Conduct of Business Prior to the Effective Time 6.1 Conduct of Business of the Company. During the period commencing on the date hereof and continuing until the Effective Time, the Company and the Sole Stockholder agree that the Company, except as otherwise expressly contemplated by this Agreement or agreed to in writing by the Parent:
(a) will carry on its business only in the ordinary course and consistent with past practice;
(b) will not declare or pay any dividend on or make any other distribution (however characterized) in respect of shares of its capital stock;
(c) will not, directly or indirectly, redeem or repurchase, or agree to redeem or repurchase, directly or indirectly, any shares of its capital stock;
(d) will not amend its Certificate of Incorporation or By-Laws;
(e) will not issue, or agree to issue, any shares of its capital stock, or any options, warrants or other rights to acquire shares of its capital stock, or any securities convertible into or exchangeable for shares of its capital stock;
(f) will not combine, split or otherwise reclassify any shares of its capital stock;
(g) will not form any subsidiaries;
(h) will use its best efforts to preserve intact its present business organization, keep available the services of its officers and key employees and preserve its relationships with clients and others having business dealings with it to the end that its goodwill and ongoing business shall not be materially impaired at the Effective Time;
(i) will not (i) make any capital expenditures individually or in the aggregate in excess of $10,000, (ii) enter into any license, distribution, OEM, reseller, joint venture or other similar agreement other than in the ordinary course, (iii) enter into or terminate any lease of, or purchase or sell, any real property, (iv) enter into any leases of personal property involving individually or in the aggregate in excess of $10,000 annually, (v) incur or guarantee any additional indebtedness for borrowed money other than in the ordinary course, (vi) create or permit to become effective any security interest, mortgage, lien, charge or other encumbrance on any of its properties or assets, or (vii) enter into any agreement to do any of the foregoing;
(j) will not adopt or amend any Benefit Plan for the benefit of Employees, or increase the salary or other compensation (including, without limitation, bonuses or severance compensation) payable or to become payable to its Employees or accelerate, amend or change the period of exercisability or the vesting schedule of options or restricted stock granted under any stock option plan or agreements or enter into any agreement to do any of the foregoing, except as specifically required by the terms of such plans or agreements;
(k) will not accelerate receivables or delay payables;
(l) will promptly advise the Parent of the commencement of, or threat of (to the extent that such threat comes to the knowledge of the Company or the Sole Stockholder) any claim, action, suit, proceeding or investigation against, relating to or involving the Company or any of its respective officers, employees, agents or consultants in connection with their businesses or the transactions contemplated hereby;
(m) will use its commercially reasonable efforts to maintain in full force and effect all insurance policies maintained by the Company on the date hereof;
(n) will not enter into any agreement to dissolve, merge, consolidate or, sell any material assets of the Company (other than in the ordinary course) or acquire or agree to acquire by merging or consolidating with, or by purchasing a substantial equity interest in or substantial portion of the assets of, or by any other manner, any business or any corporation, partnership or other business organization or division, or otherwise acquire or agree to acquire any assets in excess of $10,000 in the aggregate; and
(o) will not make any payments to officers or directors other than in the ordinary course;
(p) will not enter into any agreements with contractors or consultants (or amend or authorize additional work orders with respect to any such existing agreements); and
(q) will not change, accelerate or alter, in each case, the payment terms of any existing contract or agreement nor enter into any contract or agreement with payment terms (including timing) not materially consistent with past practice.
6.2 Conduct of Business of Acquisition Corp. During the period commencing on the date hereof and continuing until the Effective Time, Acquisition Corp. shall not engage in any activities of any nature except as provided in or contemplated by this Agreement.
Conduct of Businesses Prior to the Effective Time (a) During the period from the date of this Agreement to the Effective Time or earlier termination of this Agreement, except as expressly contemplated or permitted by this Agreement or as otherwise required by Law or regulatory directive, each of FNB and HBI shall, and shall cause each of their respective Subsidiaries to (i) conduct its business in the ordinary course in all material respects, (ii) use reasonable best efforts to maintain and preserve intact its business organization, employees and advantageous business relationships and retain the services of its key officers and key employees and (iii) take no action that would reasonably be likely to prevent or materially impede or delay the obtaining of, or materially adversely affect the ability of the parties expeditiously to obtain, any necessary approvals of any Regulatory Agency, Governmental Entity or any other person or entity required for the transactions this Agreement contemplates or to perform its respective covenants and agreements under this Agreement or to consummate the transactions contemplated by this Agreement.
(b) Subject to applicable Law, including Laws with respect to the exchange of information, the disclosure of confidential supervisory information, the protection of personally identifiable information and the exercise of a controlling influence over the management or policies of another Person, HBI agrees that between the date of this Agreement and the Effective Time:
(1) the materials to be presented at the meetings of any HBI Bank loan committee shall be provided to a designated representative of FNB at the same time such materials are provided to such loan committee; (2) HBI shall provide the minutes of each such meeting to the designated FNB representative promptly after such meeting; (3) HBI shall prepare and furnish to FNB at least quarterly an update of the reserves and other allowances for loan losses reflected in HBI’s financial statements included in the HBI Reports as of and for the year ended December 31, 2020 and for the three months ended March 31, 2021; (4) HBI shall promptly notify FNB if HBI or any HBI Subsidiary has been notified by any state or federal bank Regulatory Agency that its reserves are inadequate or that its practices for establishing its reserves or in accounting for delinquent and classified assets generally fail to comply with applicable accounting or regulatory requirements, or that any Regulatory Agency having jurisdiction over HBI or any HBI Subsidiary or HBI’s independent auditor believes such reserves to be inadequate or inconsistent with the historical loss experience of HBI; and (5) HBI shall prepare and furnish to FNB at least quarterly an updated list of all extensions of credit and OREO that have been classified by HBI or any HBI Subsidiary as other loans specifically mentioned, special mention, substandard, doubtful, loss, classified or criticized, credit risk assets, concerned loans or words of similar import;
(ii) upon request of FNB, HBI shall furnish to FNB such information to which HBI has access or prepares in the ordinary course of business as FNB may reasonably request regarding any loans, loan relationships and commitments of HBI Bank entered into between June 10, 2021, and the date hereof; and
(iii) upon request of FNB, HBI shall furnish to FNB such information to which HBI has access or prepares in the ordinary course of business as FNB may reasonably request regarding any loans, loan relationships and commitments of HBI Bank entered into after the date hereof in which the amount involved is equal to or greater than (i) $10,000,000 on a secured basis and (ii) $2,500,000 on an unsecured or undersecured basis.
Conduct of Business by Parent (a) From and after the date hereof until the earlier of the Effective Time and the Termination Date, and except (i) as may be required by Law or the regulations or requirements of any stock exchange or regulatory organization applicable to Parent or any of its Subsidiaries, (ii) as may be consented to in writing by the Partnership (which consent shall not be unreasonably withheld, delayed or conditioned), (iii) as may be contemplated or required by this Agreement or (iv) as set forth in Section 5.2(a) of the Parent Disclosure Schedule, Parent covenants and agrees that Parent shall, and shall cause its Subsidiaries to, use reasonable best efforts to (x) conduct their businesses in the ordinary course, and (y) preserve substantially intact their present lines of business and preserve their relationships with significant customers and suppliers; provided, however, that no action by Parent or its Subsidiaries with respect to matters specifically addressed by any provision of Section 5.2(b) shall be deemed a breach of this covenant unless such action would constitute a breach of such other provision.
(b) Parent agrees with the Partnership, on behalf of itself and its Subsidiaries, that from the date hereof and prior to the earlier of the Effective Time and the Termination Date, except (w) as may be required by Law or the regulations or requirements of any stock exchange or regulatory organization applicable to Parent or any of its Subsidiaries, (x) as may be consented to by the Partnership (which consent shall not be unreasonably withheld, delayed or conditioned), (y) as may be contemplated or required by this Agreement or (z) as set forth in Section 5.2(b) of the Parent Disclosure Schedule, Parent:
(i) shall not adopt any amendments to the Organizational Documents of Parent or Parent GP and shall not permit any of Parent’s Subsidiaries to adopt any material amendments to its Organizational Documents;
(ii) shall not, and shall not permit any of its Subsidiaries to, issue, sell, pledge, dispose of, encumber, split, combine or reclassify or authorize the issuance, sale, pledge, disposition, encumbrance, split, combination or reclassification of any of its Equity Interests, other than (1) issuances of Parent Common Units in respect of the vesting, exercise or settlement of any Parent equity awards outstanding on the date hereof or as may be granted after the date hereof as permitted under any Parent Equity Plan that is in the ordinary course of business consistent with Parent’s past practices, (2) for transactions among Parent and its wholly owned Subsidiaries or among Parent’s wholly owned Subsidiaries which remain Subsidiaries after the consummation of such transaction or (3) pledges or encumbrances due to Parent Permitted Liens;
(iii) except in the ordinary course of business, shall not, and shall not permit any of its Subsidiaries that is not wholly owned by Parent or wholly owned Subsidiaries of any such Subsidiaries to, authorize or pay any dividends on or make any distribution with respect to its Equity Interests (whether in cash, assets, partnership units, stock or other securities of Parent or its Subsidiaries), except (1) dividends or distributions by any Subsidiaries only to Parent or any Subsidiary of Parent in the ordinary course of business, (2) dividends or distributions required under the applicable Organizational Documents of such Person, and (3) regular quarterly cash distributions with customary record and payment dates on the Parent Common Units of $0.625 per Parent Common Unit per quarter;
(iv) shall not, and shall not permit any of its material Subsidiaries to, adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization, other than any mergers, consolidations, restructurings or reorganizations solely among Parent and its wholly owned Subsidiaries or among Parent’s wholly owned Subsidiaries or in connection with an acquisition not prohibited by Section 5.2(b)(v);
(v) shall not, and shall not permit any of its Subsidiaries to, make, directly or indirectly, any acquisition by merging or otherwise purchasing any assets (including Equity Interests) or any business of any Person or make loans, advances or capital contributions to, or investments in, any other Person (other than any of Parent’s Subsidiaries), in each case in excess of $150.0 million in the aggregate or that would reasonably be expected to prevent, materially impede or materially delay the consummation of the LP Merger;
(vi) shall not, and shall not permit any of its Subsidiaries to, sell, lease, license, transfer, exchange or swap, or otherwise dispose of any properties or non-cash assets with a value in excess of $150.0 million in the aggregate;
(vii) shall not, and shall not permit any of its Subsidiaries to, materially change financial accounting policies or procedures or any of its methods of reporting income, deductions or other material items for financial accounting purposes, except as required by GAAP, SEC rule or policy or Law;
(viii) shall not, and shall not permit any of its Subsidiaries to, incur, assume, guarantee or otherwise become liable for any indebtedness for borrowed money or any guarantee of such indebtedness for borrowed money, except for (1) any indebtedness for borrowed money so long as the Total Leverage Ratio (as defined in that certain Second Amended and Restated Credit Agreement, dated as of October 16, 2018, by and among Crestwood Midstream Partners LP, as borrower, the lenders party thereto, and Xxxxx Fargo Bank, National Association, as Administrative Agent and Collateral Agent, as in effect on the date hereof), is less than 3.75 to 1.00 and (2) any indebtedness incurred in connection with the consummation of the transactions contemplated by this Agreement;
(ix) shall not, and shall not permit any of its Subsidiaries to (except in the ordinary course of business), (1) change its fiscal year or any material method of Tax accounting, (2) make, change or revoke any material Tax election, (3) enter into any closing agreement with respect to, or otherwise settle or compromise, any material liability for Taxes, (4) file any material amended Tax Return or (5) surrender a claim for a material refund of Taxes;
(x) shall not, and shall not permit any of its Subsidiaries to, engage in any activity or conduct its business in a manner that would cause less than 90% of the gross income of Parent for any calendar quarter since its formation and prior to the Effective Time to be treated as “qualifying income” within the meaning of Section 7704(d) of the Code; and
(xi) shall not, and shall not permit any of its Subsidiaries to, agree, in writing or otherwise, to take any of the foregoing actions that are prohibited pursuant to clauses (i) through (x) of this Section 5.2(b).
(xii) Notwithstanding the provisions of this Section 5.2, from the date of this Agreement until the earlier of the Effective Time and the Termination Date, Parent and its Subsidiaries may take or refrain from taking any COVID-19 Action so long as (i) prior thereto, Parent consults with, and considers in good faith, the Partnership’s suggestions and/or feedback, or (ii) such COVID-19 Action would not reasonably be expected to materially impact Parent’s ability to operate in the ordinary course of business or materially delay or impede the consummation of the LP Merger.
Conduct of Business Prior to the Closing (a) Without the consent of Buyer, which consent shall not be unreasonably withheld, conditioned or delayed, except (x) as otherwise contemplated by this Agreement, the Closing Agreements or the Restructuring, (y) as disclosed on Section 5.1 of the Seller Disclosure Schedule or (z) as required by Law or Order, during the Pre-Closing Period, Seller shall cause the Sold Companies to conduct their businesses (other than in respect of the Legacy Defense Business, which shall not be subject to this Section 5.1(a)) in the ordinary course of business and, to the extent consistent therewith, use commercially reasonable efforts to maintain satisfactory relationships with suppliers, customers, and other third parties having material business relationships with the Sold Companies (other than in respect of the Legacy Defense Business, which shall not be subject to this Section 5.1(a)).
(b) In furtherance of Section 5.1(a), without the consent of Buyer, which consent shall not be unreasonably withheld, conditioned or delayed, except (x) as otherwise contemplated by this Agreement, the Closing Agreements or the Restructuring, (y) as disclosed on Section 5.1 of the Seller Disclosure Schedule or (z) as required by Law or Order, during the Pre-Closing Period, Seller shall cause each Sold Company (other than in respect of any actions relating to the Legacy Defense Business, which shall not be subject to this Section 5.1(b)) not to (and in the case of Section 5.1(b)(ii)(B), Seller shall not):
(i) amend its certificate of incorporation or bylaws or comparable organizational documents;
(ii) (A) issue, deliver, sell, pledge, dispose of or encumber any shares of capital stock or other ownership interests, or any options, warrants, convertible securities or other rights of any kind to acquire or receive any shares of capital stock or other ownership interests, in the Sold Companies, or (B) issue or grant any Seller Options;
(iii) reclassify, combine, split, subdivide, redeem, purchase or otherwise acquire any shares of capital stock or ownership interests;
(iv) (A) incur any obligations or commitments to make any capital expenditures in excess of $250,000 in the aggregate following the Closing, or (B) cease to continue to make capital expenditures in the ordinary course of business;
(v) with respect to Company Products, make any material change in the selling, distribution, advertising, terms of sale or collection practices outside of the ordinary course of business consistent with past practices;
(vi) after the close of business on the Business Day immediately preceding the Closing Date, declare, set aside, make or pay any dividend or other distribution in respect of the capital stock or other ownership interests of any of the Sold Companies or repurchase, redeem or otherwise acquire, or grant any rights or enter into any Contracts or commitments to repurchase, redeem or acquire, any outstanding shares of the capital stock or ownership interests of any of the Sold Companies;
(vii) acquire (whether by merger, consolidation or acquisition of stock or assets or otherwise) any corporation, partnership or other business organization or division thereof or any assets, other than purchases of inventory and other assets in the ordinary course of business and pursuant to existing Contracts made available to Buyer prior to the date hereof;
(viii) sell, lease, license, assign, transfer or otherwise dispose of (whether by merger, consolidation or acquisition of stock or assets or otherwise) (A) any corporation, partnership or other business organization or division thereof or (B) any Inventory, equipment, assets, rights or properties (including Intellectual Property) for consideration in excess of $50,000, or abandon or allow to expire any issued patent or material registration or application included in the Company-Owned Intellectual Property, in each case, other than (w) sales or dispositions of Inventory and licenses of products and services, in each case, in the ordinary course of business, (x) pursuant to existing Contracts made available to Buyer prior to the date hereof, (y) non-exclusive licenses of Company-Owned Intellectual Property granted in the ordinary course of business as necessary to make available the Company Products or (z) sales of dispositions of obsolete and worthless assets or scrap;
(ix) sell, lease, license, assign, pledge transfer, abandon, permit any Lien on or otherwise dispose of any Company-Owned Intellectual Property used in or necessary for the operation of the businesses of the Sold Companies, other than (x) non-exclusive licenses of Company-Owned Intellectual Property granted in the ordinary course of business or (y) pursuant to existing Contracts made available to Buyer prior to the date hereof;
(x) modify, amend, terminate or waive any rights under any Material Contract in any material respect or enter into any new Contract that would be a Material Contract if entered into prior to the date of this Agreement;
(xi) acquire or obtain any license to any Intellectual Property or technology other than in the ordinary course of business (including commercially available computer software available or design tools on standard terms and in object-code form) for consideration not to exceed $100,000 in the aggregate;
(xii) permit the loss, expiration or termination of any material license or right to any third party Intellectual Property used in or necessary for the operation of the businesses of the Sold Companies other than in the ordinary course of business;
(xiii) agree to by any exclusivity, non-competition, most favored nation, or similar provision or covenant restricting the Sold Companies from competing in any line of business or with any Person or in any area or engaging in any activity or business (including with respect to the development, manufacture, marketing or distribution of their respective products or services);
(xiv) disclose any material trade secrets or other material proprietary or confidential information of the Sold Companies to any Person not subject to a confidentiality or non-disclosure agreement;
(xv) except in the ordinary course of business, make any loans, advances or capital contributions to, or investments in, any other Person (other than in a Subsidiary or sister Subsidiary of such Person);
(xvi) except to the extent required under any Company Benefit Plan or Seller Benefit Plan in existence as of the date hereof or as required by applicable Law: (A) hire or terminate (other than for cause) any Business Employee who holds (or, if hired, would hold) the position of “vice president”, “director”, “manager”, “senior engineer”, “executive” or any other individual in a salary grade of 07 or higher or any individual consultant of the Sold Companies, except with respect to individual consultants who perform services for any of the Sold Companies whose aggregate fees are less than $100,000, (B) increase or establish, or commit to increase or establish, the compensation or benefits of any Business Employee or individual consultant of the Sold Companies, (C) establish, adopt, enter into, amend in any material respect or terminate any Seller Benefit Plan or Company Benefit Plan, in each case, affecting any Business Employees, (D) accelerate the vesting or payment of any compensation or benefits under any Seller Benefit Plan or Company Benefit Plan, in each case, with respect to any Business Employees, or (E) grant any cash bonus, incentive, performance or other incentive compensation to any Business Employee;
Conduct of Business Prior to Closing Between the date of the execution of this Agreement and the Closing, the Borrower and the Guarantor Parties: (a) shall not enter into any agreements of any nature relating to or affecting the Loan Collateral or the business of the Borrower or Guarantor, including any agreement which may restrict the Borrower or Guarantor, as applicable, from operating its business as currently conducted unless the written consent of the Lender shall first be obtained, (b) shall not convey or remove from any location where now located, any of the Loan Collateral to be conveyed under the Conveyance Documents, (c) shall not cancel any insurance policies with respect to the Loan Collateral and shall preserve and maintain its permits and licenses including any cannabis related licenses, (d) shall use commercially reasonable efforts to continue to operate the Cannabis Business and the Loan Collateral in the ordinary course consistent with past practice, subject to the availability of sufficient working capital and the Borrower and Guarantor’s reasonable business judgment, (e) shall use commercially reasonable efforts to preserve the rights, franchises, goodwill and relationships of its employees, customers, lenders, suppliers, regulators and others having business relationships with the Borrower and Guarantor and shall maintain the Loan Collateral in a state of repair and condition that is consistent with the requirements and normal conduct of the business of the Borrower and Guarantor, subject to the availability of sufficient working capital and the Borrower and Guarantor’s reasonable business judgment, (f) shall maintain its books and records in accordance with past practice, (g) shall not incur any Indebtedness other than Permitted Indebtedness or authorize or commit to the same, (h) shall not lend money to or guarantee the debts of any other Person or authorize or commit to the same, (i) shall not issue or amend any securities or authorize or commit to the same, except as contemplated by the Call Option Agreement, (j) shall not take any action that would materially delay, prohibit or impede the transactions contemplated by this Agreement or the Call Option Agreement, (k) shall fully cooperate with any reasonable requests of appraisers retained by the Lender or its counsel, (l) shall comply in all material respects with applicable laws, (m) shall not lend money to, or guarantee the debts of, any other Person, (n) shall not settle or commence any claim, action, cause of action, demand, lawsuit, arbitration, inquiry, audit, notice of violation, proceeding, litigation, citation, summons, subpoena or investigation of any nature, civil, criminal, administrative, regulatory or otherwise, whether at law or in equity commenced to which the Borrower or Guarantor is a party, (o) shall not amend its constating documents, (p) shall not effect any split, consolidation, reclassification, redemption or repurchase of its securities, (q) shall not reorganize, amalgamate or merge, (r) shall not undertake any voluntary dissolution, liquidation or winding-up or any other disposition of its assets for the purpose of winding up, (s) shall not declare, set aside or pay any dividend or other disposition of any kind or nature (whether in cash, stock or property or any combination thereof) in respect of any securities, (t) shall not make any bonus or profit sharing distribution or similar payment of any kind, (u) except as required by applicable law, shall not agree to or make any severance, change of control or termination payment or increase the compensation of any employee, officer, director or consultant, (v) shall not terminate, dismiss, demote or otherwise decrease the job requirement of any officer, (w) shall not appoint any officer, (x) shall complete on a timely basis all requisite filings with Governmental Authorities or as may otherwise be required under applicable law, (y) shall allow a representative of the Lender to attend and observe any meeting of the board of directors of the Borrower or Guarantor, (z) shall not make or enter into any commitment or agreement in contravention of the foregoing and (aa) shall use best efforts to satisfy the conditions to Closing set forth in Section 3 of this Agreement. Notwithstanding the Existing Events of Default, the Borrower and Guarantor Parties shall comply with all covenants contained in the Loan Agreement and the other Loan Documents subject to the continuation of the Existing Events of Default; provided, that the Lender hereby consents to the Transfer of the Loan Collateral to the Designee and such Transfer shall not constitute a Default or Event of Default under the Loan Documents. Notwithstanding the foregoing, to the extent the Modesto Planning Department informs the Lender that any covenant contained in Section 4 of this Agreement constitutes “control” requiring thirty (30) day prior written consent from the Modesto Planning Department, the parties hereto agree that (i) upon written notice from the Lender such covenant shall be deemed to be of no force and effect until such thirty (30) day prior written notice from the Modesto Planning Department has been obtained, (ii) to the extent requested by the Lender in writing, the parties shall agree to amend this Agreement to remove or modify such covenant only to the extent required so as to not trigger such thirty (30) day prior written consent requirement, and (iii) solely to the extent the Lender elects in its sole discretion by written notice to the other parties, this Agreement shall be deemed terminated.
Conduct of Business by the Company Pending the Merger From the date of this Agreement until the Merger Effective Time, except as required by this Agreement, as may be required by applicable Law or as set forth in Section 6.01 of the Company Disclosure Schedule or except with the prior written consent of Parent, which consent shall not be unreasonably withheld, delayed or conditioned (provided that consent of Parent shall be deemed to have been given if Parent does not object within three (3) Business Days after request for such consent is actually received by Parent), the Company shall, and shall cause each of the Company Subsidiaries to, conduct its business in the ordinary course consistent with past practice and shall use its commercially reasonable efforts to preserve substantially intact the business, assets and organization of the Company and the Company Subsidiaries and to preserve the current beneficial relationships of the Company and the Company Subsidiaries with any Person with which the Company or any Company Subsidiary has material business relations (including customers, suppliers, directors, officers and key employees). Except as required by this Agreement, as may be required by applicable Law or as set forth in Section 6.01 of the Company Disclosure Schedule, neither the Company nor any Company Subsidiary shall, between the date of this Agreement and the Merger Effective Time, do any of the following without the prior written consent of Parent, which consent shall not be unreasonably withheld, delayed or conditioned; provided, however, that consent of Parent shall be deemed to have been given if Parent does not object within three (3) Business Days after request for such consent is actually received by Parent.
(a) amend or otherwise change any provision of the Company Charter or Company Bylaws, or similar organizational or governance documents;
(b) (i) authorize for issuance, issue, sell, pledge, dispose of, grant or transfer or agree or commit to issue, sell, dispose of, grant or transfer any shares of any class of capital stock of the Company or any Company Subsidiary or any options, warrants, convertible securities or other rights of any kind to acquire any shares of such capital stock, or any other ownership interest, of the Company or any Company Subsidiary, other than the issuance of Company Common Shares issuable pursuant to Company Stock Awards outstanding on the date hereof, (ii) repurchase, redeem or otherwise acquire any securities or equity equivalents except in connection with the exercise of Company Stock Options or the vesting of Company Stock Awards, (iii) declare, set aside or pay any dividends on, or make any other actual, constructive or deemed distributions (whether in cash, shares, property or otherwise) in respect of, any shares of the Company’s capital stock or the shares of stock or other equity interests in any Company Subsidiary that is not directly or indirectly wholly owned by the Company, other than (A) dividends by any direct or indirect wholly owned Company Subsidiary to the Company or any other Company Subsidiary and (B) dividend equivalents already accrued as of the date hereof and paid with respect to Company Stock Awards outstanding on the date hereof and set forth in Section 6.01(b) of the Company Disclosure Schedule or (iv) split, combine or reclassify any shares, stock or other equity interests of the Company or any Company Subsidiary or issue or authorize the issuance of any securities in respect of, in lieu of or in substitution for shares of such shares, stock or other equity interests;
(c) merge or consolidate with any other Person or adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of the Company or any Company Subsidiary (other than the Merger), except (i) that a Company Subsidiary may merge with another Company Subsidiary or (ii) for acquisitions (including by way of merger, consolidation, acquisition of equity interests or assets or any other business combination) by the Company or any Company Subsidiary of any Person providing for purchase price consideration (including any related amounts or promissory notes) of an amount less than Five Million Dollars ($5,000,000) individually or Ten Million Dollars ($10,000,000) in the aggregate;
(d) sell, lease, license, subject to a Lien (other than a Permitted Lien) or otherwise surrender, relinquish or dispose of any assets or property of the Company or any Company Subsidiary other than in the ordinary course of business, except for (i) sales of investment assets by the Company or any of the Company Subsidiaries in the ordinary course of business consistent with past practice, (ii) transfers and pledges of assets in connection with the conduct of the insurance business, including pursuant to reinsurance, coinsurance, ceding of insurance, assumption of insurance or indemnification with respect to insurance and similar arrangements, in the ordinary course of business consistent with past practice, (iii) sales or transfers of assets between wholly owned Company Subsidiaries, (iv) pursuant to existing written contracts or commitments as set forth in Section 6.01(d) of the Company Disclosure Schedule or (v) in an amount not in excess of Five Million Dollars ($5,000,000) in the aggregate;
(e) incur any indebtedness for borrowed money or issue any debt securities or assume, guarantee or endorse, or otherwise as an accommodation become responsible for, the obligations of any person (other than a Company Subsidiary) for borrowed money, other than indebtedness for borrowed money incurred in the ordinary course of business and pursuant to any credit agreement to which the Company or any Company Subsidiary is a party as of the date of this Agreement (which shall be deemed to include draws or standby letters of credit under the Company’s line of credit facility or other similar lines of credit);
(f) except as required by the terms of the Plans or awards made thereunder prior to the date of this Agreement, (i) increase the compensation or benefits payable to its directors, officers or employees (other than increases for employees or officers below the level of senior vice president made in the ordinary course of business consistent with past practice), (ii) amend, change, terminate or waive any rights under any Employment Agreement or (iii) establish, adopt, enter into or amend to materially increase benefits under any collective bargaining, bonus, profit sharing, thrift, compensation, stock option, restricted stock, pension, retirement, deferred compensation, employment, loan, retention, consulting, indemnification, termination, severance or other similar plan, agreement, trust, fund, policy or arrangement with any director, officer or employee (other than with respect to (A) agreements for new hires of non-executive officers in the ordinary course of business consistent with past practice that do not provide any change in control benefits and (B) each award under the Company’s Performance Incentive Plan and the Company’s Long Term Incentive Plan;
(g) pre-pay any long-term debt (which shall be deemed to include pre-payments or repayments of lines of credit facilities or other similar lines of credit or payments made in respect of any termination or settlement of any interest rate swap or other similar hedging instrument relating thereto) in an amount exceeding Five Million Dollars ($5,000,000) in the aggregate for the Company and the Company Subsidiaries taken as a whole, except in the ordinary course of business consistent with past practice and in accordance with the terms of such debt;
(h) except as required by Law or changes in GAAP or SAP which become effective after the date of this Agreement, materially change any of its accounting policies (whether for financial accounting or Tax purposes);
(i) authorize, or enter into any commitment for, any new material capital expenditures (such authorized or committed new material capital expenditures being referred to hereinafter as the “Capital Expenditures”) in an amount in excess of Two Million Dollars ($2,000,000) in the aggregate;
(j) pay, discharge, settle or satisfy any material litigation, arbitrations, proceedings, claims, liabilities or obligations other than any payment, discharge, settlement or satisfaction in the ordinary course of business consistent with past practice (which includes payment of policyholders’ claims) where the amounts paid or to be paid, except in the case of policyholder claims, (i) are covered by insurance coverage maintained by the Company or (ii) are in an amount less than Five Million Dollars ($5,000,000) in the aggregate;
(k) take any action that would cause any of the representations or warranties of the Company contained herein to become inaccurate in any material respect or any of the covenants of the Company to be breached in any material respect or result in the failure to be satisfied of any of the conditions set forth in Section 8.02;
(l) create or have any subsidiary of the Company other than the Company Subsidiaries as of the date of this Agreement;
(m) (A) amend, change, cancel, terminate or waive or release, in any material respect, any rights under any Company Material Contract that was required to be filed as an exhibit to the Company SEC Reports pursuant to Regulation S-K of the Securities Act or (B) enter into any new contract, agreement or arrangement that would be required to be filed as an exhibit to the Company SEC Reports pursuant to Regulation S-K of the Securities Act;
(n) (i) settle or compromise any material Tax audit, (ii) make or change any material Tax election or file any material amendment to a material Tax Return, except, in each case, as required by applicable Law, or (iii) surrender any right to claim a material refund of Taxes;
(o) enter into (i) any agreement or arrangement that would be required to be reported by the Company pursuant to Item 404 of Regulation S-K promulgated by the SEC or (ii) any agreement or arrangement with Alleghany Corporation or its Affiliates; or
(p) enter into any agreement or otherwise make a commitment to do any of the foregoing.
CONDUCT OF BUSINESSES PENDING THE MERGER Section 5.01 Conduct of Business by the Company Pending the Merger. Prior to the Effective Time, unless Parent or Acquisition Corp. shall otherwise agree in writing or as otherwise contemplated by this Agreement:
(a) the business of the Company shall be conducted only in the ordinary course;
(b) the Company shall not (i) directly or indirectly redeem, purchase or otherwise acquire or agree to redeem, purchase or otherwise acquire any shares of its capital stock; (ii) amend its Certificate of Incorporation or By-laws except to effectuate the transactions contemplated in the Disclosures or (iii) split, combine or reclassify the outstanding Company Common Stock or declare, set aside or pay any dividend payable in cash, stock or property or make any distribution with respect to any such stock;
(c) the Company shall not (i) issue or agree to issue any additional shares of, or options, warrants or rights of any kind to acquire any shares of, Company Common Stock, except to issue shares of Company Common Stock in connection with any matter relating to the Disclosures; (ii) acquire or dispose of any fixed assets or acquire or dispose of any other substantial assets other than in the ordinary course of business; (iii) incur additional Indebtedness or any other liabilities or enter into any other transaction other than in the ordinary course of business; (iv) enter into any contract, agreement, commitment or arrangement with respect to any of the foregoing or (v) except as contemplated by this Agreement, enter into any contract, agreement, commitment or arrangement to dissolve, merge, consolidate or enter into any other material business combination;
(d) the Company shall use its best efforts to preserve intact the business organization of the Company, to keep available the service of its present officers and key employees, and to preserve the good will of those having business relationships with it;
(e) the Company will not, nor will it authorize any director or authorize or permit any officer or employee or any attorney, accountant or other representative retained by it to make, solicit, encourage any inquiries with respect to, or engage in any negotiations concerning, any Acquisition Proposal (as defined below for purposes of this paragraph). The Company will promptly advise Parent orally and in writing of any such inquiries or proposals (or requests for information) and the substance thereof. As used in this paragraph, “Acquisition Proposal” shall mean any proposal for a merger or other business combination involving the Company or for the acquisition of a substantial equity interest in it or any material assets of it other than as contemplated by this Agreement. The Company will immediately cease and cause to be terminated any existing activities, discussions or negotiations with any Person conducted heretofore with respect to any of the foregoing; and
CONDUCT OF BUSINESS PENDING THE MERGER SECTION 5.1 Conduct of Business by the Company Pending the Merger. ----------------------------------------------------- Prior to the Effective Time, except to the extent that Purchaser shall otherwise consent (including by virtue of action by the Board of Directors of the Company approved by all of Purchaser's or Merger Sub's designees, as applicable, at such time as they shall constitute a majority of such Board), the Company shall, and shall cause its Subsidiaries to, except as expressly permitted by this Agreement, conduct their respective businesses in, and shall not take any action except in, the ordinary course of business in a manner consistent with past practice; and the Company shall, and shall cause its Subsidiaries to, use their respective reasonable best efforts to preserve intact the business organization of the Company and its Subsidiaries, to keep available the services of the current officers, employees and consultants of the Company and its Subsidiaries and to preserve the current business relationships of the Company and its Subsidiaries, including, without limitation, with customers, licensors, suppliers, distributors and others with which the Company or any Subsidiary has business relations. Without limiting the generality of the foregoing, and except as expressly permitted or specifically contemplated by this Agreement, the Company shall not, and shall not permit any Subsidiary to, between the date of this Agreement and the Effective Time, directly or indirectly do, or propose to do, any of the following without the prior written consent of Purchaser (except as otherwise expressly permitted by this Agreement):
(i) declare, set aside or pay any dividends on or other distributions in respect of any of its capital stock (other than dividends and distributions by any direct or indirect wholly owned subsidiary of the Company to its parent), (ii) split, combine or reclassify any of its capital stock or issue or authorize or propose the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock or (iii) repurchase, redeem or otherwise acquire, or permit any Subsidiary to repurchase, redeem or otherwise acquire, any shares of capital stock;
(b) issue, deliver, sell, pledge, dispose or encumber, or authorize or propose the issuance, delivery, sale, pledge, disposal or encumbrance of, any shares of its capital stock of any class or any securities convertible into, or any rights, warrants, calls, subscriptions or options to acquire, any such shares or convertible securities, or any other ownership interest other than (i) the issuance of shares of Company Common Stock upon the exercise of stock options granted under the Company Stock Option Plans outstanding on the date of this Agreement and in accordance with the current terms of such options, (ii) issuances by a Subsidiary of its capital stock to the Company or a Subsidiary so long as the Company will, after such issuance, directly or indirectly own all the outstanding capital stock of the issuing Subsidiary and (iii) the grant of stock options to new hires in the ordinary course of business consistent with past practice and with the written consent of Purchaser;
(c) amend or propose to amend its Certificate of Incorporation or By- Laws;
(d) acquire or agree to acquire, including, without limitation, by merging or consolidating with, or by purchasing a substantial equity interest in or substantial portion of the assets of, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof;
(e) sell, lease, license, grant a security interest in, encumber or otherwise dispose of, or agree to sell, lease, grant a security interest in, encumber or otherwise dispose of, any of its material assets other than (i) sales or licenses of its products in the ordinary course of business consistent with past practice, (ii) equipment and property no longer used in the operation of the Company and its Subsidiaries' respective businesses and (iii) assets related to any discontinued operations of the Company and its Subsidiaries which operations were discontinued prior to the date hereof;
(f) incur (which shall not be deemed to include entering into credit agreements, lines of credit or similar arrangements until borrowings are made under such arrangements) any indebtedness for borrowed money or guarantee any such indebtedness or issue or sell any debt securities or warrants or rights to acquire any debt securities of the Company or any Subsidiary or guarantee any debt securities of others, except in the ordinary course of business consistent with past practice;
(i) grant any increase in the compensation of any of its directors, officers or employees, except for increases for employees in the ordinary course of business consistent with past practices, (ii) grant, pay or agree to pay any pension, retirement allowance or other employee benefit not required or contemplated by any existing employee benefit plan, program, arrangement, agreement or contract (including, without limitation, any "employee benefit plan", as defined in Section 3(3) of ERISA), maintained or contributed to by the Company or any Subsidiary, or with respect to which the Company or any Subsidiary could incur liability under Sections 4069, 4212(c) or 4204 of ERISA (the "Company Benefit Plans") as in effect on the date hereof to any director, officer or employee, (iii) enter into any new employment, severance or termination plan, program, arrangement, agreement or contract with any such director, officer or employee or (iv) except as may be required to comply with applicable law, become obligated under any Company Benefit Plan that was not in existence on the date hereof or amend any such plan in existence on the date hereof to enhance the benefits thereunder;
(h) make any capital expenditure or expenditures which exceed $250,000 in the aggregate; or
(i) authorize any of, or commit or agree to take any of, the actions described in paragraphs (a) through (h) of this Section 5.1.
Conduct of Business of Parent Except as set forth in Section 6.2 of the Parent Disclosure Schedule, during the period from the date of this Agreement to the Effective Time (unless the Company shall otherwise agree in writing and except as otherwise contemplated by this Agreement), Parent will conduct its operations according to its ordinary and usual course of business consistent with past practice and shall use all reasonable efforts to preserve intact its current business organizations, keep available the service of its current officers and employees, maintain its material Permits and Contracts and preserve its relationships with customers, suppliers and others having business dealings with it. Without limiting the generality of the foregoing, and except as otherwise contemplated by this Agreement or as set forth in Section 6.2 of the Parent Disclosure Schedule, Parent will not, without the prior written consent of the Company (which consent shall not be unreasonably withheld):
(i) issue, sell, grant, dispose of, pledge or otherwise encumber, or authorize or propose the issuance, sale, disposition or pledge or other encumbrance of (A) any additional shares of capital stock of any class (including the shares of Parent Common Stock), or any securities or rights convertible into, exchangeable for, or evidencing the right to subscribe for any shares of capital stock, or any rights, warrants, options, calls, commitments or any other agreements of any character to purchase or acquire any shares of capital stock or any securities or rights convertible into, exchangeable for, or evidencing the right to subscribe for, any shares of capital stock or (B) any other securities in respect of, in lieu of, or in substitution for, shares of Parent Common Stock outstanding on the date hereof;
(ii) redeem, purchase or otherwise acquire, or propose to redeem, purchase or otherwise acquire, any of its outstanding shares of Parent Common Stock;
(iii) split, combine, subdivide or reclassify any shares of Parent Common Stock or declare, set aside for payment or pay any dividend, or make any other actual, constructive or deemed distribution in respect of any capital stock of Parent or otherwise make any payments to stockholders in their capacity as such, other than the declaration and payment of regular quarterly cash dividends on the Parent Common Stock in an amount no greater than $.72 per share per annum and in accordance with past dividend policy and other than the declaration and payment of dividends on Parent Preferred Stock pursuant to Parent's Certificate of Incorporation as in effect on the date hereof and except for dividends by a direct or indirect wholly owned subsidiary of Parent;
(iv) adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of Parent or any of the Parent Subsidiaries (other than the Merger), except for Parent Subsidiaries which are not material to the assets, liabilities, financial condition or results of operations of Parent and the Parent Subsidiaries taken as a whole;
(v) adopt any amendments to its Certificate of Incorporation or By-Laws or alter through merger, liquidation, reorganization, restructuring or in any other fashion the corporate structure or ownership of any direct or indirect subsidiary of Parent, except for Parent Subsidiaries which are not material to the assets, liabilities, financial condition or results of operations of Parent and the Parent Subsidiaries taken as a whole;
(vi) make, or permit any Parent Subsidiary to make, any material acquisition, by means of merger, consolidation or otherwise, or material disposition, of assets or securities;
(vii) other than in the ordinary course of business consistent with past practice, incur, or permit any Parent Subsidiary to incur, any material indebtedness for borrowed money or guarantee any such indebtedness or make any material loans, advances or capital contributions to, or material investments in, any other person other than Parent or any Parent Subsidiary;
(viii) change any method of accounting or accounting practice by Parent or any Parent Subsidiary, except for any such required change in GAAP or applicable statutory accounting principles;
(ix) permit any Parent Insurance Subsidiary to materially change its investment guidelines or policies and approved programs or transactions or conduct transactions in investments except in material compliance with the investment guidelines and policies of such Parent Insurance Subsidiary and all applicable insurance Laws;
(x) enter, or permit any Parent Insurance Subsidiary to enter, into any material reinsurance, coinsurance or similar Contract, whether as reinsurer or reinsured, except in the ordinary course of business consistent with past practice;
(xi) (x) take, or agree or commit to take, or permit any Parent Subsidiary to take, or agree or commit to take, any action that would make any representation and warranty of Parent hereunder inaccurate in any material respect at the Effective Time (except for representations and warranties which speak as of a particular date, which need be accurate only as of such date), (y) omit, or agree or commit to omit, or permit any Parent Subsidiary to omit, or agree or commit to omit, to take any action necessary to prevent any such representation or warranty from being inaccurate in any material respect at the Effective Time (except for representations and warranties which speak as of a particular date, which need be accurate only as of such date), provided however that Parent shall be permitted to take or omit to take such action which can be cured, and in fact is cured, at or prior to the Effective Time or (z) take, or agree or commit to take, or permit any Parent Subsidiary to take, or agree or commit to take, any action that would result in, or is reasonably likely to result in, any of the conditions of the Merger set forth in Article VII not being satisfied; or
(xii) authorize, recommend, propose or announce an intention to do any of the foregoing, or enter into any contract, agreement, commitment or arrangement to do any of the foregoing.
Conduct of Business by the Company (a) From and after the date hereof and prior to the Effective Time or the date, if any, on which this Agreement is earlier terminated pursuant to Section 7.1 (the “Termination Date”), and except (w) as may be required by applicable Law, (x) with the prior written consent of Parent, (y) as expressly contemplated or permitted by this Agreement or (z) as disclosed in Section 5.1 of the Company Disclosure Letter, the Company shall, and shall cause each of its Subsidiaries to (i) conduct its business in the ordinary course consistent with past practices, (ii) use reasonable best efforts to maintain and preserve intact its business organization to maintain its rights, franchises, licenses and other authorizations issued by Governmental Entities and to retain the services of its key officers and key employees and (iii) take no action which would reasonably be expected to materially impair or materially delay the ability of any of the parties hereto from obtaining any necessary approvals of any regulatory agency or other Governmental Entity required for the transactions contemplated hereby, performing its covenants and agreements under this Agreement or consummating the transactions contemplated hereby.
(b) The Company agrees with Parent, on behalf of itself and its Subsidiaries, that between the date hereof and the Effective Time, except as set forth in Section 5.1(b) of the Company Disclosure Letter or expressly contemplated by this Agreement, the Company shall not, and shall not permit any of its Subsidiaries to, without the prior written consent of Parent:
(i) adjust, split, combine or reclassify any capital stock or otherwise amend the terms of its capital stock or other equity interests;
(ii) make, declare or pay any dividend, or make any other distribution on, or directly or indirectly redeem, purchase or otherwise acquire or encumber, any shares of its capital stock or other equity interests or any securities or obligations convertible (whether currently convertible or convertible only after the passage of time or the occurrence of certain events) into or exchangeable for any shares of its capital stock or other equity interests, except in connection with cashless exercises or similar transactions pursuant to the exercise of stock options issued and outstanding as of the date hereof under the Company Stock Plan;
(iii) grant any person any right to acquire any shares of its capital stock or other equity interests;
(iv) issue any additional shares of capital stock or other equity interests except pursuant to the exercise of stock options issued under the Company Stock Plans issued and outstanding as of the date hereof and listed on Section 3.2(a) of the Company Disclosure Letter and in accordance with the terms of such instruments;
(v) purchase, sell, transfer, mortgage, encumber or otherwise dispose of any properties or assets having a value in excess of $5 million in the aggregate;
(vi) make any investment or acquisition of another person or business, whether by purchase of stock or securities, contributions to capital, property transfers, or purchases of property or assets in excess of $5 million in the aggregate;
(vii) make any capital expenditures not contemplated by the capital expenditure budget having an aggregate value in excess of $5 million for any 12 consecutive month period;
(viii) incur, assume, guarantee, or become obligated with respect to, any debt, which, when taken together with all other debt of the Company and its Subsidiaries, would result in there being indebtedness of the Company and its Subsidiaries greater than $180 million in the aggregate outstanding at any given time (excluding intercompany debt), or any debt which contains covenants that restrict the Merger or that are inconsistent with the Financing Commitments;
(ix) enter into, renew, extend, amend or terminate (A) any Company Material Contract or Contract which if entered into prior to the date hereof would be a Company Material Contract, in each case, other than any Contract relating to indebtedness that would not be prohibited under clause (viii) of this Section 5.1(b), or (B) any Contracts not in the ordinary course, involving the commitment or transfer of value in excess of $5 million in the aggregate in any year;
(x) enter into, amend or terminate any material reinsurance, coinsurance, modified coinsurance or any similar Contract (including any surplus relief or financial reinsurance Contract), whether as reinsurer or reinsured;
(xi) except to the extent required by Law or by Contracts in existence as of the date hereof (complete copies of which have been provided or made available to Parent prior to the date hereof), (A) increase in any manner the compensation or benefits of any of its employees, directors, consultants, independent contractors or service providers, except, with respect to non-officer employees, in the ordinary course of business consistent with past practice, (B) pay any pension, severance or retirement benefits not required by any existing plan or agreement to any such employees, directors, consultants, independent contractors or service providers, (C) except to comply with Sections 2.3 or 5.12, enter into, amend, alter, adopt, implement or otherwise commit itself to any compensation or benefit plan, program, policy, arrangement or agreement including any pension, retirement, profit-sharing, bonus or other employee benefit or welfare benefit plan, policy, arrangement or agreement or employment or consulting agreement with or for the benefit of any employee, director, consultant, independent contractor or service provider, (D) cause the funding of any rabbi trust or similar arrangement or take any action to fund or in any other way secure the payment of compensation or benefits under any Company Benefit Plan, or (E) materially change any actuarial or other assumptions used to calculate funding obligations with respect to any Company Benefit Plan or change the manner in which contributions to such plans are made or the basis on which such contributions are determined, except as may be required by GAAP or applicable Law;
(xii) waive, release, assign, settle or compromise any claim, action or proceeding, other than waivers, releases, assignments, settlements or compromises that involve only the payment of monetary damages not in excess of $1 million in the aggregate, or otherwise pay, discharge or satisfy any claims, liabilities or obligations in excess of such amount, in each case, other than in the ordinary course consistent with past practice;
(xiii) amend or waive any provision of, or modify, the Company Charter Documents or Subsidiary Documents;
(xiv) take or omit to take any action that is intended or would reasonably be expected to, individually or in the aggregate, result in any of the conditions to the Merger set forth in Article VI not being satisfied or satisfaction of those conditions being materially delayed in violation of any provision of this Agreement;
(xv) enter into any “non-compete” or similar agreement that would materially restrict the businesses of the Surviving Corporation or its Subsidiaries following the Effective Time or that would in any way restrict the businesses of Parent or its Affiliates (excluding the Surviving Corporation and its Subsidiaries) or take any action that may impose new or additional regulatory requirements on any Affiliate of Parent (excluding the Surviving Corporation and its Subsidiaries);
(xvi) adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of such entity;
(xvii) implement or adopt any material change in its existing underwriting, claim handling, loss control, investment, actuarial (or any material assumption underlying an actuarial practice or policy) or Tax or financial accounting principles, practices or methods, other than as required by GAAP, applicable Law or regulatory guidelines;
(xviii) (A) enter into any closing agreement with respect to material Taxes, (B) settle or compromise any material liability for Taxes, (C) make, revoke or change any material Tax election, (D) file or surrender any claim for a material refund of Taxes, (E) file any amended Tax Return involving a material amount of Taxes, or (F) prepare any Tax Returns in a manner which is not consistent in all material respects with the past practice of the Company and its Subsidiaries;
(xix) enter into any new, or materially amend or otherwise materially alter any current, Affiliate Transaction or transaction which would be an Affiliate Transaction if such transaction occurred prior to the date hereof; or
(xx) agree to take, make any commitment to take, or adopt any resolutions of its Board of Directors in support of, any of the actions prohibited by this Section 5.1(b). Notwithstanding anything to the contrary herein, any action or failure to act by any of Xxxxxx X. Xxxxx, Xx., Xxx X. Xxxxx or Xxxxxx X. Xxxxx, III, or at their direction, will not be deemed to be actions of the Company for purposes of this Section 5.1 unless such action or failure to act was taken with the support of a majority of the independent members of the Board of Directors of the Company.
