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Agreement And Plan Of Merger

Agreement and Plan of Merger

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 This Agreement and Plan of Merger involves

RACKSPACE HOSTING, INC. | Apollo Global Management | INCEPTION MERGER SUB, INC | INCEPTION PARENT, INC | Professional Corporation | Rackspace Hosting, Inc | Surviving Corporation

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Title: AGREEMENT AND PLAN OF MERGER
Governing Law: Delaware     Date: 8/30/2016
Industry: Software and Programming     Law Firm: Wilson Sonsini;Paul Weiss     Sector: Technology

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Exhibit 2.1

 

Execution Version

 

AGREEMENT AND PLAN OF MERGER

 

by and among

 

INCEPTION PARENT, INC.,

 

INCEPTION MERGER SUB, INC.,

 

and

 

RACKSPACE HOSTING, INC.

 

Dated as of August 26, 2016

 



 

TABLE OF CONTENTS

 

 

 

Page

 

 

 

ARTICLE I DEFINITIONS & INTERPRETATIONS

2

 

 

 

1.1

Certain Definitions

2

1.2

Additional Definitions

19

1.3

Certain Interpretations

21

1.4

Company Disclosure Letter

23

 

 

 

ARTICLE II THE MERGER

23

 

 

 

2.1

The Merger

23

2.2

The Effective Time

23

2.3

The Closing

23

2.4

Effect of the Merger

24

2.5

Certificate of Incorporation and Bylaws

24

2.6

Directors and Officers

24

2.7

Effect on Capital Stock

25

2.8

Equity Awards

26

2.9

Exchange of Certificates

29

2.10

No Further Ownership Rights in Company Common Stock

32

2.11

Lost, Stolen or Destroyed Certificates

33

2.12

Required Withholding

33

2.13

Necessary Further Actions

33

 

 

 

ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY

33

 

 

 

3.1

Organization, Standing and Power

34

3.2

Subsidiaries of the Company

34

3.3

Capital Structure

34

3.4

Authority; Execution and Delivery; Enforceability

36

3.5

No Conflicts; Consents

37

3.6

SEC Documents; No Undisclosed Liabilities

38

3.7

Absence of Certain Changes or Events

40

3.8

Taxes

42

3.9

Benefits Matters; ERISA Compliance

44

3.10

Litigation; Orders

47

3.11

Compliance with Applicable Laws

47

3.12

Environmental Matters

48

3.13

Material Contracts

49

3.14

Properties

52

3.15

Intellectual Property

53

3.16

Agreements with Regulatory Agencies

55

3.17

Labor Matters

56

3.18

Brokers’ Fees and Expenses

57

 

i



 

TABLE OF CONTENTS

(Continued)

 

 

 

Page

 

 

 

3.19

Opinion of Financial Advisor

58

3.20

Insurance

58

3.21

Affiliate Transactions

58

3.22

Anti-Corruption; International Trade

59

3.23

Top Customers

59

3.24

Facilities and Operations

60

3.25

Required Vote

60

3.26

Indemnification Agreements

60

3.27

Solvency

60

3.28

Exclusivity of Representations and Warranties

61

 

 

 

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

62

 

 

 

4.1

Organization, Standing and Power

62

4.2

Authority; Execution and Delivery; Enforceability

62

4.3

No Conflicts; Consents

63

4.4

Litigation; Orders

63

4.5

No Ownership of Company Common Stock; Section 203 of DGCL

63

4.6

Operations of Parent and Merger Sub

64

4.7

No Parent Vote or Approval Required

64

4.8

Brokers’ Fees and Expenses

64

4.9

Guarantee

64

4.10

Financing

64

4.11

Absence of Stockholder and Management Arrangements

66

4.12

Interests in Competitors

67

4.13

Solvency

67

4.14

Exclusivity of Representations and Warranties

67

 

 

 

ARTICLE V INTERIM OPERATIONS OF THE COMPANY

68

 

 

 

5.1

Affirmative Obligations

68

5.2

Forbearance Covenants

68

5.3

No Solicitation

71

5.4

No Control of the Other Party’s Business

76

 

 

 

ARTICLE VI ADDITIONAL COVENANTS

77

 

 

 

6.1

Efforts; Required Action and Forbearance

77

6.2

Antitrust Filings

77

6.3

Proxy Statement and Other Required SEC Filings

79

6.4

Company Stockholder Meeting

81

6.5

Financing

82

 

ii



 

TABLE OF CONTENTS

(Continued)

 

 

 

Page

 

 

 

6.6

Financing Cooperation

84

6.7

Anti-Takeover Laws

89

6.8

Access

89

6.9

Section 16(b) Exemption

90

6.10

Directors’ and Officers’ Exculpation, Indemnification and Insurance

90

6.11

Employee Matters

93

6.12

Obligations of Merger Sub

94

6.13

Notification of Certain Matters

95

6.14

Public Statements and Disclosure

96

6.15

Transaction Litigation

96

6.16

Stock Exchange Delisting; Deregistration

96

6.17

Additional Agreements

96

6.18

Credit Agreement

97

6.19

Company Notes

97

6.20

Parent Vote

97

 

 

 

ARTICLE VII CONDITIONS TO THE MERGER

97

 

 

 

7.1

Conditions to Each Party’s Obligations to Effect the Merger

97

7.2

Conditions to the Obligations of Parent and Merger Sub

98

7.3

Conditions to the Company’s Obligations to Effect the Merger

99

 

 

 

ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER

100

 

 

 

8.1

Termination

100

8.2

Manner and Notice of Termination; Effect of Termination

101

8.3

Fees and Expenses

102

8.4

Amendment

106

8.5

Extension; Waiver

106

 

 

 

ARTICLE IX GENERAL PROVISIONS

106

 

 

 

9.1

Survival of Representations, Warranties and Covenants

106

9.2

Notices

107

9.3

Assignment

108

9.4

Confidentiality

108

9.5

Entire Agreement

108

9.6

Third Party Beneficiaries

109

9.7

Severability

109

9.8

Remedies

109

9.9

Governing Law

111

9.10

Consent to Jurisdiction

111

9.11

WAIVER OF JURY TRIAL

112

 

iii



 

TABLE OF CONTENTS

(Continued)

 

 

 

Page

 

 

 

9.12

Counterparts

112

9.13

No Limitation

113

9.14

Non-recourse

113

 

iv



 

AGREEMENT AND PLAN OF MERGER

 

THIS AGREEMENT AND PLAN OF MERGER (this “ Agreement ”) is made and entered into as of August 26, 2016, by and among Inception Parent, Inc., a Delaware corporation (“ Parent ”), Inception Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“ Merger Sub ”), and Rackspace Hosting, Inc., a Delaware corporation (the “ Company ”). Each of Parent, Merger Sub and the Company are sometimes referred to as a “ Party .” All capitalized terms that are used in this Agreement have the meanings given to them in Article I.

 

RECITALS

 

A.                                     The Company Board has unanimously (i) determined that it is in the best interests of the Company and its stockholders, and declared it advisable, to enter into this Agreement and to consummate the merger of Merger Sub with and into the Company (collectively with the other transactions contemplated by this Agreement, the “ Merger ”) in accordance with the DGCL upon the terms and subject to the conditions set forth in this Agreement; (ii) approved the execution and delivery of this Agreement by the Company, the performance by the Company of its covenants and other obligations in this Agreement, and the consummation of the Merger upon the terms and subject to the conditions set forth in this Agreement and in accordance with the DGCL; (iii) directed that the adoption of this Agreement be submitted to a vote of the Company Stockholders; and (iv) recommended that the Company Stockholders vote in favor of the adoption of this Agreement in accordance with the DGCL.

 

B.                                     Each of the board of directors of Parent and the board of directors of Merger Sub have (i) declared it advisable to enter into this Agreement; and (ii) approved the execution and delivery of this Agreement, the performance of their respective covenants and other obligations hereunder, and the consummation of the Merger upon the terms and subject to the conditions set forth in this Agreement and in accordance with the DGCL.

 

C.                                     Concurrently with the execution of this Agreement, and as a condition and inducement to Parent and Merger Sub’s willingness to enter into this Agreement, each of the stockholders listed on Schedule 1 has entered into a voting agreement with Parent, substantially in the form attached hereto as Exhibit A (the “ Voting Agreement ”).

 

D                                        Concurrently with the execution of this Agreement, and as a condition and inducement to the Company’s willingness to enter into this Agreement, Parent and Merger Sub have delivered a limited guarantee (the “ Guarantee ”) from Apollo Investment Fund VIII, L.P., Apollo Overseas Partners (Delaware 892) VIII, L.P., Apollo Overseas Partners (Delaware) VIII, L.P. and Apollo Overseas Partners VIII, L.P. (each, a “ Guarantor ”), in favor of the Company and pursuant to which, subject to the terms and conditions contained in the Guarantee, the Guarantors are guaranteeing certain obligations of Parent and Merger Sub in connection with this Agreement.

 



 

AGREEMENT

 

The Parties therefore agree as follows:

 

ARTICLE I
DEFINITIONS & INTERPRETATIONS

 

1.1                                Certain Definitions . For all purposes of this Agreement, the following capitalized terms have the following respective meanings:

 

(a)                                  Acceptable Confidentiality Agreement ” means a customary confidentiality agreement containing terms no less favorable to the Company than those contained in the Confidentiality Agreement (except for such changes specifically necessary in order for the Company to be able to comply with its obligations under this Agreement) and provisions that require any counterparty thereto (and any of its Affiliates and representatives named therein) that receives material non-public information of or with respect to the Company to keep such information confidential.

 

(b)                                  Acquisition Proposal ” means any offer or proposal (other than an offer or proposal by Parent or Merger Sub) relating to an Acquisition Transaction.

 

(c)                                   Acquisition Transaction ” means any transaction or series of related transactions (other than the Merger) involving:

 

(i)                                      any direct or indirect purchase or other acquisition by any Person or Group, whether from the Company or any other Person(s), of securities representing more than 15% of the total outstanding voting power of the Company after giving effect to the consummation of such purchase or other acquisition, including pursuant to a tender offer or exchange offer by any Person or Group that, if consummated in accordance with its terms, would result in such Person or Group beneficially owning more than 15% of the total outstanding voting power of the Company after giving effect to the consummation of such tender offer or exchange offer;

 

(ii)                                   any direct or indirect purchase (including by way of a merger, consolidation, business combination, recapitalization, reorganization, liquidation, dissolution or other transaction), exclusive license or other acquisition by any Person or Group of assets (including equity securities of any Subsidiary of the Company) constituting or accounting for more than 15% of the revenue, net income or consolidated assets of the Company and its Subsidiaries, taken as a whole; or

 

(iii)                                any merger, consolidation, business combination, recapitalization, reorganization, liquidation, dissolution or other transaction involving the Company or any of its Subsidiaries whose business accounts for more than 15% of the revenue, net income or consolidated assets of the Company and its Subsidiaries, taken as a whole, where the stockholders of the Company (or such Subsidiary) prior to the transaction will not own, directly or indirectly, at least 85% of the surviving company.

 

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(d)                                  Affiliate ” means, with respect to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person; provided , that (other than in the case of the definition of Parent Related Party, or for purposes of Section 3.19, Section 4.12, Section 4.14(a), Section 6.8 or Article VIII (other than 8.3(b)(iv)) in no event shall Parent, Merger Sub or any of their respective Subsidiaries be considered an Affiliate of any portfolio company or investment fund (excluding investment funds focused on private equity) affiliated with Apollo Global Management, LLC, nor shall any portfolio company or investment fund (excluding investment funds focused on private equity) affiliated with Apollo Global Management, LLC, be considered to be an Affiliate of Parent, Merger Sub or any of their respective Subsidiaries. For purposes of this definition, the term “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities, by contract or otherwise.

 

(e)                                   Anti-Corruption Laws ” means all applicable Laws, rules, and regulations relating to anti-corruption, anti-bribery and anti-money laundering, including the Foreign Corrupt Practices Act of 1977 and the U.K. Bribery Act.

 

(f)                                    Antitrust Law ” means the Sherman Antitrust Act of 1890, the Clayton Antitrust Act of 1914, the HSR Act, the Federal Trade Commission Act of 1914 and all other Laws that are designed or intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade or significant impediments or lessening of competition or the creation or strengthening of a dominant position through merger or acquisition, in any case that are applicable to the Merger.

 

(g)                                   Audited Company Balance Sheet ” means the consolidated balance sheet (and the notes thereto) of the Company and its consolidated Subsidiaries as of December 31, 2015, set forth in the Company’s Annual Report on Form 10-K filed by the Company with the SEC for the fiscal year ended December 31, 2015.

 

(h)                                  Business Day ” means each day that is not a Saturday, Sunday or other day on which the Federal Reserve Bank of Dallas is closed.

 

(i)                                      Bylaws ” means the bylaws of the Company in effect as of the date of this Agreement.

 

(j)                                     Capitalization Date ” means 5:00 p.m., Eastern time, on August 22, 2016.

 

(k)                                  Certificate of Merger ” means the certificate of merger, in customary form, relating to the Merger.

 

(l)                                      Charter ” means the Amended and Restated Certificate of Incorporation of the Company in effect as of the date of this Agreement.

 

3



 

(m)                              Chosen Courts ” means the Court of Chancery of the State of Delaware and any state appellate court therefrom within the State of Delaware (or, if the Court of Chancery of the State of Delaware does not have subject matter jurisdiction (but only in such event), the United States District Court for the District of Delaware or, if jurisdiction is not then available in the United States District Court for the District of Delaware (but only in such event), then any Delaware state court).

 

(n)                                  Code ” means the Internal Revenue Code of 1986.

 

(o)                                  Co-Investor ” means any person identified to the Company by Parent in writing as a potential co-investor prior to the execution of this Agreement, or otherwise agreed between Parent and the Company from time to time.

 

(p)                                  Collective Bargaining Agreement ” means any collective bargaining agreement, labor union contract, trade union agreement or foreign works council contract.

 

(q)                                  Company Benefit Plan ” means any pension, profit-sharing, savings, retirement, employment, collective bargaining, consulting, severance, termination, executive compensation, incentive compensation, commission, deferred compensation, bonus, stock purchase, stock option, phantom stock or other equity-based compensation (including the Company Stock Plans, all Company Options and Company Stock-Based Awards and the Company ESPP), change-in-control, retention, salary continuation, vacation or sick pay policy, disability, death benefit, group insurance, hospitalization, medical, dental, life (including all individual life insurance policies as to which the Company or any of its Subsidiaries is the sponsor, the beneficiary or both), Code Section 125 “cafeteria” or “flexible” benefit, loan, educational assistance or fringe benefit plan, program, policy, practice, agreement or arrangement, whether written or oral, formal or informal, including each “employee benefit plan” (within the meaning of Section 3(3) of ERISA) and other employee benefit plan, program, policy, practice, agreement or arrangement, whether or not subject to ERISA (including any funding mechanism therefor now in effect or required in the future as a result of the Merger), in each case, (i) under which any current, former or retired employee or director of the Company or any of its Subsidiaries or Independent Contractor has any present or future right to benefits and that is contributed to, sponsored or maintained by the Company or any of its Subsidiaries; or (ii) with respect to which the Company or any of its Subsidiaries has any actual or contingent liability, whether direct or indirect. Company Benefit Plan will not include any Company Multiemployer Plan.

 

(r)                                     Company Board ” means the Board of Directors of the Company.

 

(s)                                    Company Capital Stock ” means the Company Common Stock and the Company Preferred Stock.

 

(t)                                     Company Common Stock ” means the common stock, par value $0.001 per share, of the Company.

 

(u)                                  Company ESPP ” means the Company’s 2008 Employee Stock Purchase Plan.

 

4



 

(v)                                  Company Financial Advisor ” means Goldman, Sachs & Co.

 

(w)                                Company Intellectual Property ” means all Intellectual Property Rights used or held for use in the conduct of the business of the Company or any of its Subsidiaries by the Company or any of its Subsidiaries.

 

(x)                                  Company Leases ” means all leases, subleases and licenses or other occupancy agreements entitling the Company or any of its Subsidiaries to the use of real property owned by third Person, including, for the avoidance of doubt, the Facilities.

 

(y)                                  Company Material Adverse Effect ” means any change, event, violation, inaccuracy, effect or circumstance (each, an “ Effect ”) that, individually or taken together with all other Effects that exist or have occurred prior to the date of determination of the occurrence of the Company Material Adverse Effect, (A) has had or would reasonably be expected to have a material adverse effect on the business, assets, liabilities, financial or other condition or results of operations of the Company and its Subsidiaries, taken as a whole; or (B) would reasonably be expected to prevent or materially impair or materially delay the consummation of the Merger. Solely with respect to clause (A), none of the following (by itself or when aggregated) to the extent occurring after the date of this Agreement will be deemed to be or constitute a Company Material Adverse Effect or will be taken into account when determining whether a Company Material Adverse Effect has occurred or may, would or could occur (subject to the limitations set forth below):

 

(i)                                      changes in general economic conditions in the United States or any other country or region in the world, or changes in conditions in the global economy generally (except to the extent that such Effect has had a disproportionate adverse effect on the Company relative to other companies operating in the industries in which the Company and its Subsidiaries conduct business, in which case only the incremental disproportionate adverse impact may be taken into account in determining whether there has occurred a Company Material Adverse Effect);

 

(ii)                                   changes in conditions in the financial markets, credit markets or capital markets in the United States or any other country or region in the world, including (A) changes in interest rates or credit ratings in the United States or any other country; (B) changes in exchange rates for the currencies of any country; or (C) any suspension of trading in securities (whether equity, debt, derivative or hybrid securities) generally on any securities exchange or over-the-counter market operating in the United States or any other country or region in the world (except, in each case, to the extent that such Effect has had a disproportionate adverse effect on the Company relative to other companies operating in the industries in which the Company and its Subsidiaries conduct business, in which case only the incremental disproportionate adverse impact may be taken into account in determining whether there has occurred a Company Material Adverse Effect);

 

(iii)                                changes in conditions in the industries in which the Company and its Subsidiaries conduct business (except to the extent that such Effect has had a disproportionate adverse effect on the Company relative to other companies operating in the industries in which the Company and its Subsidiaries conduct business, in which case only the incremental disproportionate adverse impact may be taken into account in determining whether there has occurred a Company Material Adverse Effect);

 

5


 


 

(iv)                               changes in regulatory, legislative or political conditions in the United States or any other country or region in the world (except to the extent that such Effect has had a disproportionate adverse effect on the Company relative to other companies operating in the industries in which the Company and its Subsidiaries conduct business, in which case only the incremental disproportionate adverse impact may be taken into account in determining whether there has occurred a Company Material Adverse Effect);

 

(v)                                  any geopolitical conditions, outbreak of hostilities, acts of war, sabotage, terrorism or military actions (including any escalation or general worsening of any such hostilities, acts of war, sabotage, terrorism or military actions) in the United States or any other country or region in the world (except to the extent that such Effect has had a disproportionate adverse effect on the Company relative to other companies operating in the industries in which the Company and its Subsidiaries conduct business, in which case only the incremental disproportionate adverse impact may be taken into account in determining whether there has occurred a Company Material Adverse Effect);

 

(vi)                               earthquakes, hurricanes, tsunamis, tornadoes, floods, mudslides, wild fires or other natural disasters, weather conditions and other force majeure events in the United States or any other country or region in the world (except to the extent that such Effect has had a disproportionate adverse effect on the Company relative to other companies operating in the industries in which the Company and its Subsidiaries conduct business, in which case only the incremental disproportionate adverse impact may be taken into account in determining whether there has occurred a Company Material Adverse Effect);

 

(vii)                            any Effect resulting from the public announcement of this Agreement or the pendency of the Merger, including the impact thereof on the relationships, contractual or otherwise, of the Company and its Subsidiaries with employees, suppliers, customers, partners, vendors or any other third Person (it being understood that the exceptions in this clause (vii) will not apply with respect to references to Company Material Adverse Effect set forth in the representations contained in Section 3.5 (and in Section 7.2(a) and Section 8.1(c) to the extent related to such portions of such representations and warranties));

 

(viii)                         any action taken or refrained from being taken by the Company at the request or with the consent of Parent pursuant to this Agreement, after disclosure to Parent and Merger Sub by the Company of all material and relevant facts and information to the Knowledge of the Company;

 

(ix)                               any action taken or refrained from being taken, in each case to which Parent has expressly approved, consented to or requested in writing following the date of this Agreement, after disclosure to Parent and Merger Sub by the Company of all material and relevant facts and information to the Knowledge of the Company;

 

(x)                                  changes or proposed changes in GAAP or other accounting standards or Law (or the enforcement or interpretation of any of the foregoing);

 

6



 

(xi)                               changes in the price or trading volume of the Company Common Stock or Indebtedness of the Company, in each case in and of itself (it being understood that any cause of such change may be deemed to constitute, in and of itself, a Company Material Adverse Effect and may be taken into consideration when determining whether a Company Material Adverse Effect has occurred);

 

(xii)                            any failure, in and of itself, by the Company and its Subsidiaries to meet (A) any public estimates or expectations of the Company’s revenue, earnings or other financial performance or results of operations for any period; or (B) any internal budgets, plans, projections or forecasts of its revenues, earnings or other financial performance or results of operations (it being understood that any cause of any such failure may be deemed to constitute, in and of itself, a Company Material Adverse Effect and may be taken into consideration when determining whether a Company Material Adverse Effect has occurred);

 

(xiii)                         the availability or cost of equity, debt or other financing to Parent or Merger Sub; and

 

(xiv)                        the initiation or pendency of any Transaction Litigation or other Legal Proceeding threatened, made or brought by any of the current or former Company Stockholders (on their own behalf or on behalf of the Company) against the Company, any of its executive officers or other employees or any member of the Company Board arising out of the Merger or any other transaction contemplated by this Agreement.

 

(z)                                   Company Multiemployer Plan ” means any plan which is a “multiemployer plan” within the meaning of Section 4001(a)(3) of ERISA.

 

(aa)                           Company Options ” means any options to purchase shares of Company Common Stock outstanding pursuant to any of the Company Stock Plans.

 

(bb)                           Company Pension Plan ” means any Company Benefit Plan that is subject to Title IV of ERISA, Section 302 of ERISA, Section 412 of the Code, or Section 4971 of the Code.

 

(cc)                             Company Permits ” means Permits necessary to enable the Company to own, lease or otherwise hold its properties and assets and to conduct its businesses as presently conducted.

 

(dd)                           Company Preferred Stock ” means the preferred stock, par value $0.001 per share, of the Company.

 

(ee)                             Company Protected Information ” means Protected Information that is owned by or under the control of the Company or any of its Subsidiaries, stored on the information technology assets of the Company or any of its Subsidiaries, or that is collected, received, maintained, transmitted, transferred, or secured by the Company or any of its Subsidiaries.

 

7



 

(ff)                               Company Source Code ” means any source code for any Software forming part of the Technology used in the conduct of the business of the Company or any of its Subsidiaries that is owned by the Company or any of its Subsidiaries.

 

(gg)                             Company Stock Plans ” means the compensatory plans set forth in Section 1.1(gg) of the Company Disclosure Letter.

 

(hh)                           Company Stock-Based Award ” means each right of any kind, contingent or accrued, to receive shares of Company Common Stock or benefits measured in whole or in part by the value of a number of shares of Company Common Stock granted pursuant to the Company Stock Plans or Company Benefit Plans (including performance shares, performance-based units, market stock units, restricted stock, restricted stock units, phantom units, stock appreciation rights, deferred stock units and dividend equivalents, but not including any 401(k) plan of the Company), other than Company Options.

 

(ii)                                   Company Stockholders ” means the holders of shares of Company Capital Stock.

 

(jj)                                 Compliant ” means, with respect to the Required Financing Information, that (i) such Required Financing Information does not contain any untrue statement of a material fact regarding the Company and its Subsidiaries, or omit to state any material fact regarding the Company and its Subsidiaries necessary in order to make such Required Financing Information not misleading under the circumstances; (ii) such Required Financing Information complies in all material respects with all applicable requirements of Regulation S-K and Regulation S-X under the Securities Act for a registered public offering of non-convertible debt securities on Form S-1 that are applicable to such Required Financing Information (other than such provisions for which compliance is not customary in a Rule 144A offering of high yield debt securities); and (iii) the financial statements and other financial information included in such Required Financing Information would not be deemed stale or otherwise be unusable under customary practices for offerings and private placements of high yield debt securities under Rule 144A promulgated under the Securities Act and are sufficient to permit the Company’s independent public accountants to issue comfort letters to the Financing Sources to the extent required as part of the Financing, including as to customary negative assurances and change period, in order to consummate any offering of debt securities on any day during the Marketing Period.

 

(kk)                           Confidentiality Agreement ” means the confidentiality letter agreement, dated April 25, 2016, between the Company and Apollo Management VIII, L.P.

 

(ll)                                   Consent ” means any authorization, consent, approval, clearance, waiver, Permit or order.

 

(mm)                   Continuing Employees ” means each individual who is an employee of the Company or any of its Subsidiaries immediately prior to the Effective Time and continues to be an employee of Parent or one of its Subsidiaries (including the Surviving Corporation) immediately following the Effective Time.

 

8



 

(nn)                           Contract ” means any legally-binding contract, lease, license, indenture, loan agreement, guarantee agreement, credit agreement, debenture, note, bond, mortgage, deed of trust, commitment, obligation, arrangement, concession or franchise, whether written or oral.

 

(oo)                           Controlled Group Liability ” means any and all liabilities, whether actual or contingent, or direct or indirect, of the Company or any of its Subsidiaries (i) under Title IV of ERISA; (ii) under Section 302 of ERISA; (iii) under Section 412 and Section 4971 of the Code; (iv) as a result of a failure to comply with the continuation coverage requirements of Section 601 of ERISA and Section 4980B of the Code; and (v) under corresponding or similar provisions of foreign Laws, in each case, that are imposed on a “controlled group” or similar basis, as a result of the Company or any Subsidiary being treated as a “single employer” within the meaning of Section 414 of the Code or Sections 3(5) or 4001(b)(1) of ERISA, or the regulations promulgated thereunder, with respect to any ERISA Affiliate.

 

(pp)                           Credit Agreement ” means the Revolving Credit Agreement, dated November 25, 2015, by and among the Company, the lenders from time to time party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent, Morgan Stanley Bank, N.A., Goldman Sachs Bank USA and Wells Fargo Bank, N.A., as co-Syndication Agents, and J.P. Morgan Securities LLC, Morgan Stanley Senior Funding Inc., Goldman Sachs Bank USA and Wells Fargo Securities, LLC, as Joint Bookrunners and co-Lead Arrangers.

 

(qq)                           D&O Insurance ” means the Company’s current directors’ and officers’ liability insurance.

 

(rr)                                 DGCL ” means the General Corporation Law of the State of Delaware.

 

(ss)                               DOJ ” means the United States Department of Justice or any successor thereto.

 

(tt)                                 DTC ” means the Depository Trust Company.

 

(uu)                           Environmental Law ” means all applicable foreign, federal, national, state, provincial or local Laws, issued or promulgated by any Governmental Authority, relating to pollution, worker health and safety with respect to exposure to Hazardous Materials, and protection of the environment (including ambient air, surface water, groundwater, land surface or subsurface strata) or the release or threatened release of Hazardous Materials.

 

(vv)                           Environmental Permit ” means any governmental franchise, license, permit, authorization, variance, exemption, order, consent, certificate or approval issued by a Governmental Authority pursuant to Environmental Law, and any extension, modification, amendment or waiver of the foregoing issued by any Governmental Authority pursuant to Environmental Law.

 

(ww)                       ERISA ” means the Employee Retirement Income Security Act of 1974.

 

(xx)                           ERISA Affiliate ” means, with respect to the Company or any of its Subsidiaries, any trade or business, whether or not incorporated, that together with the Company or

 

9



 

any of its Subsidiaries would be deemed a “single employer” within the meaning of Section 414 of the Code or Sections 3(5) or 4001(b)(1) of ERISA, or that is a member of the same “controlled group” as the Company or any of its Subsidiaries pursuant to Section 4001(a)(14) of ERISA.

 

(yy)                           Exchange Act ” means the Securities Exchange Act of 1934.

 

(zz)                             Existing Senior Notes ” means the Company’s 6.500% senior notes due 2024 issued pursuant to the Notes Indenture.

 

(aaa)                    Facilities ” means, collectively, each of the Company’s and its Subsidiaries’ owned, leased or operated data centers and related material connectivity systems located within the Company’s and its Subsidiaries’ owned, leased or operated data centers (which, for the avoidance of doubt, will not include office, warehouse or research and development properties or portions of properties), whether used to provide or support colocation, network connectivity, managed hosting, cloud computing, disaster recovery or continuity of operations, exchange point or other services provided by the Company or any of its Subsidiaries.

 

(bbb)                    Filed Company Contract ” means a Contract required to be filed by the Company as a “material contract” pursuant to Item 601(b)(10) of Regulation S-K.

 

(ccc)                       Filed Company SEC Documents ” means the Company SEC Documents filed and publicly available after January 1, 2015.

 

(ddd)                    Financing Sources ” means the Persons that have committed to provide the debt financing contemplated by, or have otherwise entered into agreements in connection with, the Debt Commitment Letters or alternative debt financings in connection with the Merger, and any joinder agreements, indentures or credit agreements entered into pursuant thereto or relating thereto, together with their Affiliates, current or future officers, directors, employees, agents, representatives, stockholders, limited partners, managers, members or partners involved in the Debt Financing and their successors and assigns.

 

(eee)                       FTC ” means the United States Federal Trade Commission or any successor thereto.

 

(fff)                          GAAP ” means generally accepted accounting principles, consistently applied, in the United States.

 

(ggg)                       Government Official ” means an official, employee, or representative of any government department, agency, or instrumentality, any government-owned or — controlled enterprise, any public international organization, or any political party, as well as any candidate for public office.

 

(hhh)                    Governmental Authority ” means any (i) national, federal, state, county, municipal, local or foreign government or entity exercising executive, legislative, judicial, regulatory (including stock exchange), taxing or administrative functions of government; (ii) agency, division, bureau, department or other political subdivision of any government, entity or organization described

 

10



 

in clause (i); or (iii) company business, enterprise or other entity owned, in whole or in part, or controlled by any government, entity, organization or other Person described in clauses (i) or (ii).

 

(iii)                                Group ” means a “group” (as defined pursuant to Section 13(d) of the Exchange Act) of Persons.

 

(jjj)                             Hazardous Materials ” means (i) any petroleum or petroleum products, by-products or wastes, explosive or radioactive materials, asbestos in any form, toxic mold, lead and polychlorinated biphenyls; and (ii) any other chemical, material or substance that is regulated, classified or defined as “hazardous,” “toxic,” a “pollutant” or “radioactive” under Environmental Laws.

 

(kkk)                    HSR Act ” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

 

(lll)                                Indebtedness ” means, with respect to any Person, without duplication, (i) all obligations of such Person for borrowed money, or with respect to deposits or advances of any kind to such Person; (ii) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments or debt securities; (iii) all liabilities pursuant to capitalized lease obligations of such Person or obligations of such Person to pay the deferred and unpaid purchase price of property, equipment and software; (iv) all obligations of such Person pursuant to securitization or factoring programs or arrangements; (v) all liabilities pursuant to guarantees and arrangements having the economic effect of a guarantee of such Person of any Indebtedness of any other Person; (vi) all obligations or undertakings of such Person to maintain or cause to be maintained the financial position or covenants of others or to purchase the obligations or property of others; (vii) net cash payment obligations of such Person under swaps, options, derivatives and other hedging agreements or arrangements that will be payable upon termination thereof (assuming they were terminated on the date of determination); (viii) liabilities pursuant to letters of credit, bank guarantees, and other similar contractual obligations entered into by or on behalf of such Person (in each case, whether or not drawn, contingent or otherwise); (ix) all liabilities pursuant to conditional sale or title retention agreements; (x) all deferred purchase price liabilities, earnouts or other contingent payment obligations related to past acquisitions; (xi) all liabilities under sale and leaseback transactions, agreements to repurchase securities sold and other similar financing transactions; (xii) accrued interest, premiums, penalties and other obligations relating to the foregoing in connection with the repayment or breach thereof prior to the Closing Date; and (xiii) indebtedness of the type referred to in clauses (i) through (xii) secured by any Lien.

 

(mmm)        Independent Contractor ” means any individual or sole proprietorship serving as a consultant or independent contractor to the Company or any of its Subsidiaries.

 

(nnn)                    Information Privacy and Security Laws ” means all applicable Laws concerning data privacy, data protection, or data security.

 

(ooo)                    Intellectual Property License ” means (i) any grant (or covenant not to assert) by the Company or any of its Subsidiaries to another Person of any right under the Owned Intellectual Property (other than a sale of all rights of ownership); and (ii) any grant (or covenant not

 

11



 

to assert) by another Person to the Company or any of its Subsidiaries of any right under that third Person’s Intellectual Property Rights (other than a sale of all rights of ownership).

 

(ppp)                    Intellectual Property Rights ” means rights with respect to any of the following, as they exist anywhere in the world, whether registered or unregistered: (i) patents, patent applications, inventions and other patent rights (including divisionals, continuations, continuations-in-part, reissues or examinations of any of the foregoing); (ii) trademarks, trademark rights, trade names, trade name rights, trade dress, service marks, service mark rights, corporate names and logos, and all goodwill associated with or symbolized by any of the foregoing; (iii) copyrights, works of authorship and mask works; (iv) know-how and trade secret rights, (v) domain name rights and social media names; (vi) sui generis database rights; (vii) rights with respect to, or embodied within, Technology; and (viii) all other intellectual property rights or similar proprietary rights of any kind or nature.

 

(qqq)                    Intervening Event ” means any Effect that (i) as of the date of this Agreement was not known to the Company Board, or the material consequences of which (based on facts known to the members of the Company Board as of the date of this Agreement) were not reasonably foreseeable as of the date of this Agreement; and (ii) does not relate to an Acquisition Proposal.

 

(rrr)                             IRS ” means the United States Internal Revenue Service or any successor thereto.

 

(sss)                          Knowledge ” of a Person, with respect to any matter in question, means (i) with respect to the Company, the actual knowledge of the individuals set forth on Section 1.1(sss) of the Company Disclosure Letter; and (ii) with respect to Parent, the actual knowledge of the individuals set forth on Section 1.1(sss) of the Parent Disclosure Letter, in each case after reasonable inquiry of those employees of the Company or Parent, as applicable, who would reasonably be expected to have actual knowledge of the matter in question. With respect to Intellectual Property Rights and Technology, “reasonable inquiry” does not require a Person to conduct, have conducted, obtain or have obtained any freedom-to-operate opinions or similar opinions of counsel or any patent or trademark clearance searches.

 

(ttt)                             Law ” means any statute, law (including common law), ordinance, code, decree, order, directive, judgment, regulation, ruling or stock exchange listing requirement or other requirement issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any Governmental Authority and any order or decision of an applicable arbitrator or arbitration panel.

 

(uuu)                    Legal Proceeding ” means any claim, complaint, petition, investigation, hearing, action, charge, lawsuit, litigation or other similarly formal legal proceeding (public or private) brought by or pending before any Governmental Authority, arbitrator, mediator or other tribunal.

 

(vvv)                    Lien ” means any (i) pledges, liens, charges, mortgages, hypothecations, deeds of trust, rights of first offer or first refusal, options, encumbrances and security interests of any

 

12



 

kind or nature whatsoever; and (ii) covenants, conditions, restrictions, easements, encroachments, title retention agreements or other third Person rights or title or survey defects of any kind or nature whatsoever.

 

(www)              Marketing Period ” means the first period of 20 consecutive Business Days after the date of this Agreement and throughout which and at the end of which (i) Parent has the Required Financing Information and the Required Financing Information is Compliant (it being understood that if the Company in good faith reasonably believes that it has provided the Required Financing Information and the Required Financing Information is Compliant, it may deliver to Parent a written notice stating when it believes that it completed such delivery, in which case the Company will be deemed to have complied with this clause (i) at such time unless Parent in good faith reasonably believes that the Company has not completed delivery of the Required Financing Information or the Required Financing Information is not Compliant and, within five Business Days after its receipt of such notice from the Company, Parent delivers a written notice to the Company to that effect (stating with specificity which Required Financing Information the Company has not delivered or is not Compliant); (ii) the conditions set forth in Section 7.1 and Section 7.2 are satisfied (other than those conditions that by their nature can only be satisfied at the Closing, but subject to the satisfaction or waiver of such conditions); and (iii) nothing has occurred and no condition exists that would cause any of the conditions set forth in Section 7.1 or Section 7.2 to fail to be satisfied (other than those conditions that by their nature can only be satisfied at the Closing), assuming that such conditions were applicable at any time during such 20 consecutive Business Day period; provided , that (x) November 23, 2016, November 24, 2016, and November 25, 2016 shall not be considered Business Days for purposes of such period; (y) such 20 consecutive Business Day period shall commence no earlier than September 6, 2016; and (z) if such 20 consecutive Business Days shall not have fully elapsed on or prior to December 16, 2016, then such 20 consecutive Business Day period shall commence no earlier than January 3, 2017. Notwithstanding the foregoing, (A) the Marketing Period will end on any earlier date on which the Debt Financing is obtained; (B) in the event that the Debt Financing is not consummated during or upon the expiration of the 20 consecutive Business Day period, then, at Parent’s option, the Marketing Period will not end until the expiration of one additional 10 consecutive Business Day period commencing immediately after the expiration of the initial 20 Business Day period, as set forth in a written notice to be delivered by Parent prior to the expiration of the initial 20 Business Day period and prior to the Termination Date (which such notice shall, other than in respect of any willful breach following the date of delivery of such notice, provide that Parent and Merger Sub acknowledge and agree that solely with respect to Parent’s and Merger Sub’s obligations to consummate the Merger, the conditions set forth in Sections 7.2(a)(i) and 7.2(d), as well as the condition that the certificate referenced in Section 7.2(c) need certify that such conditions are satisfied be delivered at or prior to the Effective Time by the Company to Parent and Merger Sub (collectively, the “ Bring Down Conditions ”) will be deemed satisfied or waived at the end of such period after giving effect to such extension regardless of whether the Bring Down Conditions cannot be satisfied on the Closing Date as a result of a fact, event or circumstance occurring after the delivery of the Initial Officer’s Certificate, subject in all respects to receipt of a certificate of the Company (the “ Initial Officer’s Certificate ”), validly executed for and on behalf of the Company and in its name by a duly authorized executive officer thereof, certifying that the conditions set forth in each of Section 7.2(a), Section 7.2(b), Section 7.2(d) and Section 7.2(e) have been satisfied as of the date of the Initial

 

13



 

Officer’s Certificate as if the Closing were to have occurred on such date ( provided , that for the avoidance of doubt, the condition that the certificate referenced in Section 7.2(c) certifying that the conditions set forth in Sections 7.2(a)(ii), (iii) and (iv), Section 7.2(b) and Section 7.2(e) are satisfied be delivered at or prior to the Effective Time by the Company to Parent and Merger Sub shall not be deemed satisfied or waived by virtue of the delivery of the Initial Officer’s Certificate for purposes of the Closing and another certificate certifying that such conditions have been satisfied as of the Closing must be delivered in connection with the Closing), during which time Parent will have access to the Required Financing Information and such Required Financing Information will be Compliant; and (C) the Marketing Period will not commence or be deemed to have commenced if, after the date of this Agreement and prior to the completion of the consecutive Business Day period referenced herein, (1) the Company’s independent public accountant has withdrawn its audit opinion with respect to any financial statements contained in the Company’s most recently filed Annual Report on Form 10-K, in which case the Marketing Period will not be deemed to commence unless, at the earliest, and until a new unqualified audit opinion is issued with respect to the consolidated financial statements of the Company for the applicable periods by the independent public accountant or another independent public accounting firm reasonably acceptably to Parent; (2) the Company issues a public statement indicating its intent to restate any historical financial statements of the Company or any such restatement is under active consideration, in which case the Marketing Period will not be deemed to commence unless and until such restatement has been completed and the relevant Required Financing Information has been amended or the Company has announced that it has concluded that no restatement will be required in accordance with GAAP; (3) any Required Financing Information would not be Compliant at any time during such consecutive Business Day period (it being understood that if any Required Financing Information provided at the commencement of the Marketing Period ceases to be Compliant during such consecutive Business Day period, then the Marketing Period will be deemed not to have occurred) or otherwise does not include the “Required Financing Information” as defined; or (4) the Company has failed to file any report on Form 10-K, Form 10-Q or Form 8-K required to be field with the SEC by the date required under the Exchange Act, in which case (a) in the case of a failure to file a Form 10-K or Form 10-Q, the Marketing Period will not be deemed to commence unless and until, at the earliest, such reports have been filed; and (b) in the case of a failure to file a Form 8-K, the Marketing Period will be tolled until such report has been filed; provided , that if the failure to file such report occurs during the final five Business Days of the Marketing Period, the Marketing Period will be extended so that the final day of the Marketing Period will be no earlier than the fifth Business Day after such report has been filed. Notwithstanding anything to the contrary herein, each reference to the “Marketing Period” in this Agreement shall mean the Marketing Period as may be extended pursuant to this definition, including, for the avoidance of doubt, clause (B) hereof.

 

(xxx)                    Notes Indenture ” means the Indenture, dated as of November 25, 2015, by and among the Company, the subsidiary guarantors from time to time party thereto and Wells Fargo Bank, National Association relating to the Existing Senior Notes, as it may have been amended or supplemented prior to the date of this Agreement.

 

(yyy)                    NYSE ” means the New York Stock Exchange.

 

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(zzz)                       OFAC ” means the U.S. Treasury Department’s Office of Foreign Assets Control.

 

(aaaa)             Open Source ” means any Software whose source code is made available under a license that is recognized by the Open Source Initiative at opensource.org/license as an “open source” license or any similar license that requires the disclosure or licensing of such Software.

 

(bbbb)             Owned Intellectual Property ” means all Intellectual Property Rights owned or purported to be owned by the Company or any of its Subsidiaries.

 

(cccc)                 Parent Material Adverse Effect ” means any Effect that, individually or taken together with all other Effects that exist or have occurred prior to the date of determination of the occurrence of the Parent Material Adverse Effect, has had or would reasonably be expected to prevent or materially impair or materially delay the consummation of the Merger or the ability of Parent and Merger Sub to perform their respective covenants and obligations pursuant to this Agreement.

 

(dddd)             Parent Permits ” means Permits necessary to enable Parent to own, lease or otherwise hold its properties and assets and to conduct its businesses as presently conducted.

 

(eeee)                 PCI DSS ” means the Payment Card Industry Data Security Standard, issued by the Payment Card Industry Security Standards Council.

 

(ffff)                     Permit ” means any governmental franchise, license, permit, authorization, variance, exemption, order, consent, certificate or approval, and any extension, modification, amendment or waiver of the foregoing issued by any Governmental Authority.

 

(gggg)                 Permitted Lien ” means any of the following: (i) liens for Taxes, assessments and governmental charges or levies either not yet delinquent or that are being contested in good faith and by appropriate proceedings and for which appropriate reserves have been established to the extent required by GAAP; (ii) mechanics, carriers’, workmen’s, warehouseman’s, repairmen’s, materialmen’s or other similar liens or security interests that are not yet due or that are being contested in good faith and by appropriate proceedings and for which appropriate reserves have been established to the extent required by GAAP; (iii) third Person leases, subleases and licenses to Real Property to the extent listed in Section 3.14(c) of the Company Disclosure Letter (other than capital leases and leases underlying sale and leaseback transactions) entered into in the ordinary course of business under which there exists no material default; (iv) pledges or deposits to secure obligations pursuant to workers’ compensation Laws or similar legislation or to secure public or statutory obligations; (v) pledges and deposits to secure the performance of bids, trade contracts, leases, surety and appeal bonds, performance bonds and other obligations of a similar nature in each case in the ordinary course of business; (vi) defects, imperfections or irregularities in title, easements, covenants and rights of way (unrecorded and of record) and other similar liens, in each case that do not secure payment of a sum of money and do not, and are not reasonably likely to, adversely affect in any material respect the current use or occupancy of the applicable property owned, leased, used or held for use by the Company or any of its Subsidiaries; (vii) zoning, building

 

15



 

and other similar codes or restrictions that are not violated in any material respect by the current use or occupancy of the real property subject thereto; (viii) liens the existence of which are disclosed in the notes to the consolidated financial statements of the Company included in the Filed Company SEC Reports; (ix) non-exclusive licenses to Company Intellectual Property entered into in the ordinary course of business; (x) any other liens that do not secure a liquidated amount and that have been incurred or suffered in the ordinary course of business; (xi) statutory, common law or contractual liens of landlords under Company Leases or liens against the fee interests of the landlord or owner of any Leased Real Properties unless caused by the Company or any of its Subsidiaries; and (xii) restrictions on transfer of securities imposed by applicable securities Laws.

 

(hhhh)             Person ” means any individual, corporation (including any non-profit corporation), limited liability company, joint stock company, general partnership, limited partnership, limited liability partnership, joint venture, estate, trust, firm, Governmental Authority or other enterprise, association, organization or entity of any kind, whether domestic or foreign.

 

(iiii)                             Protected Information ” means any information, in any form, that: (i) relates to a natural person or that identifies or could reasonably be used to identify a natural person; (ii) the collection, use, disclosure or security of which is governed or regulated by any Information Privacy and Security Law; (iii) is covered by PCI DSS; or (iv) the Company or a Subsidiary of the Company received from or on behalf of a customer of the Company or any Subsidiary of the Company subject to a data security or confidentiality obligation of the Company or its Subsidiaries.

 

(jjjj)                         Related Party ” means a Company Related Party or a Parent Related Party, as applicable.

 

(kkkk)             Release ” means any release, spill, emission, leaking, pumping, pouring, dumping, emptying, injection, deposit, disposal, discharge, dispersal, leaching, or migration into or through the environment.

 

(llll)                             Required Financing Information ” means (i) all financial statements, financial data, audit reports and other information regarding the Company and its Subsidiaries of the type that would be required by Regulation S-X promulgated by the SEC and Regulation S-K promulgated by the SEC for a registered public offering of debt securities on a registration statement on Form S-1 under the Securities Act of the Company to consummate the offerings of high yield debt securities contemplated by the Debt Commitment Letter, assuming that such offering(s) were consummated at the same time during the Company’s fiscal year as such offering(s) of debt securities will be made (including all audited financial statements (which, for the avoidance of doubt, will include audited financial statements for and as of the fiscal years ended December 31, 2013, December 31, 2014, and December 31, 2015) and all unaudited financial statements (which will have been reviewed by the Company’s independent public accountants as provided in Statement on Auditing Standards 100)); and (ii) (A) such other pertinent and customary information regarding the Company and its Subsidiaries as may be reasonably requested by Parent (or the Financing Sources) to the extent that such information is required in connection with the Debt Commitment Letters or of the type and form customarily included in an offering memorandum for private placements of non-convertible high-yield bonds pursuant to Rule 144A promulgated under the

 

16



 

Securities Act; or (B) as otherwise necessary to receive from the Company’s independent public accountants (and any other accountant to the extent that financial statements audited or reviewed by such accountants are or would be included in such offering memorandum), customary “comfort” (including “negative assurance” comfort and change period comfort), together with drafts of customary comfort letters that such independent public accountants are prepared to deliver upon the “pricing” of any high-yield bonds being issued in lieu of any portion of the Debt Financing, with respect to the financial information to be included in such offering memorandum. Notwithstanding anything to the contrary in clauses (i) and (ii), nothing will require the Company to provide (or be deemed to require the Company to prepare) any (1) pro forma financial statements; (2) description of all or any portion of the Debt Financing, including any “description of notes”; (3) risk factors relating to all or any component of the Debt Financing or (4) other information required by Rule 3-10 or Rule 3-16 of Regulation S-X, any Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K or any other information customarily excluded from an offering memorandum for private placements of non-convertible high-yield bonds pursuant to Rule 144A).

 

(mmmm)                                             Requisite Stockholder Approval ” means the affirmative vote of the holders of a majority of the outstanding shares of Company Common Stock entitled to vote on the adoption of the Agreement.

 

(nnnn)             Sarbanes-Oxley Act ” means the Sarbanes-Oxley Act of 2002.

 

(oooo)             SEC ” means the United States Securities and Exchange Commission or any successor thereto.

 

(pppp)             Securities Act ” means the Securities Act of 1933.

 

(qqqq)             Software ” means computer programs whether in source code or object code form.

 

(rrrr)                         SOX ” means the Sarbanes-Oxley Act of 2002.

 

(ssss)                     Subsidiary ” of any Person means (i) a corporation more than 50% of the combined voting power of the outstanding voting stock of which is owned, directly or indirectly, by such Person or by one or more other Subsidiaries of such Person or by such Person and one or more other Subsidiaries of such Person; (ii) a partnership of which such Person or one or more other Subsidiaries of such Person or such Person and one or more other Subsidiaries thereof, directly or indirectly, is the general partner and has the power to direct the policies, management and affairs of such partnership; (iii) a limited liability company of which such Person or one or more other Subsidiaries of such Person or such Person and one or more other Subsidiaries of such Person, directly or indirectly, is the managing member and has the power to direct the policies, management and affairs of such company; or (iv) any other Person (other than a corporation, partnership or limited liability company) in which such Person or one or more other Subsidiaries of such Person or such Person and one or more other Subsidiaries of such Person, directly or indirectly, has at least a majority ownership or the power to direct the policies, management and affairs thereof (including by contract).

 

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(tttt)                         Superior Proposal ” means any bona fide written Acquisition Proposal for an Acquisition Transaction on terms that the Company Board (or a committee thereof) has determined in good faith (after consultation with its financial advisor and outside legal counsel) would be more favorable, from a financial point of view, to the Company Stockholders (in their capacity as such) than the Merger (taking into account (i) any revisions to this Agreement made or proposed in writing by Parent prior to the time of such determination or any reaffirmation thereof; and (ii) those factors and matters deemed relevant in good faith by the Company Board (or any committee thereof), including the (A) identity of the Person making the proposal; (B) likelihood of consummation in accordance with the terms of such proposal; and (C) legal, financial (including the financing terms), regulatory, timing and other aspects of such proposal). For purposes of the reference to an “Acquisition Proposal” in this definition, all references to “15%” in the definition of “Acquisition Transaction” will be deemed to be references to “50%.”

 

(uuuu)             Tax ” means (i) any and all federal, state, local, foreign and other taxes, customs, tariffs, imposts, levies, duties, fees or other like assessments or charges of any kind imposed by a Governmental Authority, together with all interest, penalties and additions imposed with respect to such amounts, including (a) taxes imposed on, or measured by, income, franchise, profits or gross receipts; and (b) ad valorem, value added, alternative or add-on minimum, capital gains, sales, goods and services, use, real or personal property, capital stock, license, branch, payroll, estimated, employment, disability, social security (or similar), unemployment, compensation, utility, severance, production, excise, stamp, occupation, premium, windfall profits, transfer and gains taxes, environmental and customs duties, (ii) any and all liability for the payment of any items described in clause (i) above as a result of being (or ceasing to be) a member of an affiliated, consolidated, combined, unitary or aggregate group (or being included (or being required to be included) in any Tax Return related to such group and (iii) any and all liability for the payment of any amounts as a result of any obligation to indemnify any other person, or any successor or transferee liability, in respect of any items described in clause (i) or (ii) above.

 

(vvvv)             Tax Returns ” means all Tax returns, declarations, statements, reports, claims for refunds, forms, information returns, any schedules, attachments, supplements or amendments of any of the foregoing and any other document filed, required to be filed with any Governmental Authority relating to Taxes.

 

(wwww)     Technology ” means all designs, formulas, algorithms, procedures, techniques, ideas, know-how, Software and associated documentation, databases and data collections, internet websites and web content, tools, inventions (whether patentable or unpatentable and whether or not reduced to practice), developments, creations, improvements, and works of authorship.

 

(xxxx)             Top Customer ” means each of the 20 largest customers (in the aggregate) of the Company, based on consolidated revenues of the Company as of December 31, 2015.

 

(yyyy)             Trade Laws ” means all Laws relating to imports, exports and economic sanctions, including all Laws administered and enforced by OFAC or the U.S. State Department.

 

18



 

(zzzz)                                   Transaction Documents ” means, collectively, this Agreement, the Confidentiality Agreement, the Guarantee, the Financing Letters, the Voting Agreement and any other document contemplated thereby or any document or instrument delivered in connection hereunder or thereunder.

 

(aaaaa)                        Transaction Litigation ” means any Legal Proceeding commenced or threatened against a Party or any of its Subsidiaries, Affiliates or directors or otherwise relating to, involving or affecting such Party or any of its Subsidiaries or Affiliates, in each case in connection with, arising from or otherwise relating to the Merger or any other transaction contemplated by this Agreement, including any Legal Proceeding alleging or asserting any misrepresentation or omission in the Proxy Statement or any Other Required Company Filing.

 

(bbbbb)      WARN ” means the United States Worker Adjustment and Retraining Notification Act or any similar state or local Law.

 

1.2                                Additional Definitions . The following capitalized terms have the respective meanings given to them in the respective Sections of this Agreement set forth opposite each of the capitalized terms below:

 

Term

 

Section Reference

Agreement

 

Preamble

Alternate Debt Financing

 

6.5(d)

Alternative Acquisition Agreement

 

5.3(a)

Available Cash Amount

 

2.9(h)

Bring Down Conditions

 

1.1(www)

Certificates

 

2.9(c)(i)

Closing

 

2.3

Closing Date

 

2.3

Company

 

Preamble

Company Affiliate Transaction

 

3.21

Company Affiliated Person

 

3.21

Company Board Recommendation Change

 

5.3(c)(i)

Company Disclosure Letter

 

1.4

Company Plans

 

6.11(c)

Company Related Parties

 

8.3(f)(ii)

Company SEC Documents

 

3.6(a)

Company Securities

 

3.3(d)

Company Stockholder Meeting

 

6.4(a)

Company Termination Fee

 

8.3(b)(i)

Comparable Plans

 

6.11(c)

Debt Commitment Letters

 

4.10(a)

Debt Financing

 

4.10(a)

Debt Payoff Letters

 

6.6(a)(vii)

Dissenting Company Shares

 

2.7(c)(i)

DTC Payment

 

2.9(d)

 

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Term

 

Section Reference

Effect

 

1.1(y)

Effective Time

 

2.2

Electronic Delivery

 

9.12

Equity Commitment Letter

 

4.10(a)

Equity Financing

 

4.10(a)

Exchange Fund

 

2.9(b)

Fee Letter

 

4.10(a)

Final Offering

 

2.8(e)

Financing

 

4.10(a)

Financing Letters

 

4.10(a)

FLSA

 

3.17(c)

Guarantee

 

Recitals

Guarantor

 

Recitals

Indemnified Persons

 

6.10(a)

Initial Officer’s Certificate

 

1.1(www)

Leased Real Property

 

3.14(a)

Material Contract

 

3.13(b)

Maximum Annual Premium

 

6.10(c)

Maximum Liability Amount

 

8.3(g)

Merger

 

Recitals

Merger Sub

 

Preamble

New Debt Commitment Letters

 

6.5(d)

New Plans

 

6.11(d)

Notice Period

 

5.3(d)(ii)(3)

Old Plans

 

6.11(d)

Option Consideration

 

2.8(b)

Other Required Company Filing

 

6.3(e)

Other Required Parent Filing

 

6.3(f)

Owned Company Shares

 

2.7(a)(ii)

Owned Real Property

 

3.14(a)

Parent

 

Preamble

Parent Expenses

 

8.3(b)(iv)

Parent Related Parties

 

8.3(f)(i)

Parent Termination Fee

 

8.3(c)

Party

 

Preamble

Payment Agent

 

2.9(a)

Per Share Price

 

2.7(a)(iii)

Privacy Policy

 

3.15(d)

Proxy Statement

 

6.3(a)

Real Property

 

3.14(a)

Reimbursement Obligations

 

6.6(g)

Representatives

 

5.3(a)

Required Amount

 

4.10(c)

 

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Term

 

Section Reference

Solvent

 

3.27

Surviving Corporation

 

2.1

Tail Policy

 

6.10(c)

Termination Date

 

8.1(c)

Uncertificated Shares

 

2.9(c)(ii)

Voting Agreement

 

Preamble

 

1.3                                Certain Interpretations .

 

(a)                                  Unless otherwise indicated, when a reference is made in this Agreement to an Article, Section, Schedule or Exhibit, that reference is to an Article, Section, Schedule or Exhibit to this Agreement, as applicable.

 

(b)                                  When used in this Agreement, (i) the words “hereof,” “herein” and “herewith” and words of similar import will, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement; and (ii) the words “include,” “includes” and “including” will be deemed in each case to be followed by the words “without limitation.”

 

(c)                                   Unless the context otherwise requires, “neither,” “nor,” “any,” “either” and “or” are not exclusive.

 

(d)                                  The word “extent” in the phrase “to the extent” means the degree to which a subject or other thing extends, and does not simply mean “if.”

 

(e)                                   When used in this Agreement, references to “$” or “Dollars” are references to U.S. dollars.

 

(f)                                    The meaning assigned to each capitalized term defined and used in this Agreement is equally applicable to both the singular and the plural forms of such term, and words denoting any gender include all genders. Where a word or phrase is defined in this Agreement, each of its other grammatical forms has a corresponding meaning. All terms defined in this Agreement will have the defined meanings when used in any certificate or other document made or delivered pursuant to this Agreement unless otherwise defined in such certificate or document.

 

(g)                                   When reference is made to any party to this Agreement or any other agreement or document, such reference includes that party’s successors and permitted assigns. References to any Person include the successors and permitted assigns of that Person.

 

(h)                                  Unless the context otherwise requires, all references in this Agreement to the Subsidiaries of a Person will be deemed to include all direct and indirect Subsidiaries of such Person.

 

(i)                                      A reference to any specific legislation or to any provision of any legislation includes any amendment to, and any modification, re-enactment or successor thereof, any legislative

 

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provision substituted therefor and all rules, regulations and statutory instruments issued thereunder or pursuant thereto, except that, for purposes of any representations and warranties in this Agreement that are made as a specific date, references to any specific legislation will be deemed to refer to such legislation or provision (and all rules, regulations and statutory instruments issued thereunder or pursuant thereto) as of such date. References to any agreement or Contract are to that agreement or Contract as amended, modified or supplemented from time to time.

 

(j)                                     Except as otherwise provided in this Agreement, all accounting terms used herein will be interpreted, and all accounting determinations hereunder will be made, in accordance with GAAP.

 

(k)                                  The table of contents and headings set forth in this Agreement are for convenience of reference purposes only and will not affect or be deemed to affect in any way the meaning or interpretation of this Agreement or any term or provision of this Agreement.

 

(l)                                      References to “from” or “through” any date mean, unless otherwise specified, from and including or through and including such date, respectively.

 

(m)                              The measure of a period of one month or year for purposes of this Agreement will be the day of the following month or year corresponding to the starting date. If no corresponding date exists, then the end date of such period being measured will be the next actual day of the following month or year (for example, one month following February 18 is March 18 and one month following March 31 is May 1).

 

(n)                                  The Parties agree that they have been represented by legal counsel during the negotiation and execution of this Agreement. Accordingly, they waive the application of any Law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the Party drafting such agreement or document.

 

(o)                                  No summary of this Agreement or any Exhibit, Schedule or other document delivered with this Agreement that is prepared by or on behalf of any Party will affect the meaning or interpretation of this Agreement or such Exhibit, Schedule or document.

 

(p)                                  The information contained in this Agreement and in the Company Disclosure Letter is disclosed solely for purposes of this Agreement, and no information contained herein or therein will be deemed to be an admission by any Party to any third Person of any matter whatsoever, including (i) any violation of Law or breach of contract; or (ii) that such information is material or that such information is required to be referred to or disclosed under this Agreement.

 

(q)                                  The representations and warranties in this Agreement are the product of negotiations among the Parties and are for the sole benefit of the Parties. Any inaccuracies in such representations and warranties are subject to waiver by the Parties in accordance with Section 8.5 without notice or liability to any other Person. In some instances, the representations and warranties in this Agreement may represent an allocation among the Parties of risks associated with particular matters regardless of the knowledge of any of the Parties. Consequently, Persons other than the

 

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Parties may not rely on the representations and warranties in this Agreement as characterizations of actual facts or circumstances as of the date of this Agreement or as of any other date.

 

(r)                                     Documents or other information or materials will be deemed to have been “made available” by the Company if such documents, information or materials have been, at any time prior to the execution and delivery of this Agreement, (i) posted to a virtual data room managed by the Company at https://us1.merrillcorp.com; or (ii) delivered or provided to Parent or its Affiliates or Representatives.

 

1.4                                Disclosure Letters . The information set forth in (i) the disclosure letter delivered by the Company to Parent and Merger Sub (the “ Company Disclosure Letter ”), and (ii) the disclosure letter delivered by Parent and Merger Sub to the Company (the “ Parent Disclosure Letter ”), in each case concurrently with the execution of this Agreement, is disclosed under separate and appropriate Section and subsection references that correspond to the Sections and subsections of this Agreement to which such information relates. The information set forth in each Section or subsection of the Company Disclosure Letter and the Parent Disclosure Letter, as applicable, will be deemed to be an exception to (or, as applicable, a disclosure for purposes of) (a) the representations and warranties (or covenants, as applicable) of the Company or Parent and Merger Sub, as applicable, that are set forth in the corresponding Section or subsection of this Agreement; and (b) any other representations and warranties (or covenants, as applicable) of the Company or Parent and Merger Sub, as applicable, that are set forth in this Agreement, but in the case of this clause (b) only if the relevance of that disclosure as an exception to (or a disclosure for purposes of) such other representations and warranties (or covenants, as applicable) is reasonably apparent on the face of such disclosure.

 

ARTICLE II
THE MERGER

 

2.1                                The Merger . Upon the terms and subject to the conditions set forth in this Agreement and the applicable provisions of the DGCL, at the Effective Time, (a) Merger Sub will be merged with and into the Company; (b) the separate corporate existence of Merger Sub will cease; and (c) the Company will continue as the surviving corporation in the Merger and a wholly owned Subsidiary of Parent. The Company, as the surviving corporation of the Merger, is sometimes referred to as the “ Surviving Corporation .”

 

2.2                                The Effective Time . Upon the terms and subject to the conditions set forth in this Agreement, on the Closing Date, Parent, Merger Sub and the Company will cause the Merger to be consummated pursuant to the DGCL by filing the Certificate of Merger with the Secretary of State of the State of Delaware in accordance with the applicable provisions of the DGCL (the time of such filing and acceptance with the Secretary of State of the State of Delaware, or such later time as may be agreed in writing by Parent, Merger Sub and the Company and specified in the Certificate of Merger in accordance with the DGCL, the “ Effective Time ”).

 

2.3                                The Closing . The consummation of the Merger will take place at a closing (the “ Closing ”) to occur at (a) 10:00 a.m., Eastern time, at the offices of Wilson Sonsini Goodrich & Rosati, Professional Corporation, 650 Page Mill Road, Palo Alto, CA 94304, on a date to be agreed upon by Parent, Merger Sub and the Company that is no later than the third Business Day after the

 

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satisfaction or waiver (to the extent permitted hereunder) of the last to be satisfied or waived of the conditions set forth in Article VII (other than those conditions that by their terms are to be satisfied at the Closing, but subject to the satisfaction or waiver (to the extent permitted hereunder) of such conditions); or (b) such other time, location and date as Parent, Merger Sub and the Company mutually agree in writing. Notwithstanding the foregoing, if the Marketing Period has not ended at the time of the satisfaction or waiver (to the extent permitted hereunder) of the last to be satisfied or waived of the conditions set forth in Article VII (other than those conditions that by their terms are to be satisfied at the Closing), then the Closing will occur on the earlier of (i) any Business Day during the Marketing Period specified by Parent to the Company on no less than on two Business Days’ prior written notice to the Company; and (ii) the third Business Day after the final day of the Marketing Period (as may be extended pursuant to the definition of Marketing Period) (subject, in the case of each of (i) and (ii), to the satisfaction or waiver (to the extent permitted hereunder) of all of the conditions set forth in Article VII, other than those conditions that by their terms are to be satisfied at the Closing, but subject to the satisfaction or waiver (to the extent permitted hereunder) of such conditions), except that if any of the conditions set forth in Article VII are not satisfied or waived (to the extent permitted hereunder) on any such third Business Day, then the Closing will take place on the first Business Day on which all such conditions have been satisfied or waived (to the extent permitted hereunder). The date on which the Closing actually occurs is referred to as the “ Closing Date .”

 

2.4                                Effect of the Merger . At the Effective Time, the effect of the Merger will be as provided in this Agreement and the applicable provisions of the DGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time all (a) of the property, rights, privileges, immunities, powers and franchises of the Company and Merger Sub will vest in the Surviving Corporation; and (b) debts, claims, liabilities, obligations and duties of the Company and Merger Sub will become the debts, claims, liabilities, obligations and duties of the Surviving Corporation.

 

2.5                                Certificate of Incorporation and Bylaws .

 

(a)                                  Certificate of Incorporation . At the Effective Time, the Charter will be amended and restated in its entirety to read as set forth in Exhibit B-1 and, as so amended and restated will be the certificate of incorporation of the Surviving Corporation until thereafter amended in accordance with the applicable provisions of the DGCL and such certificate of incorporation.

 

(b)                                  Bylaws . At the Effective Time, the Bylaws, as in effect immediately prior to the Effective Time, will be amended and restated in their entirety to read as set forth on Exhibit B-2 and, as so amended and restated, will be the bylaws of the Surviving Corporation until thereafter amended or restated in accordance with the applicable provisions of the DGCL, the certificate of incorporation of the Surviving Corporation and such bylaws.

 

2.6                                Directors and Officers .

 

(a)                                  Directors . The Parties will take all necessary actions so that at the Effective Time, the initial directors of the Surviving Corporation will be the directors of Merger Sub as of immediately prior to the Effective Time, each to hold office in accordance with the certificate of

 

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incorporation and bylaws of the Surviving Corporation until their respective successors are duly elected or appointed and qualified.

 

(b)                                  Officers . The Parties will take all necessary actions so that at the Effective Time, the initial officers of the Surviving Corporation will be the officers of the Company as of immediately prior to the Effective Time, each to hold office in accordance with the certificate of incorporation and bylaws of the Surviving Corporation until their respective successors are duly appointed.

 

2.7                                Effect on Capital Stock .

 

(a)                                  Capital Stock . Upon the terms and subject to the conditions set forth in this Agreement, at the Effective Time, by virtue of the Merger and without any action on the part of Parent, Merger Sub, the Company or the holders of any of the following securities, the following will occur:

 

(i)                                      each share of common stock, par value $0.01 per share, of Merger Sub that is outstanding as of immediately prior to the Effective Time will be converted into one validly issued, fully paid and nonassessable share of common stock of the Surviving Corporation, and each certificate representing ownership of such shares of common stock of Merger Sub will thereafter represent ownership of shares of common stock of the Surviving Corporation;

 

(ii)                                   each share of Company Common Stock that is (A) held by the Company as treasury stock; (B) owned by Parent or Merger Sub; or (C) owned by any direct or indirect wholly owned Subsidiary of the Company, Parent or Merger Sub as of immediately prior to the Effective Time (collectively, the “ Owned Company Shares ”) will be cancelled without any conversion thereof or consideration paid therefor; and

 

(iii)                                each share of Company Common Stock issued and outstanding immediately prior to the Effective Time (other than Owned Company Shares and Dissenting Company Shares) will be cancelled and automatically converted into the right to receive cash in an amount equal to $32.00, without interest thereon (the “ Per Share Price ”), in accordance with the provisions of Section 2.9 (or in the case of a lost, stolen or destroyed certificate, upon delivery of an affidavit (and bond, if required) in accordance with the provisions of Section 2.11).

 

(b)                                  Adjustment to the Per Share Price . The Per Share Price will be adjusted appropriately to reflect the effect of any stock split, reverse stock split, stock dividend (including any dividend or other distribution of securities convertible into Company Common Stock), reorganization, recapitalization, reclassification, combination, exchange of shares or other similar change with respect to the Company Common Stock occurring on or after the date of this Agreement and prior to the Effective Time. Nothing in this Section 2.7(b) will be construed to permit the Company, any Subsidiary of the Company or any other Person to take any action that is otherwise prohibited by the terms of this Agreement.

 

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(c)                                   Statutory Rights of Appraisal .

 

(i)                                      Dissenting Company Shares . Notwithstanding anything to the contrary set forth in this Agreement, all shares of Company Common Stock that are issued and outstanding as of immediately prior to the Effective Time and held by Company Stockholders who have (A) neither voted in favor of the adoption of this Agreement nor consented thereto in writing and (B) properly made a demand for appraisal in respect of such shares of Company Common Stock in accordance with Section 262 of the DGCL and has neither effectively withdrawn, failed to perfect, waived, or otherwise lost such stockholder’s right to appraisal (the “ Dissenting Company Shares ”) will not be converted into, or represent the right to receive, the Per Share Price pursuant to this Section 2.7. Such Company Stockholders will be entitled to receive payment of the appraised value of such Dissenting Company Shares in accordance with the provisions of Section 262 of the DGCL, except that all Dissenting Company Shares held by Company Stockholders who have failed to perfect or who have effectively withdrawn or lost their rights to appraisal of such Dissenting Company Shares pursuant to Section 262 of the DGCL will be deemed to have been converted into, and to have become exchangeable for, as of the Effective Time, the right to receive the Per Share Price, upon surrender of the Certificates or Uncertificated Shares that formerly evidenced such shares of Company Common Stock in the manner provided in Section 2.9.

 

(ii)                                   Notification of Parent of Demands for Appraisal . The Company will give Parent prompt notice (and in any event within one Business Day) of receiving any demands for appraisal received by the Company, withdrawals or attempted withdrawals of such demands and any other instruments served pursuant to the DGCL and received by the Company in respect of Dissenting Company Shares. Parent will have the right to direct and control all negotiations and Legal Proceedings with respect to any such demands, withdrawals or attempted withdrawals of such demands and any other Legal Proceedings in respect of the appraisal rights of the Company Stockholders, except that, prior to the Effective Time, Parent will consult with the Company and consider in good faith the Company’s advice with respect to such negotiations and proceedings and the Company will have the right to participate in any such negotiations and proceedings. The Company may not, except with the prior written consent of Parent (which consent may be given, conditioned or withheld in Parent’s sole discretion), voluntarily make any payment with respect to any demands for appraisal or settle or offer to settle any such demands for payment in respect of Dissenting Company Shares.

 

2.8                                Equity Awards .

 

(a)                                  Company Stock-Based Awards .

 

(i)                                      Vested Awards .  At the Effective Time, each Company Stock-Based Award outstanding as of immediately prior to the Effective Time, to the extent vested and, if applicable, unexercised, will, without any action on the part of Parent, Merger Sub, the Company or the holder thereof, be cancelled and converted into and will become a right to receive an amount in cash, without interest, equal to the product obtained by multiplying (i) the amount of the Per Share Price (less the exercise price per share, if any, attributable to such Company Stock-Based Award) by

 

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(ii) the total number of shares of Company Common Stock subject to such Company Stock-Based Award (the “ Company Stock-Based Award Consideration ”).

 

(ii)                                   Unvested Awards Subject to Only Time Vesting.    At the Effective Time, each Company Stock-Based Award outstanding as of immediately prior to the Effective Time, to the extent subject to vesting conditions based solely on continued employment or service to the Company or any of its Subsidiaries and, if applicable, unexercised, will, without any action on the part of Parent, Merger Sub, the Company or the holder thereof, be cancelled and converted into and will become a right to receive an amount in cash, without interest, equal to the Company Stock-Based Award Consideration in respect of such unvested and, if applicable, unexercised Company Stock-Based Award, payable on or following the applicable vesting date (but not later than the first payroll date following such applicable vesting date) as set forth in Section 2.8 of the Company Disclosure Letter. Notwithstanding anything in this Agreement to the contrary, Parent will not assume, substitute or convert any Company Stock-Based Award that is outstanding, and, if applicable, unexercised, as of immediately prior to the Effective Time and is held by a nonemployee member of the Company Board.

 

(iii)                                Unvested Awards Subject to Performance Vesting .  For purposes of this Section 2.8(a), and notwithstanding anything contained in the Company Stock Plan or any award agreement to the contrary, with respect to each Company Stock-Based Award, the vesting of which is conditional in whole or in part on the achievement of performance goals during a performance period that is still outstanding as of the date hereof (each, a “ Performance Company Stock-Based Award ”) that was granted after August 22, 2013, as of immediately prior to the Effective Time, the applicable performance metrics shall be deemed to have been satisfied as to 100% of the target number of shares of Company Common Stock subject to such Performance Company Stock-Based Award, regardless of when the performance period ends.  For each Performance Company Stock-Based Award granted on or after December 1, 2015, such Performance Company Stock-Based Award shall be treated in the manner set forth in Section 2.8(a)(ii) of this Agreement, and each other Performance Company Stock-Based Award shall be treated in the manner set forth in Section 2.8(a)(i) of this Agreement.  For each Performance Company Stock-Based Award granted on August 22, 2013, such Performance Company Stock-Based Award shall be treated in accordance with its terms.  Notwithstanding anything herein to the contrary, if the holder of such Performance Company Stock-Based Award terminates his service to the Company before the Effective Time, the outstanding and unvested portion of a Performance Company Stock-Based Award as of immediately prior to the termination date will be forfeited.

 

(iv)                               Withholding; 409A .  The payment of the Company Stock-Based Award Consideration will be subject to withholding for all required Taxes.  Notwithstanding any provision of this Section 2.8(a), with respect to any Company Stock-Based Award that constitutes nonqualified deferred compensation subject to Section 409A of the Code, to the extent that payment of the Company Stock-Based Award Consideration in accordance with this Section 2.8(a) would otherwise cause the imposition of a Tax or penalty under Section 409A of the Code, such payment shall instead be made at the earliest time permitted under the Company Stock Plan and applicable award agreement that will not result in the imposition of such Tax or penalty.

 

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(b)                                  Company Options . At the Effective Time, each Company Option outstanding as of immediately prior to the Effective Time, whether vested or unvested, will, without any action on the part of Parent, Merger Sub, the Company or the holder thereof, be cancelled and converted into and will become a right to receive an amount in cash, without interest, equal to the product obtained by multiplying (i) the amount of the Per Share Price (less the exercise price per share attributable to such Company Option) by (ii) the total number of shares of Company Common Stock issuable upon exercise in full of such Company Option (the “ Option Consideration ”). Notwithstanding the foregoing, with respect to any Company Options, whether vested or unvested, for which the exercise price per share attributable to such Company Options is equal to or greater than the Per Share Price, such Company Options will be cancelled without any cash payment being made in respect thereof. The payment of the Option Consideration will be subject to withholding for all required Taxes.

 

(c)                                   Payment Procedures for Vested Equity . As soon as reasonably practicable after the Effective Time (but no later than the second payroll date after the Effective Time), the applicable holders of vested and, if applicable, exercisable, Company Stock-Based Awards and Company Options will receive a payment (without interest) from the Company or the Surviving Corporation (which amounts Parent shall deposit or cause to be deposited, to the extent that Company cash as of the Closing is insufficient to fund the payment of such amounts, with the Company, by wire transfer of immediately available funds, at or prior to the Closing), through its payroll system or payroll provider, of all amounts required to be paid to such holders in respect of such vested Company Stock-Based Awards or Company Options that are cancelled and converted pursuant to Section 2.8(a)(i) or Section 2.8(b), as applicable. Notwithstanding the foregoing, if any such payment owed to a holder of vested Company Stock-Based Awards or Company Options pursuant to Section 2.8(a)(i) or Section 2.8(b), as applicable, cannot be made through the Company’s or the Surviving Corporation’s payroll system or payroll provider, then the Surviving Corporation will issue a check for such payment to such holder, which check will be sent by overnight courier to such holder promptly following the Closing Date (but in no event more than five Business Days thereafter).

 

(d)                                  Further Actions . The Company will take all action necessary to effect the cancellation of Company Stock-Based Awards and Company Options as of the Effective Time and to give effect to this Section 2.8 (including the satisfaction of the requirements of Rule 16b-3(e) promulgated under the Exchange Act). All Company Stock-Based Awards and all Company Stock Plans will terminate as of the Effective Time, and the provisions in any other Company Benefit Plan or Contract providing for the issuance or grant of any other interest in respect of the capital stock of the Company or any of its Subsidiaries will be cancelled as of the Effective Time. Following the Effective Time, no participant in any Company Stock Plan or Company Benefit Plan will have any right thereunder to acquire any equity securities (including any “phantom” stock or stock appreciation rights) of the Company, the Surviving Corporation or any of their respective Subsidiaries.

 

(e)                                   Treatment of Employee Stock Purchase Plan . As soon as reasonably practicable following the date of this Agreement and in any event prior to the Effective Time and not later than the day immediately prior to the date on which the first offering period that is regularly

 

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scheduled to commence under the ESPP after the date of this Agreement, the Company will take all necessary actions, including obtaining any necessary determinations or resolutions of the Company Board (or a committee thereof), if appropriate, and amending the terms of the ESPP as may be necessary or required under the ESPP and applicable Laws, to (i) to provide that each individual participating in the Purchase Period (as defined in the ESPP) in progress on the date of this Agreement (the “ Final Offering ”) will not be permitted to (A) increase his or her payroll contribution rate pursuant to the ESPP from the rate in effect when that Purchase Period commenced; or (B) make separate non-payroll contributions to the ESPP on or following the date of this Agreement, except as may be required by applicable Law; (ii) ensure that, except for the Final Offering, no offering period under the ESPP will be authorized or commenced on or after the date of this Agreement; (iii) if the Closing will occur prior to the end of the Final Offering, provide each individual participating in the Final Offering with notice of the transactions contemplated by this Agreement prior to the Closing Date; (iv) cause the Final Offering to end no later than one Business Day prior to the Closing Date; (v) make any pro rata adjustments that may be necessary to reflect the shortened Final Offering Purchase Period, but otherwise treat such shortened Final Offering Purchase Period as a fully effective and completed Purchase Period for all purposes pursuant to the ESPP; (vi) cause each ESPP participant’s accumulated contributions under the ESPP to be used to purchase shares of Company Common Stock in accordance with the ESPP as of the end of the Final Offering; (vii) provide that the applicable purchase price for Company Common Stock will not be decreased below the levels set forth in the ESPP as of the date of this Agreement; and (viii) ensure that no further rights are granted under the ESPP after the Effective Time. Immediately prior to and effective as of the Effective Time (but subject to the consummation of the Merger), the Company will terminate the ESPP.

 

2.9                                Exchange of Certificates .

 

(a)                                  Payment Agent . Prior to the Closing, (i) Parent will select a bank or trust company reasonably acceptable to the Company to act as the payment agent for the Merger (the “ Payment Agent ”); and (ii) Parent or Merger Sub will enter into a payment agent agreement, in form and substance reasonably acceptable to the Company, with such Payment Agent.

 

(b)                                  Exchange Fund . (i) At or prior to the Closing, Parent will deposit (or cause to be deposited) with the Payment Agent, by wire transfer of immediately available funds for payment to the holders of shares of Company Common Stock pursuant to Section 2.7(a) an amount of cash that, when taken together with the amount to be deposited by the Company pursuant to clause (ii) below, is sufficient in the aggregate for the Payment Agent to make the payments of the aggregate consideration to which such holders of Company Common Stock become entitled pursuant to Section 2.7(a); and (ii) at the Closing, after all of the conditions to the Merger set forth in Article VII have been satisfied (other than those conditions that by their terms are to be satisfied at Closing, each of which is capable of being satisfied at Closing) or waived (if permissible under applicable Law) and Parent has confirmed in writing that it will consummate the Closing, then the Company will, in consultation with and in accordance with the directions having been given by Parent, deposit (or cause to be deposited) with the Payment Agent, by wire transfer of immediately available funds for payment to the holders of shares of Company Common Stock pursuant to Section 2.7(a), an amount of cash of the Company and its Subsidiaries designated by Parent (such designation to be made no

 

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less than three Business Days prior to the Closing Date), which amount shall not exceed the Available Cash Amount. Until disbursed in accordance with the terms and conditions of this Agreement, such cash will be invested by the Payment Agent, as directed by Parent or the Surviving Corporation, in (A) obligations of or fully guaranteed by the United States or any agency or instrumentality thereof and backed by the full faith and credit of the United States with a maturity of no more than 30 days; (B) commercial paper obligations rated A-1 or P-1 or better by Moody’s Investors Service, Inc. or Standard & Poor’s Corporation, respectively; (C) certificates of deposit, bank repurchase agreements or banker’s acceptances of commercial banks with capital exceeding $1,000,000,000 (based on the most recent financial statements of such bank that are then publicly available); or (D) money market funds investing solely in a combination of the foregoing and, in any such case, no instrument shall have a maturity exceeding three months (such cash and any proceeds thereon, the “ Exchange Fund ”). To the extent that (1) there are any losses with respect to any investments of the Exchange Fund; (2) the Exchange Fund diminishes for any reason below the level required for the Payment Agent to promptly pay the cash amounts contemplated by Section 2.7(a); or (3) all or any portion of the Exchange Fund is unavailable for Parent (or the Payment Agent on behalf of Parent) to promptly pay the cash amounts contemplated by Section 2.7(a) for any reason, then Parent will, or will cause the Surviving Corporation to, promptly replace or restore the amount of cash in the Exchange Fund so as to ensure that the Exchange Fund is at all times fully available for distribution and maintained at a level sufficient for the Payment Agent to make the payments contemplated by Section 2.7(a). Any interest or other income from investment of the Exchange Fund will be payable to Parent or the Surviving Corporation, as Parent directs.

 

(c)                                   Exchange and Payment Procedures .

 

(i)                                      Certificates . Promptly following the Effective Time (and in any event within three Business Days), Parent and the Surviving Corporation will cause the Payment Agent to mail to each holder of record (as of immediately prior to the Effective Time) of a certificate that immediately prior to the Effective Time represented outstanding shares of Company Common Stock (other than Dissenting Company Shares and Owned Company Shares) (the “ Certificates ”) whose shares of Company Common Stock were converted into the right to receive the consideration payable in respect thereof pursuant to Section 2.7(a), (A) a letter of transmittal in customary form (which will specify that delivery will be effected, and risk of loss and title to the Certificates will pass, only upon delivery of the Certificates to the Payment Agent); and (B) instructions for use in effecting the surrender of the Certificates in exchange for the consideration payable in respect thereof pursuant to Section 2.7(a). Upon surrender to the Payment Agent of a Certificate (or affidavit of loss in lieu of a Certificate as provided in Section 2.11) for cancellation, together with such letter of transmittal, duly completed and validly executed, and such other documents as may be reasonably required by the Payment Agent in accordance with the terms of such materials and instructions, the holder of such Certificate will be entitled to receive in exchange for the number of shares represented by such Certificate (and Parent will cause the Payment Agent to pay and deliver in exchange therefor as promptly as practicable) an amount in cash equal to the product obtained by multiplying (1) the aggregate number of shares of Company Common Stock represented by such Certificate by (2) the Per Share Price (less any applicable withholding Taxes payable in respect thereof). The Certificate so surrendered will be cancelled. The Payment Agent will accept Certificates upon compliance with such reasonable terms and conditions as the Payment Agent may

 

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impose to cause an orderly exchange thereof in accordance with normal exchange practices. No interest will be paid or accrued for the benefit of any holder of the Certificates on the amount payable upon the surrender of such Certificates pursuant to this Section 2.9(c)(i). Until so surrendered, the Certificates will be deemed from and after the Effective Time to evidence only the right to receive the consideration payable in respect thereof pursuant to Section 2.7(a).

 

(ii)                                   Uncertificated Shares . Notwithstanding anything to the contrary in this Agreement, any holder of shares of Company Common Stock held in book-entry form (the “ Uncertificated Shares ”) will not be required to deliver a Certificate or an executed letter of transmittal to the Payment Agent to receive the consideration payable in respect thereof pursuant to Section 2.7(a). In lieu thereof, each holder of record (as of immediately prior to the Effective Time) of an Uncertificated Share that immediately prior to the Effective Time represented an outstanding share of Company Common Stock (other than Dissenting Company Shares and Owned Company Shares) whose shares of Company Common Stock were converted into the right to receive the consideration payable in respect thereof pursuant to Section 2.7(a) will, upon receipt of an “agent’s message” in customary form (it being understood that the holders of Uncertificated Shares will be deemed to have surrendered such Uncertificated Shares upon receipt of an “agent’s message” or such other evidence, if any, as the Payment Agent may reasonably request) at the Effective Time, be entitled to receive (and Parent will cause the Payment Agent to pay and deliver as promptly as practicable) an amount in cash equal to the product obtained by multiplying (A) the aggregate number of shares of Company Common Stock represented by such holder’s transferred Uncertificated Shares by (B) the Per Share Price (less any applicable withholding Taxes payable in respect thereof). The Uncertificated Shares so surrendered will be cancelled. The Payment Agent will accept transferred Uncertificated Shares upon compliance with such reasonable terms and conditions as the Payment Agent may impose to cause an orderly exchange thereof in accordance with normal exchange practices. No interest will be paid or accrued for the benefit of any holder of the Uncertificated Shares on the amount payable upon the surrender of such Uncertificated Shares pursuant to this Section 2.9(c)(ii). Until so surrendered, Uncertificated Shares will be deemed from and after the Effective Time to evidence only the right to receive the consideration payable in respect thereof pursuant to Section 2.7(a). Any Per Share Price paid upon surrender of an Uncertificated Share will be deemed to have been paid in full satisfaction of all rights pertaining to such Uncertificated Share.

 

(d)                                  DTC Payment . Prior to the Effective Time, Parent and the Company will cooperate to establish procedures with the Payment Agent and DTC with the objective that (i) if the Closing occurs at or prior to 11:30 a.m., Eastern time, on the Closing Date, then the Payment Agent will transmit to DTC or its nominees on the Closing Date an amount in cash, by wire transfer of immediately available funds, equal to the product obtained by multiplying (A) the number of shares of Company Common Stock (other than Owned Company Shares and Dissenting Company Shares) held of record by DTC or such nominee immediately prior to the Effective Time by (B) the Per Share Price (such amount, the “ DTC Payment ”); and (ii) if the Closing occurs after 11:30 a.m., Eastern time, on the Closing Date, then the Payment Agent will transmit the DTC Payment to DTC or its nominees on the first Business Day after the Closing Date.

 

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(e)                                   Transfers of Ownership . If a transfer of ownership of shares of Company Common Stock is not registered in the stock transfer books or ledger of the Company, or if the consideration payable is to be paid in a name other than that in which the Certificates surrendered or transferred in exchange therefor are registered in the stock transfer books or ledger of the Company, then the consideration payable pursuant to Section 2.7(a) may be paid to a Person other than the Person in whose name the Certificate so surrendered or transferred is registered in the stock transfer books or ledger of the Company only if such Certificate is properly endorsed and otherwise in proper form for surrender and transfer and the Person requesting such payment has paid to Parent (or any agent designated by Parent) any transfer Taxes required by reason of the payment of the Per Share Price to a Person other than the registered holder of such Certificate, or established to the satisfaction of Parent (or any agent designated by Parent) that such transfer Taxes have been paid or are otherwise not payable. Payment of the consideration payable with respect to Uncertificated Shares will only be made to the Person in whose name such Uncertificated Shares are registered.

 

(f)                                    No Liability . Notwithstanding anything to the contrary set forth in this Agreement, none of the Payment Agent, Parent, the Surviving Corporation or any other Party will be liable to a holder of shares of Company Common Stock for any amount properly paid to a public official pursuant to any applicable abandoned property, escheat or similar Law. If any Certificates or Uncertificated Shares have not been surrendered immediately prior to the date on which any cash in respect of such Certificate or Uncertificated Share would otherwise escheat to or become the property of any Governmental Authority, then any such cash in respect of such Certificate or Uncertificated Share will, to the extent permitted by applicable Law, become the property of Parent, free and clear of all claims or interest of any person previously entitled thereto.

 

(g)                                   Distribution of Exchange Fund to Parent . Any portion of the Exchange Fund that remains undistributed to the holders of the Certificates or Uncertificated Shares on the date that is one year after the Effective Time will be delivered to Parent upon demand, and any holders of shares of Company Common Stock that were issued and outstanding immediately prior to the Merger who have not theretofore surrendered or transferred their Certificates or Uncertificated Shares representing such shares of Company Common Stock for exchange pursuant to this Section 2.9 will thereafter look for payment of the Per Share Price payable in respect of the shares of Company Common Stock represented by such Certificates or Uncertificated Shares solely to Parent (subject to abandoned property, escheat or similar Laws), solely as general creditors thereof, for any claim to the Per Share Price to which such holders may be entitled pursuant to Section 2.7(a).

 

(h)                                  Cash Balances . The Company shall deliver to Parent, upon request and no later than five Business Days prior to the anticipated Closing Date, a written notice setting forth, in each case as of the close of business on the immediately preceding Business Day, the aggregate cash balances held by the Company and its Subsidiaries (by Subsidiary and by jurisdiction) as well as the amounts of such cash balances that are not being used for other purposes and that are available to be utilized in respect of the obligations set forth in Section 2.8(c) and Section 2.9(b) (the “ Available Cash Amount ”).

 

2.10                         No Further Ownership Rights in Company Common Stock . From and after the Effective Time, (a) all shares of Company Common Stock will no longer be outstanding and will

 

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automatically be cancelled and cease to exist; and (b) each holder of a Certificate or Uncertificated Shares previously representing any shares of Company Common Stock will cease to have any rights with respect thereto, except the right to receive the consideration payable therefor in accordance with Section 2.7(a) (or in the case of Dissenting Company Shares, the rights pursuant to Section 2.7(c)). The consideration paid in accordance with the terms of this Article II upon conversion of any shares of Company Common Stock will be deemed to have been paid in full satisfaction of all rights pertaining to such shares of Company Common Stock. From and after the Effective Time, there will be no further registration of transfers on the records of the Surviving Corporation of shares of Company Common Stock that were issued and outstanding immediately prior to the Effective Time, other than transfers to reflect, in accordance with customary settlement procedures, trades effected prior to the Effective Time. If, after the Effective Time, Certificates or Uncertificated Shares are presented to the Surviving Corporation for any reason, they will (subject to compliance with the exchange procedures of Section 2.9(c)) be cancelled and exchanged as provided in this Article II.

 

2.11                         Lost, Stolen or Destroyed Certificates . In the event that any Certificates have been lost, stolen or destroyed, the Payment Agent will issue in exchange therefor, upon the making of an affidavit of that fact by the holder thereof, the Per Share Price payable in respect thereof pursuant to Section 2.7(a). Parent or the Payment Agent may, in its discretion and as a condition precedent to the payment of such Per Share Price, require the owners of such lost, stolen or destroyed Certificates to deliver a bond in such amount as it may direct as indemnity against any claim that may be made against Parent, the Surviving Corporation or the Payment Agent with respect to the Certificates alleged to have been lost, stolen or destroyed.

 

2.12                         Required Withholding . Each of the Payment Agent, Parent, the Company and the Surviving Corporation, or any Subsidiary of Parent, the Company or the Surviving Corporation, will be entitled to deduct and withhold from any amounts payable pursuant to this Agreement such amounts as are required to be deducted or withheld therefrom pursuant to any Tax Laws. To the extent that such amounts are so deducted or withheld and paid over to the appropriate Governmental Authority, such amounts will be treated for all purposes of this Agreement as having been paid to the Person to whom such amounts would otherwise have been paid.

 

2.13                         Necessary Further Actions . If, at any time after the Effective Time, any further action is necessary or desirable to carry out the purposes of this Agreement and to vest the Surviving Corporation with full right, title and possession to all assets, property, rights, privileges, powers and franchises of the Company and Merger Sub, then the directors and officers of the Company and Merger Sub as of immediately prior to the Effective Time will take all such lawful and necessary action.

 

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

Except as set forth in (a) the Filed Company SEC Documents (excluding any disclosures contained under the heading “Risk Factors”, “Forward-Looking Statements”, “Quantitative and Qualitative Disclosures About Market Risk” and any other disclosures contained or referenced therein of information, factors or risks, or any other sections relating to forward-looking statements

 

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to the extent that they are predictive or forward-looking in nature) it being understood that (i) any matter disclosed in such filings shall not be deemed disclosed for purposes of Section 3.1, Section 3.2, Section 3.3, Section 3.4, or Section 3.5; and (ii) any matter disclosed in the Filed Company SEC Documents will be deemed to be disclosed in a section of the Company Disclosure Letter only to the extent that it is reasonably apparent from such Filed Company SEC Documents that it is applicable to such section of the Company Disclosure Letter; and (b) the Company Disclosure Letter (subject to Section 1.4), the Company represents and warrants to Parent and Merger Sub that the statements contained in this Article III are true and correct.

 

3.1                                Organization, Standing and Power . Each of the Company and its Subsidiaries is duly organized, validly existing and in good standing under the Laws of the jurisdiction in which it is organized (in the case of good standing, to the extent such jurisdiction recognizes such concept), except where the failure to be in good standing would not have a Company Material Adverse Effect. Each of the Company and its Subsidiaries has all requisite power and authority and possesses all Company Permits, except where the failure to have such power or authority or to possess such Company Permits would not have a Company Material Adverse Effect. Each of the Company and its Subsidiaries is duly qualified or licensed to do business in each jurisdiction where the nature of its business or the ownership or leasing of its properties make such qualification necessary, other than in such jurisdictions where the failure to be so qualified or licensed would not have a Company Material Adverse Effect. The Company has made available true, correct and complete copies of the Charter and the Bylaws.

 

3.2                                Subsidiaries of the Company .

 

(a)                                  Capital Stock; Identity . All the outstanding shares of capital stock or voting securities of, or other equity interests in, each Subsidiary of the Company have been validly issued and are fully paid and nonassessable and are owned by (i) the Company, (ii) another Subsidiary of the Company or (iii) the Company and another Subsidiary of the Company, free and clear of all Liens (other than Permitted Liens). Section 3.2(a) of the Company Disclosure Letter sets forth, as of the date of this Agreement, a true, correct and complete list of (A) the Subsidiaries of the Company; and (B) the ownership interest of the Company and any Subsidiary in each Subsidiary.

 

(b)                                  Other Equity Interests . Except for the capital stock and voting securities of, and other equity interests in, the Subsidiaries of the Company, neither the Company nor any of its Subsidiaries owns, directly or indirectly, any capital stock or voting securities of, or other equity interests in, or any interest convertible into or exchangeable or exercisable for, any capital stock or voting securities of, or other equity interests in, any Person.

 

3.3                                Capital Structure .

 

(a)                                  Capital Stock . The authorized capital stock of the Company consists of (i) 300,000,000 shares of Company Common Stock; and (ii) 50,000,000 shares of Company Preferred Stock. As of the Capitalization Date, (A) no shares of Company Preferred Stock were issued and outstanding; (B) 126,337,950 shares of Company Common Stock were issued and outstanding; and (C) no shares of Company Common Stock were held by the Company as treasury shares.

 

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(b)                                  Validity; Issuances . All outstanding shares of Company Common Stock are duly authorized, validly issued, fully paid, nonassessable and not subject to or issued in violation of any preemptive rights. Since the close of business on the Capitalization Date through the date of this Agreement, the Company has not issued or granted any Company Securities other than pursuant to the exercise, vesting or settlement of Company Stock-Based Awards or Company Options granted prior to the Capitalization Date.

 

(c)                                   Stock Reservation . As of the Capitalization Date, there were outstanding (i) Company Stock-Based Awards representing the right to receive up to 7,494,861 shares of Company Common Stock; and (ii) Company Options to acquire 965,559 shares of Company Common Stock with an exercise price per share less than the Per Share Price and a weighted average price of $11.57. As of the Capitalization Date, there were accumulated payroll contributions under the then-current offering period under the Company ESPP in the amount of $1,123,396, and an additional $1,958,407 of payroll contributions are expected to be accumulated through the completion of such offering period (assuming no withdrawals, no modifications to participant contribution percentages, and constant currency exchange rates).

 

(d)                                  Company Securities . Except as set forth in this Section 3.3(d), as of the Capitalization Date there were (i) other than the Company Capital Stock, no outstanding shares of capital stock and voting securities of, or other equity interests in, the Company; (ii) no outstanding securities of the Company convertible into or exchangeable or exercisable for shares of capital stock of, or other equity or voting interest (including voting debt) in, the Company; (iii) no outstanding subscriptions, options, warrants, calls or other rights or binding arrangements to acquire from the Company, or that obligate the Company or any of its Subsidiaries to issue, any capital stock and voting securities of, or other equity interests in, or any securities convertible into or exchangeable for shares of capital stock and voting securities of, or other equity interests in, the Company or such Subsidiary; (iv) no obligations of the Company or any of its Subsidiaries to (A) grant, extend or enter into any subscription, option, warrant, call, right, convertible, exchangeable or exercisable security, or other similar Contract relating to any capital stock and voting securities of, or other equity interests in, the Company or any of its Subsidiaries; or (B) provide funds to, or make any investment (in the form of a loan, capital contribution, guarantee, credit enhancement or otherwise) in or assume any liability or obligation to, any other Person; (v) no outstanding restricted shares, calls, restricted share units, stock appreciation rights, performance shares, contingent value rights, “phantom” stock or similar securities or rights that are derivative of, or provide economic benefits based, directly or indirectly, on the value or price of, any capital stock of, or other securities or ownership interests in, the Company or its Subsidiaries (the items in clauses (i), (ii), (iii), (iv) and (v), collectively with the Company Capital Stock, the “ Company Securities ”); (vi) voting trusts, proxies or similar arrangements or understandings to which the Company is a party or by which the Company is bound with respect to the voting of any shares of capital stock and voting securities of, or other equity interests in, the Company; (vii) obligations or binding commitments of any character restricting the transfer of any shares of capital stock and voting securities of, or other equity interests in, the Company to which the Company is a party or by which it is bound; and (viii) no other obligations by the Company or any of its Subsidiaries to make any payments based on the price or value of any Company Securities. Neither the Company nor any of its Subsidiaries is a party to any Contract that obligates it to repurchase, redeem or otherwise acquire any Company Securities. There

 

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are no accrued and unpaid dividends or dividend equivalent rights with respect to any outstanding shares of Company Capital Stock, Company Stock-Based Awards or Company Options.

 

(e)                                   No Other Rights . Neither the Company nor any of its Subsidiaries is a party to any Contract relating to the voting of, requiring registration of or granting any preemptive rights, anti-dilutive rights or rights of first refusal or other similar rights with respect to any Company Securities, including any voting trusts, rights agreements or other similar agreements, understandings or Contracts to which the Company or any of its Subsidiaries is a party.

 

(f)                                    Equity Awards Ledger . Section 3.3(f) of the Company Disclosure Letter sets forth, as of the Capitalization Date, a list of all holders of Company Stock-Based Awards and Company Options, and, with respect to each, the type of award and the Company Stock Plan under which it was issued, the date of grant, the number of shares of Company Capital Stock subject to such award, the vesting schedule thereof, and the price per share at which each Company Option may be exercised.

 

3.4                                Authority; Execution and Delivery; Enforceability .

 

(a)                                  Power and Authority . The Company has all requisite corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the Merger, subject, in the case of the Merger, to the receipt of the Requisite Stockholder Approval.

 

(b)                                  Company Board Approval . The Company Board has unanimously adopted resolutions at a meeting at or prior to the date of this Agreement duly called and convened at which all of the directors of the Company were present, (i) determining that it is in the best interests of the Company and its stockholders, and declaring it advisable, to enter into this Agreement and to consummate the Merger in accordance with the DGCL upon the terms and subject to the conditions set forth in this Agreement; (ii) approving the execution and delivery of this Agreement by the Company, the performance by the Company of its covenants and other obligations in this Agreement, and the consummation of the Merger upon the terms and subject to the conditions set forth in this Agreement and in accordance with the DGCL; (iii) directing that the adoption of this Agreement be submitted to a vote of the Company Stockholders; and (iv) recommending that the Company Stockholders vote in favor of the adoption of this Agreement in accordance with the DGCL. As of the date of this Agreement, such resolutions are in full force and effect and have not been amended or withdrawn. Assuming the accuracy of the representations and warranties set forth in Section 4.5(b), except for the (A) adoption of this Agreement by the Requisite Stockholder Approval and (B) filing of the Certificate of Merger as required by the DGCL, no other corporate proceedings or actions on the part of the Company are necessary to authorize or adopt this Agreement or to consummate the Merger. The Company has duly executed and delivered this Agreement and, assuming the due authorization, execution and delivery by Parent and Merger Sub, this Agreement constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms and conditions, except as enforcement may be limited by bankruptcy, insolvency, reorganization or similar Laws affecting creditors’ rights generally and, as to enforceability, by general principles of equity.

 

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(c)                                   Antitakeover Statutes; No Rights Plan . Assuming the accuracy of the representations and warranties set forth in Section 4.5(b), the Company Board has adopted such resolutions as are necessary to render inapplicable to this Agreement, the Voting Agreement and the Merger the restrictions on “business combinations” (as defined in Section 203 of the DGCL) as set forth in Section 203 of the DGCL. No “fair price,” “moratorium,” “control share acquisition” or other similar antitakeover Law applies with respect to the Company or any of its Subsidiaries in connection with this Agreement or the Merger. There is no stockholder rights plan, “poison pill” antitakeover plan or similar device in effect to which the Company or any of its Subsidiaries is subject, party to or otherwise bound.

 

3.5                                No Conflicts; Consents .

 

(a)                                  No Conflicts . The execution and delivery by the Company of this Agreement does not, and the performance by it of its obligations hereunder and the consummation of the Merger will not, (i) conflict with; (ii) require any notice to or consent by any Person under, result in any violation or breach of or default (with or without notice or lapse of time, or both) under; (iii) give rise to a right of termination, cancellation or acceleration of any obligation; (iv) give rise to any obligation to make an offer to purchase or redeem any Indebtedness or capital stock; (v) give rise to any loss of a material benefit under; or (vi) result in the creation of any Lien (other than a Permitted Lien) on any of the properties or assets of the Company or any of its Subsidiaries under any provision of (A) the Charter, the Bylaws or the comparable charter or organizational documents of any of its Subsidiaries (assuming that the Requisite Stockholder Approval is obtained); (B) any Material Contract to which the Company or any of its Subsidiaries is a party or by which any of their respective properties or assets is bound or any Company Permit; or (C) subject to the filings and other matters referred to in Section 3.5(b), any Law, in each case, applicable to the Company or any of its Subsidiaries or their respective properties or assets (assuming that the Requisite Stockholder Approval is obtained), other than, in the case of clauses (B) and (C), any matters that would not have a Company Material Adverse Effect.

 

(b)                                  Governmental Consents . No Consent of or from, or registration, declaration, notice or filing made to or with, any Governmental Authority is required to be obtained or made by or with respect to the Company or any of its Subsidiaries in connection with the execution and delivery of this Agreement or its performance of its obligations hereunder or the consummation of the Merger, other than: (i) the filing with the SEC of the Proxy Statement in definitive form; (ii) the filing with the SEC of such reports under, and such other compliance with, the Exchange Act and the rules and regulations thereunder as may be required in connection with this Agreement and the Merger; (iii) compliance with and filings under the HSR Act and such other Consents, registrations, declarations, notices or filings as are required to be made or obtained under any foreign antitrust, competition, trade regulation or similar Laws; (iv) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware and appropriate documents with the relevant authorities of the other jurisdictions in which Parent and the Company are qualified to do business; (v) such Consents from, or registrations, declarations, notices or filings made to or with, Governmental Authorities (other than with respect to securities, antitrust, competition, trade regulation or similar Laws), in each case as may be required in connection with this Agreement or the Merger and are required with respect to mergers, business combinations or changes in control of telecommunications

 

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companies generally; (vi) such filings with and approvals of NYSE as are required to permit the consummation of the Merger; and (vii) such other Consents, registrations, declarations, notices or filings the failure of which to obtain would not have a Company Material Adverse Effect.

 

3.6                                SEC Documents; No Undisclosed Liabilities .

 

(a)                                  Company SEC Documents . The Company has furnished or filed on a timely basis all reports, schedules, forms, statements, certifications and other documents (including exhibits and other information incorporated therein, and amendments and supplements thereto) in each case required to be furnished or filed by the Company with the SEC since January 1, 2014, through the date of this Agreement (all such documents, together with any documents filed with the SEC during such period by the Company on a voluntary basis on a Current Report on Form 8-K, but excluding the Proxy Statement, the “ Company SEC Documents ”).

 

(b)                                  Compliance of Company SEC Documents . Each Company SEC Document at the time filed (or if amended or superseded by a filing or amendment prior to the date of this Agreement, then at the time of such filing or amendment): (i) complied in all material respects with the requirements of SOX and the Exchange Act or the Securities Act, as the case may be, and the rules and regulations of the SEC promulgated thereunder applicable to such Company SEC Document and other applicable Law, each as in effect on the date of any such filing; and (ii) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Each of the consolidated financial statements of the Company included in the Company SEC Documents (A) complied at the time that it was filed as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto; (B) was prepared in accordance with GAAP (except, in the case of unaudited statements, as permitted by Form 10-Q of the SEC) applied on a consistent basis during the periods involved (except for the absence of footnotes and normal year-end adjustments as permitted by GAAP); and (C) fairly presented, in all material respects, the consolidated financial position of the Company and its consolidated Subsidiaries as of the dates thereof and the consolidated statements of operations, income and comprehensive income, cash flows and stockholders’ equity for the periods shown (subject, in the case of unaudited statements, to normal immaterial year-end audit adjustments as permitted by GAAP). Except as set forth in Section 3.6(b) of the Company Disclosure Letter, there are no outstanding or unresolved comments in comment letters received from the SEC or its staff and, to the knowledge of the Company, none of the Company SEC Documents is the subject of ongoing SEC review. There has been no material correspondence between the SEC and the Company since January 1, 2014, that is not set forth in the Company SEC Documents or that has not otherwise been disclosed to Parent prior to the date of this Agreement. Since January 1, 2014, neither the Company nor any of its Subsidiaries has received any material unresolved complaint, allegation, assertion or claim in writing regarding deficiencies in the accounting or auditing practices, procedures, methodologies or methods of the Company or its Subsidiaries or their respective internal accounting controls. Since January 1, 2014, the Company has been in compliance in all material respects with the applicable listing and corporate governance rules and regulations of the NYSE.

 

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(c)                                   No Undisclosed Liabilities . Except (i) as reflected or reserved against in the Company’s consolidated audited balance sheet as of December 31, 2015 (or the notes thereto), as included in the Filed Company SEC Documents; and (ii) for liabilities and obligations incurred in connection with or contemplated by this Agreement, neither the Company nor any of its Subsidiaries has any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) required to be set forth on a balance sheet prepared in accordance with GAAP that would have a Company Material Adverse Effect.

 

(d)                                  SOX Compliance . Since January 1, 2014, (i) the Company is and has been in compliance in all material respects with the applicable provisions of SOX; and (ii) each of the chief executive officer of the Company and the chief financial officer of the Company (or each former chief executive officer of the Company and each former chief financial officer of the Company, as applicable) has made all certifications required by Rule 13a-14 or 15d-14 under the Exchange Act and Section 302 and Section 906 of SOX with respect to the Company SEC Documents, and the statements contained in such certifications are true, correct and complete. Neither the Company nor any of its Subsidiaries has outstanding, or has arranged any outstanding, “extensions of credit” to directors or executive officers within the meaning of Section 402 of SOX.

 

(e)                                   Internal Controls . The Company maintains a system of “internal control over financial reporting” (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) sufficient to provide reasonable assurance (i) that transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP, consistently applied; (ii) that transactions are executed only in accordance with the authorization of management; and (iii) regarding prevention or timely detection of the unauthorized acquisition, use or disposition of the Company’s properties or assets.

 

(f)                                    Disclosure Controls . The “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) utilized by the Company are reasonably designed to ensure that all (i) information (both financial and non-financial) required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC; and (ii) such information that is required to be disclosed is accumulated and communicated to the management of the Company, as appropriate, to allow timely decisions regarding required disclosure and to enable the chief executive officer of the Company and the chief financial officer of the Company to make the certifications required under the Exchange Act with respect to such reports.

 

(g)                                   Off-Balance Sheet Arrangements . Except as disclosed in the Filed Company SEC Documents, neither the Company nor any of its Subsidiaries is a party to, or has any commitment to become a party to, any joint venture, off-balance sheet partnership or any similar Contract (including any Contract or arrangement relating to any transaction or relationship between or among the Company and any of its Subsidiaries, on the one hand, and any unconsolidated Affiliate, including any structured finance, special purpose or limited purpose entity or Person, on the other hand, or any “off-balance sheet arrangements” (as defined in Item 303(a) of Regulation S-K under the Exchange Act)).

 

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(h)                                  Absence of Certain Conditions . Since January 1, 2014, none of the Company, the Company’s independent public accountants, the Company Board or the audit committee of the Company Board has identified or received any oral or written notification of any (i) “significant deficiency” in the internal controls over financial reporting of the Company that is reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; (ii) “material weakness” or significant deficiency in the design or operation of the internal controls over financial reporting of the Company that is reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; or (iii) fraud or allegation of fraud, whether or not material, that involves management or other employees of the Company who have a significant role in the internal controls over financial reporting of the Company.

 

(i)                                      No Subsidiary Reporting Obligations . No Subsidiary of the Company is, or has at any time since January 1, 2014, been, subject to the reporting requirements of Section 13(a) or 15(d) of the Exchange Act.

 

3.7                                Absence of Certain Changes or Events .

 

(a)                                  No Company Material Adverse Effect . Since January 1, 2016, to the date of this Agreement, there has not occurred a Company Material Adverse Effect.

 

(b)                                  Absence of Certain Changes. From January 1, 2016, to the date of this Agreement, the Company and its Subsidiaries have each conducted its and their respective business in the ordinary course in all material respects, and during such period there has not occurred:

 

(i)                                      any amendment or the adoption of any amendment or any other change (whether by merger, consolidation or otherwise) of the Charter, the Bylaws or any similar organizational document;

 

(ii)                                   any proposal by the Company or adoption of a plan or agreement of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of the Company;

 

(iii)                                any issuance, sale, delivery, grant, authorization or agreement or commitment to issue, sell, deliver, grant or authorize, any Company Securities (whether through the issuance or granting of options, warrants, commitments, subscriptions, rights to purchase or otherwise), except for the issuance and sale of shares of Company Common Stock pursuant to Company Stock-Based Awards or Company Options or in connection with agreements made available to Parent prior to the date hereof;

 

(iv)                               any (A) declaration, setting aside or payment of any dividend or other distribution (whether in cash, stock or property or any combination thereof) in respect of any capital stock or voting securities of, or other equity interests in the Company (other than the issuance of shares of Company Common Stock pursuant to (1) the exercise of Company Options; (2) the Company ESPP; or (3) the vesting or settlement of Company Stock-Based Awards, in each case in accordance with their terms) or capital stock or voting securities of, or other equity interests in, any

 

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of its Subsidiaries (other than dividends or other distributions by a direct or indirect wholly owned Subsidiary of the Company to its parent); or (B) repurchase for value by the Company of any capital stock or voting securities of, or other equity interests in, the Company or any of its Subsidiaries;

 

(v)                                  other than pursuant to the Credit Agreement, any (A) incurrence of material Indebtedness or any guarantee of material Indebtedness for another Person; or (B) issuance or sale of debt securities, warrants or other rights to acquire any debt security of the Company or any of its Subsidiaries;

 

(vi)                               any transfer, lease, license, sale, mortgage, pledge or other disposal or encumbrance of any of the real property or other tangible assets of the Company or its Subsidiaries outside of the ordinary course of business with a fair market value, in the aggregate, in excess of $6,000,000;

 

(vii)                            any acquisition of a business or any material equity interest therein, whether by merger, consolidation, purchase of property or assets, or otherwise;

 

(viii)                         any sale, transfer or other disposal (whether by merger, consolidation or acquisition of stock or assets or otherwise) of any corporation, partnership or other business organization or division thereof;

 

(ix)                               any granting by the Company or any of its Subsidiaries to any current or former director or officer of the Company or any of its Subsidiaries of any material increase in compensation, bonus or fringe or other benefits, except in the ordinary course of business consistent with past practice or as was required under (A) applicable Law or (B) any Company Benefit Plan in effect as of January 1, 2016;

 

(x)                                  any granting by the Company or any of its Subsidiaries to any Person of any rights (that remain in effect as of the date of this Agreement) to severance, retention, change in control or termination compensation or benefits or any material increase therein, except with respect to new hires and promotions in the ordinary course of business or as was required under (A) applicable Law or (B) any Company Benefit Plan in effect as of January 1, 2016;

 

(xi)                               any entry into or adoption of any material Company Benefit Plan or any material amendment of any material Company Benefit Plan, except as required under (A) applicable Law or (B) any Company Benefit Plan in effect as of January 1, 2016; `

 

(xii)                            any change in accounting methods, principles or practices by the Company or any of its Subsidiaries, except as may have been required by a change in GAAP;

 

(xiii)                         any transfer, lease, license, sale, mortgage, pledge or other disposal or encumbrance of any of the Company Intellectual Property owned by the Company or any of its Subsidiaries with a fair market value, in the aggregate, in excess of $1,000,000, other than in the ordinary course of business;

 

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(xiv)                        entry into or adoption of any “poison pill” or similar stockholder rights plan;

 

(xv)                           any entry into any understanding, arrangement or Contract with respect to the voting or registration of the shares of the Company’s or its Subsidiaries’ capital stock or other securities, equity interests or ownership interests;

 

(xvi)                        any special meeting (or any adjournment thereof) of the stockholders of the Company;

 

(xvii)                     any (A) material elections or changes thereto or revocation thereof with respect to Taxes by the Company or any of its Subsidiaries; (B) changes to material tax accounting methods of the Company or any of its Subsidiaries, (C) filing of material amended Tax Returns by the Company or any of its Subsidiaries; (D) entry into any closing agreement within the meaning of Section 7212 of the Code (or any comparable provision of state, local or foreign Law) by the Company or any of its Subsidiaries; (E) request for any material Tax ruling by the Company or any of its Subsidiaries; or (F) settlement, compromise by the Company or any of its Subsidiaries of any material Tax liability or material Tax refund; or

 

(xviii)                  any entry into, authorization of, or agreement or commitment to enter into a Contract to take any of the actions set forth in this Section 3.7.

 

3.8                                Taxes .

 

(a)                                  Tax Returns; Taxes Paid; Tax Claims . Except for matters that would not have a Company Material Adverse Effect: (i) each of the Company and its Subsidiaries has timely filed, taking into account any extensions, all Tax Returns required to have been filed and such Tax Returns are true, correct and complete; (ii) each of the Company and its Subsidiaries has paid all Taxes required to have been paid by it and has established adequate reserves, in accordance with GAAP, in the consolidated financial statements of the Company included in the Company SEC Documents for any Taxes that are not yet due as of the date of such financial statements; (iii) no deficiency for any Tax has been asserted or assessed by a Governmental Authority against the Company or any of its Subsidiaries that has not been paid or is not being contested in good faith in appropriate proceedings and for which adequate reserves have been established, in accordance with GAAP, in the consolidated financial statements of the Company included in the Company SEC Documents; (iv) neither the Company nor any of its Subsidiaries has failed to withhold, collect or timely remit all amounts required to have been withheld, collected and remitted in respect of Taxes with respect to any payments to a vendor, employee, independent contractor, creditor, stockholder or any other Person; and (v) no claim has been made in writing by any Governmental Authority that the Company or any of its Subsidiaries is or may be subject to taxation in a jurisdiction in which it does not file Tax Returns.

 

(b)                                  Tax Return Examinations . No audit, examination, investigation or other proceedings with respect to any material Tax Return or material Taxes of the Company or any of its Subsidiaries is presently in progress, nor has the Company or any of its Subsidiaries been notified in writing of any such an audit or other examination. There are no currently effective waivers of any

 

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statute of limitations with respect to Taxes or extensions of time with respect to a Tax assessment or deficiency, and no written request for any such waiver or extension is currently pending.

 

(c)                                   Consolidated Tax Returns and Tax Agreements . Neither the Company nor any of its Subsidiaries (i) has been a member of an affiliated group filing a consolidated federal income tax return (other than the group the common parent of which was the Company); (ii) is a party to or is bound by any material Tax sharing, allocation or indemnification agreement or arrangement (other than (A) such an agreement or arrangement exclusively between or among the Company and its wholly owned Subsidiaries; or (B) any commercial agreement entered into in the ordinary course of business the primary purpose of which is unrelated to Taxes); or (iii) has any liability for Taxes of any Person (other than the Company or any of its Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any analogous or similar provision of state, local or foreign Tax Law) as transferee, successor or otherwise.

 

(d)                                  Spin-offs . Within the two years prior to the date of this Agreement, neither the Company nor any of its Subsidiaries has been a “distributing corporation” or a “controlled corporation” in a distribution that was purported or intended to qualify for tax-free treatment under Section 355 of the Code (or any similar provision of state, local or foreign Law).

 

(e)                                   No Listed Transactions . Neither the Company nor any of its Subsidiaries has been a party to or participated in a “listed transaction” for purposes of Section 6011 of the Code and applicable Treasury Regulations thereunder (or a similar provision of state, local or foreign Law).

 

(f)                                    Tax Liens . There are no material Liens for Taxes on any of the assets of the Company or any of its Subsidiaries other than (i) statutory Liens for Taxes not yet due and payable; and (ii) Liens for Taxes being contested in good faith by appropriate proceedings and for which adequate reserves have been established in accordance with GAAP in the consolidated financial statements included in the Company SEC Documents.

 

(g)                                   Taxable Income . Neither the Company nor any of its Subsidiaries will be required to include in any taxable period ending after the Closing Date material taxable income attributable to income that accrued in a taxable period prior to the Closing Date but was not recognized for Tax purposes in such prior taxable period (or to exclude from taxable income in a taxable period ending after the Closing Date any material deduction the recognition of which was accelerated from such taxable period to a taxable period prior to the Closing Date) as a result of (i) the installment method of accounting, the completed contract method of accounting, the long-term contract method of accounting, the cash method of accounting, Section 481 of the Code or Section 108(i) of the Code or comparable provisions of state, local or foreign Tax Law; (ii) any closing or similar agreement with any Governmental Authority executed on or prior to the Closing Date; (iii) any deferred intercompany gain or any excess loss account described in Treasury Regulations under Section 1502 of the Code (or any corresponding or similar provision of state, local or foreign Tax Law) resulting from any intercompany transaction occurring on or before the Closing; or (iv) any prepaid amount received on or prior to the Closing Date other than in the ordinary course of business.

 

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(h)                                  Tax Reserves . Except as would not have a Company Material Adverse Effect, the charges, accruals and reserves for Taxes with respect to the Company and its Subsidiaries reflected on the consolidated financial statements of the Company included in the Company SEC Documents are adequate, in accordance with GAAP, to cover Taxes payable by the Company and its Subsidiaries through the date of such consolidated financial statements.

 

3.9                                Benefits Matters; ERISA Compliance .

 

(a)                                  Company Benefit Plans . Section 3.9(a) of the Company Disclosure Letter sets forth, as of the date of this Agreement, a true, correct and complete list identifying each material Company Benefit Plan. The Company has made available true, correct and complete copies of (i) all material Company Benefit Plans or, in the case of any unwritten material Company Benefit Plan, a description thereof and, in each case, to the extent applicable, all amendments thereto; (ii) other than with respect to Company Benefit Plans primarily for the benefit of non-U.S. employees, the most recent annual report on Form 5500 (other than Schedule SSA thereto) filed with the IRS with respect to each Company Benefit Plan (if any such report was required); (iii) the most recent summary plan description for each material Company Benefit Plan for which such summary plan description is required; (iv) each trust agreement and group annuity contract relating to any material Company Benefit Plan; (v) the most recent financial statements and actuarial reports for each material Company Benefit Plan (if any); and (vi) all material written communications to any Governmental Authority relating to such material Company Benefit Plan made within the last year. For the purposes of this Section 3.9(a), an agreement or arrangement with a consultant who is a natural person will not be considered material unless the Company and its Subsidiaries paid such consultant more than $150,000 on an annual basis.

 

(b)                                  Qualified Status . All Company Benefit Plans that are intended to be qualified and exempt from federal income Taxes under Section 401(a) and Section 501(a), respectively, of the Code have been the subject of or have timely applied for, as of the date of this Agreement, determination letters from the IRS to the effect that such Company Benefit Plans and the trusts created thereunder are so qualified and tax-exempt, and no such determination letter has been revoked nor (i) to the Knowledge of the Company, has revocation been threatened; (ii) to the Knowledge of the Company, do any circumstances exist that could reasonably be expected to adversely affect such qualification or exemption; and (iii) has any such Company Benefit Plan been amended since the date of its most recent determination letter or application therefor in any respect that would adversely affect its qualification or materially increase its costs.

 

(c)                                   Pension Plans . Neither the Company nor any of its Subsidiaries has, during the six-year period ending on the date of this Agreement, maintained, contributed to or been required to contribute to any Company Pension Plan. Neither the Company nor any of its Subsidiaries has any unsatisfied liability under Title IV of ERISA and, to the Knowledge of the Company, no condition exists that is reasonably likely to cause the Company or any of its Subsidiaries to incur a liability under Title IV of ERISA. Neither the Company nor any of its Subsidiaries has, or within the six-year period ending on the date of this Agreement has had, contributed to, been required to contribute to, or has or within the six-year period ending on the date of this Agreement has had any obligation or liability (including “withdrawal liability” within the meaning of Title IV of ERISA) with respect to,

 

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any Company Multiemployer Plan. No Company Benefit Plan is a “multiple employer plan” (within the meaning of Section 4063 or Section 4064 of ERISA). There does not now exist nor, to the Knowledge of the Company, do any circumstances exist that are reasonably likely to result in any Controlled Group Liability that would be a liability of the Company or any of its Subsidiaries following the Closing.

 

(d)                                  No Terminations, Proceedings or Liabilities . Except for matters that would not have a Company Material Adverse Effect, no (i) Company Benefit Plans or trusts have been terminated, nor is there any intention or expectation to terminate any Company Benefit Plans and trusts; (ii) Company Benefit Plans or trusts are the subject of any proceeding by any Person, including any Governmental Authority, that could be reasonably expected to result in a termination of any Company Benefit Plan or trust; and (iii) event has occurred and, to the Knowledge of the Company, no condition exists that could be reasonably expected to subject the Company or any of its Subsidiaries to any Tax, fine, Lien, penalty or other liability imposed by ERISA, the Code or other applicable Laws.

 

(e)                                   Ability to Amend . With respect to each Company Benefit Plan that is an employee welfare benefit plan, such Company Benefit Plan (including any Company Benefit Plan covering retirees or other former employees) may be amended subject to applicable Law to reduce benefits or limit the liability of the Company or its Subsidiaries or terminated, in each case, without material liability to the Company and its Subsidiaries on or at any time after the Effective Time.

 

(f)                                    Absence of Certain Plan Terms . No Company Benefit Plan provides health, medical or other welfare benefits after retirement or other termination of employment (other than for continuation coverage required under Section 4980(B)(f) of the Code or applicable Law) in a manner that would reasonably be expected to result in any material liability to the Company and its Subsidiaries on or at any time after the Effective Time.

 

(g)                                   Compliance with Law . Except for matters that would not have a Company Material Adverse Effect, (i) each Company Benefit Plan and its related trust, insurance contract or other funding vehicle has been established, registered, amended, funded, invested, maintained and administered in accordance with its terms and is in compliance with ERISA (if applicable), the Code and all other Laws applicable to such Company Benefit Plan; and (ii) the Company and each of its Subsidiaries is in compliance with ERISA, the Code and all other Laws applicable to the Company Benefit Plans.

 

(h)                                  Absence of Claims . Except for matters that would not have a Company Material Adverse Effect and other than for routine claims for benefits, there are no pending or, to the Knowledge of the Company, threatened claims, audits or inquiries by, on behalf of or against any participant in any of the Company Benefit Plans, or otherwise involving any such Company Benefit Plan or the assets of any Company Benefit Plan.

 

(i)                                      Absence of Effects of the Merger . None of the execution and delivery of this Agreement, the obtaining of the Requisite Stockholder Approval or the consummation of the Merger (alone or in conjunction with any other event, including any termination of employment on or following the Effective Time) will (i) entitle any current or former director, officer, employee or

 

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Independent Contractor of the Company or any of its Subsidiaries to any compensation or benefit; (ii) accelerate the time of payment or vesting, or trigger or increase any payment or funding, of any compensation or benefits, or trigger any other obligation, under any Company Benefit Plan; or (iii) result in any breach or violation of, default under or limit the Company’s right to amend, modify or terminate any Company Benefit Plan.

 

(j)                                     Section 280G/4999 .  Neither the execution and delivery of this Agreement nor the consummation of the Merger will (either alone or in combination with another event) result in the payment of any amount that would, individually or in combination with any other such payment, (i) not be deductible as a result of Section 280G of the Code (or any corresponding provisions of foreign, state or local Law relating to Tax); or (ii) be subject to the excise tax under Section 4999 of the Code. The Company has provided to Parent (A) its preliminary calculations with respect to the impact of Sections 280G and 4999 of the Code (or any corresponding provisions of foreign, state or local Law related to Tax) to the extent available as of the date hereof and (B) for each Person intended to be a participant in the Rackspace Change in Control Severance Plan described in Section 5.2(m) of the Company Disclosure Letter, the form W-2 box 1 amount for calendar years 2011 through 2015, to the extent applicable.

 

(k)                                  No Gross-ups . Neither the Company nor any of its Subsidiaries is a party to, or is otherwise obligated under, any plan, policy, agreement or arrangement that provides for the gross-up or reimbursement of Taxes imposed under Section 409A or 4999 of the Code (or any corresponding provisions of foreign, state or local Law relating to Tax).

 

(l)                                      Section 409A . Each Company Benefit Plan that is a “nonqualified deferred compensation plan” (as defined in Section 409A(d)(1) of the Code) that is subject to Section 409A of the Code is in compliance in all material respects with Section 409A of the Code.

 

(m)                              Contributions . All contributions required to be made to any Company Benefit Plan by applicable Law, any plan document or other contractual undertaking, and all premiums due or payable with respect to insurance policies funding any Company Benefit Plan, for any period through the date of this Agreement have been timely made or paid in full or, to the extent not required to be made or paid on or before the date of this Agreement, have been fully reflected on the consolidated financial statements of the Company included in the Company SEC Documents. Each Company Benefit Plan that is an employee welfare benefit plan under Section 3(1) of ERISA either (i) is funded through an insurance company contract and is not a “welfare benefit fund” with the meaning of Section 419 of the Code or (ii) is unfunded.

 

(n)                                  International Plans . Except as would not have a Company Material Adverse Effect, all Company Benefit Plans subject to the Laws of any jurisdiction outside the United States (i) have been maintained in accordance with all applicable requirements; (ii) that are intended to qualify for special tax treatment, meet all the requirements for such treatment; and (iii) that are intended to be funded or book-reserved, are fully funded or book-reserved, as appropriate, based upon reasonable actuarial assumptions.

 

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(o)                                  Section 162(m) . No deduction by the Company or any of its Subsidiaries in respect of any “applicable employee remuneration” (within the meaning of Section 162(m) of the Code) has been disallowed or is subject to disallowance by reason of Section 162(m) of the Code.

 

(p)                                  Additional Company Benefit Plans . Neither the Company nor any of its Subsidiaries has any formal plan or has made any enforceable promise or commitment to create any additional benefit plans which would be considered to be a material Company Benefit Plan once created or to improve or change the benefits in any material respect provided under any material Company Benefit Plan or any other Company Benefit Plan that would be a material Company Benefit Plan as a result of such improvements or changes.

 

(q)                                  Prohibited Transactions . Neither the Company, any Company Benefit Plan nor, to the knowledge of the Company, any trustee, administrator or other third-party fiduciary and/or party-in-interest thereof has engaged in any breach of fiduciary responsibility or any “prohibited transaction” (as such term is defined in Section 406 of ERISA or Section 4975 of the Code) to which Section 406 of ERISA or Section 4975 of the Code applies and which would reasonably be expected to subject the Company, any ERISA Affiliate or any Company Benefit Plan to any tax or penalty on prohibited transactions imposed by Section 4975 of the Code (or any corresponding provisions of Law).

 

3.10                         Litigation; Orders . There is no Legal Proceeding pending or, to the Knowledge of the Company, threatened against the Company or any of its Subsidiaries, other than such Legal Proceeding that would not have a Company Material Adverse Effect. Neither the Company nor any of its Subsidiaries is subject to any judgment, order, writ, injunction, award or decree, except for those that would not have a Company Material Adverse Effect. There are no Legal Proceedings pending, or to the Knowledge of the Company, threatened against the Company or any of its Subsidiaries that seek to materially interfere with or delay the consummation of the transactions contemplated by this Agreement. There are no inquiries, investigations or reviews by any Governmental Authority or internal investigations or reviews pending or, to the Knowledge of the Company, threatened with respect to the Company or any of its Subsidiaries, except for those that would not have a Company Material Adverse Effect. As of the date of this Agreement, there are no settlements of any Legal Proceedings to which the Company or any of its Subsidiaries is a party that are material to the Company or its Subsidiaries, taken as a whole, and under which the Company or any of its Subsidiaries have material continuing obligations.

 

3.11                         Compliance with Applicable Laws . Neither the Company nor any of its Subsidiaries is in violation of, or since January 1, 2014, has been in violation of, and each of the Company and its Subsidiaries are, and since January 1, 2014, has been, in compliance with any applicable Law or applicable Company Permit, except for any such violation or non-compliance that would not have a Company Material Adverse Effect. To the Knowledge of the Company, except for matters that would not have a Company Material Adverse Effect, no action or demand by or before any Governmental Authority is pending or threatened alleging that the Company or any of its Subsidiaries is not in compliance with any applicable Law or applicable Company Permit. This Section 3.11 does not relate to Tax matters, employee benefits matters, environmental matters, or the matters with respect to Intellectual Property Rights and Technology covered in Sections 3.15(a)-(c) and (f)-(j) or privacy

 

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or data security matters, which are the subjects of Section 3.8, Section 3.9, Section 3.12 and Sections 3.15(d)-(e), respectively.

 

3.12                         Environmental Matters .

 

(a)                                  Compliance . Except for matters that would not have a Company Material Adverse Effect:

 

(i)                                      the Company and its Subsidiaries are, and for the three years prior to the date of this Agreement have been, in compliance with all Environmental Laws;

 

(ii)                                   there are no Hazardous Materials (x) present at any property currently owned or leased by the Company or its Subsidiaries or, (y) to the Knowledge of the Company, were present on any formerly owned or leased properties at the time they ceased to be owned or leased by the Company or its Subsidiaries, that require the Company or its Subsidiaries to undertake investigative or remedial action;

 

(iii)                                the Company and its Subsidiaries have not Released, disposed of, transported or arranged for the transport or disposal of Hazardous Materials at any location, in each case except in a quantity and manner that complies with Environmental Law and as has not given rise to or could not reasonably be expected to give rise to liability under Environmental Laws;

 

(iv)                               neither the Company nor any of its Subsidiaries has received any written communication from a Governmental Authority alleging that the Company or any of its Subsidiaries is in violation of, or has any actual or potential liability under, any Environmental Law or any Environmental Permit (including any written notification alleging liability for, or request for information pursuant to Section 104(e) of Comprehensive Environmental Response, Compensation and Liability Act of 1980 or similar state statute concerning any Release or threatened Release of Hazardous Materials at any locations) that remains outstanding;

 

(v)                                  the Company and its Subsidiaries have obtained and complied with all Environmental Permits required to own, lease or otherwise hold their properties and assets, for their operations and to conduct its business pursuant to applicable Environmental Law, and all such Environmental Permits are valid and in good standing or have timely renewed;

 

(vi)                               the Company and its Subsidiaries have not contractually assumed or undertaken any liability or obligation of any other Person with respect to Environmental Laws; and

 

(vii)                            there are no Legal Proceedings pending or, to the Knowledge of the Company, threatened against the Company or its Subsidiaries relating to actual or alleged noncompliance with Environmental Laws or any other liabilities or obligations pursuant to Environmental Laws.

 

(b)                                  No Environmental Orders . The Company and its Subsidiaries are not subject to any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or

 

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with any Governmental Authority or settlement agreement imposing any obligations or liabilities on the Company or its Subsidiaries with respect to or arising under Environmental Laws.

 

3.13                         Material Contracts .

 

(a)                                  Filed Company Contracts . As of the date of this Agreement, neither the Company nor any of its Subsidiaries is a party to any Filed Company Contract that has not been filed.

 

(b)                                  Identity of Material Contracts . Section 3.13(b) of the Company Disclosure Letter sets forth, as of the date of this Agreement, a true, correct and complete list, and the Company has made available to Parent true, correct and complete copies, of the following Contracts in effect as of the date of this Agreement (each Contract of the type described in this Section 3.13(b) and each Filed Company Contract, a “ Material Contract ”):

 

(i)                                      other than Company Permits imposing geographical limitations on operations, each Contract that is material to the Company and its Subsidiaries, taken as a whole, that restricts the ability of the Company or its Subsidiaries to compete in any business or with any Person in any geographical area (it being agreed that, with respect to the vendors of the Company and its Subsidiaries, this clause (i) will be limited to the 20 largest Contracts with such vendors (based on payments made to vendors over the 12 months ended December 31, 2015) and will exclude all of the other contracts with vendors of the Company and its Subsidiaries);

 

(ii)                                   other than any such agreement solely between or among the Company and its wholly owned Subsidiaries, each loan and credit Contract, note, debenture, bond, indenture, mortgage, security agreement, pledge, capital and financing method lease or other similar agreement pursuant to which any Indebtedness of the Company or any of its Subsidiaries is outstanding or may be incurred having an outstanding amount in excess of $6,000,000 in net present value;

 

(iii)                                each Contract that requires the Company or any of its Subsidiaries, directly or indirectly, to make any advance, loan, extension of credit or capital contribution to, or other investment in, any person (other than the Company or any of its wholly-owned Subsidiaries) in any such case which is in excess of $6,000,000 in net present value;

 

(iv)                               each Contract to which the Company or any of its Subsidiaries is a party relating to (A) the formation, creation, operation, management or control of any partnership or joint venture; or (B) the ownership of any equity interest in any entity or business enterprise other than the Subsidiaries of the Company, in each case material to the Company and its Subsidiaries, taken as a whole;

 

(v)                                  other than the Company Benefit Plans listed on Section 3.9(a) of the Company Disclosure Letter, each indemnification, employment, consulting or other material Contract with (A) any member of the Company Board or (B) any executive officer of the Company, in each case, other than those Contracts (or forms of) (1) filed as exhibits (including exhibits incorporated by reference) to any Filed Company SEC Documents or (2) terminable by the

 

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Company or any of its Subsidiaries on no more than 30 days’ notice without liability or financial obligation to the Company or any of its Subsidiaries;

 

(vi)                               other than Company Leases, each Contract with obligations remaining to be performed or liabilities continuing after the date of this Agreement relating to the disposition or acquisition by the Company or any of its Subsidiaries, other than in the ordinary course of business, of any business or any amount of assets (excluding Facilities) with a net present value greater than $6,000,000;

 

(vii)                            each hedge, collar, option, forward purchasing, swap, derivative or similar Contract with a net present value greater than $6,000,000;

 

(viii)                         each Contract containing any “standstill” provisions or provisions of similar effect to which the Company or any of its Subsidiaries is a party or of which the Company or any of its Subsidiaries is a beneficiary;

 

(ix)                               each Contract with a Top Customer for sales by the Company of its products or services;

 

(x)                                  each Contract (A) pursuant to which the Company or any of its Subsidiaries is granting any material Intellectual Property License (other than (1) the Company’s or its Subsidiaries’ customer Contracts (including such Contracts with resellers, distributors and systems integrators); (2) Contracts with consultants or other service providers whose rights to use Company Intellectual Property are limited to use for the benefit of the Company or its Subsidiaries; and (3) Contracts pursuant to which the Company or any of its Subsidiaries has granted Intellectual Property Licenses pursuant to an Open Source licensing or distribution model); or (B) that purports to materially limit, curtail or restrain the ability of the Company or any of its Subsidiaries to exploit any material Owned Intellectual Property (other than Contracts pursuant to which the Company or any of its Subsidiaries has granted Intellectual Property Licenses pursuant to an Open source licensing or distribution model);

 

(xi)                               each Contract pursuant to which the Company or any of its Subsidiaries is being granted any material Intellectual Property License (other than off-the-shelf licenses for generally commercially available Software that involve the one-time or annual payments of license, maintenance support and other fees, collectively, of less than $750,000);

 

(xii)                            each material settlement, conciliation or similar Contract with any Governmental Authority entered into since January 1, 2014;

 

(xiii)                         each Contract with a top-20 customer of the Company (based on payments made to the Company over the 12 months ended December 31, 2015) that (A) contains “most favored nation” pricing provisions with any third party or (B) grants exclusive rights, rights of first refusal, rights of first negotiation or offer or similar rights to any Person;

 

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(xiv)                        each Contract that by its terms calls for aggregate payments or receipts (including termination fees) by the Company and its Subsidiaries under such Contract of more than $6,000,000 over the remaining term of such Contract;

 

(xv)                           each Contract that is between the Company or any of its Subsidiaries, on the one hand, and any director or officer of the Company or any person beneficially owning five percent or more of the outstanding Company Common Stock, on the other hand, except for any Company Benefit Plan;

 

(xvi)                        with respect to any acquisition and divestiture pursuant to which the Company or any of its Subsidiaries has continuing indemnification, guarantee, “earn-out” or other contingent payment obligations, in each case, that would reasonably be expected to result in payments in excess of $6,000,000;

 

(xvii)                     involving the acquisition or disposition, directly or indirectly (by merger or otherwise), of assets or capital stock or other equity interests for aggregate consideration under such Contract of at least $6,000,000; and

 

(xviii)                  each Contract with each of the 20 largest vendors (in the aggregate) of the Company, based on consolidated accounts payable as of December 31, 2015.

 

(c)                                   Validity; No Default . Except as would not have a Company Material Adverse Effect, (i) each Material Contract is a valid, binding and legally enforceable obligation of the Company or any of its Subsidiaries, as the case may be, and, to the Knowledge of the Company, of the other parties thereto, except, in each case, except as enforcement may be limited by bankruptcy, insolvency, reorganization or similar Laws affecting creditors’ rights generally and, as to enforceability, by general principles of equity; (ii) each Material Contract is in full force and effect; (iii) neither the Company nor any of its Subsidiaries is (with or without notice or lapse of time, or both) in breach or default under any Material Contract and, to the Knowledge of the Company, no other party to any Material Contract is (with or without notice or lapse of time, or both) in breach or default thereunder; (iv) neither the Company nor any of its Subsidiaries has received written notice of any breach or default of any Material Contract, and (v) neither the Company nor any of its Subsidiaries has received written notice from any other party to a Material Contract that such other party intends to terminate, not renew, or renegotiate the terms of any such Material Contract.

 

(d)                                  No Restrictive Contracts . Except as set forth on the Company Disclosure Letter and for any Filed Company Contracts, neither the Company nor any of its Subsidiaries is a party to or bound by any loan agreement, credit agreement, note, debenture, bond, indenture, mortgage, security agreement, pledge, capital and financing method lease or other similar agreement that prevents or restricts the Company, or any of its Subsidiaries from (i) paying dividends or distributions to the Person or Persons who owns or own such entity; (ii) incurring or guaranteeing Indebtedness; or (iii) creating Liens (other than Permitted Liens) that secure Indebtedness.

 

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3.14                         Properties .

 

(a)                                  Company Properties; Valid Title; No Liens . Section 3.14(a) of the Company Disclosure Letter lists (i) the street address of each parcel of real property (which will include the Facilities) owned by the Company or any subsidiary of the Company in fee simple or jurisdictional equivalent (“ Owned Real Property ”); and (ii) the street address and approximate size of each parcel of real property (which will include the Facilities) leased, subleased, licensed or otherwise occupied by the Company or any subsidiary of the Company (“ Leased Real Property ,” and together with the Owned Real Property, the “ Real Property ”). Except as would not have a Company Material Adverse Effect, each of the Company and its Subsidiaries has good and valid title (or the jurisdictional equivalent) to the Owned Real Property, and a valid leasehold interest in the Leased Real Property. Except as would not have a Company Material Adverse Effect, the Real Property is adequate and sufficient, and in satisfactory condition, to support the operations of the Company and its Subsidiaries as presently conducted. All of the Real Property is free and clear of all Liens (other than Permitted Liens). This Section 3.14(a) does not relate to Intellectual Property Rights and Technology, privacy or data security matters, which are the subject of Section 3.15.

 

(b)                                  Compliance; Exclusive Possession . Except as would not have a Company Material Adverse Effect, (i) each Company Lease is a valid, binding and legally enforceable obligation of the Company or any of its Subsidiaries, as the case may be, and, to the Knowledge of the Company, of the other parties thereto, except, in each case, as enforcement may be limited by bankruptcy, insolvency, reorganization or similar Laws affecting creditors’ rights generally and by general principles of equity; (ii) each Company Lease is in full force and effect; and (iii) neither the Company nor any of its Subsidiaries is (with or without notice or lapse of time, or both) in breach or default under any Company Lease and, to the Knowledge of the Company, no other party to any Company Lease is (with or without notice or lapse of time, or both) in breach or default thereunder. The Company has made available to Parent a true, correct and complete copy of each Company Lease (1) with respect to a Facility, and (2) except as would not have a Company Material Adverse Effect, with respect to each Company Lease not in respect of a Facility, to the extent under the Company’s control. The Real Property constitutes all of the real property owned or leased by the Company and its subsidiaries. Each of the Company and its Subsidiaries is in exclusive possession of the portion of the properties or assets purported to be leased by the Company or its Subsidiaries, as applicable, under all of the Company Leases, except for (A) such failures to have such possession of material properties or assets as, individually or in the aggregate, do not materially impair, and would not reasonably be expected to materially impair, the continued use and operation of such material assets to which they relate in the conduct of the business of the Company and its Subsidiaries as presently conducted; and (B) failures to have such possession of immaterial properties or assets as would not have a Company Material Adverse Effect. Except as would not have a Company Material Adverse Effect, there is no pending or, to the Knowledge of the Company, threatened appropriation, condemnation, eminent domain or like Legal Proceeding, or sale or other disposition in lieu of condemnation, affecting the Real Property.

 

(c)                                   Third Party Rights . Except as set forth on Section 3.14(c) of the Company Disclosure Letter, neither the Company nor any of its Subsidiaries has leased, subleased or otherwise granted to any person the right to use or occupy all or any material portion of any parcel of the Real

 

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Property, and neither the Company nor any of its Subsidiaries has granted any outstanding options, rights of first refusal, rights of first offer or other third party rights to purchase such Real Property or any portion thereof.

 

3.15                         Intellectual Property .

 

(a)                                  Ownership . Except as would not have a Company Material Adverse Effect, (i) the Company and its Subsidiaries own, free and clear of all Liens (other than Permitted Liens), or are licensing or otherwise have the right to use, all Company Intellectual Property as used in their business as presently conducted; (ii) the Company and its Subsidiaries have taken commercially reasonable actions to maintain and protect each material item of Owned Intellectual Property; (iii) each Person who has contributed to or developed any material Owned Intellectual Property has conveyed to the Company or its applicable Subsidiary an assignment of all right, title and interest in and to such Owned Intellectual Property and (iv) since January 1, 2014, no prior or current employee or officer or any prior or current consultant or contractor of the Company or any of its Subsidiaries has asserted or, to the Knowledge of the Company, has any ownership rights in any Owned Intellectual Property.

 

(b)                                  No Infringement . Except as would not have a Company Material Adverse Effect, since January 1, 2014, (i) the conduct of the business of the Company and its Subsidiaries has not infringed, misappropriated or otherwise violated, and does not currently infringe, misappropriate or otherwise violate, any Intellectual Property Rights of any third Person, and, as of the date of this Agreement, no Legal Proceedings are pending or, to the Knowledge of the Company, threatened that the Company or any of its Subsidiaries is infringing, misappropriating or otherwise violating the Intellectual Property Rights of any third Person, and (ii) to the Knowledge of the Company, no Person has infringed upon, misappropriated or otherwise violated or is currently infringing, misappropriating or otherwise violating the rights of the Company or any of its Subsidiaries with respect to any material Owned Intellectual Property in a material fashion.

 

(c)                                   Open Source . Section 3.15(c) of the Company Disclosure Letter sets


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