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 Consummation 7.1 Affirmative Covenants of Each Party. From the date of this Agreement ----------------------------------- until the earlier of the Effective Time or the termination of this Agreement, unless the prior written consent of the other Party shall have been obtained, and except as otherwise expressly contemplated herein, each Party shall and shall cause each of its Subsidiaries to (a) operate its business only in the usual, regular, and ordinary course, (b) preserve intact its business organization and Assets and maintain its rights and franchises, and (c) take no action which would (i) materially adversely affect the ability of either Party to obtain any Consents required for the transactions contemplated hereby without imposition of a condition or restriction of the type referred to in the last sentences of Section 9.1(b) or 9.1(c), or (ii) materially adversely affect the ability of either Party to perform its covenants and agreements under this Agreement.
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 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 Pending the Closing During the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement in accordance with its terms or the Closing, the Company shall, and shall cause each of its Subsidiaries to, carry on the Business in the ordinary course of business and, to the extent consistent therewith, use all commercially reasonable efforts to preserve the Business intact and preserve the goodwill of and relationships with Governmental Entities, customers, suppliers, partners, lessors, licensors, licensees, contractors, distributors, agents, officers and employees and others having business dealings with the Business, provided that the foregoing shall not prevent Sellers from rejecting Contracts that are not Assumed Contracts. During the period from the date of this Agreement through the Closing Date, the Company shall endeavor to maintain the Net Receivables Amount, the Inventory Value and each component of Inventory at or in excess of the amounts set forth on Schedule 7.1. Without limiting the generality of the first sentence of this Section 7.1, during the period from the date of this Agreement through the Closing Date, the Company shall not, and shall not permit any of its Subsidiaries to, without the prior written consent of Buyer:
(a) abandon any rights under any of the Assumed Contracts; terminate, amend, modify or supplement the terms of any Assumed Contract; or fail to honor or perform, the Assumed Contracts;
(b) other than sales of Inventory in the ordinary course of business or the disposition of obsolete equipment, lease, license, surrender, relinquish, sell, transfer, convey, assign or otherwise dispose of any Acquired Assets;
(c) mortgage, pledge or subject to Liens (other than Permitted Liens), any property, business or any of the Acquired Assets, other than as would not result in any Liability that would be or would increase an Assumed Liability as of or subsequent to the Closing;
(d) incur or permit to be incurred any Liability (other than Accounts Payable or in connection with the performance of Assumed Contracts) that would be or would increase an Assumed Liability as of or subsequent to the Closing;
(e) fail to replenish the Inventory and Supplies of the Business in the ordinary course of business;
(f) increase the salary of any Identified Employee at or after the time such person becomes an Identified Employee, other than in the ordinary course of business consistent with past practice;
(g) make or rescind any material Tax election or take any material Tax position (unless required by law) or file any Tax Return or change its fiscal year or financial or Tax accounting methods, policies or practices, or settle any Tax Liability, except in each case as would not reasonably be expected to affect the Buyer;
(h) institute, settle or agree to settle any litigation, action or Proceeding before any court or Governmental Entity relating to the Acquired Assets, or modify in any manner that is adverse to the Business or the Acquired Assets, rescind or terminate a material Permit, allowance, or credit (or application therefor) relating to the Business or the Acquired Assets;
(i) transfer or grant any rights under, modify any existing rights under, or enter into any settlement regarding the breach or infringement of, any material Intellectual Property; or
(j) enter into any Contract to do any of the foregoing.
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 Business by the Company Pending the Closing The Company covenants and agrees that, between the date of this Agreement and the Effective Time, except as set forth in Section 6.1 of the Company Disclosure Schedule or as permitted by any other provision of this Agreement, unless Parent will otherwise agree in writing (which agreement will not be unreasonably withheld, delayed or conditioned), the Company will, and will cause each Company Subsidiary to, conduct its operations in the ordinary course of business and use commercially reasonable efforts to preserve substantially intact its business organization and maintain existing relations and goodwill with customers, suppliers and employees in the ordinary course of business consistent with past practice. Without limiting the foregoing, and as an extension thereof, except as set forth in Section 6.1 of the Company Disclosure Schedule or as permitted by any other provision of this Agreement, the Company will not (unless required by applicable Law), and will not permit any Company Subsidiary to, between the date of this Agreement and the Effective Time, directly or indirectly, do, or agree to do, any of the following without the prior written consent of Parent (which consent will not be unreasonably withheld, delayed or conditioned):
(a) amend or otherwise change its certificate of incorporation or bylaws or equivalent organizational documents;
(b) issue, sell, pledge, dispose of, grant, transfer or encumber, or authorize the issuance, sale, pledge, disposition, grant, transfer, or encumbrance of, any shares of capital stock of, or other Equity Interests in, the Company or any Company Subsidiary of any class, or securities convertible into, or exchangeable or exercisable for, any shares of such capital stock or other Equity Interests, or any options, warrants or other rights of any kind to acquire any shares of such capital stock or other Equity Interests or such convertible or exchangeable securities, or any other ownership interest (including, without limitation, any such interest represented by Contract right), of the Company or any Company Subsidiary, other than the issuance of Shares (i) upon the vesting of Company RSUs or Company Restricted Shares, (ii) the exercise of Company Options outstanding as of the date hereof in accordance with their terms or (iii) in connection with the Top-Up Option;
(c) sell, pledge, dispose of, let lapse, abandon, assign, transfer, lease, license, guarantee or encumber any material property or assets of the Company or any Company Subsidiary (including any Registered Intellectual Property and unregistered Owned Intellectual Property), except (i) to the extent required pursuant to Contracts in effect prior to the date hereof, (ii) pursuant to the sale, purchase or licensing of inventory, raw materials, equipment, goods, or other supplies in the ordinary course of business consistent with past practice or (iii) for non-exclusive licenses in the ordinary course of business consistent with past practice with a fair market value not in excess of $2,500,000 in the aggregate;
(d) declare, set aside, make or pay any dividend or other distribution (whether payable in cash, stock, property or a combination thereof) with respect to any of its capital stock (other than dividends paid by a wholly-owned Company Subsidiary to the Company or another wholly-owned Company Subsidiary) or enter into any agreement with respect to the voting or registration of its capital stock;
(e) reclassify, combine, split, subdivide or amend the terms of, or redeem, purchase or otherwise acquire, directly or indirectly, any of its capital stock, other Equity Interests or any other securities, 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 other securities, in each case other than in connection with the Top-Up Option;
(f) merge or consolidate the Company or any Company Subsidiary with any Person or adopt a plan of complete or partial liquidation or resolutions providing for a complete or partial liquidation, dissolution, restructuring, recapitalization or other reorganization of the Company or any Company Subsidiary, or otherwise enter into any agreements imposing material restrictions on the assets, operations or businesses of the Company or any Company Subsidiary;
(g) enter into a new line of business (other than currently-projected extensions of existing product lines);
(h) acquire (including, without limitation, by merger, consolidation, or acquisition of stock or assets) any interest in any Person or any division thereof or any assets, other than acquisitions of assets (including, without limitation, the purchase of inventory, raw materials, equipment, goods, or other supplies) in the ordinary course of business consistent with past practice and any other acquisitions for consideration that is individually not in excess of $2,500,000, or in the aggregate not in excess of $5,000,000;
(i) incur any indebtedness for borrowed money or issue any debt securities or assume, guarantee or endorse, or otherwise become responsible for the obligations of any Person (other than a wholly-owned Company Subsidiary) for borrowed money;
(j) make any loans, advances, guarantees or capital contributions to, or investments in, any other Person (other than any wholly-owned Company Subsidiary) in excess of $2,500,000 in the aggregate;
(k) terminate, cancel or amend any Company Material Contract, or cancel, modify or waive any rights thereunder, or enter into or amend any Contract that, if existing on the date hereof, would be a Company Material Contract;
(l) make or authorize any capital expenditure in excess of the Company’s capital expenditure budget as disclosed to Parent prior to the date hereof, other than capital expenditures that are not, in the aggregate, in excess of $2,500,000;
(m) except to the extent required by (i) applicable Law, (ii) the existing terms of any Company Benefit Plan, (iii) contractual commitments or corporate policies with respect to severance or termination pay as in existence on the date hereof and listed on Section 6.1(m) of the Company Disclosure Schedule or (iv) as otherwise provided on Section 6.1(m) of the Company Disclosure Schedule: (A) increase in any manner the compensation, bonus or benefits payable or to become payable to its Service Providers (except for increases in the ordinary course of business consistent with past practice in base salaries or base wages of employees of the Company or any Company Subsidiary); (B) grant any additional rights to severance or termination pay to, or enter into any severance agreement with, any Service Provider, or establish, adopt, enter into or amend any Company Benefit Plan; (C) grant any new awards under any Company Benefit Plan, (D) amend or modify any outstanding award under any Company Benefit Plan, (E) take any action to amend, waive or accelerate the vesting criteria or vesting requirements of payment of any compensation or benefit under any Company Benefit Plan or remove any existing restrictions in any Company Benefit Plans or awards made thereunder, (F) take any action to accelerate the payment, or to fund or in any other way secure the payment, of compensation or benefits under any Company Benefit Plan, to the extent not already provided in any such Company Benefit Plan or (G) change any actuarial or other assumptions used to calculate funding obligations with respect to any Company Benefit Plan or to 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 laws;
(n) forgive any loans to Service Providers or any of their respective affiliates;
(o) make any material change in accounting policies, practices, principles, methods or procedures, other than as required by GAAP or by a Governmental Entity;
(p) encourage customers to make payments earlier than would otherwise reasonably be expected (based on past practice) to be made to the Company or the Company Subsidiaries, or agree to payment terms or conditions with suppliers that are not consistent in all material respects with past practice;
(q) compromise, settle or agree to settle any Proceeding (including any Proceeding relating to this Agreement or the transactions contemplated hereby) other than compromises, settlements or agreements in the ordinary course of business that involve only the payment of monetary damages not in excess of $2,500,000 individually or $5,000,000 in the aggregate, in any case without the imposition of equitable relief on, or the admission of wrongdoing by, the Company or any Company Subsidiary;
(r) (i) make, change, or rescind any material Tax election, (ii) file any material amended Tax Return of the Company or any of the Company Subsidiaries, (iii) or adopt or change any material method or period of Tax accounting, (iv) settle or compromise any material claim relating to Taxes; (v) surrender any material claim for a refund of Taxes; (vi) enter into any “closing agreement” as described in Section 7121 of the Code with respect to material Taxes; or (vii) consent to any extension or waiver of the limitation period applicable to any material Tax claim or assessment (other than pursuant to extensions of time to file Tax Returns obtained in the ordinary course of business);
(s) write up, write down or write off the book value of any assets, except for depreciation and amortization and normal valuation adjustments to accounts receivable and inventory in accordance with GAAP consistently applied;
(t) pre-pay any long-term debt; or
(u) authorize or enter into any Contract or otherwise make any commitment, in each case to do any of the foregoing in clauses (a) through (t).
Conduct of Business by Company Pending the Closing Company agrees that, between the date of this Agreement and the Effective Time, unless Parent shall otherwise agree in writing, and except as a result of entering into this Agreement (x) the respective businesses of Company and the Company Subsidiaries shall be conducted only in, and Company and the Company Subsidiaries shall not take any action except in, the ordinary course of business consistent with past practice and (y) Company shall use all reasonable efforts to keep available the services of such of the current officers, significant employees and consultants of Company and the Company Subsidiaries and to preserve the current relationships of Company and the Company Subsidiaries with such of the corporate partners, customers, suppliers and other persons with which Company or any Company Subsidiary has significant business relations in order to preserve substantially intact its business organization. By way of amplification and not limitation, neither Company nor any Company Subsidiary shall, between the date of this Agreement and the Effective Time, directly or indirectly, do, or agree to do, any of the following without the prior written consent of Parent and except as a result of entering into this Agreement:
(a) amend or otherwise change its certificate of incorporation or bylaws or equivalent organizational documents;
(b) issue, sell, pledge, dispose of, grant, transfer, lease, license, guarantee or encumber, or authorize the issuance, sale, pledge, disposition, grant, transfer, lease, license or encumbrance of, (i) any shares of capital stock of Company or any Company Subsidiary of any class, or securities convertible into or exchangeable or exercisable for any shares of such capital stock, or any options, warrants or other rights of any kind to acquire any shares of such capital stock, or any other ownership interest (including, without limitation, any phantom interest), of Company or any Company Subsidiary, other than (A) the issuance of shares of Company Common Stock pursuant to the exercise of stock options theretofore outstanding as of the date of this Agreement or (B) the issuance of options to purchase up to 250,000 shares of Company Common Stock under the Company's 1999 Stock Incentive Plan, 200,000 shares of which may be issued to newly hired management employees and 50,000 shares of which may be issued to existing non-executive employees, or (ii) any property or assets of Company or any Company Subsidiary except entering into alliance agreements or providing products and services in the ordinary course of business consistent with past practice;
(i) acquire (including, without limitation, by merger, consolidation, or acquisition of stock or assets) any interest in any corporation, partnership, other business organization or person or any division thereof; (ii) 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 Company and Company Subsidiaries) for borrowed money or make any loans or advances, other than routine employee loans to employees other than Company officers (not to exceed $1,000 to any individual), material to the business, assets, liabilities, financial condition or results of operations of Company and the Company Subsidiaries, taken as a whole, other than in the ordinary course of business consistent with past practice; (iii) terminate, cancel or request any material change in, or agree to any material change in, any Company Material Contract or other License Agreement; (iv) make or authorize any capital expenditure, other than capital expenditures in the ordinary course of business consistent with past practice that have been budgeted for fiscal year 1999 and disclosed in writing to Parent and that are not, in the aggregate, in excess of $3,000,000 for Company and the Company Subsidiaries taken as a whole; or (v) enter into or amend any contract, agreement, commitment or arrangement that, if fully performed, would not be permitted under this Section 6.01(c);
(d) declare, set aside, make or pay any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to any of its capital stock, except that any Company Subsidiary may pay dividends or make other distributions to Company or any other Company Subsidiary;
(e) reclassify, combine, split, subdivide or redeem, purchase or otherwise acquire, directly or indirectly, any of its capital stock;
(f) amend or change the period (or permit any acceleration, amendment or change unless required pursuant to the terms of existing agreements of Company previously provided to Parent) of exercisability of options granted under the Company Stock Plans or authorize cash payments in exchange for any Company Stock Options granted under any of such plans;
(g) amend the terms of, repurchase, redeem or otherwise acquire, or permit any Company Subsidiary to repurchase, redeem or otherwise acquire, any of its securities or any securities of any Company Subsidiary or propose to do any of the foregoing;
(h) other than in the ordinary course of business consistent with past practices or pursuant to existing agreements of Company previously provided to Parent increase the compensation payable or to become payable to its directors, officers, consultants or employees, grant any rights to severance or termination pay to, or enter into any employment or severance agreement which provides benefits upon a change in control of Company that would be triggered by the Merger with, any director, officer, consultant or other employee of Company or any Company Subsidiary who is not currently entitled to such benefits from the Merger, establish, adopt, enter into or amend any collective bargaining, bonus, profit sharing, thrift, compensation, stock option, restricted stock, pension, retirement, deferred compensation, employment, termination, severance or other plan, agreement, trust, fund, policy or arrangement for the benefit of any director, officer, consultant or employee of Company or any Company Subsidiary, except to the extent required by applicable Law or the terms of a collective bargaining agreement, or enter into or amend any contract, agreement, commitment or arrangement between Company or any Company Subsidiary and any of Company's directors, officers, consultants or employees;
(i) pay, discharge or satisfy any claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction in the ordinary course of business and consistent with past practice of liabilities reflected or reserved against on the consolidated balance sheet of Company and the consolidated the Company Subsidiaries dated as of March 31, 1999 included in Company's quarterly report on Form 10-Q for the period then ended (the "Company Balance Sheet") and only to the extent reflected or to the extent of such reserves or incurred in the ordinary course of business since March 31, 1999;
(j) make any change with respect to Company's accounting policies, principles, methods or procedures, including, without limitation, revenue recognition policies, other than as required by U.S. GAAP;
(k) make any material Tax election or settle or compromise any material Tax liability; or
(l) authorize or enter into any formal or informal agreement or otherwise make any commitment to do any of the foregoing or to take any action which would make any of the representations or warranties of Company contained in this Agreement untrue or incorrect in any material respect or result in any of the conditions to the Merger set forth herein not being satisfied.
Conduct of Business Pending Closing Between the date of this Agreement and the Funding and Consummation Date, the Company will, except as set forth on Schedule 7.2:
(i) carry on its business in substantially the same manner as it has heretofore and not introduce any material new method of management, operation or accounting;
(ii) use its reasonable efforts to maintain its properties and facilities, including those held under leases, in as good working order and condition as at present, ordinary wear and tear excepted;
(iii) perform in all material respects all of its obligations under agreements relating to or affecting its respective assets, properties or rights;
(iv) use its reasonable efforts to keep in full force and effect present insurance policies or other comparable insurance coverage;
(v) use its reasonable efforts to maintain and preserve its business organization intact, retain its respective present key employees and maintain its relationships with suppliers, customers and others having business relations with the Company;
(vi) use its reasonable efforts to maintain compliance with all Licenses, laws, rules and regulations, consent orders, and all other orders of applicable courts, regulatory agencies and similar governmental authorities applicable to it;
(vii) maintain present debt and lease instruments and not enter into new or amended debt or lease instruments without the knowledge and consent of TCI (which consent shall not be unreasonably withheld), provided that debt and/or lease instruments may be replaced without the consent of TCI if such replacement instruments are on terms at least as favorable to the Company as the instruments being replaced; and
(viii) maintain or reduce present salaries and commission levels for all officers, directors, employees and agents except for ordinary and customary bonus and salary increases for employees in accordance with past practices.
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.
