EQUITY PURCHASE AGREEMENT This EQUITY PURCHASE AGREEMENT (this “Agreement”) is made and entered into as of October 25, 2023 (the “Agreement Date”) by and among SADA Systems, Inc., a California corporation (the “Company”), Insight Enterprises, Inc., a...
EXHIBIT 2.1 EQUITY PURCHASE AGREEMENT by and among XXXX SYSTEMS, INC., THE PURCHASER NAMED HEREIN, VERSE HOLDCO, INC., THE STOCKHOLDERS NAMED HEREIN, AND THE LEAD STOCKHOLDER NAMED HEREIN OCTOBER 25, 2023
EQUITY PURCHASE AGREEMENT This EQUITY PURCHASE AGREEMENT (this “Agreement”) is made and entered into as of October 25, 2023 (the “Agreement Date”) by and among XXXX Systems, Inc., a California corporation (the “Company”), Insight Enterprises, Inc., a Delaware corporation (the “Purchaser”), Verse Holdco, Inc., a Delaware corporation (“Seller”), and the Persons listed on Schedule A attached hereto under the heading “Stockholders” (collectively referred to herein as the “Stockholders” and individually as a “Stockholder”), and Xxxx Xxxxxxx, in his capacity as representative of the Seller Parties pursuant to Section 11.14 (the “Lead Stockholder”). The Company, the Purchaser, the Stockholders, and the Lead Stockholder are sometimes collectively referred to herein as the “Parties” and individually as a “Party.” Certain capitalized terms used but not otherwise defined herein have the meanings given to such terms in Article I. WHEREAS, the Stockholders own 100% of the issued and outstanding shares of capital stock (the “Shares”) of the Company; WHEREAS, after the Agreement Date but prior to the Closing Date, the Stockholders and Seller will undertake the following series of transactions in sequential order (steps (i) through (iv) collectively, the “Pre-Closing Restructuring”): (i) the Stockholders will contribute all of the Shares to Seller in exchange for the same number of newly issued shares of Seller, resulting in the Company becoming a wholly owned subsidiary of Seller (the “Contribution”); (ii) the Stockholders will cause Seller to make an election by filing IRS Form 8869 to treat the Company as a Qualified Subchapter S Subsidiary (a “Q-Sub”) that is a disregarded entity as provided in Section 1361(b)(3) of the Code (as defined below) and indicate on such form that such election was being made in combination with a reorganization under Section 368(a)(1)(F) of the Code as described in IRS Revenue Ruling 2008-18 (the “Q-Sub Election”); and (iii) with effect on the Business Day (as defined below) immediately following the effective date of the Q-Sub Election, the Seller will cause the Company to be converted into a Delaware limited liability company (the “Conversion”); WHEREAS, after giving effect to the Pre-Closing Restructuring (including the Conversion), the Stockholders will own 100% of the issued and outstanding capital stock of Seller, and Seller will own 100% of the issued and outstanding limited liability company membership interests of the Company (the “Membership Interests”); and WHEREAS, subject to the foregoing, the Stockholders desire to cause Seller to sell to the Purchaser, and the Purchaser desires to purchase from Seller, all right, title and interest in and to the Membership Interests (as defined below), in each case on the terms and subject to the conditions set forth in this Agreement. NOW, THEREFORE, in consideration of the mutual covenants, agreements and understandings contained herein, and intending to be legally bound, the Parties hereby agree as follows: ARTICLE I Definitions Section 1.1 Certain Defined Terms. For the purposes of this Agreement, capitalized terms used herein and not otherwise defined herein have the meanings given to such terms as set forth below: “Adjustment Amount” means the sum of the following values, determined as of the Measurement Time: Company Cash, minus Company Debt, minus unpaid Company Expenses. For clarity, the Adjustment Amount may be a positive or a negative number.
2 “Adjustment Escrow Amount” means $5,000,000. “Adjustment Escrow Fund” means the Adjustment Escrow Amount, and any interest or earnings thereon, that is held by the Escrow Agent under the Escrow Agreement. “Affiliate” of any particular Person means any other Person controlling, controlled by or under common control with such particular Person, where “control” means the possession, directly or indirectly, of the power to direct the management and policies of a Person whether through the ownership of voting securities, Contract or otherwise. “Amended SAR Holders” means the Persons set forth on Schedule A under the heading “Amended SAR Holders.” “Antitrust Laws” means the HSR Act, the Xxxxxxx Antitrust Act of 1890, the Xxxxxxx Antitrust Act of 1914, the Federal Trade Commission Act of 1914 and any other United States federal or state or foreign statutes, rules, regulations, orders, decrees, administrative or judicial doctrines or other Laws that are designed to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade or lessening competition through merger or acquisition. “Base Purchase Price” means (i) $400,000,000 plus (ii) the Gross-Up Amount. “Benefit Plan” means any retirement, pension, profit sharing, deferred compensation, employment, consulting, savings, bonus, incentive, cafeteria, medical, dental, vision, hospitalization, life insurance, accidental death and dismemberment, medical expense reimbursement, dependent care assistance, tuition reimbursement, disability, sick pay, holiday, vacation, paid time off (PTO), severance, change of control, retention, phantom stock, stock appreciation rights, stock or stock-based, performance award, fringe benefit, or other employee benefit plan, fund, policy, program, Contract or the like (other than regular salary or wages in the Ordinary Course of Business) (a) sponsored, maintained or contributed to by a XXXX Entity or to which a XXXX Entity (or any of its Affiliates for the benefit of any XXXX Entity employee, director or independent contractor, whether current or former) is a party, (b) covering or benefiting any current or former officer, employee, agent, director or independent contractor of a XXXX Entity, or (c) with respect to which a XXXX Entity has any obligation or Liability. “Bonus Letters” means the Contracts set forth in Section 1.1(a) of the Disclosure Schedules. “Business Day” means a day other than a Saturday, Sunday or other day on which commercial banks in Los Angeles, California or Phoenix, Arizona are authorized or required to close. “Calculation Principles” means (i) the accounting principles, policies, practices and methodologies set forth on Exhibit B (the “Specific Policies”); (ii) to the extent not inconsistent with the Specific Policies, GAAP consistently applied as of the Year-End Financial Statements; and (iii) to the extent not addressed in paragraphs (i) and (ii) above, GAAP. The Specific Policies shall take precedence over paragraph (ii) and (iii), and paragraph (ii) shall take precedence over paragraph (iii). “CARES Act” means Coronavirus Aid, Relief, and Economic Security Act (Pub. L. 116-136) and any administrative or other guidance published with respect thereto by any Governmental Entity. “CERCLA” means the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. §§ 9601 et seq.
3 “Change of Control Payments” means all transaction, retention, stay, change of control and severance payments payable by any of the XXXX Entities pursuant to agreements, arrangements, or plans entered into prior to the Closing (other than any arrangements providing for payments or severance at the Purchaser’s direction or request or payments of severance to individuals that the Purchaser requests be terminated prior to Closing), whether payable on or after the Closing Date (including the employer portion of any withholding, payroll, employment or similar Taxes, if any, associated therewith whether payable on the Closing Date or after), solely as a result of, or in connection with, the consummation of the Transactions, including any such payments due and payable under the SAR Plans, the Bonus Letters, and the Seller Retention Fund (including any employer’s share of employment Taxes on any payments pursuant to the SAR Plans and the Bonus Letters payable following the Closing Date). Change of Control Payments shall exclude (i) any releases from the Adjustment Escrow Fund or the Indemnity Escrow Fund to the Consideration Recipients, (ii) Earn-Out Payments made to the Consideration Recipients pursuant to Section 2.5, (iii) any employer’s share of employment Taxes associated with the payments referred to in the foregoing clauses (i) and (ii), and (iv) any employer’s share of employment Taxes associated with payments made pursuant to the Seller Retention Fund. “Close Family Member” means a parent, grandparent, child or sibling, whether by blood or marriage, or a spouse or civil union partner. “Code” means the Internal Revenue Code of 1986, as amended, and any successor thereto. “Company Cash” means, without duplication, as determined in accordance with GAAP, the aggregate consolidated amount of cash on hand and in banks, cash equivalents and marketable securities (including deposits in transits, demand deposits, money markets or similar accounts and short-term investments), including interest thereon, held by the XXXX Entities. Company Cash shall exclude: (a) restricted cash under GAAP; (b) cash held by third parties (including security deposits and prepayments); and (c) all cash held that is designated for use in connection with any cash collateralized letters of credit, performance bonds, surety bonds or similar arrangements that have been drawn. Company Cash shall: (i) be calculated net of issued but uncleared checks, wires, transfers and drafts; and (ii) include checks, wires, transfers and drafts deposited for the account of the XXXX Entities but not yet reflected as available proceeds in such Person’s account. “Company Debt” means, without duplication and with respect to the XXXX Entities: (a) the principal, accrued and unpaid interest, prepayment and redemption premiums or penalties (if any), and unpaid fees or expenses and other monetary obligations in respect of (i) indebtedness for money borrowed and (ii) indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which one or more of the XXXX Entities is responsible or liable (including any notes, debentures, bonds or other similar instruments issued in connection with an acquisition of any equity interests, assets or rights of any Person); (b) all obligations under capital or finance leases of any XXXX Entity recorded in the Financial Statements as such (excluding any lease for real property or operating lease classified as such in the Financial Statements); (c) all obligations for deferred purchase price or earn-out or similar contingent payment obligations (whether or not currently payable and to the fullest extent payable), but excluding any trade payables to the extent included as a “current liability” in the calculation of Working Capital and any Earn-Out Payments pursuant to Section 2.5; (d) any unfunded or underfunded liabilities pursuant to any pension, retirement or nonqualified deferred compensation plan or arrangement, any contributions (other than an employee contribution) required to be made by any of the XXXX Entities under any Benefit Plan that contains a cash or deferred arrangement intended to qualify under Section 401(k) of the Code for any periods prior to the Closing that have not been remitted to such plan prior to the Closing, any unpaid severance obligations of the XXXX Entities with respect to any Service Providers terminated prior to the Closing (other than any payments of severance to individuals that Purchaser requests be terminated prior to Closing), in each case, together with the employer portion of any withholding, payroll, employment or
4 similar Taxes, if any, associated therewith and only to the extent not otherwise reflected as “current liabilities” in the calculation of Working Capital or as a Company Expense (excluding any Taxes on any payments pursuant to the SAR Plans and the Bonus Letters payable following the Closing Date); (e) any net obligations necessary to settle any interest rate protection agreements, foreign currency exchange agreements, forward contracts or interest, exchange rate or commodity hedging or swap agreements to the extent actually terminated; (f) letters of credit issued on behalf of any Person to the extent drawn; (g) all obligations of the type referred to in clauses (a) through (f) of any XXXX Entity for the payment of which one or more XXXX Entities is responsible or liable, directly or indirectly, as obligor, guarantor, surety or otherwise; (h) all obligations of the type referred to in clauses (a) through (g) of other Persons secured by any Lien (other than Permitted Liens) on any property or asset of any XXXX Entity (whether or not such obligation is assumed or guaranteed by any XXXX Entity); (i) all accrued and unpaid corporate bonuses of the XXXX Entities as of the Closing Date, along with any applicable payroll taxes; and (j) accounts payable of the XXXX Entities that are 120 days or more past due (including any penalties and late fees). Company Debt shall not include (A) any amounts included as Company Expenses, (B) any intercompany accounts or transactions among any XXXX Entities, (C) deferred revenue, (D) any Liability to the extent included as a current liability in the calculation of the Working Capital, (E) any accrued commission liabilities included in the calculation of the Working Capital or (F) any Liabilities with respect to contract assets and accrued licensing costs to the extent included in the calculation of the Working Capital. “Company Debt Certificate” means a certificate executed by the Chief Financial Officer of the Company certifying on behalf of the Company an itemized list of all outstanding Company Debt as of the Measurement Time and the Person to whom such Company Debt is owed and an aggregate total of such Company Debt. “Company Expenses” means, without duplication and to the extent unpaid as of the Measurement Time: (a) all fees costs, and expenses and other Liabilities of any Person accrued or incurred by, or payable by, any Seller Party, the Lead Stockholder, or any of the XXXX Entities in connection with the Transactions and any auction or sales process in respect of the sale of the XXXX Entities, including all legal, accounting, investment banking, tax and financial advisory fees, costs, expenses and other Liabilities; (b) the Change of Control Payments; and (c) 100% of the premium, fees and expenses in connection with the D&O Tail Policy. Company Expenses shall not include any amounts included as Company Debt or owed to the Escrow Agent. “Company Expenses Certificate” means a certificate executed by the Chief Financial Officer of the Company, certifying the amount of Company Expenses remaining unpaid as of the Measurement Time (including an itemized list of each such unpaid Company Expense with a description of the nature of such expense and the Person to whom such expense is owed). “Company Product” means the Company’s proprietary Software, services or other products that are currently provided, leased, licensed, sold, marketed, distributed, or made available by the XXXX Entities to third parties, and excluding in each case any third-party products that the XXXX Entities simply resell or support without material modifications. “Confidentiality Agreement” means the non-disclosure agreement, dated April 21, 2023, between the Company and Purchaser. “Consideration Recipients” means the Stockholders and the Amended SAR Holders. “Contract” means any binding contract, agreement, understanding, arrangement or commitment, written or oral.
5 “COVID-19 Law” means the Coronavirus Aid, Relief, and Economic Security Act of 2020, the Families First Coronavirus Response Act of 2020, the Paycheck Protection Program Flexibility Act of 2020, any U.S. presidential memorandum, executive order or similar publication or document permitting or requiring the deferral of any Taxes, and any other Law intended to address the consequences of COVID- 19, in each case, as may be amended or modified, together with all rules and regulations and guidance issued by any Governmental Entity. “Data Security Requirements” means, collectively, all of the following: (a) all applicable industry self-regulatory standards, including self-regulatory standards related to data security, cyber security, information security or online behavioral advertising; (b) contractual obligations as to the Processing of Personally Identifiable Information; and (c) Company’s and each XXXX Entity’s Privacy Policies and Procedures. “Earn-Out Calculation Principles” means the accounting principles, policies, practices and methodologies set forth on Exhibit A attached hereto. The sole purpose of the Earn-Out Calculation Principles is for calculating Adjusted EBITDA and Net Revenue for purposes of Section 2.5. “Environmental Law” means any applicable Law, and any Governmental Order or binding agreement with any Governmental Entity: (a) relating to pollution (or the cleanup thereof) or the protection of natural resources, endangered or threatened species, human health or safety, or the environment (including ambient or indoor air, soil, surface water or groundwater, or subsurface strata); or (b) concerning the presence of, exposure to, or the management, manufacture, use, containment, storage, recycling, reclamation, reuse, treatment, generation, discharge, transportation, processing, production, disposal or remediation of any Hazardous Materials. The term “Environmental Law” includes the following (including their implementing regulations and any state analogs): the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. §§ 9601 et seq.; the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976, as amended by the Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. §§ 6901 et seq.; the Federal Water Pollution Control Act of 1972, as amended by the Clean Water Act of 1977, 33 U.S.C. §§ 1251 et seq.; the Toxic Substances Control Act of 1976, as amended, 15 U.S.C. §§ 2601 et seq.; the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. §§ 11001 et seq.; the Clean Air Act of 1966, as amended by the Clean Air Act Amendments of 1990, 42 U.S.C. §§ 7401 et seq.; the Federal Insecticide, Fungicide and Rodenticide Act of 1910, as amended, 7 U.S.C. §§ 136 et seq.; the Oil Pollution Act of 1990, as amended, 33 U.S.C. §§ 2701 et seq.; the Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. §§ 651 et seq; and the (Indian) Environmental Protection Act, 1986; and the (Indian) Hazardous and Other Wastes (Management and Transboundary Movement) Rules, 2016. “ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the regulations thereunder. “ERISA Affiliate” means any trade or business (whether or not incorporated) that, together with the Company or any of its Subsidiaries is treated as single employer under Section 414 of the Code. “Escrow Agent” means PNC Bank. “Escrow Agreement” means the Escrow Agreement dated as of the Closing Date by and between Lead Stockholder, the Purchaser, and Escrow Agent, in the form attached hereto as Exhibit C. “Escrow Fund” means, as of the applicable date of determination, the Adjustment Escrow Fund and the Indemnity Escrow Fund that is held by the Escrow Agent under the Escrow Agreement.
6 “Fundamental Documents” means the documents by which any Person (other than an individual) establishes its legal existence or which govern its internal affairs, as in effect from time to time including any amendments thereto. For the avoidance of doubt, “Fundamental Documents” includes any corporate, partnership or limited liability organizational documents, including Certificates or Articles of Incorporation, Bylaws, Articles of Organization, Certificates of Formation, Operating Agreements, Limited Liability Company Agreements, Certificates of Limited Partnership, Partnership Agreements, and Certificates of Existence, as applicable. “GAAP” means United States generally accepted accounting principles in effect from time to time. “Google Contracts” means (a) all Contracts in effect as of the Agreement Date between any XXXX Entity and Google LLC (or any of its Affiliates), and (b) all Contracts in effect as of the Agreement Date between any XXXX Entity and a customer thereof whereby such XXXX Entity, as an authorized reseller of Google LLC, provides the applicable customer access to one or more Google Services (including all corresponding Ordering Documents, Google Cloud Platform Customer Agreements, Google Workspace Customer Agreements, Google Maps Platform Customer Agreement, and addendums to the foregoing). “Google Services” means services offered by Google LLC (or any of its Affiliates), including the Google Cloud Platform Services, Google Workspace services, Google Maps Platform services. “Government Official” means any officer, director or employee of any Governmental Entity. Without limiting the foregoing, “Government Official” includes any government officer, director or employee, any officer, director or employee of any government-controlled entity or public international organization, any officer, director or employee of a government-owned or -controlled (in whole or in part) business, corporation, organization or entity, any Person acting in an official capacity for or on behalf of any Governmental Entity or any political party, party official or candidate for public office. “Governmental Entity” means any federal, state, local, municipal, foreign, multinational, national, regional, provincial or other (a) government or governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department, official, entity or self-regulatory organization and any court or other tribunal); (b) governmental or similar body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, arbitral, police, regulatory, or taxing authority or power of any nature, including any arbitral tribunal thereof; or (c) agency, authority, board, bureau, commission, department, office or instrumentality of any nature whatsoever of any federal, state, province, local, municipal or foreign government or other political subdivision or otherwise, or any officer or official thereof with requisite authority. “Governmental Order” means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Entity. “Gross-Up Amount” means an amount equal to $9,362,901. “Hazardous Materials” means: (a) any material, substance, chemical, waste, product, derivative, compound, mixture, solid, liquid, mineral or gas, in each case, whether naturally occurring or manmade, that is hazardous, acutely hazardous, toxic, or words of similar import or regulatory effect under Environmental Laws; and (b) any petroleum or petroleum-derived products, radon, radioactive materials or wastes, asbestos in any form, lead or lead-containing materials, urea formaldehyde foam insulation, and polychlorinated biphenyls. “HSR Act” means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.
8 to incidental rights in the Ordinary Course of Business solely for the provision of such service provider’s services to the Company (collectively, (A) through (H) inclusive, “Standard IP Contracts”). “Investment” as applied to any Person means: (a) any direct or indirect purchase or other acquisition (whether by loan, contribution of capital, exchange or otherwise) by such Person of any notes, obligations, instruments, stock, securities or other ownership interests (including partnership interests and joint venture interests) of any other Person; and (b) any capital contribution by such Person to any other Person. “Key Employees” means each of Xxxxxxxx Xxxxxxx, Xxxx Xxxx, Xxxxx Xxxxx, Xxxxxx Xxxxxxxx, Xxxxxxx Xxxxxxxx, Xxxxxxx Xxxxxxx, Xxxxx Xxxx, and Xxxxxx Xxxxxxxxxxxx. “Knowledge” when used in the phrase “to the Company’s Knowledge” or similar phrases means the actual or constructive knowledge of each of Xxxx Xxxxxxx, Xxxx Xxxx, Xxxxxx Xxxxxxxxxxxx, Xxxxx Xxxx, and Xxxxxxx Xxxxxxxx, after reasonable due inquiry, including of such person’s direct reports. “Law” means any federal, state, local, municipal or foreign statute, law, ordinance, regulation, rule, code, order, principle of common law or judgment enacted, promulgated, issued, enforced or entered by any Governmental Entity, or other requirement (including pursuant to any settlement, consent decree or determination of or settlement under any arbitration) or rule of law. “Liability” means any liability, obligation or commitment of any nature whatsoever, asserted or unasserted, known or unknown, absolute or contingent, accrued or unaccrued, matured or unmatured or otherwise. “Licenses” means all licenses, registrations, certifications, accreditations, permits, bonds, franchises, approvals, authorizations, consents or orders obtained, or required to be obtained, from a Governmental Entity, whether foreign, federal, state or local, a nationally recognized industry association or nationally recognized standards compliance organization. “Lien” means any community property interest, claim, condition, equitable interest, mortgage, encroachment, pledge, security interest, encumbrance, lien or charge of any kind (including any conditional sale or other title retention agreement or lease in the nature thereof), option, right of way, right of first refusal, restriction of any kind, including any restriction on use, voting, transfer, right to receive income on the basis of ownership or exercise of any other attribute of ownership, or any filing or agreement to file a financing statement as debtor under the Uniform Commercial Code or any similar statute, other than Permitted Liens. “Losses” means any liabilities, Governmental Orders, Liens, losses, damages, bonds, dues, assessments, fines, penalties, Taxes, reasonable out-of-pocket fees and costs (including reasonable out-of- pocket costs of investigation, defense and enforcement of this Agreement and the other Transaction Agreements) and expenses, or subject to Section 9.6 amounts paid in settlement, in each case, including reasonable out-of-pocket attorneys’ and experts fees and expenses; provided, however, that “Losses” shall not include punitive, speculative or remote damages except to the extent actually awarded to a bona fide third party or Governmental Entity in a finally settled or finally determined Third-Party Claim. “Lower Working Capital Target” means $205,000,000. “Material Adverse Effect” means any circumstance, event, condition, occurrence, development, effect or change that is, or would reasonably be expected to become, individually or in the aggregate, materially adverse to (a) the business, operations, condition (financial or otherwise), assets, or results of
9 operations of the XXXX Entities, or (b) the ability of the Company or any Seller Party to consummate the Membership Interest Purchase and any other Transactions to be consummated at the Closing on a timely basis; provided, however, that any adverse change, event or effect arising from or related to any of the following shall not be taken into account in determining whether a Material Adverse Effect has occurred: (i) conditions generally affecting the United States or world economy or generally affecting one or more industries in which the XXXX Entities operate; (ii) national or international political conditions, (iii) acts of terrorism or the engagement in or escalation of hostilities or acts of war; (iv) any natural disaster, epidemic, pandemic, or disease outbreak or worsening of such conditions existing as of the Agreement Date; (v) financial, banking or securities market conditions and changes therein (including any disruption thereof, any decline in the price of any security or any market index or change in interest rates); (vi) changes in GAAP or other applicable accounting requirements, or any interpretation thereof; (vii) changes in any applicable Law or any interpretation thereof; (viii) the failure of the XXXX Entities to meet any internal projections, including budgets or estimates of revenue or earnings; (ix) the taking of, or omission of, any action as required by this Agreement or the other Transaction Agreements; or (x) the announcement, pendency, or closing of the Transactions. Notwithstanding the foregoing, the underlying causes of the failure described in clause (viii) may be taken into account in determining whether a Material Adverse Effect has occurred, and in the case of any effect described in clauses (i) through (vii) in the immediately preceding sentence, such effect may be taken into account in determining whether or not there has been a Material Adverse Effect only if and to the extent that such effect has a disproportionate adverse effect on the XXXX Entities as compared to other participants in the industry in which the XXXX Entities operate and conduct their business. “Maximum Earn-Out Amount” means $390,000,000. “Measurement Time” means 12:01 a.m. Pacific time on the Closing Date. “Open Source Software” means all software that are subject to an “open source” license or other agreement commonly referred to as an open source, free software, copyleft or community source code license that meets the definition of open source promulgated by the Open Source Initiative located online at xxxx://xxxxxxxxxx.xxx/xxx (including any code or library licensed under the GNU Affero General Public License, GNU General Public License, GNU Lesser General Public License, BSD License, Apache Software License, or any other public source code license arrangement). “Ordinary Course of Business” means the ordinary course of commercial operations of the Company’s business, consistent with past practice. “Owned Intellectual Property” means all Intellectual Property owned or purported to be owned by any of the XXXX Entities. “Payoff Letter” with respect to indebtedness for borrowed money (or any other Company Debt secured by a Lien on any XXXX Entity’s assets) means a payoff letter and wire instructions in customary form reasonably acceptable to the Purchaser providing (a) the applicable XXXX Entity with a confirmation that all Liens and all payment obligations with respect to such indebtedness for borrowed money have been or will have been released effective as of the payment in full of such indebtedness as indicated; and (b) that upon payment in full of such indebtedness, the applicable holder shall agree or authorize the Company to execute Uniform Commercial Code termination statements (if applicable), or such other documents or endorsements necessary to release of record the security interests of such holder, and evidence of the release or discharge of such financing statements, judgments, or other Liens. “PCI DSS” means the Payment Card Industry Data Security Standard in effect as of the Agreement Date.
10 “Permitted Liens” means: (a) statutory liens for current Taxes not yet due and payable or are being contested in good faith by appropriate Proceedings by the Company, in either case, for which sufficient reserves have been established in the most recent balance sheet included in the Financial Statements; (b) mechanics’, carriers’, workers’, construction, repairers’ and similar Liens arising or incurred in the Ordinary Course of Business for amounts which are not delinquent; (c) zoning, entitlement, building and other land use regulations imposed by Governmental Entities having jurisdiction over the Leased Real Property which are not violated by the current use and operation of the Leased Real Property or the operation of the business activities carried out by any XXXX Entity; (d) covenants, conditions, restrictions, easements and other similar matters of record affecting title to the Leased Real Property which do not materially impair the occupancy or use of the Leased Real Property for the purposes for which it is currently used in connection with the business of any XXXX Entity; (e) restrictions or liens arising under federal or state securities Laws that, individually or in the aggregate, do not and could not reasonably be affected to materially affect the use of the properties or assets subject thereto or otherwise materially impair business operations as presently conducted; and (f) with respect to Company Intellectual Property, Standard IP Contracts. “Person” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization or other entity or a Governmental Entity. “Personally Identifiable Information” means, in addition to any similar term provided by applicable Privacy and Security Laws: (a) any personally-identifiable information (including protected health information as defined under HIPAA; personal information as defined in Code § 1798.140(o)(1) of the CCPA; and personal data as defined in Article 4 of the UK GDPR and Article 4 of the GDPR) or any information that could be associated with a natural person, such as addresses, telephone numbers, drivers’ license numbers, government issued identification numbers, and “cardholder data” and “sensitive authentication data,” as defined by PCI DSS. “Post-Closing Tax Period” means any taxable period beginning after the Closing Date, and, in the case of any Straddle Period, the portion of such period beginning after the Closing Date. “Pre-Closing Tax Period” means any taxable period ending on or before the Closing Date, and, in the case of any Straddle Period, the portion of such period ending on the Closing Date. “Privacy and Security Laws” means all applicable Laws concerning data protection, privacy, or security, including any Laws relating to the use, protection, privacy, and/or breach of Personally Identifiable Information which are from time-to-time applicable to XXXX Entities (and their respective business activities), including, as applicable, HIPAA, the Xxxxx-Xxxxx-Xxxxxx Act, the Fair Credit Reporting Act, the Fair and Accurate Credit Transaction Act, the Privacy Act of 1974, the CAN-SPAM Act, the Telephone Consumer Protection Act and similar Laws concerning email, text message or telephone communications, the Telemarketing and Consumer Fraud and Abuse Prevention Act, Children’s Online Privacy Protection Act, the California Consumer Privacy Act (CCPA), the EU General Data Protection Regulation ((EU) 2016/679) (GDPR), the United Kingdom General Data Protection Regulation (UK-GDPR), the Canadian Personal Information Protection and Electronic Documents Act (PIPEDA), the US State and Federal Social Security number protection Laws, US state data breach notification Laws, US State consumer protection Laws, and PCI-DSS. “Proceeding” means any litigation (in law or in equity), arbitration, mediation, action, lawsuit, proceeding, complaint, charge, claim, demand, hearing, inquiry, investigation or like matter before or by any Governmental Entity, whether administrative, judicial or arbitral in nature.
11 “Process” or “Processing” means the collection, storage, use, access, disclosure, processing, security, or transfer of information, including Personally Identifiable Information. “Processor” has the meaning given in Article 4 (2) of the UK GDPR and Article 4(2) of the GDPR. “Pro Rata Share” means, with respect to each Consideration Recipient, the percentage set forth opposite such Consideration Recipient’s name on the Payment Schedule. The aggregate Pro Rata Shares of all Consideration Recipients shall equal 100%. “Related Person” means, with respect to any Person, any director, senior officer or trustee of such Person or other person or entity that controls or otherwise holds a direct interest in such Person; provided, that as to any Person that is publicly held, the term shall only include such controlling Persons whose holdings are required to be, and are, publicly reported. “Release” means any actual or threatened release, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, abandonment, disposing or allowing to escape or migrate into or through the environment (including, ambient or indoor air, surface water, groundwater, land surface or subsurface strata or within any building, structure, facility or fixture). “Representative” means, with respect to any Person, any and all directors, officers, employees, consultants, financial advisors, counsel, accountants and other agents of such Person. “XXXX Entities” means the Company and its Subsidiaries (each a “XXXX Entity”) and for clarity, excludes the Seller. “XXXX India” means XXXX Systems India Private Limited, a Subsidiary of the Company. “XXXX India Closing Documents” means the (a) resignation letters (“XXXX India Resignation Letters”) to be submitted by the XXXX India Seller Directors as resigning directors of XXXX India; (b) board resolution approving the appointment of the Purchaser’s nominees to XXXX India’s board of directors (as additional directors), accepting and taking on record the XXXX India Resignation Letters and revoking the subsisting authorities for operation of XXXX India’s bank accounts and granting such authorities in favor of the Persons identified by the Purchaser; (c) updated statutory records of XXXX India; and (d) filings to be made with the jurisdictional registrar of companies in connection with the reconstitution of XXXX India’s board of directors. “XXXX India Seller Directors” means Xxxx Xxxxxxx, Xxxx Xxxxx Xxxx and Xxxxxxxxx Xxxxxxxx. “Sanctions” means economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by (a) the U.S. government, including those administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury or the U.S. Department of State, or (b) the European Union or Her Majesty’s Treasury of the United Kingdom. “SAR Plans” means the XXXX Systems, Inc. 2016 Stock Appreciation Rights Plan, dated as of January 11, 2016, and the Amended and Restated 2016 XXXX Systems, Inc. Stock Appreciation Rights Plan, dated as of November 12, 2020. “SAR Restricted Parties” means each of Xxxxxxx Xxxxxxx, Xxxxxx Xxxxxxxx, Xxx Xxxxx, Xxxxxxxx Xxxxxxx, Xxxx Xxxx, Xxxxx Xxxxx, Xxxxx Xxxx, and Xxxxxx Xxxxxxxxxxxx. “Seller Parties” means, collectively, the Stockholders and Seller.
12 “Service Provider” means each individual who is a current or former director, officer, employee, independent contractor or other service provider of any of the XXXX Entities. “Significant Contracts” means all Contracts between any XXXX Entity, on the one hand, and a Material Customer or Material Vendor, on the other hand. “Software” means any and all (a) computer programs, applications, routines and modules, including any and all software implementation of algorithms, models and methodologies, whether in source code, object code, human readable form or other form, as well as any Software-as-a-Service and other software-enabled hosted services and platforms, (b) databases and compilations, including any and all data, data records, data files and other collections of data, whether machine readable or otherwise, (c) wire frames, screens, interfaces, firmware, development tools and templates, and flow charts used to design, plan, develop, and organize any of the foregoing, and (d) all documentation and descriptions including user manuals and other training documentation relating to any of the foregoing. “Straddle Period” means any taxable period that begins on or before the Closing Date and ends after the Closing Date. “Stockholder Restricted Parties” means each of Xxxx Xxxxxxx, Xxxxx Xxxxxxx, and Xxxxx Xxxxxxx. “Subsidiary” means, with respect to any Person, any corporation, partnership, limited liability company or other Person of which such Person, either alone or together with one or more subsidiaries or by one or more other subsidiaries (a) directly or indirectly owns or purports to own, beneficially or of record securities or other interests representing more than 50% of the outstanding equity, voting power, or financial interests of such other Person; or (b) is entitled, by Contract or otherwise, to elect, appoint or designate directors constituting a majority of the members of such other Person’s board of directors or other governing body. “Supervisory Authority” any local, national, supranational, state, governmental or quasi- governmental agency, body, department, board, official or entity exercising regulatory or supervisory authority pursuant to any Privacy and Security Laws. “Tax” means (a) any federal, state, county, local, foreign or other income, gross receipts, ad valorem, franchise, profits, sales or use, transaction privilege, transfer, conveyance, real property gains, registration, value added, excise, service, service use, utility, environmental (including pursuant to Code Section 59A), communications, real or personal property, capital stock, license, payroll, wage or other withholding, employment, social security (or similar tax, including Federal Insurance Contribution Act (FICA) tax), worker’s compensation, capital stock, severance, stamp, occupation, premium, windfall profits, customs duties, unemployment, disability, backup withholding, value-added, unclaimed property or escheatment, alternative or add on minimum, net worth, production, lease, estimated and other taxes of any kind whatsoever, including deficiencies, penalties, additions to tax, and interest attributable thereto, whether disputed or not; (b) liability for the payment (or non-payment) of any amounts of the type described in clause (a), including liability arising as a result of being (or ceasing to be) a member of any affiliated, consolidated, combined or unitary group for any period (or being included (or required to be included) in any Tax Return relating thereto); and (c) liability for the payment of any amounts of the type described in clause (a) as a result of any express or implied obligation, tax sharing or tax allocation agreement, arrangement, commitment or understanding, by contract or pursuant to Law, whether as a transferee or successor, to indemnify or otherwise assume or succeed to the liability of any other Person. “Tax Return” means any return, declaration, statement, elections, designation, report, claim for refund, information return (including any related or supporting schedule, statement or information and
16 (iii) cause to be repaid, on behalf of the XXXX Entities, the Company Debt set forth in the Payoff Letters by wire transfer of immediately available funds to the account(s) specified in the Payoff Letters; (iv) cause to be paid, on behalf of the XXXX Entities, the Company Expenses as set forth in final invoices for the Company Expenses and identified in the Payment Schedule by wire transfer of immediately available funds in a manner that is in compliance with applicable Law; and (v) deliver to the Company all agreements, documents, instruments or certificates required to be delivered by the Purchaser at or prior to the Closing pursuant to Section 3.3. (d) At the Closing, the Seller, the Lead Stockholder and the Company shall deliver to the Purchaser all agreements, documents, instruments or certificates required to be delivered by them at or prior to the Closing pursuant to Section 3.2. (e) At or as soon as reasonably practicable after the Closing, and in any event not later than 30 days following the first regularly scheduled payroll following the later of the Closing and the date the applicable Change of Control Payment Recipient (as defined below) has executed a Change of Control Payment Agreement (as defined below), the Purchaser shall pay or cause the Company to pay the Change of Control Payments payable at the Closing (which for clarity shall exclude any payments under the Seller Retention Fund and any Amended SAR Holder’s Pro Rata Share of (y) the Total Escrow Amount and (z) any Earn-Out Payments) to each Person who is both (i) entitled to receive a Change of Control Payment (each, a “Change of Control Payment Recipient”), and (ii) has executed and delivered a Contract in the form attached as Exhibit D (a “Change of Control Payment Agreement”). Such Change of Control Payments shall be made (A) through the Company’s payroll system in accordance with standard payroll practices, and subject to any required withholding for applicable Taxes, in the case of such Change of Control Payment Recipients who are current or former employees and (B) through the Company’s accounts payable system, in the case of such Change of Control Payment Recipients who are neither current nor former employees. Section 2.3 Closing Statement. (a) At least 3 Business Days before the Closing, the Company shall provide the Purchaser with (i) a statement (the “Closing Statement”) that sets forth (x) a good faith estimate of the Adjustment Amount (the “Estimated Adjustment Amount”) and each component thereof as of the Measurement Time, including, if requested by Purchaser, reasonable supporting documentation used in the preparation thereof, (y) the Closing Date Cash Payment based on the foregoing estimates, and (z) a schedule of the Pro Rata Shares of each Consideration Recipient and directions for payment of the amounts payable pursuant to Section 2.2(b) (the “Payment Schedule”), and (ii) an estimated consolidated balance sheet of the XXXX Entities as of the Closing Date (without giving effect to the Transactions), with a certificate of the Chief Financial Officer of the Company certifying that such balance sheet was prepared only in accordance with the Calculation Principles (the “Financial Certificate”). (b) In the event that the Purchaser notifies the Company in writing that the Purchaser believes there are reasonably apparent errors in the Closing Statement delivered prior to the Closing Date, the Purchaser and the Company shall discuss such errors in good faith and the Company shall consider in good faith any comments from the Purchaser regarding such alleged errors prior to the Closing, in accordance with this Section 2.3(b). The Company shall provide such supporting documentation, workpapers, information and calculations as are reasonably necessary for the Purchaser to verify and
17 determine the calculations, amounts and other matters set forth in the Closing Statement. If the Purchaser and the Company are unable to agree to any changes proposed by the Purchaser with respect to the Closing Statement, such disagreement shall not delay the Closing and the Payment Schedule shall be based on the amounts set forth in the Closing Statement delivered by the Company (modified to reflect any changes that have been agreed upon in writing by the Company and the Purchaser). Section 2.4 Purchase Price Adjustment. (a) Within 90 days after the Closing Date, the Purchaser shall prepare and deliver to the Lead Stockholder a statement, duly certified by the Purchaser as accurately setting forth the Purchaser’s good faith determination of (i) the Adjustment Amount and each component thereof as of the Measurement Time, including reasonable supporting documentation used in the preparation thereof, (ii) the Working Capital, (iii) a consolidated balance sheet of the XXXX Entities as of the Closing Date (without giving effect to the Transactions), and a certificate of the Chief Financial Officer of the Purchaser certifying that such balance sheet was prepared only in accordance with the Calculation Principles, and (iv) the Purchase Price based on the foregoing, without regard to any Earn-Out Payments that may become payable pursuant to Section 2.5 (such statement, the “Adjustment Statement”). If the Purchaser fails to timely deliver the Adjustment Statement within 90 days after the Closing, the Lead Stockholder may send the Purchaser a written notice to cure such failure. If the Purchaser fails to deliver the Adjustment Statement within 30 days after receiving a written notice from the Lead Stockholder in accordance with the previous sentence, then the Closing Statement will be conclusively deemed to be the Adjustment Statement; provided that the Lead Stockholder may elect to deliver a Dispute Notice with respect thereto in accordance with Section 2.4(b). (b) If the Lead Stockholder disagrees with any item set forth in the Adjustment Statement, Lead Stockholder may, within 45 days after receipt of the Adjustment Statement (the “Review Period”), deliver a written notice (the “Dispute Notice”) to the Purchaser setting forth the Lead Stockholder’s calculation of each disputed amount (each an “Item of Dispute”). The Lead Stockholder and its Representatives shall have reasonable access during normal business hours to, and the Purchaser shall use commercially reasonable efforts to provide the Lead Stockholder with electronic copies of, all books and records and work papers (including those of the Purchaser’s and the XXXX Entities’ accountants and auditors) relating to the Adjustment Statement and all other items and Representatives of the Purchaser reasonably requested by the Lead Stockholder or its Representatives, as applicable, for the limited purpose of the Lead Stockholder’s review and confirmation of the same (subject to compliance with accountants’ customary procedures for release and subject to any limitations that are reasonably required to preserve any applicable attorney-client privilege, protect any proprietary or confidential information, or comply with third-party confidentiality obligations); provided, that any such access shall be conducted in such a manner as not to unreasonably interfere with the normal operations of the business of the Purchaser or any of its Affiliates, including, after the Closing, the XXXX Entities. (c) If the Purchaser does not receive a Dispute Notice within the Review Period, the Adjustment Statement shall be conclusive and binding upon each of the Parties. If the Purchaser receives a Dispute Notice from the Lead Stockholder within the Review Period, the Purchaser and the Lead Stockholder shall use reasonable efforts to resolve each Item of Dispute, and, if any Item of Dispute is so resolved, the Adjustment Statement shall be modified to the extent necessary to reflect such resolution. (d) If any Item of Dispute remains unresolved as of the 45th day after delivery by the Lead Stockholder of the Dispute Notice, the Purchaser and Lead Stockholder shall jointly retain a mutually agreeable dispute resolution firm with the requisite experience (the “Arbiter”) to resolve such remaining disagreement, it being understood that any item not included as an Item of Dispute in the Dispute Notice shall be conclusive and binding upon each of the Parties as set forth in the Adjustment Statement. The
18 Purchaser and the Lead Stockholder shall request that the Arbiter render a determination as to each unresolved Item of Dispute within 45 days after the Arbiter’s retention, and the Purchaser shall, and shall cause the XXXX Entities and each of their respective Representatives to, reasonably cooperate with the Arbiter so as to enable it to make such determination as quickly and accurately as reasonably practicable, including by the provision by the XXXX Entities of all books and records and work papers (including those of the XXXX Entities’ accountants and auditors) relating to the Adjustment Statement and all other items reasonably requested by the Arbiter (subject to compliance with accountants’ customary procedures for release and subject to any limitations that are reasonably required to preserve any applicable attorney-client privilege, protect any proprietary or confidential information, or comply with third-party confidentiality obligations). The Arbiter shall act as an expert, not as an arbitrator, and shall consider only those Items of Dispute that remain unresolved by the Purchaser and the Lead Stockholder. In resolving any Item of Dispute, the Arbiter may not assign a value to any item greater than the greatest value, or less than the smallest value, for such item claimed by the Purchaser on the Adjustment Statement or the Lead Stockholder in the Dispute Notice. The Arbiter’s determination(s) shall be based upon the definitions included herein and shall not be an independent review. The Arbiter’s determination of each Item of Dispute submitted to it shall be in writing, shall conform with this Section 2.4 and shall be conclusive and binding upon each of the Parties, and the Adjustment Statement shall be modified to the extent necessary to reflect such determination(s). The Arbiter shall allocate its fees, costs and expenses between the Purchaser, on the one hand, and the Seller Parties, on the other hand, based upon the percentage which the portion of the contested amount not awarded to each such Party bears to the amount actually contested by such Party. For example, if the Lead Stockholder claims in a Dispute Notice that the Items of Dispute are in the aggregate $1,000 greater than the amounts determined for such items by the Purchaser in the Adjustment Statement, and the Arbiter ultimately determines to award the Lead Stockholder $600 of the $1,000 contested, then the fees, costs and expenses of the Arbiter will be allocated 60% (i.e., 600 ÷ 1,000) to the Purchaser and 40% (i.e., 400 ÷ 1,000) to the Seller Parties. (e) If the Adjustment Amount as finally determined pursuant to this Section 2.4 (the “Final Adjustment Amount”) is less than the Estimated Adjustment Amount in the Closing Statement (the aggregate amount of such difference being referred to herein as the “Adjustment Shortfall”), the Purchaser shall recover the Adjustment Shortfall from the Seller Parties in accordance with Section 9.8(b). If the Final Adjustment Amount is greater than the Estimated Adjustment Amount in the Closing Statement, then the Purchaser shall cause the amount of such difference (the aggregate amount of such difference being referred to herein as the “Adjustment Surplus”) to be delivered to the Consideration Recipients. (f) If the Lower Working Capital Target exceeds the Working Capital as finally determined pursuant to this Section 2.4 (the “Final Working Capital” and such difference the “Working Capital Shortfall”), the Purchaser shall recover the Working Capital Shortfall from the Adjustment Escrow Fund (in which case, the Purchaser and Lead Stockholder shall deliver a joint written instruction to the Escrow Agent to disburse the amount of the Working Capital Shortfall (up to the balance of the Adjustment Escrow Fund) from the Adjustment Escrow Fund to the Purchaser’s designee. To the extent the balance of the Adjustment Escrow Fund exceeds the Working Capital Shortfall, any remaining amounts in the Adjustment Escrow Fund after the Escrow Agent pays the Purchaser the Working Capital Shortfall shall be released to the Consideration Recipients, in accordance with their respective Pro Rata Shares. The sole and exclusive source of recourse and recovery for any Working Capital Shortfall shall be the Adjustment Escrow Fund. If the Final Working Capital is greater than the Upper Working Capital Target, then (I) the Purchaser shall cause the amount of such difference (the aggregate amount of such difference being referred to herein as the “Working Capital Surplus”) to be delivered to the Consideration Recipients; provided that the Working Capital Surplus shall not exceed, and Purchaser shall not be required to pay more than, an amount equal to the amount of the Adjustment Escrow Amount, and (II) the Purchaser and Lead Stockholder shall deliver a joint written instruction to the Escrow Agent to disburse the Adjustment Escrow Fund to the Consideration Recipients, in each case in accordance with their respective Pro Rata Shares.
19 Notwithstanding anything in Section 2.4(e) or this Section 2.4(f) to the contrary, (A) any amounts payable to the Consideration Recipients pursuant to Section 2.4(e) or this Section 2.4(f) shall be net of any applicable employer’s share of employment Taxes on the amounts payable to the Amended SAR Holders pursuant to Section 2.4(e) or this Section 2.4(f), and (B) amounts payable to Amended SAR Holders pursuant to Section 2.4(e) or this Section 2.4(f) shall be released by the Escrow Agent to the Purchaser and thereafter distributed by the Company to the Amended SAR Holders in accordance with the Company’s applicable payroll processes and subject to each Amended SAR Holders Amended SAR and Bonus Agreement. Subject to the Purchaser Indemnitees’ right to be indemnified for unpaid Company Expenses or Company Debt pursuant to Section 9.3(c), the Parties agree that this Section 2.4 is the sole and exclusive remedy for resolving disputes with respect to the Adjustment Statement. (g) The Parties agree that any amount paid under this Section 2.4 shall be treated as an adjustment to the Purchase Price for Tax purposes and, except to the extent required by applicable Tax Law, not to take any position inconsistent with such treatment on any Tax Return. Section 2.5 Post-Closing Earn-Out. (a) During the period commencing on the Closing Date and ending on December 31, 2026, the Seller shall be eligible to receive additional consideration (each an “Earn-Out Payment” and collectively, the “Earn-Out Payments”) if the XXXX Entities’ Adjusted GAAP EBITDA and Net Revenue growth, each calculated in accordance with the Earn-Out Calculation Principles, during the applicable Earn- Out Period (as defined below) exceed certain targets, as further described in this Section 2.5. The aggregate Earn-Out Payments shall not exceed the Maximum Earn-Out Amount. (b) The XXXX Entities’ Adjusted GAAP EBITDA and Net Revenue shall be calculated in accordance with the Earn-Out Calculation Principles and Section 2.5(e) for (A) the period beginning on January 1, 2023 and ending on December 31, 2023 (the “2023 Earn-Out Period”), (B) the 12 month period beginning on January 1, 2024 and ending on December 31, 2024 (the “2024 Earn-Out Period”), (C) the 12 month period beginning on January 1, 2025 and ending on December 31, 2025 (the “2025 Earn-Out Period”), and (D) the 12 month period beginning on January 1, 2026 and ending on December 31, 2026 (the “2026 Earn-Out Period” and collectively with the 2023 Earn-Out Period, the 2024 Earn-Out Period, and the 2025 Earn-Out Period, the “Earn-Out Periods”, or each, an “Earn-Out Period”). (c) For purposes of this Section 2.5, “EBITDA Target”, “Lower EBITDA Target”, “Earn-Out Target Payment”, and “Maximum Earn-Out Payment” mean, for each applicable Earn-Out Period: 2023 Earn-Out Period 2024 Earn-Out Period 2025 Earn-Out Period 2026 Earn-Out Period EBITDA Target $[***] $[***] $[***] $[***] Lower EBITDA Target $[***] $[***] $[***] $[***] Earn-Out Target Payment $30,000,000 $60,000,000 $60,000,000 $60,000,000 Maximum Earn-Out Payment $30,000,000 $120,000,000 $120,000,000 $120,000,000
21 (i) Within 60 days after the end of each Earn-Out Period, the Purchaser shall prepare and deliver to the Lead Stockholder a statement (the “Earn-Out Statement”) setting forth the Purchaser’s good faith calculation of the XXXX Entities’ Adjusted GAAP EBITDA and Net Revenue (the “Estimated Earn-Out Metrics”) for such period, which the Purchaser and the Lead Stockholder agree shall be calculated in accordance with Section 2.5 and Exhibit A attached hereto. (ii) If the Lead Stockholder disagrees with any item set forth in the Earn-Out Statement, the Lead Stockholder may, within 30 days after receipt of the Earn-Out Statement (“Earn-Out Review Period”), deliver a written notice (an “Earn-Out Objection Notice”) to the Purchaser setting forth the Lead Stockholder’s calculation of each disputed amount (each an “Earn- Out Disputed Item”). The Lead Stockholder and its Representatives shall have reasonable access during normal business hours to, and the Purchaser shall use commercially reasonable efforts to provide the Lead Stockholder with electronic copies of, all books and records and work papers (including those of the Purchaser’s and the XXXX Entities’ accountants and auditors) relating to the Earn-Out Statement and all other items and Representatives of the Purchaser reasonably requested by the Lead Stockholder or its Representatives, as applicable, for the limited purpose of the Lead Stockholder’s review and confirmation of the same (subject to compliance with accountants’ customary procedures for release and subject to any limitations that are reasonably required to preserve any applicable attorney-client privilege, protect any proprietary or confidential information, or comply with third-party confidentiality obligations); provided, that any such access shall be conducted in such a manner as not to unreasonably interfere with the normal operations of the business of the Purchaser or any of its Affiliates, including, after the Closing, the XXXX Entities. (iii) If the Purchaser does not receive an Earn-Out Objection Notice within the Earn-Out Review Period, the Earn-Out Statement shall be conclusive and binding upon each of the Parties. If the Purchaser receives an Earn-Out Objection Notice from the Lead Stockholder within the Earn-Out Review Period, the Purchaser and the Lead Stockholder shall use reasonable efforts to resolve each Earn-Out Disputed Item, and, if any Earn-Out Disputed Item is so resolved, the Earn-Out Statement shall be modified to the extent necessary to reflect such resolution. (iv) If any Earn-Out Disputed Item remains unresolved as of the 30th day after delivery by the Lead Stockholder of the Earn-Out Objection Notice, the Purchaser and Lead Stockholder shall jointly retain the Arbiter to resolve such remaining disagreement, it being understood that any item not included as an Earn-Out Disputed Item in the Earn-Out Objection Notice shall be conclusive and binding upon each of the Parties as set forth in the Earn-Out Statement. The Purchaser and the Lead Stockholder shall request that the Arbiter render a determination as to each unresolved Earn-Out Disputed Item within 30 days after the Arbiter’s retention, and the Purchaser shall, and shall cause the XXXX Entities and each of their respective Representatives to, reasonably cooperate with the Arbiter so as to enable it to make such determination as quickly and accurately as reasonably practicable, including by the provision by the XXXX Entities of all books and records and work papers (including those of the XXXX Entities’ accountants and auditors) relating to the Earn-Out Statement and all other items reasonably requested by the Arbiter (subject to compliance with accountants’ customary procedures for release and subject to any limitations that are reasonably required to preserve any applicable attorney-client privilege, protect any proprietary or confidential information, or comply with third-party confidentiality obligations). The Arbiter shall consider only those Earn-Out Disputed Items that remain unresolved by the Purchaser and the Lead Stockholder. In resolving any Earn-Out Disputed Item, the Arbiter may not assign a value to any item greater than the greatest value, or less than the smallest value, for such item claimed by the Purchaser on the Earn-Out Statement or the Lead Stockholder in the Earn-Out Objection Notice. The Arbiter’s determination(s) shall be based upon
22 the definitions included herein and shall not be an independent review. The Arbiter’s determination of each Earn-Out Disputed Item submitted to it shall be in writing, shall conform with this Section 2.5 and shall be conclusive and binding upon each of the Parties, and the Earn-Out Statement shall be modified to the extent necessary to reflect such determination(s). The fees, costs and expenses of the Arbiter pursuant to this Section 2.5(e) shall be allocated in the manner set forth in Section 2.4(d), mutatis mutandis. (f) Within 10 days after an Earn-Out Payment has been finally determined pursuant to Section 2.5(e), the Purchaser shall pay an amount equal to such Earn-Out Payment to the Consideration Recipients, in accordance with their respective Pro Rata Shares. Notwithstanding anything in this Section 2.5(f) to the contrary, (i) any amounts payable to the Consideration Recipients pursuant to this Section 2.5(f) shall be net of any applicable employer’s share of employment Taxes, (ii) amounts payable to the Amended SAR Holders shall be paid by the Purchaser in accordance with the Company’s applicable payroll processes no later than 30 days after the first regularly scheduled payroll following such time, and (iii) any amounts payable to an Amended SAR Holder shall be subject to the terms of such Amended SAR Holder’s Amended SAR and Bonus Agreement. (g) The right of the Seller to receive any Earn-Out Payment (i) is solely a contractual right and is not a security for purposes of any federal or state securities Laws (and shall confer upon the Seller only the rights of a general unsecured creditor under applicable state Law); (ii) will not be represented by any form of certificate or instrument; (iii) does not give Seller any dividend rights, voting rights, liquidation rights, preemptive rights or other rights common to holders of the Purchaser’s equity interests; (iv) is not redeemable; and (v) may not be sold, assigned, pledged, gifted, conveyed, transferred or otherwise disposed of by the Seller without obtaining the Purchaser’s prior written consent. (h) The Purchaser shall not take any action with the primary purpose of impeding the Seller’s ability to achieve any Earn-Out Payments, but otherwise the Purchaser shall (acting at all times reasonably and in good faith) have the right to control or direct the operations of the XXXX Entities in such a manner as may be determined by the Purchaser in its sole discretion; provided, however, that the Purchaser shall manage the operations of the XXXX Entities in accordance with the “Guiding Principles” set forth on Exhibit I. The Earn-Out Calculation Principles and Guiding Principles are incorporated herein by reference and represent the agreement of the Parties. In the event of any conflict between this Agreement and the Earn-Out Calculation Principles or Guiding Principles, the Earn-Out Calculation Principles and Guiding Principles shall control. (i) The Parties agree that any payments under this Section 2.5 will be treated as an adjustment to the Purchase Price for Tax purposes and, except to the extent required by applicable Tax Law, not to take any position inconsistent with such treatment on any Tax Return, it being acknowledged that a portion of any such payment may be treated as interest pursuant to Section 483 of the Code. (j) If any of the Stockholder Restricted Parties breach any of the provisions set forth in the Stockholder Restrictive Covenant Agreement, no Earn-Out Payments shall be owed to any Consideration Recipient after the date of such breach. Section 2.6 Withholding. To the extent required by Law, the Purchaser, the Company, and any other applicable withholding agent, as applicable, shall be entitled to deduct, withhold, and pay over to the applicable Taxing Authority from consideration otherwise payable pursuant to this Agreement to any Person such amounts as are required to be deducted, withheld, and are to be paid over with respect to the making of such payment under the Code, or any provision of state, local, or foreign Tax Law. The Purchaser or the Company, as applicable, shall use commercially reasonable efforts to (a) provide reasonable advance notice to the Person in respect of whom such withholding is required and (b) cooperate to minimize the
26 correct in all respects (in the case of any representation or warranty qualified by materiality or Material Adverse Effect) or in all material respects (in the case of any representation or warranty not qualified by materiality or Material Adverse Effect) on and as of the Agreement Date and on and as of the Closing Date with the same effect as though made at and as of such date (except for those representations and warranties that address matters only as of a specified date, the accuracy of which shall be determined as of that specified date in all respects). (b) Covenants. The Purchaser shall have complied in all material respects with the covenants, agreements, and conditions set forth in this Agreement and each of the other Transaction Agreements that are required to be performed or complied with by the Purchaser before or on the Closing Date. (c) Officer’s Certificate. The Purchaser shall have delivered to the Company a certificate from the Purchaser, dated as of the Closing Date and signed on behalf of the Purchaser by an executive officer thereof, stating that the conditions specified in Section 3.3(a) and Section 3.3(b) have been satisfied. (d) Escrow Agreement. The Purchaser shall have delivered its and the Escrow Agent’s executed counterpart of the Escrow Agreement to the Lead Stockholder. Section 3.4 Frustration of Closing Conditions. No Party may rely on the failure of any condition set forth in this Article III to be satisfied if such failure was primarily caused by such Party’s breach of this Agreement. ARTICLE IV Representations and Warranties of the Company Subject to the disclosures set forth in the disclosure schedules of the Company delivered to the Purchaser with the execution of this Agreement (the “Disclosure Schedules”) (it being agreed that disclosure of any item in any section or subsection of the Disclosure Schedules shall also be deemed disclosure with respect to any other section or subsection of this Agreement to which the relevance of such item is reasonably apparent on its face), the Company hereby represents and warrants to the Purchaser, as of the Agreement Date and as of the Closing Date, as follows: Section 4.1 Organization; Power and Authority. (a) As of the Agreement Date and through the effective time of the Conversion, the Company is a corporation validly existing and in good standing under the Laws of the State of California. As of and after the effective time of the Conversion, the Company will be a limited liability company validly existing and in good standing under the Laws of the State of Delaware. Each XXXX Entity (other than the Company) is duly incorporated, validly existing and in good standing under the Laws of its jurisdiction of organization. (b) Each XXXX Entity is qualified to do business in every jurisdiction in which the properties owned or leased by it or the conduct of its business as currently conducted requires such qualification under applicable Law, except in each case where the failure to be so qualified would not have a materially and adverse effect on the XXXX Entities (taken as a whole). Each XXXX Entity possesses all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now conducted. The Fundamental Documents of each XXXX Entity, true and complete copies of which have been delivered to the Purchaser, each as amended to date and which are in full force and effect. No
30 (c) split, combination or reclassification of any shares of its capital stock; (d) issuance, sale or other disposition of any of its capital stock (including pursuant to any dividends), or grant of any options, warrants or other rights to purchase or obtain (including upon conversion, exchange or exercise) any of its capital stock; (e) redemption, purchase or acquisition by any XXXX Entity of its capital stock; (f) material change in any method of accounting or accounting practice of the Company, except as required by GAAP or as disclosed in the notes to the Financial Statements; (g) material change in any XXXX Entity’s cash management practices and its policies, practices and procedures with respect to collection of accounts receivable, establishment of reserves for uncollectible accounts, accrual of accounts receivable, inventory control, prepayment of expenses, payment of trade accounts payable, accrual of other expenses, deferral of revenue and acceptance of customer deposits; (h) entry into, termination (other than non-renewal), amendment, or modification of any Google Contract with a value in excess of $500,000 annually, other than in the Ordinary Course of Business; (i) incurrence, assumption or guarantee of any indebtedness for borrowed money except unsecured current obligations and Liabilities incurred in the Ordinary Course of Business; (j) transfer, assignment, sale or other disposition of any of the assets shown or reflected in the Balance Sheet or cancellation of any debts or entitlements; (k) transfer or assignment of or grant of any license or sublicense under or with respect to any Owned Intellectual Property or Intellectual Property Licenses except non-exclusive licenses or sublicenses granted in the Ordinary Course of Business; (l) (i) abandonment or lapse of or failure to maintain in full force and effect all Owned Intellectual Property that is subject to any issuance, registration or application by or with any Governmental Entity or authorized private registrar in any jurisdiction, including issued patents, registered trademarks, domain names and copyrights, and pending applications for any of the foregoing, or (ii) failure to take or maintain reasonable measures to protect the confidentiality or value of any trade secrets included in the Owned Intellectual Property; (m) damage, destruction or loss (whether or not covered by insurance) to its property in excess of $500,000; (n) Investment in, or loan (which for the avoidance of doubt excludes credit extended to a customer in the Ordinary Course of Business), any other Person that is not a XXXX Entity; (o) entry into, amendments, acceleration, termination (other than any non-renewals), material modification to or cancellation (other than any non-renewals) of (i) any Material Contract (other than Google Contracts), or (ii) any Significant Contract providing for amounts paid by or to a XXXX Entity in excess of $500,000 annually (other than the Google Contracts); (p) capital expenditures in excess of $500,000;
31 (q) imposition of any Lien upon any XXXX Entity’s properties, capital stock or assets, tangible or intangible; (r) (i) grant of any bonuses, whether monetary or otherwise, or increase in any wages, salary, severance, pension or other benefits in respect of its current or former employees, officers, directors, independent contractors or consultants, other than as provided for in any written agreements, in the Ordinary Course of Business (including grants of commissions) or as required by applicable Law, (ii) any termination of any employees for which the aggregate costs and expenses exceed $200,000, or (iii) action to accelerate the vesting or payment of any compensation or benefit for any current or former employee, officer, director, independent contractor or consultant; (s) hiring or promoting of any person as or to (as the case may be) an officer, except to fill a vacancy in the Ordinary Course of Business; (t) adoption, modification or termination of any: (i) severance, retention or similar agreement with any current or former employee, officer, director, independent contractor or consultant, or (ii) collective bargaining or other agreement with a Union, in each case whether written or oral; (u) loan to (or forgiveness of any loan to), or entry into any other transaction with, (i) any of its stockholders or their Affiliates, (ii) current or former directors, officers and employees, or (iii) any other XXXX Entity; (v) entry into a new line of business or abandonment or discontinuance of existing lines of business; (w) adoption of any plan of merger, consolidation, reorganization, liquidation or dissolution or filing of a petition in bankruptcy under any provisions of federal or state bankruptcy Law or consent to the filing of any bankruptcy petition against it under any similar Law; (x) purchase, lease or other acquisition of the right to own, use or lease any property or assets for an amount in excess of $250,000, individually (in the case of a lease, per annum) or $500,000 in the aggregate (in the case of a lease, for the entire term of the lease, not including any option term), except for purchases of inventory, software or supplies in the Ordinary Course of Business consistent with past practice; (y) acquisition by merger or consolidation with, or by purchase of a substantial portion of the assets or stock of, or by any other manner, any business or any Person or any division thereof; (z) settlement or compromise of any Proceeding, or entry into any consent decree or settlement agreement with any Governmental Entity (in its capacity as a regulatory body), against or affecting the XXXX Entities; (aa) action to make, change or rescind any Tax election, or amend any Tax Return in each case that would have the effect of increasing the Tax liability or reducing any Tax asset of the Purchaser in respect of any Post-Closing Tax Period; or (bb) Contract to do any of the foregoing, or any action or omission that would result in any of the foregoing. Section 4.8 Tangible Assets. Each XXXX Entity has either good and valid title to, a valid leasehold interest in, or a license to use, all Leased Real Property and the tangible personal property and
32 other tangible assets owned or used by it or shown on the Balance Sheet or acquired since the Balance Sheet Date, free and clear of all Liens, except for tangible personal property and assets disposed of in the Ordinary Course of Business since the Balance Sheet Date. The buildings, plants, structures, furniture, fixtures, machinery, equipment, vehicles and other items of tangible personal property of the XXXX Entities are structurally sound, are in good operating condition and repair, and are adequate for the uses to which they are being put, and none of such buildings, plants, structures, furniture, fixtures, machinery, equipment, vehicles and other items of tangible personal property is in need of maintenance or repairs except for ordinary, routine maintenance and repairs that are not material in nature or cost. The buildings, plants, structures, furniture, fixtures, machinery, equipment, vehicles and other items of tangible personal property currently owned or leased by the XXXX Entities, together with all other tangible properties and assets of the XXXX Entities, are sufficient for the conduct of the XXXX Entity’s business as currently conducted. Section 4.9 Tax Matters. (a) Since its formation and until the Pre-Closing Restructuring, the Company has been and will be a validly electing S corporation (within the meaning of Section 1361(a) of the Code and any comparable provision of state or local income Tax Law). Prior to and on the day immediately preceding the Pre-Closing Restructuring, the Company had not taken any action or failed to take any action, nor, to the Company’s Knowledge, had any event occurred, that would result in the revocation or termination of any of the foregoing elections. The Company has not received any notice or otherwise become aware of any action by the IRS (or any state or local Taxing Authority) to disallow the Company’s tax election to be an S corporation (or any comparable state or local election) for any taxable year. Seller is as of the Closing, and has been since the date of its formation, properly treated as an “S corporation” (within the meaning of Section 1361(a) of the Code and any comparable provision of state or local income Tax Law). The Company was, following the Q-Sub Election and prior to the Conversion, properly treated as a “qualified Subchapter S subsidiary” within the meaning of Section 1361(b)(3)(B) of the Code (and any comparable provision of state or local income Tax Law). Following the Conversion, the Company was, and currently is as of the Closing Date, properly treated as an entity disregarded as separate from its owner, Seller, for U.S. federal and applicable state and local income Tax purposes. The Contribution and the Q-Sub Election are together properly treated as a “reorganization” within the meaning of Section 368(a)(1)(F) of the Code (and any comparable provision of state or local income Tax Law). Section 4.9(a) of the Disclosure Schedules sets forth true and accurate tax classification (for all U.S. federal, state and local, and foreign Tax Law purposes) of each XXXX Entity other than the Seller and the Company. (b) Since January 1, 2019, each XXXX Entity has filed all income and other material Tax Returns that it is required to file under applicable Laws, and all such Tax Returns are complete and correct in all material respects. (c) Since January 1, 2019, each XXXX Entity has (i) paid all Taxes due and owing by it (whether or not such Taxes are shown or required to be shown on a Tax Return) and including any estimated Tax payments sufficient to avoid any material amount of underpayment penalties or interest have been timely paid, (ii) withheld and timely paid over to the appropriate Taxing Authority all material Taxes which it is required to withhold from amounts paid or owing by it to any employee, independent contractor, securityholder, creditor or other Person, and (iii) complied in all material respects with all information reporting obligations in respect of such withholding Taxes. There are no Liens on the XXXX Entities with respect to Taxes other than Permitted Liens. (d) Since January 1, 2019, no foreign, federal, state or local Tax audits, investigations, suits or administrative or judicial Tax Proceedings are pending, or to the Company’s Knowledge, are threatened, or have been conducted with respect to the XXXX Entities.
33 (e) No claim is pending or has been made in writing by a Taxing Authority in a jurisdiction where the XXXX Entities do not file Tax Returns that the XXXX Entities are or may be subject to taxation by, or required to file Tax Returns in, that jurisdiction. (f) Except for permitted extensions of time to file Tax Returns that are set forth on Section 4.9(f) of the Disclosure Schedules, there are no agreements, waivers or other arrangements providing for any extension of time with respect to the filing of any Tax Return or other document or the payment of any Taxes by the XXXX Entities or the period for any assessment or reassessment of Taxes. (g) No XXXX Entity has been a member of an affiliated group of corporations within the meaning of Section 1504 of the Code, or a member of a combined, consolidated, unitary or other group for state, local or foreign Tax purposes (other than an affiliated, combined, consolidated, unitary or other group of which a XXXX Entity is, or was the common parent), or filed or been included in a combined, consolidated or unitary income Tax Return (other than a group, the common parent of which was a XXXX Entity). (h) No XXXX Entity is a party to or bound by any Tax indemnity, Tax allocation, Tax sharing agreement or similar agreement or any other agreement under which it would have liability for any other Person’s Taxes (other than any agreement entered into in the Ordinary Course of Business, the primary purpose of which is not related to Taxes). (i) The unpaid Taxes of each XXXX Entity (i) did not, as of the date of the Financial Statements, exceed in any material respect the reserve for Tax liability (rather than any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the face of the Financial Statements (rather than in any notes thereto) and (ii) will not at the Closing exceed in any material respect that reserve as adjusted for the passage of time through the Closing in accordance with the past custom and practice of the XXXX Entities in filing their Tax Returns. (j) No XXXX Entity is a resident for Tax purposes in, nor does it have a branch, permanent establishment, or other similar fixed place of business in, any country other than its country of organization. (k) The prices for any property or services (or for the use of any property) provided between or among the XXXX Entities are arm’s-length prices for purposes of all applicable transfer pricing Laws. (l) No XXXX Entity has ever been, and as of immediately prior to the Closing no XXXX Entity will be, a passive foreign investment company within the meaning of Section 1297 of the Code. (m) No XXXX Entity is, nor has been during the period specified in Section 897(c)(1)(A)(ii) of the Code, a “United States real property holding corporation” within the meaning of Section 897(c)(2) of the Code. (n) No XXXX Entity has constituted either a “distributing corporation” or a “controlled corporation” in a distribution of stock intended to be governed by Section 355(a) of the Code in the 2-year period ending on the Agreement Date. (o) No XXXX Entity will be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any: (i) change in a method of accounting for a taxable period ending on or prior to the
35 providing for annual total amounts in excess of $500,000 paid by XXXX Entities (other than the Google Contracts); (v) [Reserved]; (vi) all Contracts for the providing of services by any officer, employee or other Person on a full-time, part-time, independent contractor or other basis that (A) provides annual total compensation in excess of $500,000 with respect to employees (each, a “Significant Employee”) or $250,000 with respect to independent contractors; (B) provides for the payment of any cash or other compensation, benefits, or acceleration of any benefit as a result of the execution of this Agreement, the other Transaction Agreements, or the consummation of the Transactions (in all cases, whether alone, or in conjunction with another event, and whether with or without the passage of time, the giving of notice, or both); or (C) restricts the ability of any XXXX Entity to terminate the service of any employee or the independent contractor Contract of any Person at any time for any lawful reason or for no reason without liability (including severance obligations), other than those that are terminable by the XXXX Entity without financial obligation to the XXXX Entity upon notice of 90 days or less (excluding any requirements of Law outside the United States); (vii) all Contracts relating to Company Debt for borrowed money (including guarantees of Company Debt); (viii) all Contracts with any Governmental Entity, other than the Google Contracts (“Government Contracts”); (ix) each Lease and any other lease or agreement under which the XXXX Entity is lessee of or holds or operates any personal property under which the aggregate annual rental payments exceed $250,000; (x) all Contracts entered into on or after January 1, 2017 providing for, or relating to, the settlement or compromise of any Proceeding, and all Contracts entered into as of any time providing for, or relating to, the settlement or compromise of any Proceeding if any XXXX Entity has any outstanding obligations thereunder; (xi) all Contracts with respect to the acquisition or disposition of any business, a material amount of stock or assets of any other Person, or any equity (or equity-linked) or debt Investment in or any loan to any Person, whether by merger, consolidation, business combination, sale of assets or otherwise, and all related Contracts, in each case where the value of such acquisition or disposition exceeds $500,000; (xii) all Contracts providing for capital expenditures by the XXXX Entity with an outstanding amount of unpaid obligations and commitments in excess of $500,000; (xiii) all Contracts containing any acquisition or disposition of, or grant of, any license or covenant not to assert relating to or under Intellectual Property (1) by any XXXX Entity to a third party or (2) by a third party to the XXXX Entity, excluding, in each of (1) and (2) Standard IP Contracts; (xiv) all Contracts containing any covenant: (A) limiting the right of the XXXX Entity to engage or compete in any line of business or to compete with any Person anywhere in the world; (B) granting to any third party any exclusive rights; or (C) providing “most favored pricing” clauses to any third party;
36 (xv) all Contracts for the repurchase, redemption, issuance, sale or voting of any equity securities of any XXXX Entity, or the grant of a stock option or similar equity security (in each case, including the SAR Plans and any award or grant agreements thereunder); (xvi) all Contracts relating to any joint venture, partnerships, joint development, profit sharing or similar agreement involving the sharing of profits, losses, costs or Liabilities (other than the Google Contracts); (xvii) all collective bargaining agreements or Contracts with any Union; (xviii) all Contracts that grants to a third party any option, right of first refusal, right of first offer or similar right with respect to any material assets, rights or properties of the XXXX Entity; (xix) all Contracts under which a XXXX Entity is the lessor of or permits any third Person to hold or operate any real or personal property owned or controlled by a XXXX Entity; (xx) all Contracts involving the sale of the accounts receivable of a XXXX Entity to any other Person; (xxi) all Contracts with the 20 largest sources of revenue of the XXXX Entities (based on the aggregate dollar amount of sales to the XXXX Entities) for the 12-calendar month period ended December 31, 2022; and (xxii) all Contracts with the 10 largest vendors of the XXXX Entities (based on the aggregate dollar amount of purchases by the XXXX Entities from such vendors) for the 12 calendar month period ended December 31, 2022. (b) As of the Agreement Date, each of the Material Contracts are in full force and effect and valid and binding and enforceable against the XXXX Entities and against the other party thereto in accordance with their respective terms, subject to the Enforceability Exceptions. Each XXXX Entity has performed all obligations required to be performed by it under, including the timely making of any payments, and is not in default or breach of any Material Contract, and no event has occurred which, with due notice or lapse of time or both, would constitute such a default or breach. To the Company’s Knowledge, each other party to each Material Contract has performed all material obligations required to be performed by it under, including the timely making of any payments, and is not in default or breach of, any Material Contract, and as of the Agreement Date, no event has occurred which, with due notice or lapse of time or both, would constitute such a default or breach. The Company has made available to the Purchaser a true, complete and correct copy of each of the written Material Contracts together with all amendments, waivers or other changes thereto. The Company does not have any oral Material Contracts. (c) As of the Agreement Date, each of the Google Contracts are in full force and effect and valid and binding and enforceable against the XXXX Entities and against the other party thereto in accordance with their respective terms, subject to the Enforceability Exceptions. Each XXXX Entity has performed all obligations required to be performed by it under, including the timely making of any payments, and is not in default or breach of any Google Contract, and no event has occurred which, with due notice or lapse of time or both, would constitute such a default or breach. To the Company’s Knowledge, each other party to each Google Contract has performed all obligations required to be performed by it under, including the timely making of any payments, and is not in default or breach of, any Google Contract, and as of the Agreement Date, no event has occurred which, with due notice or lapse of time or both, would constitute such a default or breach. The Company has made available to the Purchaser
38 (d) No XXXX Entity is the subject of any pending Proceedings and, since January 1, 2020, has not received any written communications alleging, in each case, that the XXXX Entity has violated any Intellectual Property rights of any other Person. To the Company’s Knowledge, since January 1, 2020, neither the use nor practice of the Owned Intellectual Property nor the business and operations of the XXXX Entities, including the licensing, marketing, offering for sale, sale, or use of the products and services of the XXXX Entities, has infringed, misappropriated or otherwise violated or currently infringes upon, misappropriates, or otherwise violates any Intellectual Property rights of any Person. To the Company’s Knowledge, no Person has or is infringing, misappropriating or otherwise violating any Owned Intellectual Property, and, since January 1, 2020, no claims or Proceedings have been asserted in writing by any XXXX Entity against any Person for infringement, misappropriation, or other violation of the Owned Intellectual Property rights. (e) To the extent a XXXX Entity uses any Open Source Software, the XXXX Entity is in material compliance with the terms of any such licenses, and the XXXX Entity has not incorporated Open Source Software into the Company Products, or distributed Open Source Software in conjunction with Company Products in a manner that (i) requires the XXXX Entity under the applicable license to grant, or (ii) grants to any third party any rights to or immunities under any Owned Intellectual Property in the Company Products, including obligations that the XXXX Entity (A) make or permit any disclosure of, or make available, any source code for such Intellectual Property (or any of its licensors’ Intellectual Property) (excluding the Open Source Software code itself) or (B) distribute or make available any Owned Intellectual Property in the Company Products (or to permit any such distribution or availability) (excluding the Open Source Software code itself). (f) The XXXX Entities have taken commercially reasonable security measures to protect the secrecy, confidentiality and value of all material trade secrets, know-how and proprietary information included in the Owned Intellectual Property. No trade secret, know-how, or proprietary information material to the Company’s business as presently conducted has been authorized to be disclosed or has been actually disclosed by the XXXX Entities to any former or current employee or any Person other than pursuant to a non-disclosure agreement restricting the disclosure and use of the Intellectual Property. (g) Except for disclosures to employees, contractors or consultants under binding written agreements that prohibit use or disclosure except in the performance of services to the Company, the Company has not delivered, licensed, released or disclosed to any Person any of the proprietary source code for any software that is material to any Company Product. The Company is not a party to any contract requiring the deposit of any such source code with an escrow agent or escrow service. The Company has entered into an agreement with each third party to whom it has provided access to any source code for any software that is material to any Company Product that obligates the recipient to: (i) use the source code solely for its internal business purposes in conjunction with its use of the Company Products; and (ii) maintain the source code in confidence and not provide or disclose the source code to any other Person. (h) Each current and former employee, officer, consultant and contractor of a XXXX Entity who is or has been involved in the development (alone or with others) of any Intellectual Property by or for the XXXX Entity has executed and delivered a written Contract with a XXXX Entity sufficient to transfer ownership of all rights, title, and interest with respect to such Intellectual Property to a XXXX Entity. (i) The XXXX Entities own or have all right, title and interest necessary for full and unrestricted access and use, for purposes of operating the Company’s business as currently conducted, of all computer systems, networks, hardware, Software, databases, websites, and equipment used to process, store, maintain and operate the information technology infrastructure controlled or owned by the XXXX Entities to operate the Company’s business as currently conducted (the “Company IT Systems”). The
43 XXXX Entity has incurred nor expects to incur any Company Debt under, Title IV of ERISA or Section 412 of the Code. Nothing has occurred with respect to any Benefit Plan that has subjected or could reasonably be expected to subject the Company or any of any XXXX Entity or, with respect to any period on or after the Closing Date, the Purchaser or any of its Affiliates, to a penalty under Section 502 of ERISA or to tax or penalty under Sections 4975 or 4980H of the Code. With respect to each Benefit Plan, no “reportable event,” as defined in Section 4043 of ERISA, with respect to which the reporting requirement has not been waived has occurred with respect to any such plan. (c) None of the Company or any of its ERISA Affiliates maintain, sponsor, participate in, contribute to, or have any current or contingent liability in respect of, and has not ever maintained, established, sponsored, participated in, or contributed to, any pension plan (within the meaning of Section 3(2) of ERISA) that is subject to Part 3 of Subtitle B of Title I of ERISA, Title IV of ERISA or Section 412 of the Code. Neither the Company nor any of its ERISA Affiliates is a party to, or has ever made any contribution to or otherwise incurred any obligation in respect of, and could not incur any obligation in respect of (i) any “multiemployer plan” as such term is defined in Section 3(37) of ERISA. (ii) any “multiple employer plan” as such term is defined in Section 413(c) of the Code, or (iii) any multiple employer welfare arrangement (as defined in Section 3(40) of ERISA). None of the Benefit Plans provides for post-retiree health, welfare or life insurance benefits or coverage for any participant or any beneficiary of a participant, except as may be required under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, or similar state Law and at the sole expense of such participant or the participant’s beneficiary and neither the Company nor any of its ERISA Affiliates has any liability to provide post-termination or retiree health benefits to any individual or ever represented, promised or contracted to any individual that such individual would be provided with post-termination or retiree health benefits. (d) Each Benefit Plan can be amended, terminated or otherwise discontinued after the Closing in accordance with its terms, without material Liabilities to the Purchaser, the Company or any of their Affiliates other than ordinary administrative expenses typically incurred in a termination event. No XXXX Entity has a commitment or obligation nor has any XXXX Entity made any representations to any employee, officer, director, independent contractor or consultant to adopt, amend, modify or terminate any Benefit Plan or any collective bargaining agreement, in connection with the consummation of the Transactions or otherwise. (e) There is no pending or, to the Company’s Knowledge, threatened Proceeding relating to a Benefit Plan (other than routine claims for benefits), and no Benefit Plan has within the 3 years prior to the date hereof been the subject of an examination or audit by a Governmental Entity or the subject of an application or filing under or is a participant in, an amnesty, voluntary compliance, self-correction or similar program sponsored by any Governmental Entity. (f) There has been no amendment to, announcement by the Company or its Affiliates relating to, or change in employee participation or coverage under, any Benefit Plan or collective bargaining agreement that would materially increase the annual expense of maintaining such plan above the level of the expense incurred for the most recently completed fiscal year. (g) Neither the execution and delivery of this Agreement nor the consummation of the Transactions shall, either alone or in connection with any other event(s), (i) result in any payment or benefit becoming due, or an increase in any amount of compensation or benefits otherwise payable, to any current or former employee, contractor or director of the Company or its Subsidiaries or under any Benefit Plan, or (ii) result in the acceleration of the time of payment, funding or vesting of any benefits to any current or former employee, contractor or director of the Company or its Subsidiaries or under any Benefit Plan. Neither the execution and delivery of this Agreement nor the consummation of the Transactions shall, either alone or in connection with any other event(s) give rise to any “excess parachute payment” as defined in
50 Section 5.1 Organization. Seller is a corporation validly existing and in good standing under the Laws of the State of Delaware. With respect to each Stockholder that is an entity, such Stockholder is duly organized, validly existing and in good standing under the Laws of its applicable jurisdiction of organization. Section 5.2 Ownership. As of the Agreement Date, and through the effective date of the Pre- Closing Restructuring, such Stockholder is and will be the sole and record beneficial owner of the Shares set forth opposite such Stockholder’s name on Schedule A. As of the Closing Date, after giving effect to the Pre-Closing Restructuring (including the Conversion), such Stockholder will own the same number of shares of capital stock of Seller as it previously held in the Company. Section 5.3 Authorization; Governmental Authorization; No Breach. (a) Such Seller Party has the requisite power and authority to execute and deliver this Agreement and all other Transaction Agreements to which such Person is a party. The execution, delivery and performance of this Agreement and all other Transaction Agreements to which such Seller Party is a party have been duly authorized by all requisite action on the part of such Seller Party. This Agreement has been duly executed and delivered by such Seller Party, constitutes a valid and binding obligation of such Seller Party, enforceable against it in accordance with its terms, subject to the Enforceability Exceptions. When each other Transaction Agreement to which such Seller Party is or will be a party has been duly executed and delivered by such Person, such other Transaction Agreement will constitute a legal and binding obligation of such Person, enforceable against it in accordance with its terms, subject in each case to the Enforceability Exceptions. (b) No consent, approval, License, Governmental Order, declaration or filing with, or notice to, any Governmental Entity is required by or with respect to such Seller Party in connection with the execution and delivery of this Agreement and the other Transaction Agreements and Transactions, except for (i) such filings as may be required under applicable securities Laws, which will be timely filed within the applicable periods therefor, (ii) such actions or filings as may be required under the HSR Act and (iii) such consents, approvals, Licenses, Governmental Orders, declarations, filings or notices which the failure to obtain would not have a material effect on the XXXX Entities or on any Seller Party’s ability to consummate the Transactions. (c) The execution, delivery and performance of this Agreement and each other Transaction Agreement to which such Seller Party is a party, and the consummation of the transactions contemplated hereby and thereby (including the Pre-Closing Restructuring), do not and will not (i) conflict with or result in a breach, violation, or default under (whether with or without the passage of time, the giving of notice or both), any provision of the Fundamental Documents of any Seller Party (with respect to any Seller Party that is an entity), (ii) conflict with or result in a violation or breach of any provision of any Law or Governmental Order applicable to such Seller Party; (iii) require the consent, notice or other action by any Person under, conflict with, result in a violation or breach of, constitute a default or an event that, with or without notice or lapse of time or both, would constitute a default under, result in the acceleration of or create in any party the right to accelerate, terminate, modify or cancel any Contract to which any Seller Party is a party, except as would not have a material effect on the XXXX Entities or on any Seller Party’s ability to consummate the Transactions; or (iv) result in the creation of any Lien upon any of the Shares or the Membership Interests other than Liens arising under applicable state or federal securities Laws or created by Purchaser or its Affiliates. Section 5.4 Litigation. There are no Proceedings pending or threatened against or affecting such Seller Party in which it is sought to restrain or prohibit such Seller Party’s ability to consummate the Transactions.
54 (v) not terminate, amend, or modify in any material respect any Google Contract with an annual contract value in excess of $500,000, other than in the Ordinary Course of Business; and (vi) not take any action that would cause any of the changes, events or conditions described in Section 4.7 (excluding Section 4.7(m)) to occur, other than in the Ordinary Course of Business. Nothing contained in this Agreement shall give the Purchaser, directly or indirectly, the right to control or direct any XXXX Entity’s businesses or operations prior to the Closing. Section 7.2 Access to Information. From the Agreement Date through the earlier of the Closing or the valid termination of this Agreement, and subject to the requirements of applicable Laws, the Company shall, and shall cause the other XXXX Entities to, afford the Purchaser reasonable access to (a) all Leased Real Property, the properties, assets, premises, Contracts, books and records, and other documents and data related to the XXXX Entities under the supervision of the personnel of the Company or other XXXX Entities, during normal business hours consistent with applicable Law and in accordance with the procedures established by the Company or other XXXX Entities, (b) furnish the Purchaser and its Representatives with such financial, operating and other data and information related to the XXXX Entities as the Purchaser or any of its Representatives may reasonably request, and (c) Representatives of the XXXX Entities to confer with the Purchaser and its Representatives regarding operational matters and the general status of ongoing operations, during normal business hours consistent with applicable Law. Notwithstanding the foregoing, such access shall not unreasonably interfere with the conduct of the Company’s business, such access shall occur in such a manner as the Company reasonably determines to be appropriate to protect the confidentiality of the Transactions, and nothing herein shall require the Company to provide access to, or to disclose any information to, the Purchaser if such access or disclosure would be reasonably likely to (i) waive any legal privilege or (ii) be in violation of applicable Law. No investigation by the Purchaser or other information received by the Purchaser shall operate as a waiver or otherwise affect any representation, warranty or agreement given or made by the Company or the Seller Parties in this Agreement. Until the date that is 5 years after the Closing Date, the Purchaser shall, and shall cause the XXXX Entities to, provide the Lead Stockholder and its authorized Representatives with reasonable access during normal business hours consistent with applicable Law, to the books and records of the XXXX Entities that were delivered to the Purchaser as a result of the Closing and that relate only to periods prior to the Closing, for any reasonable business purposes, including in connection with financial statements, Taxes, any potential Proceeding or investigation by or before a Governmental Entity and Governmental Entity reporting obligations; provided that the Purchaser shall not be required to provide the Lead Stockholder access to any books or records (including personnel files) where such access would violate any Law. Section 7.3 Press Releases and Announcements; Confidentiality. Unless otherwise required by applicable Law (in which case such Person agrees to consult with the Purchaser prior to any such disclosure as to the form and content of such disclosure), neither any Seller Party, the Lead Stockholder, nor the Company shall, and the Company shall cause the other XXXX Entities not to, at any time after the Agreement Date, issue any press releases or other public releases of information related to this Agreement or the other Transaction Agreements (including the existence thereof and the terms and conditions set forth therein), the transactions contemplated hereby or thereby or any other fact relating to the transactions contemplated hereby and thereby without the prior written consent of the Purchaser, not to be unreasonably withheld or delayed. The Purchaser shall consult with the Lead Stockholder before issuing, and provide the Lead Stockholder with the opportunity to review and comment upon, any press release or other public releases of information related to this Agreement or the other Transaction Agreements. Notwithstanding the foregoing, the Purchaser may include disclosures regarding this Agreement, the other Transaction
55 Agreements and the transactions contemplated hereby or thereby in its SEC filings and associated press releases without the prior review or written consent of any other Party hereto if and to the extent required by applicable Law. Section 7.4 Required Actions. (a) The Parties shall take, or cause to be taken, all actions, and do, or cause to be done, all things necessary, proper or advisable under any applicable Laws to consummate and make effective in an expeditious manner the Transactions, including (i) the preparation and filing of all forms, registrations and notices known to be required consummate the Transactions, (ii) taking all actions necessary to obtain (and cooperating with each other in obtaining) any consent, clearance, expiration or termination of any waiting period, authorization, order or approval of, or any exemption by, any Governmental Entity (which actions shall include furnishing all necessary information required under any Antitrust Laws) in connection with the Transactions, and (iii) the execution and delivery of any additional instruments necessary to consummate the Transactions and to fully carry out the purposes of this Agreement. Additionally, each of the Parties shall use reasonable best efforts to take, or cause to be taken, all actions, and use reasonable best effort to do, or cause to be done, all things necessary to satisfy the closing conditions set forth in Article III and shall not take any action prior to the Closing Date that would reasonably be expected to delay the obtaining of, or result in not obtaining, any consent, clearance, expiration or termination of a waiting period, authorization, order or approval of, or any exemption by, any Governmental Entity necessary to be obtained at or prior to the Closing. (b) Prior to the Closing, to the extent not prohibited by applicable Law, the Purchaser and the Company shall each keep the other apprised of the status of matters relating to the completion of the Transactions and work cooperatively in connection with obtaining all required consents, clearances, expirations or terminations of waiting periods, authorizations, orders or approvals of, or any exemptions by, any Governmental Entity. In that regard, prior to the Closing, subject to the Confidentiality Agreement, to the extent not prohibited by applicable Law, each of the Purchaser and the Company, on behalf of itself and the other XXXX Entities, and the Seller Parties, shall promptly consult with the other Parties to provide any necessary information with respect to all filings made by such party with any Governmental Entity in connection with this Agreement or the Transactions. Subject to the Confidentiality Agreement, to the extent not prohibited by applicable Law, the Purchaser and the Company shall promptly inform the other Party, of any communication from any Governmental Entity regarding the Transactions, and permit the other Party to review and discuss in advance, and consider in good faith the views of the other Party in connection with, any proposed written or oral communication or submission with or to any such Governmental Entity. If any Party or its representative receives a request for additional information or documentary material from any Governmental Entity with respect to the Transactions, then such Party will make, or cause to be made, promptly and after consultation with the other Parties, an appropriate response in compliance with such request. Except as otherwise required by applicable Law, no Party shall participate in any meeting with any Governmental Entity in connection with this Agreement or the Transactions, or with any other Person in connection with any Proceeding by a private party relating to any Antitrust Laws in connection with this Agreement or the Transactions, or make oral submissions at meetings or in telephone or other conversations, unless it consults with the other Parties in advance and, to the extent not prohibited by such Governmental Entity or applicable Law, gives the other Parties the opportunity to attend and participate thereat. Each of the Purchaser and the Company, as each deems advisable and necessary, may reasonably designate any competitively sensitive material provided to the other party under this Agreement as “outside counsel/in-house counsel only.” Such designated materials and any materials provided by the Parties to each other pursuant to this Section 7.4, and the information contained therein, shall be given only to the outside legal counsel and in-house counsel of the recipient and shall not be disclosed by such outside counsel and in-house counsel to employees (other than in-house counsel), officers or directors of the recipient unless express permission is obtained in advance from the source of the materials or its legal
56 counsel; it being understood that materials provided pursuant to this Agreement may be redacted as reasonably determined by the providing Party. (c) The Purchaser and the Company shall file or cause to be filed, as promptly as practicable, but in any event no later than 5 Business Days after the date of this Agreement, notifications under the HSR Act. (d) The Purchaser, the Company, on behalf of itself and the other XXXX Entities, and the Seller Parties shall cooperate with each other to resolve such objections, if any, as may be asserted by any Governmental Entity with respect to the Transactions under any Laws that are designed or intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization or lessening of competition through merger or acquisition or restraint of trade. (e) The Purchaser shall be responsible for and shall pay all filing and other similar fees to any Governmental Entity that are payable in connection with any filings or submissions under the HSR Act. (f) Each of the Purchaser and the Company, on behalf of itself and the other XXXX Entities, and each Seller Party covenants and agrees that, from the Agreement Date through the earlier of the Closing or the termination of this Agreement, such Party shall not take any action that would reasonably be expected to prevent, delay or impede the consummation of the Transactions. Section 7.5 Exclusivity. From the Agreement Date through the earlier of the Closing or the valid termination of this Agreement, the Company, on behalf of itself and the XXXX Entities, and each Seller Party, agrees that such Person shall not, and shall cause their members, managers, agents, advisors and other Representatives not to, directly or indirectly, solicit, initiate, knowingly encourage or assist, or respond to the submission of any proposal or offer from any Person (other than with Purchaser and its Representatives) relating to (a) the acquisition of any equity interests of the XXXX Entities, (b) any re- capitalization, merger, consolidation, or other business combination involving the XXXX Entities, or (c) or the sale, lease, exchange or other disposition of any significant portion of the XXXX Entities’ properties or assets (a “Competing Transaction”), nor participate in any or continue any ongoing discussions or negotiations regarding or furnish to any other Person and information with respect to, or otherwise cooperate in any way with, or assist or participate in, or knowingly facilitate or encourage, any effort or attempt by any Person to pursue or effect a Competing Transaction or enter into any agreement with respect to a Competing Transaction. The Company, on behalf of itself and the XXXX Entities, and each Seller Party, agrees that such Person shall, and shall cause their members, managers, agents, advisors and other Representatives to, immediately cease and cause to be terminated any existing activities, discussions or negotiations with any Person (other than the Purchaser and its Representatives) with respect to a Competing Transaction. In addition to the other obligations under this Section 7.5, the Company and the Seller Parties, as applicable, shall promptly (and in any event within 2 Business Days after receipt thereof by any XXXX Entity, any Seller Party, or any of their Representatives) advise the Purchaser in writing of any inquiry, proposal or offer from any Person regarding a Competing Transaction, any request for information with respect to a Competing Transaction, or any inquiry that the board of directors of any XXXX Entity or Seller Party (as applicable) in good faith believes would reasonably be expected to result in a proposal or offer for a Competing Transaction, the material terms and conditions of such request or inquiry (including the proposed terms of the Competing Transaction), and the identity of the Person making the same. The Parties hereto agree that the rights and remedies for noncompliance with this Section 7.5 shall include having such provision specifically enforced by any court having equity jurisdiction, it being acknowledged and agreed that any such breach or threatened breach shall cause irreparable injury to the Purchaser and that money damages would not provide an adequate remedy to the Purchaser.
57 Section 7.6 Notices and Consents. At the Purchaser’s reasonable written request prior to the Closing, the Company shall give (and shall cause each of the applicable XXXX Entities to give) any required notices to third parties, and the Company shall use reasonable best efforts (and will cause each of the XXXX Entities to use reasonable best efforts) to obtain any third-party consents required in connection with the matters referred to on Section 4.4 of the Disclosure Schedules; provided, that nothing in this Section 7.6 shall require any XXXX Entity to (i) expend any money or grant any concession to obtain any such consent (unless the Purchaser provides the funds for or reimburses the XXXX Entities for such payment), or (ii) commence any Proceeding against a third party. Section 7.7 Further Assurances. In case at any time after the Closing any further action is necessary, advisable or desirable to carry out the purposes of this Agreement, the other Transaction Agreements or the transactions contemplated hereby or thereby, each of the Parties will take such further action (including the execution and delivery of such further instruments and documents) as any other Party may reasonably request. Section 7.8 D&O Indemnitees. (a) For a period of 6 years after the Closing Date, the Purchaser shall not, and shall not permit the Company or any of the XXXX Entities to amend, repeal or modify any indemnification or exculpation provision in any XXXX Entity’s articles of incorporation, bylaws or other similar governing documents as in effect immediately prior to the Closing in any manner that would adversely affect the rights thereunder of individuals who, on or prior to the Closing, were directors, officers, managers, employees or holders of equity interests of such XXXX Entity (each, a “D&O Indemnitee”). The Purchaser shall pay all reasonable expenses, including reasonable attorneys’ fees that may be incurred by a D&O Indemnitee in enforcing the covenants set forth in this Section 7.8. (b) At the Closing, the Purchaser shall, or shall cause the Company to, obtain, maintain and fully pay for irrevocable “tail” insurance policies with respect to its current directors’ and officers’ liability insurance policies, naming all D&O Indemnitees as direct beneficiaries where applicable with a claims period of at least 6 years from the Closing Date from an insurance carrier with the same or better credit rating as the Company’s current insurance carrier with respect to such insurance, as applicable, in an amount and scope at least as favorable as the Company’s existing policies with respect to matters existing or occurring at or prior to the Closing Date (the “D&O Tail Policy”). For the avoidance of doubt, 100% of the premium, fees and expenses in connection with the D&O Tail Policy shall be included in the Company Expenses. The Purchaser shall not, and shall cause the XXXX Entities after the Closing not to, cancel or change such insurance policies in any respect. (c) The provisions of this Section 7.8 are intended for the benefit of, and will be enforceable by, any D&O Indemnitee and his or her heirs and representatives, and are in addition to, and not in substitution for, any other rights to indemnification or contribution that any such person may have had by contract or otherwise. Section 7.9 Employee Obligations. (a) For the period commencing upon the Closing Date and continuing through the first anniversary of the Closing Date, the Purchaser shall, and shall cause the XXXX Entities to, provide to each employee of the XXXX Entities who continues in service following the Closing Date (each such person, a “Continuing Employee”), a base salary or a base rate of pay that is not less than that received by such Continuing Employee immediately prior to the Closing Date; provided, however that: (i) nothing in this Section 7.9 shall alter the Continuing Employees’ at-will relationship, limit or restrict, in any way, the Purchaser’s right to discharge such Continuing Employees, or require the Purchaser to provide any
58 severance pay or benefits to Continuing Employees upon termination of employment, regardless of the reason or cause, subject to applicable Laws; (ii) such obligations to Continuing Employees shall cease upon the termination of the Continuing Employees’ employment for any reason, that may occur between the Closing Date and the first anniversary of the Closing Date; (iii) nothing in this Section 7.9 shall limit or restrict the Purchaser’s right to make across-the-board adjustments in pay and benefits to such Continuing Employees more than 90 calendar days after the Closing Date, as long as comparable across-the-board adjustments are being made for other employees of the Purchaser or its affiliated companies serving the same geographic region, e.g., a 10% reduction in pay among all United States-based employees; and (iv) in the event of a Continuing Employee of XXXX India being guilty of any misconduct or breach of any terms and conditions of employment policies of the Purchaser, the Purchaser shall be entitled to take disciplinary action (which may extend to termination) against such Continuing Employee, in accordance with applicable Laws and the Purchaser’s employee policies. (b) For all purposes under the employee benefit plans of the Purchaser, the XXXX Entities, or any applicable Affiliate thereof which employs Continuing Employees following the Closing Date, the Purchaser shall cause each Continuing Employee to be credited with his or her years of service with the XXXX Entities before the Closing Date, to the same extent as such Continuing Employee was entitled, before the Closing Date, to credit for such service under the corresponding Benefit Plan, except (i) for purposes of benefit accrual under defined benefit plans, (ii) for any purpose where service credit for the applicable period is not provided to participants generally, and (iii) to the extent such credit would result in a duplication of benefits. (c) With respect to any benefit plan maintained by the Purchaser, the XXXX Entities, or any applicable Subsidiary thereof which employs Continuing Employees following the Closing Date, in which Continuing Employees are eligible to participate, the Purchaser shall also use commercially reasonable efforts to (i) waive all limitations as to preexisting conditions and exclusions with respect to participation and coverage requirements applicable to such employees to the extent such conditions and exclusions were satisfied or did not apply to such Continuing Employees under the group health plans of the XXXX Entities prior to the Closing and (ii) provide each Continuing Employee with credit for any copayments and deductibles paid prior to the Closing in satisfying any analogous deductible or out of pocket requirements to the extent applicable under any such plan. Where applicable, and automatically applicable if required by applicable Law, the Purchaser shall use commercially reasonable efforts to credit or cause to be credited each Continuing Employee’s length of service with the XXXX Entities for purposes of eligibility, vesting and for purposes of future vacation and sick day accruals and determining severance amounts under the Purchaser’s employee benefit plans to the same extent and for the same purpose as such service was recognized under the analogous XXXX Entity’s Benefit Plan; provided, however, that such service shall not be recognized to the extent that it would result in a duplication of benefits. (d) For a period of 90 days after the Closing Date, the Purchaser shall not, and shall cause the XXXX Entities not to, terminate employees of the XXXX Entities in such numbers as would trigger any notice requirements or liability under the Worker Adjustment and Retraining Notification Act of 1988 (the “WARN Act”) or any applicable similar Law. The Purchaser shall cause the XXXX Entities to comply with any and all applicable notice or filing requirements under the WARN Act and all applicable similar Laws. The Purchaser shall be solely responsible for any obligations arising under Section 4980B of the Code with respect to all “M&A qualified beneficiaries” as defined in Treasury Regulation Section 54.4980B-9. (e) [Reserved]. (f) With respect to each outstanding award under the SAR Plans or the Bonus Letters, as of the Closing Date, the Company’s Board of Directors (or, if appropriately designated, the
59 Compensation Committee of the Company’s Board of Directors) will determine in good faith, following consultation with the Purchaser, the settlement value of the awards granted under the SAR Plans and the Bonus Letters. Thereafter, payments shall be made under the Change of Control Payment Agreements in accordance with Section 2.2(e). As of the Agreement Date, unless otherwise determined and agreed to in writing by Purchaser, no further awards under the SAR Plans or Bonus Letters shall be granted or awarded and the SAR Plans shall terminate automatically once there are no further awards outstanding thereunder. (g) Nothing in this Section 7.9 shall give any Person other than the Parties, including any employees of the XXXX Entities, any right to enforce the provisions of this Section 7.9 as a third-party beneficiary. Section 7.10 Release. (a) In further consideration of the Transactions and contingent on the Closing, each of the Seller Parties, on behalf of itself and its Affiliates and their respective predecessors, successors, heirs and assigns (the “Seller Releasors”), hereby irrevocably and unconditionally releases, each XXXX Entity and the Purchaser, their Subsidiaries, Affiliates, predecessors, successors, heirs and assigns, and its and their respective directors (or persons in similar positions), officers, employees, shareholders, equityholders, advisors and agents from any and all claims of any nature arising prior to and through the Closing (the “Released Claims” and such release, the “Claims Release”), and hereby irrevocably covenants to refrain from, directly or indirectly, asserting any claim or demand, or commencing, instituting or causing to be commenced, any suit, litigation, arbitration, claim, investigation, action or other Proceeding of any kind against the Purchaser, any XXXX Entity, their subsidiaries, Affiliates, predecessors, successors, heirs and assigns, and its and their respective directors (or persons in similar positions), officers, employees, shareholders, equityholders, advisors and agents, by reason of any matters released under this Section 7.10. It is further agreed and understood that this Release is a full and final release of all the Released Claims whether known or unknown, fixed or contingent, manifested or unmanifested. Each of the Seller Parties hereby waives the protection of any provision of any Law that would operate to preserve claims that are unknown as of the Closing Date. Notwithstanding the foregoing, the Released Claims and the Claims Release does not extend to, include or restrict claims, actions or rights (i) that the Seller Releasors may have under this Agreement or any other Transaction Agreements, including entitlements to the Earn-Out Payments, (ii) with respect to exculpation, indemnification, reimbursement or advancement of expenses under the provisions of any XXXX Entity’s Fundamental Documents (or any directors’ and officers’ liability insurance policy maintained by any XXXX Entity), provided that, following the Closing, each Seller Releasor’s rights pursuant to this clause (ii) shall be first against the D&O Tail Policy (to the extent available) until it is exhausted before recovery against the Purchaser shall take place, and (iii) in the case of a Seller Releasor who is also a Service Provider, (A) any right to accrued and unpaid compensation in respect of services performed by such party as an employee, consultant, officer, advisor or director of the Company or any of the XXXX Entities, (B) any rights under any Benefit Plan and (C) any right to payment of unreimbursed customary business expenses incurred prior to the Closing. (b) Each Seller Party, for itself and on behalf of its Affiliates and their respective predecessors, successors and assigns, acknowledges that the Released Claims include claims which it does not know or suspect exist, and hereby waives all rights which may exist under California Civil Code Section 1542, which provides as follows: “A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS THAT THE CREDITOR OR RELEASING PARTY DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, AND THAT IF KNOWN BY HIM OR HER WOULD HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR OR RELEASED PARTY.”
62 take any action after the Closing on the Closing Date that is outside the Ordinary Course of Business to the extent the same may be reasonably expected to increase Indemnified Taxes or otherwise increase the Tax liability of the Stockholders. To the maximum extent permitted by Law based on a “more likely than not” or higher level of comfort, the Parties shall treat as accrued at Closing, and allocate all Transaction Tax Deductions to the Pre-Closing Tax Period and the Seller’s Form 1120-S and shall file all Tax Returns in a manner consistent with that Tax treatment (for the avoidance of doubt, notwithstanding that any such payment is not actually made until after the Closing); provided, however, that notwithstanding the generality of the foregoing, the Parties agree that Purchaser shall not claim any Transaction Tax Deductions attributable to payments in respect of the SAR Plan and Bonus Letters; and provided further, that the Parties acknowledge and agree that the Seller shall be entitled to take any available deductions for the payments made at the Closing in respect of the SAR Plan and Bonus Letters. The Purchaser shall reasonably cooperate in the sharing of information regarding payments after the Closing of the SAR Plan and Bonus Letters (including providing copies of IRS Forms W-2 reporting such payments) as reasonably requested by Seller to support its claiming of such Tax deductions. Section 8.5 Tax Treatment. The Parties intend that, for U.S. federal income Tax purposes, (a) the Contribution together with the Q-Sub Election qualify as a reorganization described in Section 368(a)(1)(F) of the Code and Rev. Rul. 2008-18 (and corresponding provisions of state and local applicable Laws) and the Conversion be disregarded for U.S. federal (and applicable state and local) income Tax purposes; (b) the transactions contemplated under this Agreement (excluding the Pre-Closing Restructuring) be characterized as a taxable purchase by the Purchaser, and sale by the Seller, of each asset of the Company in exchange for the purchase price (as determined for applicable Tax purposes), including any assumed liabilities that constitute a liability for Tax purposes (determined in a manner consistent with Section 8.6 and the Allocation Principles below), in a transaction described in Section 1001 of the Code (the “Intended Tax Treatment”), and (c) for purposes of determining total purchase consideration for federal income tax purposes that is allocated above under Section 1001 of the Code, the parties agree to treat accrued licensing costs and other similar items shown on XXXX’x closing balance sheet as (i) taken into account solely as a reduction of the amount of XXXX’x contract assets and (ii) not as constituting an assumed liability of XXXX for purposes of Sections 1001 and 1012 of the Code. The Intended Tax Treatment shall be binding on all the Parties and the Parties shall, and shall cause their Affiliates to, prepare and file all Tax Returns in all respects and for all income Tax purposes consistent with such Intended Tax Treatment and not take any position inconsistent with such Intended Tax Treatment for any Tax purpose (whether on any Tax Return, in any Tax Claim, or otherwise) except (i) as otherwise required by a change in applicable Law occurring after the date hereof, (ii) as otherwise required by a “determination” within the meaning of Section 1313(a) of the Code, or (iii) with the written consent of the other Party. Section 8.6 Purchase Price Allocation. The Purchaser, the Seller, and the Stockholders agree that the Purchase Price, any assumed liabilities and any other amounts treated as consideration for U.S. federal income tax purposes shall be allocated for U.S. federal income tax purposes among the assets of the Company in accordance with Section 1060 of the Code and the Treasury Regulations promulgated thereunder and the allocation principles set forth in Schedule 8.6 to this Agreement (the “Allocation Principles”). Within 120 days after the Closing Date, the Purchaser shall deliver an initial draft of such allocation (the “Allocation Schedule”) to the Lead Stockholder for review and comment. The Lead Stockholder shall provide the Purchaser with any comments to the Allocation Schedule within 30 days after the date of receipt by the Lead Stockholder. If the Lead Stockholder does not deliver any written notice of objection to the Allocation Schedule within such 30 day period, the Allocation Schedule shall be final, conclusive and binding on all Parties. If a written notice of objection is timely delivered to the Purchaser, the Lead Stockholder and Purchaser shall use commercially reasonable efforts to resolve such disputes for 20 days after the date of receipt by the Purchaser. If, during such 20 day period, the Lead Stockholder and the Purchaser agree in writing as to an Allocation Schedule, such Allocation Schedule shall be deemed final and binding on the Parties. In the event that the Lead Stockholder and the Purchaser do not agree to an
66 period shall not thereafter be barred by the expiration of the relevant representation or warranty and such claims shall survive until finally resolved. Section 9.3 Indemnification by the Seller Parties. Subject to the other terms and conditions of this Article IX, from and after Closing, the Seller Parties shall, jointly and severally (except for the Specified Trust, for which the liability shall be several and not joint in accordance with its Pro Rata Share), indemnify and defend each of the Purchaser and its Affiliates (including the Company and the other XXXX Entities) and their respective Representatives (collectively, the “Purchaser Indemnitees”) against, and shall hold each of them harmless from and against, and shall pay and reimburse each of them for, any and all Losses incurred or sustained by, or imposed upon, the Purchaser Indemnitees arising out of, with respect to or by reason of: (a) any inaccuracy in or breach of any of the representations or warranties of the Company or any Seller Party contained in this Agreement, the other Transaction Agreements, or in any schedule, certificate or other document delivered pursuant hereto or thereto, as of the date such representation or warranty was made or as if such representation or warranty was made on and as of the Closing Date (except for representations and warranties that expressly relate to a specified date, the inaccuracy in or breach of which will be determined with reference to such specified date); (b) any breach or non-fulfillment of any covenant, agreement or obligation to be performed (i) prior to the Closing by the Company, or (ii) at any time by the Lead Stockholder or any Seller Party, in each case, pursuant to this Agreement, the other Transaction Agreements, or in any schedule, certificate or other document delivered pursuant hereto or thereto; (c) any Company Expenses or Company Debt outstanding as of the Closing to the extent not deducted from the Purchase Price in the determination of the Final Adjustment Amount; (d) any Indemnified Taxes; (e) any Wrongful Acts by or on behalf of any Seller Party, the Company, or the Lead Stockholder (in its capacity hereunder as the representative of the Stockholders); (f) any obligations to provide indemnification, exculpation or expense reimbursement of any D&O Indemnitee pursuant to Section 7.8 to the extent not covered by the D&O Tail Policy; or (g) the matter set forth on Section 9.3(g) of Disclosure Schedules. Section 9.4 Indemnification by the Purchaser. Subject to the other terms and conditions of this Article IX, from and after Closing, the Purchaser shall indemnify and defend the Seller Parties and their respective Affiliates and their respective Representatives (collectively, the “Stockholder Indemnitees”) against, and shall hold each of them harmless from and against, and shall pay and reimburse each of them for, any and all Losses incurred or sustained by, or imposed upon, the Stockholder Indemnitees arising out of, with respect to or by reason of: (a) any inaccuracy in or breach of any of the representations or warranties of the Purchaser contained in this Agreement, the other Transaction Agreements, or in any schedule, certificate or other document delivered pursuant hereto or thereto, as of the date such representation or warranty was made or as if such representation or warranty was made on and as of the Closing Date (except for representations and warranties that expressly relate to a specified date, the inaccuracy in or breach of which will be determined with reference to such specified date);
67 (b) any breach or non-fulfillment of any covenant, agreement or obligation to be performed by the Purchaser pursuant to this Agreement, the other Transaction Agreements, or in any schedule, certificate or other document delivered pursuant hereto or thereto; or (c) Wrongful Acts by or on behalf of the Purchaser. Section 9.5 Certain Limitations. The indemnification provided for in Section 9.3 and Section 9.4 shall be subject to the following limitations: (a) The Seller Parties shall not be liable to the Purchaser Indemnitees for indemnification under Section 9.3(a) until the aggregate amount of all Losses in respect of indemnification under Section 9.3(a) exceeds $2,000,000 (the “Basket”), at which time and thereafter the Seller Parties shall be liable to the Purchaser Indemnitees only for Losses in excess of the Basket. The aggregate amount of all Losses for which the Seller Parties shall be liable pursuant to Section 9.3(a) or (g) shall not exceed $50,000,000. Notwithstanding the foregoing, the limitations set forth in this Section 9.5(a) shall not apply to Losses arising out of, with respect to or by reason of any (i) Wrongful Act by or on behalf of the Company or any Seller Party or (ii) inaccuracy in or breach of any Seller Fundamental Representation. (b) Except with respect to any Losses in respect of indemnification under Section 9.3(e), the aggregate Liability of the Seller Parties under this Article IX shall not exceed the aggregate Purchase Price paid or payable to the Seller Parties hereunder; provided that if both (i) any Losses are payable by the Seller Parties pursuant to this Article IX, and (ii) the amount of Losses previously recovered by the Purchaser Indemnitees from the Seller Parties pursuant to this Article IX plus the Losses then payable by the Seller Parties would exceed the Purchase Price paid to the Seller Parties as of the applicable time, then the portion of such Losses that are payable by the Seller Parties that exceed the Purchase Price paid to the Seller Parties shall be recovered in accordance with Section 9.9 if an Earn-Out Payment is due and payable as of the applicable time. Notwithstanding the forgoing sentence or anything to the contrary contained herein, the aggregate Liability of the Specified Trust shall not exceed the Specified Trust’s Pro Rata Share of the Purchase Price paid or payable to the Specified Trust. (c) The Purchaser shall not be liable to the Stockholder Indemnitees for indemnification under Section 9.4(a) until the aggregate amount of all Losses in respect of indemnification under Section 9.4(a) exceeds the Basket, at which time and thereafter the Purchaser shall be liable to the Stockholder Indemnitees only for Losses in excess of the Basket. The aggregate amount of all Losses for which the Purchaser shall be liable to the Stockholder Indemnitees pursuant to Section 9.4(a) shall not exceed $50,000,000. Notwithstanding the foregoing, the limitations set forth in this Section 9.5(c) shall not apply to Losses arising out of, with respect to or by reason of any (i) Wrongful Act by or on behalf of the Purchaser or (ii) inaccuracy in or breach of any Purchaser Fundamental Representation. For the avoidance of doubt, nothing in this Section 9.5(c) shall be interpreted to limit the Purchaser’s obligations pursuant to Section 2.2. (d) For purposes of this Article IX, any inaccuracy in or breach of any representation or warranty shall be determined without regard to any materiality, Material Adverse Effect or other similar qualification contained in or otherwise applicable to such representation or warranty for calculating the amount of any Loss with respect thereto. However, materiality, Material Adverse Effect and other similar qualifications shall be taken into account in determining whether an inaccuracy or breach of a representation or warranty exists. (e) In no event shall any Indemnified Party be entitled to double recovery for Losses with respect to any particular incident, fact or event which resulted in Losses that are recoverable under Section 9.3 or Section 9.4 regardless of whether there were breaches of more than one representation,
69 Party is a Purchaser Indemnitee and the Third-Party Claim involves a customer or material supplier of a Purchaser Indemnitee. (b) In the event that the Indemnifying Party assumes the defense of any Third-Party Claim, subject to Section 9.6(c), it shall have the right to take such action as it deems necessary to avoid, dispute, defend, appeal or make counterclaims pertaining to any such Third-Party Claim in the name and on behalf of the Indemnified Party. The Indemnified Party shall have the right to participate in the defense of any Third-Party Claim with counsel selected by it subject to the Indemnifying Party’s right to control the defense thereof. The fees and disbursements of such counsel shall be at the expense of the Indemnified Party, provided, that if in the reasonable opinion of counsel to the Indemnified Party, (i) there are legal defenses available to an Indemnified Party that are different from or additional to those available to the Indemnifying Party; or (ii) there exists a conflict of interest between the Indemnifying Party and the Indemnified Party that cannot be waived, the Indemnifying Party shall be liable for the reasonable fees and expenses of counsel to the Indemnified Party in each jurisdiction for which the Indemnified Party determines counsel is required. If the Indemnifying Party elects not to compromise or defend such Third- Party Claim, fails to promptly notify the Indemnified Party in writing of its election to defend as provided in this Agreement, or fails to diligently prosecute the defense of such Third-Party Claim, the Indemnified Party may, subject to Section 9.6(c), pay, compromise, defend such Third-Party Claim and seek indemnification for any and all Losses arising from or relating to such Third-Party Claim. The Seller Parties and the Lead Stockholder, on the one hand, and the Purchaser, on the other hand, shall cooperate with each other in all reasonable respects in connection with the defense of any Third-Party Claim, including making available (subject to the provisions of the Stockholder Restrictive Covenant Agreements) records relating to such Third-Party Claim and furnishing, without expense (other than reimbursement of actual out-of- pocket expenses) to the defending party, management employees of the non-defending party as may be reasonably necessary for the preparation of the defense of such Third-Party Claim. (c) Notwithstanding any other provision of this Agreement, the Indemnifying Party shall not enter into settlement of any Third-Party Claim without the prior written consent of the Indemnified Party, except as provided in this Section 9.6(c). If a firm offer is made to settle a Third-Party Claim without leading to liability or the creation of a financial or other obligation on the part of the Indemnified Party (other than cooperating with the release of the Escrow Fund as the case may be) and provides, in customary form, for the unconditional release of each Indemnified Party from all liabilities and obligations in connection with such Third-Party Claim and the Indemnifying Party desires to accept and agree to such offer, the Indemnifying Party shall give written notice to that effect to the Indemnified Party. If the Indemnified Party fails to consent to such firm offer within 10 days after its receipt of such notice, the Indemnified Party may continue to contest or defend such Third-Party Claim and in such event, the maximum liability of the Indemnifying Party as to such Third-Party Claim shall not exceed the amount of such settlement offer. If the Indemnified Party fails to consent to such firm offer and also fails to assume defense of such Third-Party Claim, the Indemnifying Party may settle the Third-Party Claim upon the terms set forth in such firm offer to settle such Third-Party Claim. If the Indemnified Party has assumed the defense pursuant to Section 9.6(a), it shall not agree to any settlement without the written consent of the Indemnifying Party (which consent shall not be unreasonably withheld, conditioned or delayed). (d) Any Proceeding by an Indemnified Party on account of a Loss which does not result from a Third-Party Claim (a “Direct Claim”) shall be asserted by the Indemnified Party giving the Indemnifying Party reasonably prompt written notice thereof, but in any event not later than 30 days after the Indemnified Party becomes aware of such Direct Claim. The failure to give such prompt written notice shall not, however, relieve the Indemnifying Party of its indemnification obligations, except and only to the extent that the Indemnifying Party forfeits rights or defenses by reason of such failure. Such notice by the Indemnified Party shall describe the Direct Claim in reasonable detail, shall include copies of all material written evidence thereof and shall indicate the estimated amount, if reasonably practicable, of the Loss that
74 Agreement, each other Party hereto or thereto shall re-execute original forms thereof and deliver them to all other Parties. No Party hereto or to any other Transaction Agreement shall raise the use of a facsimile machine or electronic transmission in pdf to deliver a signature or the fact that any signature or document was transmitted or communicated through the use of facsimile machine as a defense to the formation of a Contract, and each such Party forever waives any such defense. Section 11.7 Descriptive Headings; Interpretation. The headings and captions used in this Agreement and the table of contents to this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Any capitalized terms used in any Schedule or Exhibit attached hereto and not otherwise defined therein shall have the meanings set forth in this Agreement. The use of (a) the word “including” herein shall mean “including without limitation”, (b) the word “or” is not exclusive, (c) the word “knowledge” shall mean “knowledge after reasonable inquiry” unless otherwise specifically defined herein, and (d) the words “herein,” “hereof,” “hereby,” “hereto,” and “hereunder” refer to this Agreement as a whole. Any reference to the masculine, feminine or neuter gender shall be deemed to include any gender or all 3 as appropriate. $ and “dollars” mean U.S. dollars. Any document, list or other item shall be deemed to have been “made available” to the Purchaser for all purposes of this Agreement only if such document, list or other item was posted on or before the day immediately preceding the Agreement Date in the electronic dataroom established by the Company in connection with the Transactions. Unless otherwise provided in this Agreement or required by the context, all references to the “Company” refer to XXXX Systems, Inc., a California corporation, for all periods through the effective time of the Conversion, and to the resulting Delaware limited liability company (to be called “XXXX Systems, LLC”) for all periods from and after the effective time of the Conversion. Section 11.8 Entire Agreement. This Agreement, the Exhibits, and the Schedules (including the Disclosure Schedules) hereto taken together with the other Transaction Agreements contain the entire agreement and understanding between the Parties with respect to the subject matter hereof and supersede all prior agreements and understandings, whether written or verbal, relating to such subject matter in any way. All Exhibits and Schedules attached hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein. In the event of any inconsistency between the statements in the body of this Agreement and those in the other Transaction Agreements, the Exhibits and Schedules (including the Disclosure Schedules) (other than an exception expressly set forth as such in the Disclosure Schedules), the statements in the body of this Agreement will control. Section 11.9 No Third-Party Beneficiaries. Except as provided in Section 7.8 with respect to the D&O Indemnitees, Section 7.13 with respect to the Consideration Recipients and Article IX with respect to the Purchaser Indemnitees and Stockholder Indemnitees, this Agreement is for the sole benefit of the Parties and their permitted successors and assigns and nothing herein expressed or implied shall give or be construed to give any Person, other than the Parties and such permitted successors and assigns, any legal or equitable rights hereunder. Section 11.10 Governing Law. All issues, conflicts and questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by, and construed in accordance with, the Laws of the State of Delaware, without giving effect to any choice of Law or conflict of Law rules or provisions (whether of the State of Delaware or any other jurisdiction) that would cause the application of the Laws of any jurisdiction other than the State of Delaware. In furtherance of the foregoing, the internal Law of the State of Delaware shall control the interpretation and construction of this Agreement, even though under that jurisdiction’s choice of Law or conflict of Law analysis, the substantive Law of some other jurisdiction would ordinarily apply. Section 11.11 Jurisdiction; Venue; WAIVER OF JURY TRIAL. With respect to any disputes arising out of or related to this Agreement, the Parties consent to the exclusive jurisdiction of, and venue
75 in, any court of the Chancery Court of the State of Delaware, and any state appellate court therefrom or, if (but only if) such court lacks subject matter jurisdiction, the United States District Court sitting in New Castle County in the State of Delaware and any appellate court. EACH PARTY HEREBY IRREVOCABLY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING UNDER THIS AGREEMENT OR ANY ACTION OR PROCEEDING ARISING OUT OF THE TRANSACTIONS CONTEMPLATED HEREBY, REGARDLESS OF WHICH PARTY INITIATES SUCH ACTION OR PROCEEDING. Section 11.12 Notices. All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given only: (i) when delivered personally to the recipient; (ii) 2 Business Days after being sent to the recipient by reputable overnight courier service (charges prepaid) provided that confirmation of delivery is received; (iii) on the same day if sent by email (with confirmation of receipt); or (iv) 5 Business Days after being mailed to the recipient by certified or registered mail (return receipt requested and postage prepaid). Such notices, demands and other communications shall be sent to the Purchaser, the Company and Lead Stockholder at the addresses indicated below or to such other address or to the attention of such other Person as the recipient party has specified by prior written notice to the sending party. All notices to the Lead Stockholder shall be deemed received by the Seller Parties on the day received by the Lead Stockholder. Notices to the Purchaser: Insight Enterprises, Inc. 0000 Xxxx Xxxxxxx Xxx Xxxxxxxx, XX 00000 Attention: General Counsel/Legal Department E-mail: [***] with a copy to (which shall not constitute notice to the Purchaser): Xxxxx & Xxxxxx L.L.P. Xxx Xxxx Xxxxxxxxxx Xxxxxx Xxxxx 0000 Xxxxxxx, Xxxxxxx 00000 Attention: Xxxxxxx X. Xxxxxxx, P.C. E-mail: [***] Notices to the Company prior to the Closing: XXXX Systems Inc. 0000 Xxxxxxxxxx Xxxx. Suite 720 North Hollywood CA 91601 Attention: Chief Legal Officer Email: [***] with a copy to (which shall not constitute notice to the Company): Fenwick & West LLP 000 Xxxxxxxx, Xxxxx 00 Xxx Xxxx, Xxx Xxxx 00000 Attention: Xxxxx X. Xxxxxx; Xxxx Xxxxxxxx; Xxxx Xxxxx
76 Email: [***] Notices to Lead Stockholder: Xxxx Xxxxxxx XXXX Systems Inc. 0000 Xxxxxxxxxx Xxxx. Suite 720 North Hollywood CA 91601 with a copy to (which shall not constitute notice to the Lead Stockholder): Fenwick & West LLP 000 Xxxxxxxx, Xxxxx 00 Xxx Xxxx, Xxx Xxxx 00000 Attention: Xxxxx X. Xxxxxx; Xxxx Xxxxxxxx; Xxxx Xxxxx Email: [***] Section 11.13 No Strict Construction. The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties, and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement. Section 11.14 Stockholders’ Representative. (a) The Lead Stockholder shall act as the representative, true and lawful agent, proxy and attorney-in-fact of the Seller Parties for all purposes of this Agreement, with full power and authority on each Seller Party’s behalf to: (i) consummate the Transactions, (ii) pay such Seller Party’s expenses (whether incurred on or after the Agreement Date) incurred in connection with the negotiation and performance of this Agreement, (iii) receive, give receipt and disburse any funds received hereunder on behalf of the Seller Parties and to hold back from disbursement any such funds to the extent it reasonably determines may be necessary (including withholding any Taxes), (iv) execute and deliver any certificates representing the Membership Interests, if any, and execute such further instruments as the Purchaser shall reasonably request, (v) execute and deliver on behalf of each Seller Party all documents contemplated herein and any amendment or waiver hereto, (vi) take all other actions to be taken by or on behalf of any Seller Party in connection herewith, (vii) negotiate, settle, compromise and otherwise handle all disputes under this Agreement, including disputes pursuant to Section 2.4 and Section 2.5, and indemnification claims pursuant to Article IX, (viii) waive any condition to the obligation of the Seller Parties to consummate the Transactions, (ix) give and receive notices on behalf of the Seller Parties, and (x) do each and every act and exercise any and all rights which a Seller Party is, or the Seller Parties collectively are, permitted or required to do or exercise under this Agreement. Each Seller Party hereby irrevocably grant unto said attorney-in- fact and agent full power and authority to do and perform each and every act and thing necessary or desirable to be done in connection with the Transactions, as fully to all intents and purposes as such Seller Party might or could do in person. Each of the Seller Parties agrees that such agency and proxy are coupled with an interest, are therefore irrevocable without the consent of the Lead Stockholder and shall survive the death, incapacity or bankruptcy of any such Seller Party and shall further survive the Closing. (b) All decisions, actions, consents and instructions of the Lead Stockholder shall be final and binding upon all of the Seller Parties and none of any such Seller Parties shall have any right to object, dissent, protest or otherwise contest the same, except in the case of fraud or bad faith by the Lead Stockholder. After the Closing, the Purchaser shall be entitled to deal exclusively with the Lead Stockholder
77 on all matters relating to this Agreement (including Article IX) and shall be entitled to rely conclusively (without further evidence of any kind whatsoever) on any document executed or purported to be executed on behalf of any Seller Party by the Lead Stockholder, and on any other action taken or purported to be taken on behalf of any Seller Party by the Lead Stockholder, as being fully binding upon such Person. Neither the Lead Stockholder nor any officer, director, employee or agent of the Lead Stockholder shall incur any liability to any Seller Party relating to the performance of its duties hereunder except for actions or omissions by the Lead Stockholder or such agent constituting fraud or bad faith. The Lead Stockholder shall not have by reason of this Agreement a fiduciary relationship in respect of any Seller Party, except in respect of amounts actually received on behalf of any such Seller Party. (c) The Seller Parties shall cooperate with the Lead Stockholder and any accountants, attorneys or other agents whom the Lead Stockholder may retain to assist in carrying out the Lead Stockholder’s duties hereunder. The Seller Parties shall reimburse the Lead Stockholder for all costs and expenses incurred, including professional fees. (d) In the event that the current Lead Stockholder becomes unable to perform the Lead Stockholder’s responsibilities or resigns from such position, the Lead Stockholder shall select another representative to fill such vacancy. In the event the Lead Stockholder fails to appoint another representative to fill such vacancy, a new Lead Stockholder shall be appointed by Xxxxxx. Notice of such vote or a copy of the written consent appointing such new Lead Stockholder shall be sent to the Purchaser, such appointment to be effective upon the later of the date indicated in such consent or the date such notice is received by the Purchaser; provided, that until such notice is received, the Purchaser shall be entitled to rely on the decisions and actions of the prior Lead Stockholder as described in this Section 11.14. Such substituted Lead Stockholder shall (i) be deemed to be Lead Stockholder for all purposes of this Agreement and (ii) exercise the rights and powers of, and be entitled to the indemnity, reimbursement and other benefits of, the Lead Stockholder hereunder. Section 11.15 Conflicts; Privilege. (a) It is acknowledged by each of the Parties that the Company has retained Fenwick & West LLP (“Sellers’ Counsel”) to act as counsel in connection with the Transactions and that Sellers’ Counsel has not acted as counsel for any other Person in connection with the Transactions and that no other Person has the status of a client of Sellers’ Counsel for conflict of interest or any other purposes as a result thereof. The Parties hereby agree that, in the event that a dispute arises in connection with the Transactions or the Transaction Agreements between the Seller Parties and the Purchaser, Sellers’ Counsel may represent Lead Stockholder and the Seller Parties or any of their Affiliates in such dispute even though the interests of such Persons may be directly adverse to the Purchaser, any XXXX Entity, or any of their respective Affiliates, and even though Sellers’ Counsel may have represented the Company in a matter substantially related to such dispute, and each of the Parties hereby waives on behalf of itself and its respective Affiliates, any conflict of interest in connection with such representation by Sellers’ Counsel. (b) Each of the Parties further agrees that, as to all communications among Sellers’ Counsel, any XXXX Entity, or any Seller Party prior to the Closing that relate to the Transactions, the attorney-client privilege, the expectation of client confidence and all other rights to any evidentiary privilege belong to Lead Stockholder (the “Privileged Communications”) and may only be controlled by Lead Stockholder and shall not pass to or be claimed by the Purchaser or the XXXX Entities. Each of the Parties other than Lead Stockholder hereby agrees, on behalf of itself and its respective Affiliates, that no such Person may use or rely on any of the Privileged Communications, whether located in the records or email server of the XXXX Entities, or otherwise, in any action against or involving any of the Parties after the Closing. Each of the Purchaser and the Company further agrees, on behalf of itself and its respective Affiliates, not to assert or waive any privilege with respect to the Privileged Communication except with
78 the consent of Lead Stockholder in the case of a post-Closing dispute with a Person that is not a Party hereto or one of its Affiliates. * * * * *
IN WITNESS WHEREOF, the parties hereto have executed or caused to be executed on their behalf this Equity Purchase Agreement on the date first written above. THE COMPANY: XXXX SYSTEMS, INC. By: /s/ Xxxx Xxxxxxx Name: Xxxx Xxxxxxx Its: Chief Executive Officer
IN WITNESS WHEREOF, the parties hereto have executed or caused to be executed on their behalf this Equity Purchase Agreement on the date first written above. THE PURCHASER: INSIGHT ENTERPRISES, INC. By: /s/ Xxxxxx Xxxxx Name: Xxxxxx Xxxxx Its: Chief Financial Officer
IN WITNESS WHEREOF, the parties hereto have executed or caused to be executed on their behalf this Equity Purchase Agreement on the date first written above. SELLER: VERSE HOLDCO, INC. By: /s/ Xxxx Xxxxxxx Name: Xxxx Xxxxxxx Its: Chief Executive Officer
IN WITNESS WHEREOF, the parties hereto have executed or caused to be executed on their behalf this Equity Purchase Agreement on the date first written above. THE STOCKHOLDERS: XXXX XXXXXXX /s/ Xxxx Xxxxxxx
IN WITNESS WHEREOF, the parties hereto have executed or caused to be executed on their behalf this Equity Purchase Agreement on the date first written above. XXXXX AND XXXXX XXXXXXX By: /s/ Xxxxx Xxxxxxx Name: Xxxxx Xxxxxxx By: /s/ Xxxxx Xxxxxxx Name: Xxxxx Xxxxxxx
IN WITNESS WHEREOF, the parties hereto have executed or caused to be executed on their behalf this Equity Purchase Agreement on the date first written above. 2017 SAFOIAN GRANDCHILDREN’S TRUST By: /s/ Xxxx Xxxxxxx Name: Xxxx Xxxxxxx Its: Trustee By: /s/ Xxxxxx Xxxxxxxx Name: Xxxxxx Xxxxxxxx Its: Trustee
IN WITNESS WHEREOF, the parties hereto have executed or caused to be executed on their behalf this Equity Purchase Agreement on the date first written above. LEAD STOCKHOLDER: XXXX XXXXXXX /s/ Xxxx Xxxxxxx