidiaries or any of their respective officers or directors, in each case, arising out of or relating to the execution of this Agreement or the transactions contemplated hereby; provided, that with respect to clauses (i), (ii), (iii) and (iv), such Effects may be taken into account to the extent they materially and disproportionately adversely affect the Company and its Subsidiaries, taken as a whole, compared to other similarly situated Persons operating primarily in the industries in which the Company and its Subsidiaries operate.
“Company Material Contract” shall have the meaning set forth in Section 4.16(a).
“Company Option” shall mean an option to purchase shares of Company Common Stock issued under any Company Equity Plan.
“Company Option Consideration” shall have the meaning set forth in Section 3.3(a).
“Company Owned IP” shall have the meaning set forth in Section 4.14(b).
“Company Permits” shall have the meaning set forth in Section 4.5(a).
“Company PSU” shall mean a performance stock unit granted pursuant to a Company Equity Plan that vests on the basis of time and the achievement of performance targets and pursuant to which the holder has a right to receive shares of Company Common Stock following the vesting or lapse of restrictions applicable to such performance stock unit.
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“Company PSU Consideration” shall have the meaning set forth in Section 3.3(c).
“Company Recommendation” shall mean the recommendation of the Company Board that the stockholders of the Company vote in favor of adoption of this Agreement.
“Company Registered IP” shall have the meaning set forth in Section 4.14(a).
“Company Related Parties” shall have the meaning set forth in Section 8.3(d).
“Company RSU” shall mean a restricted stock unit granted pursuant to a Company Equity Plan that vests solely on the basis of time and pursuant to which the holder has a right to receive shares of Company Common Stock or a cash amount equal to the fair market value of the applicable number of shares of Company Common Stock following the vesting or lapse of restrictions applicable to such restricted stock unit.
“Company RSU Consideration” shall have the meaning set forth in Section 3.3(b).
“Company SEC Documents” shall have the meaning set forth in Section 4.6(a).
“Company Service Provider” shall mean each individual who is a current or former director, officer, employee or individual independent contractor or other service provider of the Company or any of its Subsidiaries.
“Company Stock Units” shall mean any of the Company RSUs and the Company PSUs.
“Company Sublandlord Leases” shall have the meaning set forth in Section 4.18(b)(ii).
“Company Tenant Leases” shall have the meaning set forth in Section 4.18(b)(i).
“Company Termination Fee” shall mean an amount equal to $32,338,491.
“Competing Proposal” shall have the meaning set forth in Section 6.5(h)(i).
“Compliant” shall mean, with respect to information delivered as Required Information, that (i) such information does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make such information not misleading in light of the circumstances in which it is made, (ii) the auditors of any audited financial information contained therein have not withdrawn their audit opinion with respect to such information and (iii) the Company has not been informed by its auditors that the Company is required to restate, and the Company has not announced any intention to restate, any financial statements included in Required Information (in each case of this clause (iii) unless and until either such restatement has been completed or the Company and its auditors have concluded that no restatement is necessary).
“Consent” shall have the meaning set forth in Section 4.4(b).
“Continuation Period” shall have the meaning set forth in Section 6.9(a).
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“Continuing Employees” shall have the meaning set forth in Section 6.9(a).
“Contract” shall mean any legally binding contract, subcontract, lease, sublease, conditional sales contract, purchase order, sales order, task order, delivery order, license, indenture, note, bond, loan, instrument, understanding, permit, concession, franchise, commitment or other agreement, arrangement or understanding (whether oral or written).
“control” (including the terms “controlled by” and “under common control with”) shall mean, with respect to a Person, the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, as trustee or executor, by Contract or credit arrangement or otherwise.
“Covered Person” shall mean any independent financial professionals or advisors (whether in-house or through licensed affiliations) that have a relationship with the Company, and any employee, registered representative, independent contractor or agent of the Company or its Subsidiaries.
“COVID-19” shall mean SARS-CoV-2 and its disease commonly known as COVID-19, and any evolutions or additional strains, variations or mutations thereof or any related or associated epidemics, pandemic or disease outbreaks.
“COVID-19 Laws” shall mean the CARES Act, the Families First Coronavirus Response Act of 2020, the Consolidated Appropriations Act, 2021 or any other applicable Law intended to address the consequences of COVID-19.
“COVID-19 Measures” shall mean any quarantine, “shelter in place,” “stay at home,” workforce reduction, social distancing, shut down, closure, sequester, safety or similar Law, directive, guidelines or recommendations promulgated or applied by any Governmental Authority, including the Centers for Disease Control and Prevention and the World Health Organization, in each case, in connection with or in response to the health and safety consequences of COVID-19, including the COVID-19 Laws.
“D&O Indemnified Parties” shall have the meaning set forth in Section 6.6(a).
“Data Protection Laws” shall mean all applicable Laws pertaining to data protection, data privacy, data security, cybersecurity data transfer (including cross-border transfer) and general consumer protection Laws as applied in the context of data privacy, data breach notification, electronic communication, telephone and text message communications, marketing by email or other channels and other similar Laws.
“Debt Commitment Letter” shall have the meaning set forth in Section 5.8(a).
“Debt Fee Letters” shall have the meaning set forth in Section 5.8(a).
“Debt Financing” shall have the meaning set forth in Section 5.8(a).
“Debt Financing Definitive Documents” shall have the meaning set forth in Section 6.11(b).
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“Debt Financing Sources” shall mean the entities, including the Lenders, that have committed to arrange or provide or otherwise entered into agreements in connection with all or any portion of the Debt Financing or other financings in connection with the transactions contemplated hereby (together with any lead arrangers, bookrunner, syndication agent or similar entity thereto or added to the Debt Commitment Letter after the date hereof), including parties to any joinder agreements, indentures or credit agreements entered into pursuant thereto or relating thereto, together with their respective Affiliates, and their respective Affiliates’ former, future or current direct or indirect equity holders, controlling Persons, general or limited partners, members, stockholders, officers, directors, managers, employees, agents, attorneys, advisors, and representatives and their respective successors and assigns. Notwithstanding anything in this Agreement to the contrary, Parent, Acquisition Sub and their respective Affiliates shall not be considered Debt Financing Sources.
“Debt Payoff Amount” shall have the meaning set forth in Section 6.13.
“DGCL” shall have the meaning set forth in the Recitals.
“Dissenting Shares” shall have the meaning set forth in Section 3.5.
“Effect” shall have the meaning set forth in Section 6.5(h)(iii).
“Effective Time” shall have the meaning set forth in Section 2.3(a).
“Employee” shall mean a Person employed by the Company or its Subsidiaries.
“Employee Agent” shall have the meaning set forth in Section 4.28.
“Environmental Laws” shall mean all Laws relating to (a) the protection of the natural environment, including natural resources, (b) the protection of worker health and safety as it pertains to exposure to Hazardous Substances, (c) the manufacture, registration, distribution, formulation, packaging or labeling of Hazardous Substances or products containing Hazardous Substances or (d) the handling, use, presence, generation, treatment, storage, disposal or Release of or exposure to Hazardous Substances.
“Environmental Permits” shall mean any permit, registration, license or other authorization required under any applicable Environmental Law.
“ERISA” shall mean the Employee Retirement Income Security Act of 1974, and the rules and regulations promulgated thereunder.
“ERISA Affiliate” shall mean, for any Person, each entity, trade or business, whether or not incorporated, that, together with such Person, is, or at the relevant time, would be deemed a “single employer” within the meaning of Section 4001(b) of ERISA or Section 414 of the Code.
“Exchange Act” shall mean the Securities Exchange Act of 1934.
“Exchange Fund” shall have the meaning set forth in Section 3.2(a).
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“Excluded Information” shall mean any (i) pro forma financial statements (but excluding financial information relating to the Company necessary for Parent to prepare pro forma financial statements required by paragraph 5 of Exhibit D to the Debt Commitment Letter), any information regarding post-Closing pro forma cost savings, synergies, adjustments, capitalization or ownership or projections, (ii) description of all or any portion of the Debt Financing or any securities issued in lieu thereof, including any “description of notes”, “plan of distribution” and other information customarily provided by Debt Financing Sources, investment banks or their respective counsel, (iii) risk factors relating to all or any component of the Debt Financing or any securities issued in lieu thereof, (iv) other information required by Rules 3-05, 3-09, 3-10, 3-16, 13-01 or 13-02 of Regulation S-X, the Compensation Discussion and Analysis or other information required by Item 10, Item 402 or Item 601 of Regulation S-K, XBRL exhibits and the executive compensation and related person disclosure rules related to SEC Release Nos. 33-8732A, 34-54302A and IC-27444A, (v) financial information with respect to the Company and its Subsidiaries, in either case, on a non-combined basis or non-consolidated basis, financial statements or other financial data (including selected financial data) for any period earlier than the fiscal year ended December 31, 2021, information required by segment reporting and disclosure (including as required by Regulation S-K Item 101(c) and FASB Accounting Standards Codification Topic 280), the effects of purchase accounting or any adjustments related thereto for any applicable transaction, any tax consideration disclosure, (vi) any other information or financial data customarily excluded from an offering memorandum for private placements of non-convertible high-yield debt securities in a Rule 144A-for-life offering or (vii) any financial information or other information (other than the financial statements set forth in the definition of Required Information) that is not maintained in the ordinary course of business, that is not reasonably available to the Company under its current reporting systems, that the Company is not reasonably able to produce without undue burden or expense or to the extent that the provision thereof would violate any Law or any obligation of confidentiality binding upon the Company or any of its Affiliates, or that is subject to attorney-client privilege or would reasonably be expected to result in the loss of any attorney-client privilege or consists of attorney work product, in each case unless any such information would be required to ensure that the Required Information would not contain any untrue statement of a material fact or omit a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.
“Excluded Shares” shall have the meaning set forth in Section 3.1(a).
“Existing Credit Agreement” shall mean that certain Amended and Restated Credit Agreement, dated as of January 24, 2023, by and among the Company, certain of its Subsidiaries and Affiliates, the lenders from time to time party thereto, the issuing banks from time to time party thereto and JPMorgan Chase Bank, N.A., as administrative agent and collateral agent, as amended, restated, amended and restated, refinanced, replaced, supplemented or otherwise modified from time to time.
“Existing D&O Insurance Policies” shall have the meaning set forth in Section 6.6(c).
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“Expenses” shall mean all out-of-pocket expenses (including all fees and expenses of counsel, accountants, investment bankers, experts and consultants to a party hereto and its Affiliates) incurred by a party or on its behalf in connection with or related to the authorization, preparation, negotiation, execution and performance of this Agreement, the preparation, printing, filing and mailing of the Proxy Statement and all SEC and other regulatory filing fees incurred in connection with the Proxy Statement, the solicitation of stockholder approvals, any filing with, and obtaining of any necessary action or non-action or Consent from any Governmental Authority, including pursuant to any Antitrust Laws, engaging the services of the Paying Agent, any other filings with the SEC and all other matters related to the Closing and the other transactions contemplated by this Agreement.
“Final Offering Period” shall have the meaning set forth in Section 3.3(e).
“Financial Advisor” shall mean (i) an investment adviser representative of the Company or any of its Subsidiaries that is registered as an investment adviser under the Investment Advisers Act; or (ii) a registered representative of the Company or any of its Subsidiaries that is a registered broker-dealer.
“Financing Commitments” shall have the meaning set forth in Section 5.8(a).
“Financing Sources” shall mean the Debt Financing Sources.
“FINRA” shall mean the Financial Industry Regulatory Authority, Inc. and any successor thereto.
“FINRA Approval” shall have the meaning set forth in Section 6.3(d).
“Funding Obligations” shall have the meaning set forth in Section 5.8(b).
“Funds” shall have the meaning set forth in Section 5.8(b).
“GAAP” shall mean the United States generally accepted accounting principles.
“Governmental Authority” shall mean any United States (federal, state or local) or foreign government, multi-national, national, federal, regional, state, provincial or local court, legislature, executive or any governmental, regulatory, Self-Regulating Authority, judicial or administrative authority, agency or commission, or other similar governmental authority, body, court, judicial body, tribunal or subdivision thereof.
“Grant Date” shall have the meaning set forth in Section 4.2(d).
“Hazardous Substances” shall mean (a) any petrochemical or petroleum products, by-products, derivatives or wastes, radioactive materials, asbestos or asbestos containing materials or products, urea formaldehyde foam insulation, polychlorinated biphenyls or materials containing same, per- and polyfluoroalkyl substances, lead or lead-based paints or materials, mold in quantities or concentrations that may adversely affect human health, radon gas and other substances that may have an adverse effect on human health or the environment; (b) any chemicals, materials or substances defined as or included in the definition of “hazardous substances,” “hazardous wastes,” “hazardous materials,” “restricted hazardous materials,” “extremely hazardous substances,” “toxic substances,” “contaminants” or “pollutants” or words of similar meaning and regulatory effect; or (c) any other chemical, material or substance, exposure to which is prohibited, limited or regulated or for which liability or standards of conduct may be imposed pursuant to any applicable Environmental Law.
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“HSR Act” shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the rules and regulations thereunder.
“Insurance Carrier” shall mean any insurance company or reinsurance company or other Person with whom the Company or any of its Subsidiaries has placed insurance or reinsurance or has a Contract or other arrangement in place with respect to the placement of insurance or reinsurance.
“Insurance Producer” shall mean any insurance broker, customer representative, agent, agency, managing general agent, solicitor, producer or sub-producer.
“Intellectual Property” shall mean any of the following, in any jurisdiction of the world (a) patents, utility models and industrial design registrations and applications (including any continuations, divisionals, continuations-in-part, provisionals, renewals, reissues, re-examinations and applications for any of the foregoing) (“Patents”); (b) trademarks, service marks, trade names, brand names, slogans, logos, trade dress and similar designations of source or origin, in each case together with all goodwill associated with any of the foregoing, and all registrations and applications for registration related to any of the foregoing (“Trademarks”); (c) copyrights, mask works (including any registrations, applications and renewals for any of the foregoing), rights in Software and moral rights (“Copyrights”); (d) rights associated with the registration, ownership or use of any internet domain name, together with rights in such internet domain name and any account associated therewith (“Domain Names”); (e) rights associated with the registration, ownership or use of an account with a proprietor of an internet-based application or Web site that facilitates the creation and exchange of user-generated content, such as Facebook, X, Pinterest, TikTok or Instagram; (f) trade secrets, including know-how, processes, formulae, algorithms, models, methodologies, inventions, discoveries, research and development, compositions, ideas, technical data, procedures, designs, including customer lists, supplier lists, pricing and cost information, and business and marketing plans and proposals (“Trade Secrets”); (g) all other intellectual property rights which subsist in any part of the world; and (h) all tangible embodiments of the foregoing.
“Intentional Breach” means, with respect to any representation, warranty, agreement or covenant, an action or omission (including a failure to cure circumstances) taken or omitted to be taken that the breaching party intentionally takes (or intentionally fails to take) and knows (or reasonably should have known) would, or would reasonably be expected to, cause a material breach of such representation, warranty, agreement or covenant.
“Intervening Event” shall have the meaning set forth in Section 6.5(h)(iii).
“Investment Advisers Act” shall mean the Investment Advisers Act of 1940 and the rules and regulations of the SEC thereunder.
“IRS” shall mean the Internal Revenue Service.
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“Knowledge” shall mean the actual knowledge, after reasonable due inquiry of direct reports, of the following officers and employees of the Company or Parent, as applicable: (i) for the Company: each of those individuals listed on Section 1.1(a) of the Company Disclosure Letter (without independent investigation); and (ii) for Parent: each of those individuals listed on Section 1.1(a) of the Parent Disclosure Letter (without independent investigation).
“Law” shall mean any and all domestic (federal, state or local) or foreign laws (including common law), rules, statutes, directives, constitutions, treaties, conventions, ordinances, mandates, codes, regulations, orders, judgments, common law or decrees or other similar requirements or rules of law enacted, adopted, promulgated or applied by any Governmental Authority, including any COVID-19 Measures.
“Leased Real Property” means any real property subject to a Company Tenant Lease.
“Lenders” shall mean each of the lenders listed on Section 1.1(b) of the Parent Disclosure Letter.
“Lien” shall mean liens, claims, mortgages, encumbrances, pledges, security interests or charges of any kind.
“Material Supplier” shall have the meaning set forth in Section 4.16(a)(vi).
“Maximum Amount” shall have the meaning set forth in Section 6.6(c).
“Merger” shall have the meaning set forth in the Recitals.
“Merger Consideration” shall have the meaning set forth in Section 3.1(b).
“Money Laundering Laws” shall have the meaning set forth in Section 4.5(e).
“Multiemployer Plan” means a “multiemployer plan” as defined by Section 3(37) of ERISA.
“NASDAQ” shall have the meaning set forth in Section 4.4(b).
“New Plans” shall have the meaning set forth in Section 6.9(c).
“Notice of Adverse Recommendation” shall have the meaning set forth in Section 6.5(e)(iii).
“Old Plans” shall have the meaning set forth in Section 6.9(c).
“Open Source Software” means any software licensed, provided or distributed under any open-source or similar license, including any license meeting the Open Source Definition (as promulgated by the Open Source Initiative) or the Free Software Definition (as promulgated by the Free Software Foundation) (including the GNU General Public License (GPL), GNU Lesser General Public License (LGPL), Affero General Public License (AGPL), Mozilla Public License (MPL), BSD licenses, the Artistic License, the Netscape Public License, the Sun Community Source License (SCSL), the Sun Industry Standards License (SISL), Open Source Initiative and the Apache License).
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“Order” shall mean any order, verdict, decision, writ, ruling, decree, judgment, injunction made, issued or entered by or with any Governmental Authority.
“Parent” shall have the meaning set forth in the Preamble.
“Parent Audited Financial Statements” shall have the meaning set forth in Section 5.15(a).
“Parent Confidentiality Agreement” shall have the meaning set forth in Section 6.3(g).
“Parent Credit Agreement” shall mean that certain credit agreement set forth on Section 1.1(c) of the Parent Disclosure Letter.
“Parent Disclosure Letter” shall mean the disclosure letter delivered by Parent to the Company simultaneously with the execution of this Agreement.
“Parent Financial Statements” shall have the meaning set forth in Section 5.15(a).
“Parent Indenture” shall mean that certain indenture set forth on Section 1.1(d) of the Parent Disclosure Letter.
“Parent Material Adverse Effect” shall mean any Effect which, individually or in the aggregate, has prevented or materially delayed or materially impaired or would reasonably be expected to prevent or materially delay or materially impair, the ability of Parent or Acquisition Sub to consummate the Merger and the other transactions contemplated by this Agreement.
“Parent Organizational Documents” shall mean the certificate of incorporation, bylaws (or equivalent organizational or governing documents) and other organizational or governing documents, agreements or arrangements, each as amended to date, of each of Parent and Acquisition Sub.
“Parent Related Parties” shall have the meaning set forth in Section 8.3(c).
“Parent Unaudited Financial Statements” shall have the meaning set forth in Section 5.15(a).
“Paying Agent” shall have the meaning set forth in Section 3.2(a).
“Paying Agent Agreement” shall have the meaning set forth in Section 3.2(a).
“Payoff Letter” shall have the meaning set forth in Section 6.13.
“PCAOB” shall mean the Public Company Accounting Oversight Board.
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“Permitted Liens” means (a) any Lien for Taxes, utilities, landlords and other governmental charges not yet due and payable or that are being contested in good faith by any appropriate proceedings and for which adequate accruals or reserves have been established in accordance with GAAP, (b) Liens securing indebtedness or liabilities that are reflected in the Company SEC Documents or incurred in the ordinary course of business, incurred not in violation of Section 6.1 and since the end of the most recent fiscal year for which an Annual Report on Form 10-K has been filed by the Company with the SEC and Liens securing indebtedness or liabilities that have otherwise been disclosed to Parent in writing, (c) such non-monetary encumbrances of record, if any, disclosed on the existing title policies, title commitments or surveys which have been previously provided or made available to Parent or the Company, as applicable, that do not have a Company Material Adverse Effect, (d) Liens imposed or promulgated by Laws 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 Authority, provided that none of the foregoing individually or in the aggregate materially impair the value or marketability or continued use, occupancy or operation of the Leased Real Property as conducted as of the date hereof and are not violated by the current use, occupancy or operation of the Leased Real Property or the operation of the business of the Company and its Subsidiaries, (e) mechanics’, carriers’, workmen’s, repairmen’s, materialmen’s, warehousemen’s, suppliers’, cashiers’ and similar Liens incurred in the ordinary course of business or arising by operation of law, each of which are not yet due and payable, (f) Liens securing acquisition financing with respect to the applicable asset (excluding with respect to any real property), (g) non-exclusive licenses of Intellectual Property granted in the ordinary course of business, (h) covenants, conditions, restrictions, rights-of-way, servitudes, encroachments, permits and oil, gas, mineral and any mining reservations, rights, licenses and leases that do not materially impair the value, occupancy or use of such property, (i) deposits made in the ordinary course of business to secure payments of worker’s compensation, unemployment insurance or other types of social security benefits or the performance of bids, tenders, sales, Contracts, public or statutory obligations, and surety, stay, appeal, customs or performance bonds, in each case, arising in the ordinary course of business, (j) Liens resulting from securities Laws, (k) Liens incurred in the ordinary course of business in connection with any purchase money security interests, equipment leases or similar financing arrangements, (l) Liens created by (or at the request of) Parent, Acquisition Sub or any of their respective Affiliates, (m) Liens that will be removed prior to or at the Closing and (n) Liens securing obligations in connection with the Existing Credit Agreement.
“Permitted PSU” means each Company PSU that is granted on or after January 1, 2024 as part of the Company’s ordinary course annual equity award grant practice, which Company PSUs will be consistent in all material respects with the vesting, performance and other terms applicable to the Company PSUs granted prior to the date hereof, including the Company Board’s (or a committee thereof) process of approving such awards.
“Permitted RSU” means each Company RSU that is granted on or after January 1, 2024 as part of the Company’s ordinary course annual equity award grant practice, which Company RSUs will be consistent in all material respects with the vesting and other terms applicable to the Company RSUs granted prior to the date hereof, including the Company Board’s (or a committee thereof) process of approving such awards.
“Person” shall mean an individual, a corporation, a limited liability company, a partnership, an association, a trust or any other entity or organization, including a Governmental Authority.
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“Personal Data” shall mean data or information that (a) identifies, relates to, describes or is reasonably capable of being associated, or could reasonably be linked, directly or indirectly, with a natural person or (b) is defined as “personal data,” “personal information,” or “personally identifiable information” or a similar term under applicable Data Protection Law.
“Plan Client” shall have the meaning set forth in Section 4.31(a).
“Pre-Closing Period” shall have the meaning set forth in Section 6.1.
“Privacy Obligations” means, to the extent applicable to the Company or its Subsidiaries, all (a) applicable Data Protection Laws; (b) publicly facing policies, procedures, and notices of the Company or its Subsidiaries relating to the collection, access, use, storage, disclosure, transmission, destruction, or cross-border transfer of Personal Data; (c) contractual requirements or obligations, that in each case pertain to privacy or restrictions or obligations related to the collection or processing of Personal Data (including any security breach notification requirements); and (d) applicable standards published by the Payment Card Industry Security Standards Council (e.g., PCI-DSS).
“Prohibited Actions” shall have the meaning set forth in Section 6.11(b).
“Proprietary Software” means all Software constituting or embodying Company Owned IP.
“Proxy Statement” shall have the meaning set forth in Section 4.7.
“QPAM Exemption” shall have the meaning set forth in Section 4.31(b).
“Registered Adviser” shall have the meaning set forth in Section 4.17(a).
“Registered Adviser Regulatory Filings” shall have the meaning set forth in Section 4.17(c).
“Registered Adviser Service Provider” means each individual who is a current director, officer, employee, independent contractor or other service provider of a Registered Adviser.
“Registered Broker-Dealer” shall have the meaning set forth in Section 4.17(e).
“Regulation A Disqualifying Event” shall have the meaning set forth in Section 4.17(s).
“Regulation D Disqualifying Event” shall have the meaning set forth in Section 4.17(s).
“Regulatory Documents” shall mean, with respect to a Person, all forms, reports, registration statements, submissions, schedules and other documents filed, or required to be filed, by such Person pursuant to applicable securities Laws or the other applicable rules and regulations of any Governmental Authority.
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“Release” shall mean any actual or threatened release, spill, emission, discharge, leaking, pumping, injection, deposit, disposal, discharge, dispersal leaching or migration of a Hazardous Substance into the environment, including the movement of Hazardous Substances through or in the air, soil, surface water or groundwater or into or out of any property or including the movement of Hazardous Substances through or in the air, soil, surface water, groundwater or property.
“Remedial Action” shall have the meaning set forth in Section 6.3(b).
“Replacement Cash Award” shall have the meaning set forth in Section 3.3(d).
“Representatives” shall mean, as to any Person, such Person’s Affiliates and its and their respective directors, officers, employees, agents, advisors, consultants, representatives and controlling Persons and any representatives of the foregoing.
“Required Information” shall mean the specific financial statements, financial data, audit reports and other information regarding the Company and its Subsidiaries that are required by paragraph 4 of Exhibit D to the Debt Commitment Letter.
“Requisite Stockholder Approval” shall have the meaning set forth in Section 4.19.
“Reverse Termination Fee” shall mean an amount equal to $82,129,502.
“Sanctions” shall have the meaning set forth in Section 4.5(f).
“Sarbanes-Oxley Act” shall have the meaning set forth in Section 4.5(c).
“SEC” shall mean the Securities and Exchange Commission.
“Secretary” shall have the meaning set forth in Section 2.3(a).
“Securities Act” shall mean the Securities Act of 1933.
“Security Breach” shall have the meaning set forth in Section 4.14(j).
“Self-Regulating Authority” means FINRA, the New York Stock Exchange, Inc., NASDAQ, the National Futures Association, the CBOE BZX Exchange, the CBOE BYX Exchange, The Depository Trust & Clearing Corporation or any other agency, body, exchange, authority or organization similar to the foregoing having jurisdiction or regulatory authority over the Company or any of its Subsidiaries.
“Similar Law” shall have the meaning set forth in Section 4.31(a).
“Software” shall mean all (a) computer programs (including any and all software, firmware, or implementation of algorithms, models and methodologies whether in source code, executable code, or object code), (b) APIs; (c) assemblers and compilers; (d) data files, (e) software libraries; (f) device drivers; (g) databases and database schema and compilations (including any and all data and collections of data, whether machine readable or otherwise), (h) all programming notes, flow-charts and other work product used to design and develop any of the foregoing, and (i) documentation (including user manuals and training materials) relating to any of the foregoing.
“Solvent” shall have the meaning set forth in Section 5.12.
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“Specified Date” shall have the meaning set forth in Section 4.2(a).
“Stockholders’ Meeting” shall have the meaning set forth in Section 6.2(c).
“Subsidiary” of any Person, shall mean any corporation, partnership, joint venture or other legal entity of which such Person (either above or through or together with any other subsidiary), owns, directly or indirectly, more than 50% of the stock or other equity interests, the holders of which are generally entitled to vote for the election of the board of directors or other governing body of such corporation or other legal entity.
“Superior Proposal” shall have the meaning set forth in Section 6.5(h)(ii).
“Surviving Corporation” shall have the meaning set forth in Section 2.1.
“Tail Coverage” shall have the meaning set forth in Section 6.6(c).
“Takeover Laws” shall have the meaning set forth in Section 4.27.
“Tax” or “Taxes” shall mean any and all taxes, fees, levies, duties, tariffs, imposts and other similar charges (together with any and all interest, penalties and additions to tax) imposed by any Governmental Authority, including taxes or other charges on or with respect to income, franchises, windfall or other profits, gross receipts, real property, personal property, sales, use, capital stock, payroll, employment, social security, workers’ compensation, unemployment compensation or net worth; taxes or other charges in the nature of excise, withholding, ad valorem, stamp, transfer, value added or gains taxes; customs duties and tariffs; and other obligations of the same or of a similar nature to any of the foregoing.
“Tax Returns” shall mean returns, reports, declarations, information statements and similar documents, including any schedule or attachment thereto, with respect to Taxes required to be filed with the IRS or any other Governmental Authority or taxing authority, including any claim for refund or amended return.
“TDI Consent” shall mean the non-disapproval from the Texas Department to the filings by the Company with the Texas Department as required under Texas Insurance Code § 4001.253, in connection with the transactions contemplated hereby, to request the non-disapproval of the Texas Department of the change of control of Avantax Insurance Agency, LLC, Avantax Insurance Services, Inc., and Avantax Planning Partners, Inc. that are licensed as agencies in Texas.
“Termination Date” shall have the meaning set forth in Section 8.1(b)(i).
“Texas Department” shall mean the Texas Department of Insurance.
“Third Party” shall mean any Person or group other than Parent, Acquisition Sub and their respective Affiliates.
“Third-Party Agent” shall mean each Person, other than an Employee Agent, that is acting as an Insurance Producer for or on behalf of the Company or any of its Subsidiaries.
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“Trade Control Laws” shall have the meaning set forth in Section 4.5(g).
“Treasury Regulations” shall mean the income tax regulations promulgated under the Code.
“VDR” shall have the meaning set forth in Section 4.32(a).
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Exhibit 10.1
EXECUTION VERSION
AVANTAX, INC.
EXECUTIVE CHANGE OF CONTROL SEVERANCE PLAN
FIRST AMENDMENT
TO
PARTICIPATION AGREEMENT
This First Amendment (the “Amendment”) to that certain Participation Agreement (the “Participation Agreement”), entered into as of May 11, 2022, between Avantax, Inc. (f/k/a Blucora, Inc.) (the “Company”) and Christopher W. Walters (“Executive”), is entered into as of September 9, 2023, between the Company and Executive.
WHEREAS, the Compensation Committee of the Company’s Board of Directors has adopted the Avantax, Inc. Executive Change of Control Severance Plan, effective as of January 17, 2021 and as amended on May 2, 2022 and January 26, 2023 (the “Plan”), to provide certain benefits to participants upon a qualifying termination of employment, as contemplated under the Plan;
WHEREAS, Executive previously entered into a Confidentiality and Non-Competition Agreement (as defined in the Plan) with the Company in consideration for (i) the Company’s promise to provide Executive with Confidential Information (as defined in such Confidentiality and Non-Competition Agreement), (ii) the substantial economic investment made by the Company in the Confidential Information and goodwill of the Company, and/or the business opportunities disclosed or entrusted to Executive, (iii) access to the customers and clients of the Company, and (iv) the Company’s employment of Executive in an executive position and the compensation and other benefits provided by Company to Executive;
WHEREAS, pursuant to the Participation Agreement, Executive agreed to amend the Confidentiality and Non-Competition Agreement to provide that upon a qualifying termination of employment, as contemplated under the Plan, the period of any non-competition, non-solicitation, non-recruitment or similar provision under any Confidentiality and Non-Competition Agreement (generally referred to therein as the “Restricted Period”) would be for a period of twenty-four (24) months after the Termination Date (as defined in the Plan) notwithstanding anything to the contrary contained in such Confidentiality and Non-Competition Agreement;
WHEREAS, the Plan Administrator (as defined in the Plan) desires to amend the Participation Agreement to extend the Restricted Period from twenty-four (24) months after the Termination Date to thirty (30) months after the Termination Date (the “Additional Restricted Covenant Extension”) and in exchange for Executive’s agreement to the Additional Restricted Covenant Extension, the Company has agreed to provide the Executive with access to additional Confidential Information and also provide Executive with a payment as set forth in this Amendment;
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WHEREAS, Executive agrees that (i) the Company’s promise to provide additional Confidential Information, (ii) the Company’s promise to pay Executive the amounts set forth in this Amendment, (iii) the substantial economic investment made by the Company in the Confidential Information and goodwill of the Company, and/or the business opportunities entrusted to Executive, (iv) access to customers and clients of the Company, and (v) the Company’s employment of Executive in an executive position and the compensation and other benefits provided by the Company to Executive, and each of them, are good and valuable consideration for the Additional Restricted Covenant Extension; and
WHEREAS, Executive acknowledges that Executive has carefully reviewed this Amendment and has decided that Executive wishes to enter into this Amendment on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants, promises and obligations set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Executive agree as follows:
1. Section 3(a) of the Participant Agreement is hereby amended in its entirety to read as follows:
a. Executive agrees that upon the termination of Executive’s employment with the Company, if such termination is a Qualifying Termination, the period of any non-competition, non-solicitation, non-recruitment or similar provision under any Confidentiality and Non-Competition Agreement (generally referred to therein as the “Restricted Period”) shall be for a period of thirty (30) months after the Termination Date notwithstanding anything to the contrary contained in such Confidentiality and Non-Competition Agreement. Each such Confidentiality and Non-Competition Agreement shall be deemed amended to the extent necessary to reflect the terms of this Agreement.
2. Executive has consulted with legal counsel regarding the Restrictive Covenants and based on such consultation has determined and hereby acknowledges that the Restrictive Covenants are reasonable in terms of duration, scope and area restrictions and are necessary to protect the goodwill of the Company and its Affiliates.
3. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument.
4. Adequacy of Consideration. Executive acknowledges and agrees that (i) the Company’s promise to provide additional Confidential Information, (ii) the Company’s promise to pay Executive $100 in a lump sum cash payment within thirty (30) days of the date Executive executes this Amendment, (iii) the substantial economic investment made by the Company in the Confidential Information and goodwill of the Company, and/or the business opportunities entrusted to Executive, (iv) access to customers and clients of the Company, and (v) the Company’s employment of Executive in an executive position and the compensation and other benefits provided by the Company to Executive, and each of them, are good and valuable consideration for being subject to the terms of this Amendment, including the Additional Restricted Covenant Extension. Executive further acknowledges and agrees that Executive has previously received Confidential Information from the Company in consideration and support of the restricted covenants set forth in Executive’s Confidentiality and Non-Competition Agreement.
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5. Severability. If a court of competent jurisdiction determines that any provision of this Amendment is invalid or unenforceable, then the invalidity or unenforceability of that provision shall not affect the validity or enforceability of any other provision of this Amendment, the Participation Agreement or the Plan and all other provisions shall remain in full force and effect.
6. Complete Agreement. This Amendment, the Participation Agreement and the Plan constitute the complete agreement between Executive and the Company concerning the subject matter herein and therein and while in effect they supersede and replace any prior written or oral understandings entered into between Executive and the Company solely to the extent relating to severance or related benefits in the event of, or in connection with, a Change of Control; provided, further, that for the avoidance of doubt, Section 3(b)(ii) of the Plan shall supersede and replace any prior writing entered into between Executive and the Company (including any employment agreement or award agreements) relating to the treatment of Executive’s outstanding equity awards in the event of a Qualifying Termination (including as any such prior writing provides in respect of any determination of actual performance in the event of a Qualifying Termination). Notwithstanding the foregoing, to the extent Executive was subject to restrictive covenants prior to the execution of the Participation Agreement, such restrictive covenants shall continue to remain in full force and effect, except as otherwise provided in Section 3 of the Participation Agreement, as modified by Section 1 of this Amendment.
* * * * *
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IN WITNESS WHEREOF, the parties have executed this Agreement, effective as of the date first set forth above.
| AVANTAX, INC. | ||
| By: | /s/ Tabitha Bailey | |
| Name: | Tabitha Bailey | |
| Title: | Chief Legal Officer | |
| Date: | September 9, 2023 | |
| EXECUTIVE | ||
| /s/ Chris Walters | ||
| Name: Chris Walters | ||
[Signature Page to First Amendment to Participation Agreement]
Exhibit 99.1
Avantax Enters into Definitive Agreement to be Acquired by Cetera Holdings
Avantax Stockholders to Receive $26.00 Per Share in Cash
Avantax Financial Professionals and Accounting Firms to Expand and Enhance Cetera’s Wealth Management Group Ecosystem
Avantax To Operate as a Standalone Entity Within Cetera Holdings, Further Expanding Cetera’s Tax and Wealth Management Offerings
DALLAS and LOS ANGELES, September 11, 2023 -- Avantax, Inc. (NASDAQ: AVTA) (the “Company”), a leader in tax-focused financial planning and wealth management, and Cetera Financial Group (“Cetera”), the premier financial advisor Wealth Hub, announced today that Avantax and Aretec Group, Inc. d/b/a Cetera Holdings, the holding company of Cetera, have entered into a definitive agreement whereby Cetera Holdings will acquire all of the issued and outstanding equity of Avantax in an all-cash transaction valuing Avantax at approximately $1.2 billion, inclusive of Avantax’s net debt.
Following the closing, Avantax will become a standalone business unit within the Cetera family with 3,078 Avantax financial professionals, representing $83.8 billion in assets under administration and $42.6 billion in assets under management, as of June 30, 2023. Through the transaction, Cetera will retain Avantax’s legal entities, core technology, product offerings and existing clearing and custody relationships.
Holders of shares of Avantax common stock will receive $26.00 in cash per share, without interest and subject to required withholding taxes. The purchase price represents a premium of approximately 30% to the closing price of shares of Avantax common stock on September 8, 2023, the last full trading day prior to announcement of the transaction.
“This transaction, upon closing, will deliver immediate cash value to Avantax stockholders. It is a result of Avantax’s strategic transformation and value creation efforts, which, when combined with the sale of TaxAct in December 2022, has unlocked significant value for our stockholders,” said Chris Walters, Chief Executive Officer of Avantax. “I am extremely grateful to our extraordinary community of financial professionals as well as the entire Avantax team for their unwavering focus and steadfast professionalism throughout our transformation. I am confident that this combination with Cetera is beneficial for Avantax, our financial professionals, employees and stockholders.”
“Over the past several years, Avantax’s Board and senior management team have positioned the Company for long-term, sustainable growth through a simplified strategy, strengthened balance sheet and improved operational performance while exploring strategic opportunities for the future success of the business,” said Georganne Proctor, Avantax’s Chair of the Board. “These efforts and the strength of our platform, people and financial professional community have not gone unnoticed. After carefully evaluating how best to maximize value for our stockholders, the Board unanimously determined that this transaction is in the best interests of Avantax and its stockholders. We also believe that this will position the business, our people, our financial professionals and our affiliates for the future.”
“As we explored expanding Cetera’s capabilities into wealth management and tax expertise as a core component of our growth strategy, it quickly became clear that Avantax was an ideal target and a powerful fit for our business,” said Mike Durbin, CEO of Cetera Holdings. “As we enter Cetera’s next phase of evolution, our five-year growth strategy is off to a terrific start. Avantax will significantly build out Cetera’s capabilities in tax and wealth management. As we have said in the past, disrupting the market with expanding capabilities means more flexibility for advisors, and developing adjacent capabilities and channels expands our addressable market. This acquisition will activate this potential and represents an important milestone in Cetera’s growth trajectory.”
“The addition of Avantax Planning Partners, an award-winning employee-based RIA with over $7.6 billion in assets under management, will complement and strengthen Cetera’s recently launched, highly successful succession solution offering and will deliver a combined offering that is even more compelling and impactful across all of the advisor communities,” continued Mr. Durbin.
“This acquisition will establish a strategic relationship between Cetera and Fidelity, which will enable Cetera to expand further into a multi-custodial platform, enhancing Cetera’s capabilities to provide tools and functionalities for its affiliated advisors. We are executing against our multi-custodian aspirations, and capturing new markets and adjacencies,” said Adam Antoniades, CEO of Cetera Financial Group. “We will take a thoughtful, personalized, and proactive approach with Avantax to ensure Avantax’s valued financial professionals aren’t disrupted in any way. Our tax-centric Cetera Financial Specialist team has already created a formidable presence in our industry, and we are delighted that after the closing of this acquisition, we will be able to offer all of our advisors even greater opportunities to expand into tax and accounting.”
Transaction Details
Avantax’s Board of Directors unanimously approved the transaction, and the transaction is expected to close by the end of 2023, subject to stockholder approval, regulatory approvals, and other customary closing conditions. The transaction is not subject to any financing condition.
Upon completion of the transaction, Avantax will become a privately held company, and its common stock will no longer be traded on Nasdaq.
For further information regarding the terms and conditions contained in the definitive transaction agreement, please see Avantax’s current report on Form 8-K, which will be filed with the U.S. Securities and Exchange Commission in connection with the transaction.
Advisors
PJT Partners is acting as financial advisor to Avantax, and Sidley Austin LLP and Haynes and Boone, LLP are serving as legal counsel to Avantax. Morgan Stanley & Co. is serving as financial advisor to Cetera. UBS Investment Bank and BMO Capital Markets served as co-advisors to Cetera. Willkie Farr & Gallagher LLP is serving as legal counsel to Cetera.
About Avantax®
Avantax, Inc. (NASDAQ: AVTA) delivers tax-focused financial planning and wealth management solutions for financial professionals, tax professionals and CPA firms, supporting its goal of minimizing clients’ tax burdens through comprehensive tax-focused financial planning. Avantax has two distinct, but related, models within its business: the independent Financial Professional model and the employee-based model. Avantax refers to its independent Financial Professional model as Avantax Wealth Management®. Avantax Wealth Management offers services through its registered broker-dealer, registered investment advisor (RIA) and insurance agency subsidiaries and is a leading U.S. tax-focused independent broker-dealer that works with a nationwide network of financial professionals operating as independent contractors. Avantax refers to its employee-based model as Avantax Planning Partners℠. Avantax Planning Partners offers services through its RIA and insurance agency by partnering with CPA firms to provide their consumer and small-business clients with holistic financial planning and advisory services. Collectively, Avantax had $83.8 billion in total client assets as of June 30, 2023. For additional information, please visit www.avantax.com. You can also find Avantax on LinkedIn.
About Cetera Financial Group®
Cetera Financial Group (Cetera) is the premier Wealth Hub where financial advisors and institutions optimize their control and value creation. Breaking away from a commoditized and homogenous IBD model, Cetera offers financial professionals and institutions the latest solutions, support, and services to grow, scale, or transition with a merger, sale, investment, or succession plan. Cetera proudly serves independent financial advisors, tax professionals, licensed administrators, large enterprises, as well as institutions, such as banks and credit unions, providing an established and repeatable blueprint for scalable growth.
Home to more than 9,000 financial professionals and their teams, Cetera oversees approximately $341 billion in assets under administration and $121 billion in assets under management, as of June 30, 2023. In a recent advisor satisfaction survey of more than 21,000 reviews, Cetera’s Voice of Customer (VoC) program vigorously measures advisor experience and satisfaction 24/7. Currently, it’s ranked 4.8 out of 5 stars.
Visit www.cetera.com, and follow Cetera on LinkedIn, YouTube, Twitter and Facebook.
“Cetera Financial Group” refers to the network of independent retail firms encompassing, among others, Cetera Advisors LLC, Cetera Advisor Networks LLC, Cetera Investment Services LLC (marketed as Cetera Financial Institutions or Cetera Investors), and Cetera Financial Specialists LLC. All firms are FINRA/SIPC members. Located at: 655 W. Broadway, 11th Floor, San Diego, CA 92101.
Securities offered through Cetera Advisor Networks, LLC (doing insurance business in CA as CFGAN Insurance Agency LLC), member FINRA/SIPC, a broker/dealer. Advisory services offered through Cetera Investment Advisers, LLC, a registered investment adviser. Cetera is under separate ownership from any other named entity.
Individuals affiliated with Cetera firms are either Registered Representatives who offer only brokerage services and receive transaction-based compensation (commissions), Investment Adviser Representatives who offer only investment advisory services and receive fees based on assets, or both Registered Representatives and Investment Adviser Representatives, who can offer both types of services.
*Value approximated based on asset holding details provided to Cetera.
Avantax Investor Contact:
Dee Littrell
(972) 870-6463
Media Contacts:
For Avantax:
Tony Katsulos
(972) 870-6654
Dan Gagnier
Gagnier Communications
(646) 569-5897
For Cetera:
Jessica Caris
Ryan Hoffman
Cautionary Statement Regarding Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including, without limitation, statements regarding the anticipated timing of the consummation of the proposed merger transaction (the “proposed transaction”) involving Avantax, Inc. (the “Company”), Aretec Group, Inc. (“Parent”) and C2023 Sub Corp., whereby the Company would become a wholly-owned subsidiary of Parent, plans for the Company following the closing of the proposed transaction and the anticipated effects of the proposed transaction on the Company’s business and Cetera Financial Group. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Forward-looking statements can also be identified by words such as “anticipates,” “believes,” “plans,” “expects,” “future,” “intends,” “may,” “will,” “would,” “could,” “should,” “estimates,” “predicts,” “potential,” “continues,” “target,” “outlook” and similar terms and expressions, but the absence of these words does not mean that the statement is not forward-looking. Actual results may differ significantly from management’s expectations due to various risks and uncertainties including, without limitation: (i) the risk that the proposed transaction may not be completed in a timely manner, or at all; (ii) the failure to satisfy the conditions to the consummation of the proposed transaction, including, without limitation, the receipt of stockholder and regulatory approvals; (iii) unanticipated difficulties or expenditures relating to the proposed transaction; (iv) the effect of the announcement or pendency of the proposed transaction on the plans, business relationships, operating results and operations; (v) potential difficulties retaining employees, financial professionals and clients as a result of the announcement and pendency of the proposed transaction; (vi) the response of employees, financial professionals and suppliers to the announcement of the proposed transaction; (vii) risks related to diverting management’s attention from the Company’s ongoing business operations; (viii) legal proceedings, including those that may be instituted against the Company, its board of directors, its executive officers or others following the announcement of the proposed transaction; and (ix) risks regarding the failure to obtain the necessary financing to complete the proposed transaction. In addition, a description of certain other factors that could affect the Company’s business, financial condition or results of operations is included in the Company’s most recent Annual Report on Form 10-K and most recent Quarterly Report on Form 10-Q filed with the U.S. Securities and Exchange Commission (the “SEC”). Forward-looking statements reflect the Company’s good faith beliefs, assumptions and expectations but are not guarantees of future performance or events. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date hereof, except as may be required by law.
Additional Information Regarding the Merger and Where to Find It
This press release is being issued in connection with the proposed transaction. This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities or the solicitation of any vote or approval. The proposed transaction will be submitted to the stockholders of the Company for their consideration at a special meeting of the stockholders. In connection therewith, the Company intends to file a proxy statement and other relevant materials with the SEC, including a definitive proxy statement on Schedule 14A, which will be mailed or otherwise disseminated to the stockholders of the Company as of the record date established for voting on the proposed transaction. The Company may also file other relevant documents with the SEC regarding the proposed transaction. BEFORE MAKING ANY VOTING OR INVESTMENT DECISION WITH RESPECT TO THE PROPOSED TRANSACTION, INVESTORS AND SECURITY HOLDERS OF THE COMPANY ARE URGED TO READ THE DEFINITIVE PROXY STATEMENT REGARDING THE PROPOSED TRANSACTION (INCLUDING ANY AMENDMENTS OR SUPPLEMENTS THERETO) AND OTHER RELEVANT DOCUMENTS FILED OR TO BE FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. Investors and security holders may obtain free copies of the definitive proxy statement, any amendments or supplements thereto and other documents containing important information about the Company, once such documents are filed with the SEC, through the website maintained by the SEC at www.sec.gov. In addition, stockholders of the Company may obtain free copies of the documents filed with the SEC by directing a request through the Investor Relations portion of the Company’s website at https://investors.avantax.com or by mail to Avantax, Inc., 3200 Olympus Boulevard, Suite 100, Dallas, Texas 75019, Attention: Dee Littrell, Investor Relations.
Participants in the Solicitation
The Company and its directors, its executive officers and certain other members of Company management and Company employees may, under the rules of the SEC, be deemed to be participants in the solicitation of proxies in connection with the proposed transaction. Information about the directors and executive officers of the Company is set forth in the Company’s definitive proxy statement on Schedule 14A for the 2023 annual meeting of the stockholders of the Company, filed with the SEC on April 3, 2023 and in subsequent documents filed with the SEC, each of which is (or, when filed will be) available free of charge from the sources indicated above. Other information regarding the participants in the solicitation of proxies from the stockholders of the Company and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the preliminary and definitive proxy statements and other relevant materials to be filed with the SEC regarding the proposed transaction when they become available.