Document:

Exhibit 10.1

 

EXECUTION VERSION

 

MEMBERSHIP INTEREST PURCHASE AGREEMENT
 dated as of October 13, 2015
 by and among

 

STATION CASINOS LLC

(“Purchaser”),

 

FERTITTA BUSINESS MANAGEMENT LLC,

LNA INVESTMENTS, LLC,

KVF INVESTMENTS, LLC,

FE EMPLOYEECO LLC

(collectively, “Sellers”),

 

FERTITTA ENTERTAINMENT LLC

(the “Company”)

 

and

 

Frank J. Fertitta III

(the “Seller Representative”)

 

with respect to all

 

outstanding membership interests of
 the Company

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
No.
    
	
 
    	
 
    	
 
    
	
ARTICLE I
    
	
DEFINITIONS
    
	
 
    	
 
    	
 
    
	
1.01
    	
Definitions
    	
1
    
	
 
    
	
ARTICLE II
    
	
SALE OF UNITS AND CLOSING
    
	
 
    	
 
    	
 
    
	
2.01
    	
Purchase and Sale
    	
12
    
	
2.02
    	
Purchase Price
    	
12
    
	
2.03
    	
Closing
    	
12
    
	
2.04
    	
Purchase Price Adjustment
    	
13
    
	
2.05
    	
Purchase Price   Allocation
    	
15
    
	
2.06
    	
Further Assurances;   Post-Closing Cooperation
    	
15
    
	
2.07
    	
Excluded Assets
    	
16
    
	
2.08
    	
Tax Treatment
    	
16
    
	
2.09
    	
Certain Determinations
    	
16
    
	
 
    	
 
    	
 
    
	
ARTICLE III
    
	
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
    
	
 
    	
 
    	
 
    
	
3.01
    	
Authority
    	
17
    
	
3.02
    	
Organization of the   Company
    	
17
    
	
3.03
    	
Equity Interests
    	
17
    
	
3.04
    	
Subsidiaries
    	
17
    
	
3.05
    	
No Conflicts
    	
18
    
	
3.06
    	
Governmental Approvals   and Filings
    	
18
    
	
3.07
    	
Books and Records
    	
19
    
	
3.08
    	
Financial Statements   and Condition
    	
19
    
	
3.09
    	
Taxes
    	
20
    
	
3.10
    	
Legal Proceedings
    	
21
    
	
3.11
    	
Compliance with Laws
    	
21
    
	
3.12
    	
Benefit Plans; ERISA
    	
22
    
	
3.13
    	
Real Property
    	
24
    
	
3.14
    	
Tangible Personal   Property
    	
24
    
	
3.15
    	
Intellectual Property   Rights
    	
24
    
	
3.16
    	
Sufficiency of Assets
    	
25
    
	
3.17
    	
Contracts
    	
25
    
	
3.18
    	
Licenses; Gaming Licenses
    	
27
    
	
3.19
    	
Insurance
    	
27
    
	
3.20
    	
Employees; Labor   Relations
    	
28
    
	
3.21
    	
Certain Payments
    	
28
    

 

ii

 

	
3.22
    	
Related Party   Transactions
    	
29
    
	
3.23
    	
Brokers
    	
29
    
	
3.24
    	
Environmental Matters
    	
29
    
	
3.25
    	
Representations   Complete
    	
29
    
	
 
    	
 
    	
 
    
	
ARTICLE IV
    
	
REPRESENTATIONS AND WARRANTIES OF SELLERS
    
	
 
    	
 
    	
 
    
	
4.01
    	
Organization; Good   Standing
    	
29
    
	
4.02
    	
Authority
    	
30
    
	
4.03
    	
Ownership of Units
    	
30
    
	
4.04
    	
No Conflicts
    	
30
    
	
4.05
    	
Governmental Approvals   and Filings
    	
31
    
	
4.06
    	
Legal Proceedings
    	
31
    
	
4.07
    	
Representations   Complete
    	
31
    
	
 
    	
 
    	
 
    
	
ARTICLE V
    
	
REPRESENTATIONS AND WARRANTIES OF PURCHASER
    
	
 
    	
 
    	
 
    
	
5.01
    	
Organization
    	
31
    
	
5.02
    	
Authority
    	
31
    
	
5.03
    	
No Conflicts
    	
31
    
	
5.04
    	
Governmental Approvals   and Filings
    	
32
    
	
5.05
    	
Legal Proceedings
    	
32
    
	
5.06
    	
Purchase for Investment
    	
32
    
	
5.07
    	
Brokers
    	
32
    
	
5.08
    	
Representations   Complete
    	
32
    
	
 
    	
 
    	
 
    
	
ARTICLE VI
    
	
COVENANTS OF SELLERS
    
	
 
    	
 
    	
 
    
	
6.01
    	
Regulatory, Gaming and   Other Approvals
    	
33
    
	
6.02
    	
HSR Filings
    	
33
    
	
6.03
    	
Investigation by   Purchaser
    	
33
    
	
6.04
    	
Conduct of Business
    	
34
    
	
6.05
    	
Financial Statements   and Reports; Cooperation in IPO Transactions
    	
36
    
	
6.06
    	
Certain Restrictions
    	
37
    
	
6.07
    	
Books and Records
    	
37
    
	
6.08
    	
Notice and Cure
    	
37
    
	
6.09
    	
Satisfaction of   Conditions
    	
37
    
	
6.10
    	
Affiliate Agreements
    	
38
    
	
6.11
    	
Certification regarding   Indemnification Claims
    	
38
    
	
6.12
    	
Pre-Roadshow Bring Down
    	
38
    
	
 
    	
 
    	
 
    
	
ARTICLE VII
    
	
COVENANTS OF PURCHASER
    
	
 
    	
 
    	
 
    
	
7.01
    	
Regulatory, Gaming and   Other Approvals
    	
38
    

 

iii

 

	
7.02
    	
HSR Filings
    	
39
    
	
7.03
    	
Governmental or   Regulatory Authorities
    	
39
    
	
7.04
    	
Indemnification and   Insurance of Officers and Managers
    	
39
    
	
7.05
    	
Notice and Cure
    	
40
    
	
7.06
    	
Satisfaction of   Conditions
    	
40
    
	
7.07
    	
Employee Matters
    	
40
    
	
 
    	
 
    	
 
    
	
ARTICLE VIII
    
	
CONDITIONS TO OBLIGATIONS OF PURCHASER
    
	
 
    	
 
    	
 
    
	
8.01
    	
Representations and   Warranties
    	
42
    
	
8.02
    	
Performance
    	
43
    
	
8.03
    	
Seller Deliverables
    	
43
    
	
8.04
    	
Orders and Laws
    	
43
    
	
8.05
    	
Regulatory Consents and   Approvals
    	
43
    
	
8.06
    	
Third Party Consents
    	
44
    
	
8.07
    	
IPO Transactions
    	
44
    
	
8.08
    	
Availability of Funds
    	
44
    
	
8.09
    	
Availability of   Specified Executives
    	
44
    
	
 
    
	
ARTICLE IX
    
	
CONDITIONS TO OBLIGATIONS OF SELLERS
    
	
 
    	
 
    	
 
    
	
9.01
    	
Representations and   Warranties
    	
44
    
	
9.02
    	
Performance
    	
45
    
	
9.03
    	
Officers’ Certificates
    	
45
    
	
9.04
    	
Orders and Laws
    	
45
    
	
9.05
    	
Regulatory Consents and   Approvals
    	
45
    
	
9.06
    	
Third Party Consents
    	
45
    
	
9.07
    	
IPO Transactions
    	
45
    
	
 
    	
 
    	
 
    
	
ARTICLE X
    
	
TAX MATTERS
    
	
 
    	
 
    	
 
    
	
10.01
    	
Tax Indemnity
    	
46
    
	
10.02
    	
Allocations; Straddle   Periods
    	
46
    
	
10.03
    	
Tax Returns
    	
46
    
	
10.04
    	
Cooperation
    	
47
    
	
10.05
    	
Transfer Taxes
    	
47
    
	
10.06
    	
Tax Refunds
    	
47
    
	
10.07
    	
Tax Audits
    	
47
    
	
10.08
    	
Disputes
    	
48
    
	
10.09
    	
Purchase Price   Adjustment
    	
48
    

 

iv

 

	
ARTICLE XI
    
	
SURVIVAL OF REPRESENTATIONS, WARRANTIES,
    
	
COVENANTS AND AGREEMENTS
    
	
 
    	
 
    	
 
    
	
11.01
    	
Survival of   Representations, Warranties, Covenants and Agreements
    	
48
    
	
 
    	
 
    	
 
    
	
ARTICLE XII
    
	
INDEMNIFICATION
    
	
 
    	
 
    	
 
    
	
12.01
    	
Indemnification
    	
49
    
	
12.02
    	
Method of Asserting   Claims
    	
51
    
	
12.03
    	
Release
    	
52
    
	
12.04
    	
Purchase Price   Adjustment
    	
52
    
	
 
    	
 
    	
 
    
	
ARTICLE XIII
    
	
TERMINATION
    
	
 
    	
 
    	
 
    
	
13.01
    	
Termination
    	
52
    
	
13.02
    	
Effect of Termination
    	
53
    
	
 
    	
 
    	
 
    
	
ARTICLE XIV
    
	
MISCELLANEOUS
    
	
 
    	
 
    	
 
    
	
14.01
    	
Notices
    	
53
    
	
14.02
    	
Specific Performance
    	
54
    
	
14.03
    	
Entire Agreement
    	
54
    
	
14.04
    	
Expenses
    	
54
    
	
14.05
    	
Public Announcements
    	
55
    
	
14.06
    	
Confidentiality
    	
55
    
	
14.07
    	
Waiver
    	
56
    
	
14.08
    	
Amendment
    	
56
    
	
14.09
    	
No Third-Party   Beneficiary
    	
56
    
	
14.10
    	
No Assignment; Binding   Effect
    	
56
    
	
14.11
    	
Headings; Schedules
    	
56
    
	
14.12
    	
Invalid Provisions
    	
57
    
	
14.13
    	
Governing Law
    	
57
    
	
14.14
    	
Disputes
    	
57
    
	
14.15
    	
Counterparts
    	
57
    
	
14.16
    	
Seller Representative
    	
57
    

 

EXHIBITS

 

	
EXHIBIT A
    	
Form of Unit   Assignment Agreement
    
	
EXHIBIT B
    	
Form of Seller’s   Certificate
    
	
EXHIBIT C
    	
Officer’s Certificate   of Purchaser
    
	
EXHIBIT D
    	
Secretary’s Certificate   of Purchaser
    
	
EXHIBIT E
    	
Form of   Post-Closing Certificates regarding Indemnification Claims
    
	
EXHIBIT F
    	
Form of   Pre-Roadshow Bring Down Certificate
    

 

v

 

This MEMBERSHIP INTEREST PURCHASE AGREEMENT dated as of October 13, 2015 is made and entered into by and among (i) Station Casinos LLC, a Nevada limited liability company (“Purchaser”), (ii) Fertitta Business Management LLC, a Nevada limited liability company, LNA Investments, LLC, a Nevada limited liability company, KVF Investments, LLC, a Nevada limited liability company, and FE Employeeco LLC, a Delaware limited liability company (each a “Seller” and collectively the “Sellers”), (iii) Fertitta Entertainment LLC, a Delaware limited liability company (the “Company”), and (iv) Frank J. Fertitta III, an individual (the “Seller Representative”).

 

Capitalized terms not otherwise defined herein have the meanings set forth in Section 1.01.

 

WHEREAS, Sellers collectively own an aggregate of 81,133 Common Units and 18,050 Incentive Units of the Company (such Common Units and Incentive Units collectively being referred to herein as the “Units”), constituting all issued and outstanding membership interests of the Company;

 

WHEREAS, the Company and the Subsidiaries (as defined herein) currently manage all of the gaming and non-gaming facilities owned or managed by indirect subsidiaries of Purchaser (the “Station Operations”);

 

WHEREAS, Purchaser and its subsidiaries desire to internalize the management functions provided by the Company and the Subsidiaries;

 

WHEREAS, Purchaser intends to effect an initial public offering of equity securities of Purchaser or an Affiliate of Purchaser formed for the purpose of effecting such initial public offering (the “IPO Transactions”) and apply a portion of the net proceeds of the IPO Transactions to purchase the Units; and

 

WHEREAS, Sellers desires to sell, and Purchaser desires to purchase, the Units on the terms and subject to the conditions set forth in this Agreement;

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

ARTICLE I
 DEFINITIONS

 

1.01                                          Definitions.

 

(a)         Defined Terms.  As used in this Agreement, the following defined terms have the meanings indicated below:

 

“AAA” has the meaning ascribed to it in Section 14.14.

 

1

 

“Actions or Proceedings” means any action, suit, litigation, arbitration, audit, claim, complaint, hearing, or investigation (whether civil, criminal, administrative, investigative, or informal) commenced, brought, conducted, or heard by or before, or otherwise involving, any Governmental or Regulatory Authority or arbitrator.

 

“Affiliate” means, with respect to any Person, any other Person that directly, or indirectly through one of more intermediaries, controls or is controlled by or is under common control with such Person.  For purposes of this definition, control of a Person means the power, direct or indirect, to direct or cause the direction of the management and policies of such Person whether by Contract or otherwise and, in any event and without limitation of the foregoing, any Person owning ten percent (10%) or more of the voting securities of another Person shall be deemed to control that Person.  For purposes of this Agreement, unless the context otherwise requires, prior to Closing, none of the Sellers, the Company and the Company’s Subsidiaries shall constitute or be deemed to constitute an Affiliate of Purchaser.

 

“Affiliate Agreement” has the meaning ascribed to it in Section 3.17(a)(viii).

 

“Agreement” means this Membership Interest Purchase Agreement, the Disclosure Schedule and the certificates delivered in accordance with Sections 8.03 and 9.03, as the same shall be amended from time to time

 

“Ancillary Agreement” means each assignment agreement entered into pursuant to Section 2.03(c).

 

“Arbitrating Accountants” has the meaning ascribed to it in Section 2.04(d).

 

“Assets and Properties” of any Person means all assets and properties of every kind, nature, character and description (whether real, personal or mixed, whether tangible or intangible, and wherever situated), including the goodwill related thereto, operated, owned or leased by such Person.

 

“Assumed Liabilities” means an amount equal to (a) the aggregate Liabilities of the Company and the Subsidiaries as calculated as of 12:01 AM (Pacific time) on the Closing Date minus (b) Closing Indebtedness to the extent paid by Purchaser in accordance with Section 2.03(b)(ii).

 

“Audited Financial Statements” means the Financial Statements for the most recent fiscal year of the Company delivered to Purchaser pursuant to Section 3.08.

 

“Basket” has the meaning ascribed to it in Section 12.01  (c).

 

“Benefit Plan” means any Plan (i) covering one or more current or former Company Employees, or other individual independent contractors, of the Company or any of its Subsidiaries, or the beneficiaries or dependents of any such Persons; (ii) sponsored, maintained, contributed to, or required to be contributed to, by the Company or any of its Subsidiaries; or (iii) under or with respect to which the Company or any of its Subsidiaries have any Liabilities.

 

2

 

“Books and Records” means all files, documents, instruments, papers, books and records relating to the Business or Condition of the Company, including without limitation financial statements, Tax Returns and related work papers and letters from accountants, budgets, pricing guidelines, ledgers, journals, deeds, title policies, minute books, stock certificates and books, stock transfer ledgers, Contracts, Licenses, customer lists, operating data and plans and environmental studies and plans.

 

“Business Day” means a day other than Saturday, Sunday or any day on which banks located in the State of Nevada are authorized or obligated to close.

 

“Business or Condition of the Company” means the business, condition (including financial condition), results of operations, Liabilities and Assets and Properties of the Company and the Subsidiaries taken as a whole.

 

“Claim Notice” means written notification pursuant to Section 12.02(a) of a Third Party Claim as to which indemnity under Section 12.01 is sought by an Indemnified Party, enclosing a copy of all papers served, if any, and specifying in reasonable detail and to the extent practicable the nature of and basis for such Third Party Claim and for the Indemnified Party’s claim against the Indemnifying Party under Section 12.01, together with the amount if then known or reasonably determinable in good faith, of the Loss arising from such Third Party Claim.

 

“Closing” means the closing of the transactions contemplated by Section 2.03.

 

“Closing Date” means (a) the fifth Business Day after the day on which all of the conditions to each party’s obligations hereunder have been satisfied or, to the extent permitted under applicable Laws, waived (other than those conditions that by their nature have to be satisfied at Closing, but subject to the satisfaction or, to the extent permitted under applicable Laws, waiver of those conditions at Closing), or (b) such other date as Purchaser and Sellers mutually agree upon in writing.

 

“Closing Indebtedness” means the total aggregate amount of the Indebtedness and all accrued and unpaid interest, premiums and prepayment fees applicable with respect thereto of the Company and the Subsidiaries as calculated as of 12:01 AM (Pacific time) on the Closing Date.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Committee” has the meaning ascribed to it in Section 2.09.

 

“Company” has the meaning ascribed to it in the forepart of this Agreement.

 

“Company Employees” has the meaning ascribed to it in Section 7.07(a).

 

“Company Material Adverse Effect” means any change, development, circumstance or event that, individually or in the aggregate, has or would reasonably be expected to have, a material adverse effect on the Business or Condition of the Company or on the Company’s or Sellers’ ability to consummate the transactions contemplated by this Agreement or

 

3

 

any Ancillary Agreement; provided, however, that none of the following shall be or will be at the Closing, deemed to constitute, or shall be taken into account in determining the occurrence of, a Company Material Adverse Effect: (i) any effect or change that results from the announcement of the execution and delivery of this Agreement or the Transactions, or from any action taken by Purchaser or its Affiliates, (ii) any effect or change that results from the taking of any action required pursuant to this Agreement or expressly permitted by this Agreement, (iii) any change in general business, economic, political, legislative or social conditions, whether locally, nationally or internationally, affecting the travel, hospitality or gaming industries generally, (iv) any change in the financial, banking or securities markets (including changes to interest rates, currency rates or the value of the U.S. Dollar relative to other currencies, consumer confidence, stock, bond and/or debt prices and trends), (v) any acts of war, hostilities, military action, sabotage or terrorism (whether or not declared or undeclared) or any escalation or worsening of any such acts of war, hostility, military action, sabotage or terrorism, (vi) any failure to meet projections, forecasts or revenue or earnings predictions for any period ending on or after the Closing (provided that the changes or effects underlying or contributing to such failure to meet projections, forecasts or revenue or earnings predictions may be deemed to constitute, and be taken into account in determining the occurrence of, a Company Material Adverse Effect); or (vii) any change in Law or generally accepted accounting principles or the interpretation thereof, except, in each case of clauses (iii), (iv), (v) and (vii), to the extent the Business or Condition of the Company is disproportionately affected by such effect or change compared to Persons engaged in similar or comparable businesses in the industries in which the Company and/or its Subsidiaries operate.

 

“Company Owned Intellectual Property” has the meaning ascribed to it in Section 3.15(a).

 

“Company/Seller Fundamental Representations” has the meaning ascribed to it in Section 11.01.

 

“Contract” means any agreement, lease, license, evidence of Indebtedness, mortgage, indenture, security agreement, commitment, promise, undertaking or other contract (whether written or oral), including all amendments thereto.

 

“Disclosure Schedule” means the record delivered to Purchaser by the Company or to Purchaser by Sellers or to Sellers by Purchaser, as applicable, herewith and dated as of the date hereof, containing all lists, descriptions, exceptions and other information and materials as are required to be included therein by the Company, Sellers or Purchaser, as applicable, pursuant to this Agreement.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

 

“ERISA Affiliate” means any Person who, together with the Company, is treated as a single employer under Section 414(t) of the Code; provided, however, that in no event shall Purchaser or any subsidiary of Purchaser be deemed to be an ERISA Affiliate.

 

“Estimated Assumed Liabilities” has the meaning ascribed to it in Section 2.04(a).

 

4

 

“Estimated Closing Balance Sheet” has the meaning ascribed to it in Section 2.04(a).

 

“Estimated Closing Balance Sheet Documents” has the meaning ascribed to it in Section 2.04(a).

 

“Estimated Assumed Liabilities” has the meaning ascribed to it in Section 2.04(a).

 

“Excluded Assets” has the meaning ascribed to it in Section 2.07.

 

“FE Senior Executive” means each of Frank J. Fertitta III, Lorenzo Fertitta, Stephen L. Cavallaro, Marc J. Falcone and Richard J. Haskins.

 

“Final Assumed Liabilities” has the meaning ascribed to it in Section 2.04(b).

 

“Final Closing Balance Sheet” has the meaning ascribed to it in Section 2.04(b).

 

“Final Closing Balance Sheet Documents” has the meaning ascribed to it in Section 2.04(b).

 

“Financial Statements” means the consolidated financial statements of the Company and its consolidated Subsidiaries delivered to Purchaser pursuant to Section 3.08 or 6.05.

 

“GAAP” means United States generally accepted accounting principles, consistently applied.

 

“Gaming Authorities” means any Governmental or Regulatory Authority with regulatory control, authority or jurisdiction over casino, gambling or other gaming activities and operations conducted by any of the Company or the Subsidiaries, including the Nevada Gaming Commission, the Nevada State Gaming Control Board, the Las Vegas City Council, the North Las Vegas City Council, the Henderson City Council, the National Indian Gaming Commission, and the Clark County Liquor and Gaming Licensing Board.

 

“Gaming Laws” means all Laws pursuant to which any Gaming Authority possesses regulatory, licensing or permit authority over gambling, gaming or casino activities, including the rules and regulations established by any Gaming Authority.

 

“Gaming Licenses” means all Licenses issued under applicable Gaming Laws or by any Gaming Authorities.

 

“Governmental or Regulatory Authority” means any: (a) nation, state, county, city, town, village, district, or other jurisdiction of any nature; (b) federal, state, local, municipal, foreign, or other government; (c) governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department, official, or entity and any court or other tribunal); (d) multi-national organization or body; or (e) body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory, or taxing authority or power of any nature, including any Gaming Authority.

 

5

 

“HSR Act” means Section 7A of the Clayton Act (Title II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended) and the rules and regulations promulgated thereunder.

 

“Income Tax” means any federal, state, local, or foreign income tax, including any interest, penalty, or addition thereto, whether disputed or not.

 

“Income Tax Returns” means any return, declaration, report, claim for refund, or information return or statement relating to Income Taxes, including any schedule or attachment thereto, and including any amendment thereof.

 

“Indebtedness” of any Person means all obligations of such Person (and any accrued and unpaid interest thereon) (i) for borrowed money or extension of credit, (ii) evidenced by notes, bonds, debentures, letters of credit or similar instruments, (iii) upon which interest charges are customarily paid (other than trade payables incurred in the ordinary course of business consistent with past practice), (iv) for the deferred purchase price of goods or services including “earn-outs” and “seller notes” payable with respect to the acquisition of any business, assets or securities but excluding trade payables incurred in the ordinary course of business consistent with past practice), (v) under capital leases, synthetic leases or sale leaseback transactions, (vi) arising under Contracts relating to interest rate protection, swap or other hedging agreements, (vii) under conditional sale or other title retention agreements relating to any purchased property, and (vi) in the nature of guarantees (including “keep well” arrangements, support agreements and similar agreements) of the obligations described in clauses (i) through (vi) above of any other Person.

 

“Indemnified Party” means any Person claiming indemnification under any provision of Article XII.

 

“Indemnifying Party” means any Person against whom a claim for indemnification is being asserted under any provision of Article XII.

 

“Indemnity Notice” means written notification pursuant to Section 12.02(b) of a claim for payment or indemnity under Article XII by an Indemnified Party, specifying the nature of and basis for such claim, together with the amount, if then known or reasonably determinable in good faith, of the Loss arising from such claim.

 

“Initial Purchase Price” has the meaning ascribed to it in Section 2.02.

 

“Intellectual Property” means intellectual property rights of any kind, including both statutory and common law rights, throughout the world, as applicable, including without limitation (i) all industrial designs, invention disclosures, patents and patent applications (including divisions, continuations, continuations-in-part, reexaminations, and renewals), and any renewals, extensions, supplementary protection certificates or reissues thereof, in any jurisdiction, (ii) trademarks, service marks, names, corporate names, trade names, brand names, certification marks, designs, logos, slogans, commercial symbols, business name registrations, Internet domain names, trade dress and other similar indications of source or origin and general intangibles of like nature, together with the goodwill associated with the foregoing and registrations and applications relating to the foregoing in any jurisdiction, including any

 

6

 

extension, modification or renewal of any such registration or application, (iii) copyrights, writings and other works and other copyrightable subject matter, (including rights in computer programs (whether in source code, object code or other forms), algorithms, databases, compilations and data, technology supporting the foregoing, and all documentations including user manuals and training materials, related to any of the foregoing), in any jurisdiction, whether registered or not, and all applications and registrations for the foregoing, and any renewals or extensions thereof, (iv) trade secrets, non-public information, and all other confidential or proprietary information and materials, including, discoveries, research and development, ideas, know-how, inventions, proprietary processes, designs, procedures, laboratory notes, technical information, formulae, biological materials, models and methodologies, in each case whether patentable or not, and rights in any jurisdiction to limit the use or disclosure thereof by any Person, and (v) any other intellectual property or proprietary rights and all rights and remedies against past infringement, misappropriation, or other violation of any of the foregoing.

 

“IPO Transactions” has the meaning ascribed to it in the forepart of this Agreement.

 

“IRS” means the United States Internal Revenue Service.

 

“Knowledge of Sellers” or “Known to Sellers” means the actual knowledge after reasonable due inquiry of any FE Senior Executive at the time the applicable representation or warranty is made.

 

“Laws” means all laws, statutes, constitutions, treaties, rules, regulations, judgments, decrees, ordinances and other pronouncements having the effect of law, in each case, of the United States, any foreign country or any domestic or foreign state, county, city or other political subdivision or of any Governmental or Regulatory Authority.

 

“Lender Directors” means Station Holdco LLC’s Lender Directors (as defined in that certain Equityholders Agreement, dated as of June 16, 2011, by and among Station Holdco LLC, Purchaser and the other parties thereto, as amended.

 

“Lender Directors’ Consent” means approval of the Lender Directors to the consummation of the Transactions.

 

“Liabilities” means all direct or indirect Indebtedness, obligations and other liabilities of a Person of any kind or character (whether absolute or contingent, accrued or unaccrued, conditional or unconditional, fixed or otherwise, matured or unmatured, latent or patent, known or unknown, asserted or unasserted, due or to become due, in contract, tort, strict liability or otherwise).

 

“Licenses” means all licenses, permits, certificates of authority, authorizations, approvals, registrations, privileges, qualifications, franchises, findings of suitability, waivers and exemptions, including any condition or limitation placed thereon, and similar consents granted or issued by any Person, including Gaming Licenses.

 

“Licensed Parties” means the Company, and each Subsidiary and Licensing Affiliate that owns or holds a License.

 

7

 

“Licensing Affiliates” means any officer, director, employee or equityholder of, or other Person associated with, the Company or any Subsidiary that (a) may be required to own or hold a License, or (b) may be required to be found suitable, or may be taken into account in the process of determining the suitability of the Company or any Subsidiary, with respect to a License.

 

“Liens” means any mortgage, pledge, assessment, security interest, lease, lien, adverse claim, levy, restriction on transfer of title, charge or other encumbrance of any kind, or any conditional sale Contract, title retention Contract or other Contract to give any of the foregoing.

 

“LLC Agreement” means the limited liability company agreement of the Company, as in effect immediately prior to the Closing.

 

“Loss” means any and all damages, fines, fees, claims, judgments, settlements, penalties, deficiencies, losses and expenses (including without limitation interest, court costs, fees of attorneys, accountants and other experts or other expenses of litigation or other Actions or Proceedings or of any claim, default or assessment).

 

“New Plans” has the meaning ascribed to it in Section 7.07(b).

 

“Objection Notice” has the meaning ascribed to it in Section 2.04(c).

 

“Old Plans” has the meaning ascribed to it in Section 7.07(b).

 

“Option” with respect to any Person means any security, right, subscription, warrant, option, “phantom” stock right or other Contract that gives the right to (i) purchase or otherwise receive or be issued any equity interests of such Person or any security of any kind convertible into or exchangeable or exercisable for any equity interests of such Person or (ii) receive or exercise any benefits or rights similar to any rights enjoyed by or accruing to the holder of equity interests of such Person, including any rights to participate in the equity or income of such Person or to participate in or direct the election of any directors or officers of such Person or the manner in which any equity interests of such Person are voted.

 

“Order” means any writ, judgment, decree, injunction, award, decision, decree, ruling, subpoena, verdict or similar order of any Governmental or Regulatory Authority (in each such case whether preliminary or final).

 

“Payoff Letters” has the meaning ascribed to it in Section 2.03(b)(ii).

 

“Permitted Lien” means (i) any Lien for Taxes not yet due or delinquent or being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP and (ii) any landlords’, carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and similar Lien arising in the ordinary course of business with respect to a Liability that is not yet due or delinquent.

 

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“Person” means any natural person, corporation, limited liability company, general partnership, limited partnership, proprietorship, other business organization, trust, union, association or Governmental or Regulatory Authority.

 

“Plan” means any bonus, incentive compensation, deferred compensation, compensation, pension, profit sharing, retirement, equity purchase, equity option, restricted stock, deferred stock, equity ownership, equity appreciation rights, phantom stock, equity-related, leave of absence, layoff, vacation, day or dependent care, legal services, cafeteria, life, health, accident, disability, change in control, retention, severance, separation, fringe benefit or other employee benefit plan, practice, policy, agreement or arrangement of any kind, whether written or oral, including any “employee benefit plan” within the meaning of Section 3(3) of ERISA, whether or not ERISA applies.

 

“Post-Closing Adjustment” has the meaning scribed to it in Section 2.04(e).

 

“Post-Closing Tax Period” means any taxable period that begins after the Closing Date and the portion of any Straddle Period that begins the day after the Closing Date.

 

“Pre-Closing Tax Obligations” means any Taxes of the Company or any Subsidiary that are due and payable by such Company or Subsidiary and that are allocable to any Pre-Closing Tax Period pursuant to Section 10.02.

 

“Pre-Closing Tax Period” means any taxable period that ends on or prior to the Closing Date and the portion of any Straddle Period that ends on the Closing Date.

 

“Pre-Roadshow Bring Down Certificate” has the meaning ascribed to it in Section 6.12.

 

“Preliminary Confirmations” has the meaning ascribed to it in Section 6.12.

 

“Purchase Price” has the meaning ascribed to it in Section 2.02.

 

“Purchaser” has the meaning ascribed to it in the forepart of this Agreement.

 

“Purchaser Fundamental Representations” has the meaning ascribed to it in Section 11.01.

 

“Purchaser Indemnified Parties” means Purchaser, the Company and the Subsidiaries, their respective Affiliates, and all Representatives of any of the foregoing.

 

“Purchaser Tax Contest” has the meaning ascribed to it in Section 10.07(b).

 

“Qualified Plan” means each Benefit Plan which is intended to qualify under Section 401 of the Code.

 

“Related Person” means (a) with respect to an individual, such individual’s spouse and the immediate family members of such individual and such individual’s spouse, including any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law,

 

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son-in-law, daughter-in-law, brother-in-law, or sister-in-law of such individual or such individual’s spouse, and any person sharing the household of such individual, (b) with respect to an entity, any Person that directly or indirectly controls, is controlled by or is under common control with such entity and each Person that serves as a director, officer, partner, executor or trustee of such entity, and (c) any Affiliates of any of the foregoing.

 

“Representatives” has the meaning ascribed to it in Section 6.03.

 

“Restrictive Covenant” means any non-compete, non-solicit, non-interference, non-disparagement or confidentiality obligation.

 

“Seller” or “Sellers” has the meaning ascribed to it in the forepart of this Agreement.

 

“Seller Certificate” has the meaning ascribed to it in Section 6.11.

 

“Seller Indemnified Parties” means Sellers and their Affiliates, and all Representatives of any of the foregoing.

 

“Seller Prepared Return” has the meaning ascribed to it in Section 10.03(a).

 

“Seller Representative” has the meaning ascribed to it in the forepart of this Agreement.

 

“Seller Tax Contest” has the meaning ascribed to it in Section 10.07(b).

 

“Shared Tax Return” has the meaning ascribed to it in Section 10.03(b).

 

“Specified Executive” means Frank J. Fertitta III, Marc J. Falcone, Stephen L. Cavallaro and Richard J. Haskins.

 

“Station Operations” has the meaning ascribed to it in the forepart of this Agreement.

 

“Straddle Period” means any taxable period that begins prior to the Closing Date and ends after the Closing Date.

 

“Subsidiary” means any Person in which the Company, directly or indirectly through Subsidiaries or otherwise, beneficially owns more than fifty percent (50%) of either the equity interests in, or the voting control of, such Person and any partnership the only general partner or general partners of which are the Company or one or more of its Subsidiaries.

 

“Tax Claim” has the meaning ascribed to it in Section 10.07(b).

 

“Tax Dispute” has the meaning ascribed to it in Section 10.08.

 

“Tax Return” means any return, declaration, report, claim for refund, or information return or statement filed with or submitted to, or required to be filed with or submitted to, any Governmental or Regulatory Authority in connection with the determination,

 

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assessment, collection, or payment of any Tax, including any schedule or attachment thereto, and including any amendment thereof.

 

“Taxes” or “Tax” means any federal, state, local, or foreign income, gross receipts, License, payroll, employment, excise, stamp, occupation, premium, windfall profits, environmental (including taxes under Code Section 59A), customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto.

 

“Termination Date” has the meaning ascribed to it in Section 13.01(d).

 

“Third Party Claim” has the meaning ascribed to it in Section 12.02(a).

 

“Threshold” has the meaning ascribed to it in Section 12.01(c).

 

“Transactions” means all transactions contemplated by this Agreement.

 

“Transfer Taxes” has the meaning ascribed to it in Section 10.02.

 

“Treasury Regulations” means regulations promulgated by the United States Treasury Department pursuant to the Code.

 

“Unaudited Financial Statement Date” means the last day of the most recent fiscal quarter of the Company for which Financial Statements are delivered to Purchaser pursuant to Section 3.08.

 

“Unaudited Financial Statements” means the Financial Statements for the most recent fiscal quarter of the Company delivered to Purchaser pursuant to Section 3.08.

 

“Underwriters” has the meaning ascribed to it in Section 6.03.

 

“Units” has the meaning ascribed to it in the forepart of this Agreement.

 

“Zuffa 401(k) Plan” has the meaning ascribed to it in Section 7.07(c).

 

Construction of Certain Terms and Phrases.  Unless the context of this Agreement otherwise requires, (i) words of any gender include each other gender; (ii) words using the singular or plural number also include the plural or singular number, respectively; (iii) the terms “hereof,” “herein,” “hereby” and derivative or similar words refer to this entire Agreement; (iv) the terms “Article” or “Section” refer to the specified Article or Section of this Agreement; (v) the phrases “ordinary course of business” and “ordinary course of business consistent with past practice” refer to the business and practice of the Company or a Subsidiary; and (vi) wherever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.”  Whenever this Agreement refers to a number of days, such number shall refer to calendar days unless Business Days are specified.

 

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All accounting terms used herein and not expressly defined herein shall have the meanings given to them under GAAP.

 

ARTICLE II
 SALE OF UNITS AND CLOSING

 

2.01                                          Purchase and Sale.  Each Seller agrees to sell to Purchaser, and Purchaser agrees to purchase from such Seller, all of the right, title and interest of such Seller in and to the Units listed opposite such Seller’s name on Section 2.01 of the Disclosure Schedule, free and clear of all Liens, at the Closing on the terms and subject to the satisfaction or waiver of the conditions set forth in this Agreement.

 

2.02                                          Purchase Price.  At the Closing, Purchaser shall pay an aggregate purchase price for the Units equal to $460,000,000, minus Estimated Assumed Liabilities, minus the amount, if any, of the Closing Indebtedness (the resulting amount, the “Initial Purchase Price” and, following adjustment pursuant to Section 2.04, the “Purchase Price”) in immediately available United States funds in the manner provided in Section 2.03.  The Purchase Price shall be allocated among Sellers in accordance with the terms and conditions of the LLC Agreement.

 

2.03                                          Closing.

 

(a)         The Closing will take place at the offices of Purchaser at 1505 South Pavilion Center Drive, Las Vegas, Nevada 89135, or at such other place as Purchaser and the Seller Representative mutually agree, at 10:00 a.m. local time, on the Closing Date.

 

(b)         At the Closing, Purchaser will pay or cause to be paid, by wire transfer of immediately available funds:

 

(i)                         an aggregate amount equal to the Initial Purchase Price, in such amounts and to such accounts as shall be designated in writing by the Seller Representative to Purchaser at least two (2) Business Days before the Closing Date; and

 

(ii)                      an aggregate amount equal to the Closing Indebtedness, in such amounts and to such accounts as set forth in payoff letters (the “Payoff Letters”), in form and substance reasonably satisfactory to Purchaser, indicating that all corresponding Indebtedness will have been paid in full and providing for, among other things, the release of any Liens relating to such Indebtedness and including all necessary Uniform Commercial Code authorizations.

 

(c)          Simultaneously, each Seller will assign and transfer to Purchaser all of such Seller’s right, title and interest in and to the Units by delivering to Purchaser an assignment agreement, in the form of Exhibit A attached hereto, and the Sellers will cause the Company to prepare an amendment to the LLC Agreement to reflect such transfers and the admission of Purchaser, and the withdrawal of each Seller, as a member thereunder.  At the Closing, there shall also be delivered to the Seller Representative and Purchaser the certificates and other documents to be delivered under Articles VIII and IX.

 

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2.04                                          Purchase Price Adjustment.

 

(a)         No less than five (5) Business Days prior to the Closing Date, the Seller Representative shall prepare and deliver to Purchaser (i) a projected unaudited consolidated balance sheet of the Company and the Subsidiaries as of 12:01 AM (Pacific time) on the Closing Date, prepared in accordance with (I) GAAP and (II) accounting policies applied by the Company for purposes of preparing its consolidated financial statements for the year ended December 31, 2014 (with any conflicts between GAAP and the policies set forth in the preceding clause (II) to be resolved in favor of GAAP), without reflecting any actual or anticipated adjustments or effects arising from the transactions contemplated hereby (the “Estimated Closing Balance Sheet”), and (ii) a closing statement setting forth in reasonable detail a calculation, on the basis of the Estimated Closing Balance Sheet, of Assumed Liabilities (the “Estimated Assumed Liabilities”) and Closing Indebtedness (the items specified in the preceding clauses (i) and (ii) collectively, the “Estimated Closing Balance Sheet Documents”).  The Estimated Closing Balance Sheet Documents shall be subject to Purchaser’s review.  In reviewing such items, Purchaser shall have the right to review the work papers, schedules, memoranda and other documents Sellers and/or the Company prepared or reviewed in preparing the Estimated Closing Balance Sheet Documents and thereafter will have access, during normal business hours, to all relevant Books and Records, all to the extent Purchaser reasonably requires them to complete its review of the Estimated Closing Balance Sheet Documents.  In the event that Purchaser does not agree with the Estimated Closing Balance Sheet Documents or any portion thereof, Sellers shall consider any comments or changes proposed by Purchaser in good faith and Sellers and Purchaser shall negotiate in good faith to resolve the disputed items; provided that, for the avoidance of doubt, none of the failure to include in the Estimated Closing Balance Sheet Documents any comments or changes proposed by Purchaser, Purchaser’s acceptance of the Estimated Closing Balance Sheet Documents, and the consummation of Closing shall constitute an acknowledgement by Purchaser of the accuracy of the Estimated Closing Balance Sheet Documents or limit or otherwise affect Purchaser’s rights and remedies under this Agreement, including Purchaser’s right to include such comments or changes in the Final Closing Balance Sheet Documents.

 

(b)         Not later than 90 days after the Closing Date, Purchaser shall deliver to the Seller Representative (i) an unaudited consolidated balance sheet of the Company and the Subsidiaries as of 12:01 AM (Pacific time) on the Closing Date, prepared in accordance with (I) GAAP and (II) accounting policies applied by the Company for purposes of preparing its consolidated financial statements for the year ended December 31, 2014 (with any conflicts between GAAP and the policies set forth in the preceding clause (II) to be resolved in favor of GAAP), without reflecting any actual or anticipated adjustments or effects arising from the transactions contemplated hereby (the “Final Closing Balance Sheet”), and (ii) a closing statement setting forth in reasonable detail a calculation, on the basis of the Final Closing Balance Sheet, of Assumed Liabilities (the “Final Assumed Liabilities”) (the items specified in the preceding clauses (i) and (ii) collectively, the “Final Closing Balance Sheet Documents”).

 

(c)          The Final Closing Balance Sheet Documents shall be subject to the Seller Representative’s review.  In reviewing such items, the Seller Representative shall have the right to review the work papers, schedules, memoranda and other documents Purchaser prepared or reviewed in preparing the Final Closing Balance Sheet Documents and thereafter will have

 

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access, during normal business hours and upon reasonable advance notice, to all relevant Books and Records, all to the extent the Seller Representative reasonably requires them to complete its review of the Final Closing Balance Sheet Documents.  Within 30 days after its receipt of the Final Closing Balance Sheet Documents, the Seller Representative shall notify Purchaser whether, based on such review, it has any objections to the calculation of the Final Assumed Liabilities (an “Objection Notice”).  Unless the Seller Representative delivers to Purchaser within such 30-day period an Objection Notice, the Final Assumed Liabilities shall be final and binding.

 

(d)         If the Seller Representative delivers an Objection Notice, then (i) for 20 days after Purchaser receives such Objection Notice, Purchaser and the Seller Representative shall use their commercially reasonable efforts to agree on the calculation of the disputed amounts and (ii) lacking such agreement, the matter shall be referred to an independent nationally-recognized accounting firm as may be mutually agreed upon by Purchaser and the Seller Representative (the “Arbitrating Accountants”).  The Arbitrating Accountants shall be directed to render a written report to the Seller Representative and Purchaser on the unresolved disputed items as soon as practicable (and in no event later than thirty (30) days after submission of the dispute to the Arbitrating Accountants), to resolve only those unresolved disputed items set forth in the Objection Notice, not to make any determination of a disputed amount that is outside the range of the proposed amounts submitted by Purchaser and the Seller Representative, and to make any determinations solely in accordance with the terms and provisions of this Agreement.  If unresolved disputed items are submitted to the Arbitrating Accountants, the Seller Representative and Purchaser shall each furnish to the Arbitrating Accountants such work papers, schedules and other documents and information relating to the unresolved disputed items as the Arbitrating Accountants may reasonably request.  The determination of the Arbitrating Accountants shall be final and binding on Purchaser and Sellers and not subject to collateral attack for any reason other than manifest error or fraud.  The Seller Representative and Purchaser each agree to use its respective commercially reasonable efforts to cooperate with the Arbitrating Accountants and to cause the Arbitrating Accountants to resolve any dispute no later than thirty (30) days after submission of the dispute to the Arbitrating Accountants in accordance with this Agreement.  Of the fees, costs and expenses of the Arbitrating Accountants, Purchaser, on the one hand, and Sellers jointly and severally, on the other hand, shall bear a fraction equal to (i) the absolute value of the difference between the Post-Closing Adjustment that would have been payable based on the submission of such party and the Post-Closing Adjustment based on the determination of the Arbitrating Accountants divided by (ii) the absolute value of the difference between the Post-Closing Adjustment that would have been payable based on the submission of Purchaser and the Post-Closing Adjustment that would have been payable based on the submission of the Seller Representative.  For illustrative purposes only, should the Post-Closing Adjustment payable based on the submission of Purchaser be $80, the Post-Closing Adjustment payable based on the submission of the Seller Representative be $100 and the Post-Closing Adjustment payable based on the determination of the Arbitrating Accountants be $95, Purchase would bear 75% (($95 — $80) / ($100 - $80)) and Sellers would bear 25% (($100-$95) / ($100 - $80)) of the fees, costs and expenses of the Arbitrating Accountants.

 

(e)          If the amount equal to the Estimated Assumed Liabilities minus the Final Assumed Liabilities as finally determined hereunder (the “Post-Closing Adjustment”) is greater than $0 (zero), then Purchaser shall pay to the Seller Representative (for the benefit of Sellers) an

 

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amount equal to the Post-Closing Adjustment.  If the Post-Closing Adjustment is less than $0 (zero), then the Seller Representative shall (on behalf of Sellers) pay to Purchaser an amount equal to the absolute value of the Post-Closing Adjustment.  Each payment under this Section 2.04(e) shall be made within five Business Days after such final determination by wire transfer of immediately available funds to a bank account specified by the recipient.

 

2.05                                          Purchase Price Allocation.  Within sixty (60) days following the Closing, the Seller Representative shall deliver to Purchaser a proposed allocation of the Purchase Price (including any liabilities of the Company or any Subsidiary that are properly taken into account for Tax purposes and any payments to Sellers pursuant to Section 14.04) among the Assets and Properties of the Company and the Subsidiaries in accordance with Section 1060 of the Code and Treasury Regulations thereunder (and any similar provision of state, local or foreign law, as applicable). Purchaser shall have thirty (30) days following receipt of Seller Representative’s proposed allocation to provide any changes or objections. If Purchaser objects in writing to Seller Representative’s proposed allocation within such thirty (30) day period, then the parties shall cooperate in good faith to reach a mutually agreeable allocation. Any agreed allocation shall be binding on the parties, and each Seller and Purchaser shall use such agreed allocation in connection with the filing of all relevant U.S. federal, state and local income Tax Returns.  If the parties cannot agree on an appropriate allocation of the Purchase Price, each party shall be entitled to report using an allocation that such party determines appropriate for purposes of computing such party’s Tax obligations.

 

2.06                                          Further Assurances; Post-Closing Cooperation.

 

(a)         At any time or from time to time after the Closing, Sellers shall execute and deliver to Purchaser such other documents and instruments, provide such materials and information and take such other actions as Purchaser may reasonably request more effectively to vest title to the Units in Purchaser and, to the full extent permitted by Law, to put Purchaser in actual possession and operating control of the Company and the Subsidiaries and their Assets and Properties and Books and Records, and otherwise to cause Sellers to fulfill their obligations under this Agreement.

 

(b)         Following the Closing, Sellers and Purchaser will afford each other, and their respective counsel and accountants, during normal business hours, reasonable access to the books, records and other data relating to the Business or Condition of the Company in their possession with respect to periods prior to the Closing and the right to make copies and extracts therefrom, to the extent that such access may be reasonably required by the requesting party in connection with (i) the preparation of Tax Returns, (ii) the determination or enforcement of rights and obligations under this Agreement, (iii) compliance with the requirements of any Governmental or Regulatory Authority, (iv) the determination or enforcement of the rights and obligations of any party to this Agreement or (v) in connection with any actual or threatened Action or Proceeding.  Further, Sellers and Purchaser agree for a period extending six (6) years after the Closing Date not to destroy or otherwise dispose of any such books, records and other data unless they shall first offer in writing to surrender such books, records and other data to the other party and such other party shall not agree in writing to take possession thereof during the ten (10) day period after such offer is made.

 

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(c)          Notwithstanding anything to the contrary contained in this Section, if the parties are in an adversarial relationship in litigation or arbitration, the furnishing of information, documents or records in accordance with any provision of this Section shall be subject to applicable rules relating to discovery; provided that nothing in this Section 2.06(c) shall limit or otherwise modify Purchaser’s rights in, and Sellers’ obligation to deliver, all Assets and Properties and Books and Records of the Company and/or any Subsidiary.

 

2.07                                          Excluded Assets.  Notwithstanding anything in this Agreement to the contrary, the Assets and Properties listed on Section 2.07 of the Disclosure Schedule and all accounts receivable of any of the Company and the Subsidiaries to the extent such accounts receivable are set forth, with specific ledger references allowing their identification, on the Estimated Closing Balance Sheet (such Assets and Properties and accounts receivable, collectively, the “Excluded Assets”) shall be excluded from the Assets and Properties of the Company and its Subsidiaries.  The Sellers shall cause the Company and its Subsidiaries to transfer all right, title and interest in, and all obligations and liabilities related to, such Excluded Assets to a Person, other than the Company or any Subsidiary, effective prior to the Closing.  There shall be no adjustment of the Purchase Price in respect of such Excluded Assets.

 

2.08                                          Tax Treatment.  Purchaser and Sellers agree to treat the purchase and sale of the Units pursuant to this Agreement in accordance with, and as covered by, Revenue Ruling 99-6, 1999-1 C.B. 423 (Situation 2).  Sellers and Purchaser shall not (and shall cause their respective Affiliates not to) take any position on any Tax Return or any other filings, declarations or reports with the Internal Revenue Service and/or other taxing authorities that is inconsistent with such treatment unless otherwise required by applicable Law or pursuant to a final determination (within the meaning of Code Section 1313(a)) or corresponding provision of state, local or foreign Tax Law.

 

2.09                                          Certain Determinations.  Any determinations under this Agreement in which Purchaser action is required, including in connection with determinations of Purchase Price (specifically adjustments thereto), and indemnification (to the extent provided in Section 12.02(c)) or any dispute hereunder, any amendment or waiver of any of the terms and provisions hereof, and any consent or approval provided hereunder, shall be made by the Special Committee of the Board of Managers of Purchaser (or as may be constituted at the parent company of Purchaser) as constituted on the date hereof or, if such committee is no longer constituted, by a majority of the independent members of the Board of Managers of Purchaser or its parent (independence for these purposes meaning such individual is and has been independent of the Seller and has no interest in the Seller or any of its Affiliates other than solely by reason of an interest in Purchaser) (as applicable, the “Committee”).

 

ARTICLE III
 REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

Except as set forth in the applicable section of the Disclosure Schedule (it being agreed that any matter disclosed in any section or subsection of the Disclosure Schedule shall be deemed disclosed in any other section or subsection thereof to the extent that such information is reasonably apparent to be applicable to such other section or subsection), the Company represents and warrants to Purchaser, as of the date hereof and as of the Closing Date, as follows:

 

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3.01                                          Authority.  The Company has all requisite limited liability company power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby.  This Agreement has been duly and validly executed and delivered by the Company.  This Agreement constitutes a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms (assuming in each case due execution and delivery by each other party to this Agreement).

 

3.02                                          Organization of the Company.  The Company is a limited liability company duly organized, validly existing and in good standing under the Laws of the State of Delaware, and has full limited liability company power and authority to conduct its business as and to the extent now conducted and to own, use and lease its Assets and Properties.  The Company is duly qualified, licensed or admitted to do business and is in good standing in those jurisdictions specified in Section 3.02 of the Disclosure Schedule, which are the only jurisdictions in which the ownership, use or leasing of its Assets and Properties, or the conduct or nature of its business, makes such qualification, licensing or admission necessary, except for those jurisdictions in which the adverse effects of all such failures by the Company to be qualified, licensed or admitted and in good standing could not in the aggregate reasonably be expected to have a Company Material Adverse Effect.  Sellers have prior to the execution of this Agreement delivered to Purchaser true and complete copies of the certificate of formation and limited liability company agreement of the Company as in effect on the date hereof.

 

3.03                                          Equity Interests.

 

(a)         The Units are duly authorized, validly issued and outstanding and represent 100% of the equity interests in the Company.

 

(b)         Except as disclosed in Section 3.03 of the Disclosure Schedule, there are no outstanding Options with respect to the Company.  The delivery of an assignment agreement, in the form of Exhibit A attached hereto, and an amendment to the LLC Agreement reflecting such transfer will transfer to Purchaser good and valid title to such Units, free and clear of all Liens.  Except as provided under the LLC Agreement, there are no preemptive rights, rights of first refusal, registration rights or similar rights with respect to the Units or any other equity interests of the Company or any agreements relating to voting of the Units or any other equity interests of the Company.

 

3.04                                          Subsidiaries.

 

(a)         Section 3.04 of the Disclosure Schedule lists the name and jurisdiction of organization of each Subsidiary.  Each Subsidiary is a limited liability company duly organized, validly existing and in good standing under the Laws of its jurisdiction of organization, and has full limited liability company power and authority to conduct its business as and to the extent now conducted and to own, use and lease its Assets and Properties.  Each Subsidiary is duly qualified, licensed or admitted to do business and is in good standing in each jurisdiction in which the ownership, use or leasing of such Subsidiary’s Assets and Properties, or the conduct or nature of its business, makes such qualification, licensing or admission necessary, except for those jurisdictions in which the adverse effects of all such failures by the Subsidiaries to be

 

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qualified, licensed or admitted and in good standing could not in the aggregate reasonably be expected to have a Company Material Adverse Effect.  Except for the equity interests in the Subsidiaries set forth on Section 3.04 of the Disclosure Schedule, neither the Company nor any Subsidiary owns or holds, directly or indirectly, any equity, membership, limited or general partner, or other ownership, economic and/or voting interests in any Person or any other securities.

 

(b)         Section 3.04 of the Disclosure Schedule lists for each Subsidiary all record owners of the outstanding equity interests of each Subsidiary and the equity interests held by each such record owner.  Except as disclosed in Section 3.04 of the Disclosure Schedule, all of the outstanding equity interests of each Subsidiary have been duly authorized and validly issued, are fully paid and nonassessable, and are owned, beneficially and of record, by the Company or Subsidiaries wholly owned by the Company free and clear of all Liens.  Except as disclosed in Section 3.05 of the Disclosure Schedule, there are no outstanding Options with respect to any Subsidiary.

 

(c)          Sellers have prior to the execution of this Agreement delivered to Purchaser true and complete copies of the certificate of formation and limited liability company agreement of each of the Subsidiaries as in effect on the date hereof.

 

3.05                                          No Conflicts.  The execution and delivery by the Company of this Agreement does not, and the performance by the Company of its obligations under this Agreement and the consummation of the transactions contemplated hereby will not:

 

(a)         conflict with or result in a violation or breach of any of the terms, conditions or provisions of the certificate or articles of incorporation or by-laws (or other comparable organizational documents) of the Company or any Subsidiary;

 

(b)         subject to obtaining the consents, approvals and actions, making the filings and giving the notices disclosed in Section 3.06 of the Disclosure Schedule, conflict with or result in a material violation or breach of any term or provision of any Law or Order applicable to the Company or any Subsidiary or any of their respective Assets and Properties (other than such conflicts, violations or breaches as would occur solely as a result of the identity or the legal or regulatory status of Purchaser or any of its Affiliates); or

 

(c)          except as disclosed in Section 3.05 of the Disclosure Schedule, (i) conflict with or result in a material violation or breach of, (ii) constitute (with or without notice or lapse of time or both) a default under, (iii) require the Company or any Subsidiary to obtain any consent, approval or action of, make any filing with or give any notice to any Person as a result or under the terms of, (iv) result in or give to any Person any right of termination, cancellation, acceleration or modification of or with respect to any Contract or License to which the Company or any Subsidiary is a party or by which any of their respective Assets and Properties is bound, or (v) result in the creation or imposition of any Lien upon the Company or any Subsidiary or any of their respective Assets and Properties.

 

3.06                                          Governmental Approvals and Filings.  Except as disclosed in Section 3.06 of the Disclosure Schedule, no consent, approval or action of, filing with or notice

 

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to any Governmental or Regulatory Authority, including any Gaming Authority, on the part of the Company or any Subsidiary is required in connection with the execution, delivery and performance of this Agreement or the consummation of the transactions contemplated hereby.

 

3.07                                          Books and Records.  The minute books and other similar records of the Company and the Subsidiaries as made available to Purchaser contain a true and complete record, in all material respects, of all action taken at all meetings and by all written consents in lieu of meetings of the members and managers of the Company and the Subsidiaries.  The membership interest transfer ledgers and other similar records of the Company and the Subsidiaries as made available to Purchaser accurately reflect all prior record transfers in the equity interests of the Company and the Subsidiaries. At Closing, all such books and records will be in the possession of the Company.

 

3.08                                          Financial Statements and Condition.

 

(a)         Prior to the execution of this Agreement, the Company has delivered to Purchaser true and complete copies of the following financial statements:

 

(i)                                                             the audited balance sheets of the Company and its consolidated Subsidiaries as of December 31, 2014, 2013 and 2012, and the related audited consolidated statements of operations, members’ equity and cash flows and related notes for each of the years ended December 31, 2014, 2013 and 2012 together with a true and correct copy of the report on such audited information by Ernst & Young LLP, and all letters from such accountants with respect to the results of such audits; and

 

(ii)                                                          the unaudited balance sheets of the Company and its consolidated Subsidiaries as of June 30, 2015, and the related unaudited consolidated statements of operations, members’ equity and cash flows for the portion of the fiscal year then ended.

 

Except as set forth in the notes thereto and as disclosed in Section 3.08(a) of the Disclosure Schedule, all such financial statements were prepared in accordance with GAAP (except for the absence of footnotes and changes resulting from audits and year-end adjustments in the case of the Unaudited Financial Statements the effect of which is not, individually or in the aggregate, material) and fairly present in all material respects the consolidated financial condition and results of operations of the Company and its consolidated Subsidiaries as of the respective dates thereof and for the respective periods covered thereby.  The financial condition and results of operations of each Subsidiary are, and for all periods referred to in this Section 3.08 have been, consolidated with those of the Company.

 

(b)         Except for the execution and delivery of this Agreement and the transactions to take place pursuant hereto on or prior to the Closing Date and as disclosed in Section 3.08 of the Disclosure Schedule, since the Unaudited Financial Statement Date (i) the business of the Company and the Subsidiaries has been operated in all material respects in the ordinary course, (ii) there has not been any Company Material Adverse Effect and (iii) no action has been taken that, if taken after the date hereof, would require the consent of Purchaser under Section 6.04(b).

 

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(c)          Except (i) as and to the extent disclosed in the Financial Statements, (ii) for Liabilities incurred after June 30, 2015 in the ordinary course of business consistent with past practice and expressly included in the calculation of Final Assumed Liabilities, and (iii) for Liabilities set forth on Section 3.08(c) of the Disclosure Schedule, neither the Company nor any of its Subsidiaries has any Liabilities, whether or not such Liabilities would be required by GAAP to be reflected on a consolidated balance sheet of the Company and its Subsidiaries.

 

3.09                                          Taxes.  Except as set forth in Section 3.09 of the Disclosure Schedule:

 

(a)         The Company has been treated as a partnership and not as an association taxable as a corporation for U.S. federal income tax purposes since its inception, and will be so treated for all taxable periods up to the Closing Date.  Each Subsidiary has been treated as disregarded as an entity separate from the Company for U.S. federal income tax purposes and will be so treated for all taxable periods up to the Closing Date.

 

(b)         The Company and each Subsidiary have filed all Tax Returns required to be filed by applicable Law.  All Tax Returns were (and, as to Tax Returns not filed as of the date hereof but due on or before the Closing Date, will be) true, complete and correct and filed on a timely basis.  The Company and each Subsidiary (i) has timely paid all Taxes required to be paid as of the date hereof (and, as to Taxes not due as of the date hereof but due on or before the Closing Date, will timely pay such Taxes); or (ii) has duly and fully provided (or, prior to the Closing Date, will provide) reserves adequate to pay all Taxes for the periods up to and including the Closing Date.

 

(c)          There are no Tax Liens upon the assets of the Company (or any Subsidiary) except Permitted Liens.

 

(d)         The Company and each Subsidiary have withheld and paid all Taxes required to have been withheld and paid by it in connection with amounts paid or owing to any employee, independent contractor, creditor, equityholder or other third party, and all Forms W-2 and 1099 with respect thereto have been properly completed and timely filed.

 

(e)          No deficiency for any Taxes has been proposed, asserted or assessed, in each case in writing, against the Company or any Subsidiary that has not been resolved and paid in full.

 

(f)           No audits or other Actions or Proceedings are presently pending or, to the Knowledge of Sellers, threatened with regard to any Taxes or Tax Returns of the Company or any Subsidiary.

 

(g)          Neither the Company nor any Subsidiary has received any written ruling of a Governmental or Regulatory Authority relating to Taxes, or any other written and legally binding agreement with a Governmental or Regulatory Authority relating to Taxes, in each case within the last five years.

 

(h)         No agreement as to indemnification for, contribution to, or payment of Taxes exists between the Company or any Subsidiary, on the one hand, and any other person, on the

 

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other (other than the LLC Agreement).  Neither the Company nor any Subsidiary has any liability for Taxes of any person under Treasury Regulation Section 1.1502-6 (or any similar provision of any state, local or foreign Law), or as a transferee or successor, by contract or otherwise.

 

(i)             No written claim has been made by a Governmental or Regulatory Authority with respect to the Company or any Subsidiary in a jurisdiction where such Company or Subsidiary does not file Tax Returns that it is subject to taxation by that jurisdiction.

 

(j)            Neither the Company nor any Subsidiary has ever been a member of any consolidated, combined, affiliated, unitary or similar group for any Tax purposes.

 

(k)         Neither the Company nor any Subsidiary has engaged in any “reportable transactions” as defined in Treasury Regulation Section 1.6011-4(b).

 

(l)             Neither the Company nor any Subsidiary has, nor has it ever had, a permanent establishment in any country other than the United States.

 

(m)     Neither the Company nor any Subsidiary (nor any other Person on their behalf) has (i) executed or entered into a closing agreement pursuant to Section 7121 of the Code or any similar provision of law; or (ii) other than pursuant to extensions of time to file Tax Returns obtained in the ordinary course of business, granted any extension or waiver for the assessment or collection of Taxes, which Taxes have not since been paid.

 

3.10                                          Legal Proceedings.  Except as disclosed in Section 3.10 of the Disclosure Schedule (with paragraph references corresponding to those set forth below), (i) there is not pending or, to the Knowledge of Sellers, threatened (A) any material Actions or Proceedings against, relating to or affecting the Company or any Subsidiary or any of their respective Assets and Properties or any of their respective directors, officers, employees or agents (in their capacities as such), or (B) any Actions or Proceedings seeking to restrain, enjoin, or otherwise prohibit or make illegal the consummation of any of the Transactions, and (ii) there are no Orders outstanding against the Company or any Subsidiary. To the Knowledge of Sellers, no event has occurred or circumstance exists that would reasonably be expected to give rise to or serve as a basis for the commencement of any material Actions or Proceedings or material Orders against the Company or any Subsidiary.

 

3.11                                          Compliance with Laws.  Since December 31, 2012, (i) the Company and each of its Subsidiaries have complied in all material respects with all applicable Laws, including Gaming Laws, and Orders, (ii) no written notice, charge, claim, action or assertion has been received by the Company or any of its Subsidiaries or has been filed or commenced against the Company or any Subsidiary alleging any violation of any of the foregoing, and (iii) to the Knowledge of Sellers, no charge, claim, action or assertion has been threatened in writing against the Company or any of its Subsidiaries alleging any material violation of any of the foregoing.

 

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3.12                                          Benefit Plans; ERISA.

 

(a)         Section 3.12(a) of the Disclosure Schedule contains a true and complete list of each Benefit Plan.

 

(b)         With respect to each material Benefit Plan, true and complete copies of the following have been provided or made available to Purchaser:  (i) the three (3) most recent annual reports (if required under ERISA), including all schedules and attachments; (ii) the latest/current summary plan description (if required under ERISA), together with each summary of material modifications required under ERISA; (iii) each such written Benefit Plan and all amendments and restatements thereto; (iv) with respect to each Qualified Plan, the most recent determination, opinion or advisory letter, ruling or notice issued by the IRS or any other Governmental or Regulatory Authority, and a complete set of plan documents since inception or, if later, the date of the last IRS determination or opinion letter; (v) all trust agreements, insurance contracts, and other funding vehicles, (vi) to the extent applicable, the most recent financial statements; (vii) all contracts with third party administrators, investment managers, consultants, and other service providers; (viii) all reports, including all discrimination testing reports, submitted within the three (3) years preceding the Closing Date by third party administrators, actuaries, investment managers, consultants, or other service providers; (ix) all correspondence within the last six (6) years to or from the IRS, U.S. Department of Labor or other Governmental or Regulatory Authority; and (x) such additional documents related to the Benefit Plans as are reasonably requested by Purchaser prior to the Closing Date.

 

(c)          Each Benefit Plan complies and has been administered in all material respects in accordance with the applicable Benefit Plan documents and with all applicable Laws (including ERISA and the Code).  Each Benefit Plan that is intended to be a Qualified Plan has received a favorable determination letter from the IRS, or with respect to a prototype plan, can rely on an opinion letter from the IRS to the prototype plan sponsor, to the effect that such Qualified Plan is so qualified and that the plan and the trust related thereto are exempt from federal income Taxes under Sections 401(a) and 501(a), respectively, of the Code, and, to the Knowledge of Sellers, nothing has occurred that could reasonably be expected to cause the revocation of such determination letter from the IRS or the unavailability of reliance on such opinion letter from the IRS, as applicable.

 

(d)         Except as set forth in Section 3.12(d) of the Disclosure Schedule, all benefits, contributions and premiums required by Sellers, the Company or any of its Subsidiaries and due under the terms of each Benefit Plan or applicable Law have been timely made and paid in accordance with the terms of such Benefit Plan, the terms of all applicable Laws and GAAP.  With respect to any Benefit Plan, no event has occurred or, to the Knowledge of Sellers, is reasonably expected to occur that has resulted in or would subject the Company or a Subsidiary to a Tax under Section 4971 of the Code or the assets of the Company or the Subsidiaries to a lien under Section 430(k) of the Code.

 

(e)          Except as set forth in Section 3.12(e) of the Disclosure Schedule, (i) no Benefit Plan has been or is covered by Title IV of ERISA, ERISA Section 302 or 303 or Code Section 412 or 430 and neither the Company nor the Subsidiaries nor any ERISA Affiliate has any liability or obligation under Title IV of ERISA, ERISA Section 302 or 303 or Code Section

 

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412 or 430; and (ii) neither the Company nor any Subsidiary (A) has at any time prior to the execution date of this Agreement contributed to or had an obligation to contribute to, (B) contributes to or has an obligation to contribute to, (C) has any obligation whatsoever relating to, or (D) expects to incur an obligation relating to, any of the following: (x) any “employee pension benefit plan” as defined in ERISA Section 3(2) subject to Title IV of ERISA, Section 302 or 303 or Code Section 412 or 430, (y) any “multiemployer plan” as defined in ERISA Section 3(37) or ERISA Section 4001(a)(3), or (z) a “multiple employer plan” (within the meaning of Code Section 413(c) or ERISA Section 4001(a)(3)).

 

(f)           Except as set forth in Section 3.12(f) of the Disclosure Schedule and other than as required under Section 4980B of the Code or other applicable Laws, no Benefit Plan provides benefits or coverage in the nature of health, life or disability insurance following retirement or other termination of employment (other than death benefits when termination occurs upon death).

 

(g)          Except as set forth in Section 3.12(g) of the Disclosure Schedule: (i) there is no pending or, to the Knowledge of Sellers, threatened Actions or Proceedings relating to a Benefit Plan; and (ii) to the Knowledge of Sellers, no Benefit Plan has within the three (3) years prior to the date hereof been the subject of an examination or audit by a Governmental or Regulatory Authority.

 

(h)         Except as set forth in Section 3.12(h) of the Disclosure Schedule, neither the execution of the Agreement nor the consummation of the Transactions will, either alone or in combination with another event: (i) result in the payment to any Company Employee, director or consultant of the Company or the Subsidiaries of any money or other property; (ii) accelerate the vesting of or provide any additional rights or benefits (including funding of compensation or benefits through a trust or otherwise) to any Company Employee, director or consultant; or (iii) limit or restrict the ability of Purchaser or its Affiliates to merge, amend or terminate any Benefit Plan.  Neither the execution of this Agreement nor the consummation of the transactions contemplated hereby will result in “excess parachute payments” within the meaning of Section 280G(b) of the Code or otherwise result in any payments that would fail to be deductible under Section 280G of the Code.

 

(i)             Except as set forth on Section 3.12(i) of the Disclosure Schedule, each Benefit Plan can be terminated within thirty (30) days of the Closing Date without payment of any additional contribution or amount and without creating any unfunded or unaccrued liability or the vesting or acceleration of any benefits promised by such Benefit Plan, except with respect to vesting as may be required by law.  Except as set forth on Section 3.12(i) of the Disclosure Schedule, no action or omission of the Company or any Subsidiary, Benefit Plan fiduciary, or any shareholder, director, officer, employee, or agent thereof, and no Benefit Plan documentation or agreement, summary plan description or other written communication distributed generally to employees, in any way restricts, impairs or prohibits (whether legally binding or not) the Company, any Subsidiary, Purchaser, Purchaser’s Affiliates or any successor thereof from amending, merging, terminating or otherwise discontinuing any Benefit Plan in accordance with the express terms of any such plan and applicable law at or after Closing, except as required by law and any such amendment, merger, termination or discontinuance may occur without any liability to the Company, any Subsidiary or Purchaser or any Affiliate of Purchaser.

 

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(j)            Except as set forth in Section 3.12(j) of the Disclosure Schedule, to the Knowledge of Sellers, there is no transaction nor has there been any such transaction in connection with the Company or any Subsidiary or any fiduciary of any Benefit Plan which could be subject to either a civil penalty assessed pursuant to ERISA Section 502, a tax imposed by Code Section 4975 or Liabilities for a breach of fiduciary responsibility under ERISA (including liability through an indemnification agreement or policy), and, to the Knowledge of Sellers, no basis for any such Liability exists, including, but not limited to, any transaction in violation of ERISA Section 406(a) or (b) or any “prohibited transaction” (as defined in Code Section 4975(c)(1)).

 

(k)         No Benefit Plan is funded by, associated with, or related to a “voluntary employee’s beneficiary association” within the meaning of Code Section 501(c)(9), a “welfare benefit fund” within the meaning of Code Section 419, a “qualified asset account” within the meaning of Code Section 419A or a “multiple employer welfare arrangement” within the meaning of ERISA Section 3(40).

 

(l)             Neither the Company nor any of its Subsidiaries has any obligation or Liabilities for the gross-up or reimbursement of Taxes resulting from violations of Code Section 409A.

 

3.13                                          Real Property.  None of the Company nor any Subsidiary owns any real property.  Section 3.13 of the Disclosure Schedule contains a true and correct list of all leases of real property under which the Company or any Subsidiary is the lessee as of the date hereof (true and complete copies of which, together with all amendments and supplements thereto and all waivers of any terms thereof, have been delivered to Purchaser prior to the execution of this Agreement).

 

3.14                                          Tangible Personal Property.  The Company or a Subsidiary is in possession of and has good title to, or has valid leasehold interests in or valid rights under Contract to use, all tangible personal property used in and individually or in the aggregate with other such property material to the Business or Condition of the Company.  All such tangible personal property is free and clear of all Liens, other than Permitted Liens and Liens, if any, disclosed in Section 3.14 of the Disclosure Schedule.  All such tangible personal property is in good working order and condition, ordinary wear and tear excepted, and free of any deferred maintenance or deferred capital expenditure needs.

 

3.15                                          Intellectual Property Rights.

 

(a)         The Company or a Subsidiary owns (free and clear of any Liens), or is licensed or otherwise has sufficient rights to use, for any purpose and without restrictions, all Intellectual Property used or held for use in the operation of the business of the Company and the Subsidiaries as currently conducted and to the knowledge of the Company and the Subsidiaries as currently planned to be conducted (“Company Owned Intellectual Property”).  Section 3.15(a) of the Disclosure Schedule sets forth a true and complete list of all Intellectual Property owned by the Company or any Subsidiary with a description of owner, jurisdiction, registration number, applicant number or issuance number, date of application, issuance and/or filing as to which a registration has been obtained by or applied for with any Governmental or Regulatory

 

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Authorities in any jurisdiction in the world.  Except as disclosed in Section 3.15(a) of the Disclosure Schedule all registrations with and applications to Governmental or Regulatory Authorities with respect to Intellectual Property owned by the Company or a Subsidiary are valid, subsisting and in full force and effect (or with respect to applications applied for).

 

(b)         Except as disclosed in Section 3.15(b) (i) there are no material restrictions on the direct or indirect transfer of any Contract, or any interest therein, held by the Company or any Subsidiary with respect to Intellectual Property and (ii) neither the Company nor any Subsidiary is in default in any material respect under any Contract to use Intellectual Property.

 

(c)          Except as set forth in Section 3.15(c) of the Disclosure Schedule, none of Sellers, the Company nor any Subsidiary has received written notice that the Company or any Subsidiary is infringing, misappropriating, diluting or otherwise violating any Intellectual Property of any other Person.  To the Knowledge of Sellers, no claim is pending or has been made, asserted or threatened to such effect that has not been resolved and neither the Company nor any Subsidiary is infringing, misappropriating, diluting or otherwise violating any Intellectual Property of any other Person.  To the Knowledge of Sellers, no Person has misappropriated, infringed, diluted, or otherwise violated, either directly or indirectly, any Intellectual Property owned, used or held for use by the Company or any Subsidiary.

 

3.16                                          Sufficiency of Assets; No other Business.

 

(a)         Immediately following the Closing, the Company and the Subsidiaries will own, or will have valid rights to use, all rights, properties and other assets used in the ordinary course or necessary for the conduct of the business of the Company and the Subsidiaries as it is currently conducted, other than the Excluded Assets.

 

(b)         Except as set forth in Section 3.16(b) of the Disclosure Schedule, neither the Company nor any Subsidiary currently engages, or since January 1, 2012 has engaged, in any business or in the provision of any services, other than in the management of the Station Operations.

 

3.17                                          Contracts.

 

(a)         Section 3.17(a) of the Disclosure Schedule (with paragraph references corresponding to those set forth below) contains a true and complete list of each of the following Contracts or other arrangements (true and complete copies or, with respect to oral Contracts or oral arrangements, reasonably complete and accurate written descriptions of which, together with all amendments and supplements thereto and all waivers of any terms thereof, have been delivered to Purchaser prior to the execution of this Agreement), to which the Company or any Subsidiary is a party or by which any of their respective Assets and Properties is bound:

 

(i)                                                             all Contracts (excluding Benefit Plans) providing for a commitment of employment or consultation services for a specified or unspecified term or otherwise relating to employment or consultation services or the termination of employment or consultation services;

 

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(ii)                                                          all Contracts containing any provision or covenant prohibiting or limiting the ability of the Company or any Subsidiary to engage in any business activity or compete with any Person or prohibiting or materially limiting the ability of any Person to compete with the Company or any Subsidiary;

 

(iii)                                                       all Contracts containing any provision or covenant prohibiting or limiting the ability of the Company or any Subsidiary to solicit or hire any individual or group of individuals;

 

(iv)                                                      all material partnership, joint venture, shareholders’ or other similar Contracts with any Person;

 

(v)                                                         all Contracts relating to Indebtedness of the Company or any Subsidiary in excess of One Hundred Thousand Dollars ($100,000.00) (including Indebtedness owing to the Company or any wholly-owned Subsidiary);

 

(vi)                                                      all Contracts relating to (A) the disposition or acquisition of any Assets and Properties, other than dispositions or acquisitions in the ordinary course of business consistent with past practice, and (B) any merger or other business combination;

 

(vii)                                                   all Contracts that (A) limit or contain restrictions on the ability of the Company or any Subsidiary to declare or pay dividends on, to make any other distribution in respect of or to issue or purchase, redeem or otherwise acquire its capital stock, to incur Indebtedness, to incur or suffer to exist any Lien, to purchase or sell any Assets and Properties, to change the lines of business in which it participates or engages or to engage in any merger, consolidation or other business combination or (B) require the Company or any Subsidiary to maintain specified financial ratios or levels of net worth or other indicia of financial condition;

 

(viii)                                                all Contracts with or for the benefit of any Affiliate of the Company (other than any Subsidiary or the Purchaser or any of its subsidiaries), any Seller, or any Related Person of any Seller (each, an “Affiliate Agreement”);

 

(ix)                                                      any Contract between the Company or any Subsidiary, on the one hand, and Purchaser or any of Purchaser’s subsidiaries, on the other hand, including Contracts providing for management services;

 

(x)                                                         any Contract relating to the development, ownership, licensing or use of any Intellectual Property, including license agreements, coexistence agreements and covenants not to sue;

 

(xi)                                                      any Contract for capital expenditures committing the Company and Subsidiaries, collectively, to such expenditures in excess of One Hundred Thousand Dollars ($100,000);

 

(xii)                                                   any collective bargaining agreement or other Contract with any labor union or employee representative;

 

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(xiii)                                                each Contract which provides for payment by the Company or any Subsidiary of commissions or similar payments (other than to their respective employees in the ordinary course of business);

 

(xiv)                                               any power of attorney that is currently effective and outstanding;

 

(xv)                                                  each written warranty, guaranty or other similar undertaking with respect to contractual performance extended by the Company or any Subsidiary other than in the ordinary course of business; and

 

(xvi)                                               all other Contracts (other than Benefit Plans, leases listed in Section 3.13 of the Disclosure Schedule and insurance policies listed in Section 3.19 of the Disclosure Schedule) that either (A) involve the payment or potential payment, pursuant to the terms of any such Contract, by or to the Company or any Subsidiary of more than One Hundred Thousand Dollars ($100,000.00) at one time or in any twelve (12) month period, or (B) cannot be terminated within sixty (60) days after giving notice of termination without resulting in any material cost or penalty to the Company or any Subsidiary.

 

(b)         Each Contract required to be disclosed in Section 3.13 of the Disclosure Schedule, Section 3.17(a) of the Disclosure Schedule, or Section 3.19 of the Disclosure Schedule is in full force and effect and constitutes a legal, valid and binding agreement, enforceable in accordance with its terms, of the Company or its Subsidiary and, to the Knowledge of Sellers, each other party thereto, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar Laws relating to or limiting creditors’ rights generally or by equitable principles relating to enforceability.  Except as disclosed in Section 3.17(b) of the Disclosure Schedule neither the Company, any Subsidiary nor, to the Knowledge of Sellers, any other party to such Contract is, or has received notice of termination or notice that it is, in violation or breach of or default under any such Contract (or with notice or lapse of time or both, would be in violation or breach of or default under any such Contract) in any material respect, and there are no outstanding claims for indemnification under any such Contract.

 

3.18                                          Licenses; Gaming Licenses.  Except as disclosed in Section 3.18 of the Disclosure Schedule: (i) collectively, all Licensed Parties own or validly hold all Licenses necessary for or used in the operation of the business of the Company and the Subsidiaries; (ii) each such License is valid, binding and in full force and effect and no event has occurred that permits (or with the giving of notice or lapse of time, would permit) the revocation, non-renewal, modification, suspension, limitation or termination of any such License; (iii) no Licensed Party is (or with the giving of notice or lapse of time or both, would be) in non-compliance with or default under any such License or has received written notification by a Governmental or Regulatory Authority alleging any such non-compliance or default; and (iv) neither the Company nor any Subsidiary or Licensing Affiliate has ever abandoned or withdrawn or been denied or had suspended or revoked a License or an application therefor.

 

3.19                                          Insurance.  Section 3.19 of the Disclosure Schedule contains a true and complete list of all material insurance policies currently in effect that insure the business, operations or employees of the Company or any Subsidiary or affect or relate to the ownership,

 

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use or operation of any of the Assets and Properties of the Company or any Subsidiary and that (i) have been issued to the Company or any Subsidiary or (ii) have been issued to any Person (other than the Company or any Subsidiary) for the benefit of the Company or any Subsidiary.  The insurance coverage provided by any of the policies described in clause (i) above will not terminate or lapse by reason of the transactions contemplated by this Agreement.  Each policy referred to in clause (i) above is valid and binding and in full force and effect, all premiums due under such policies have been paid and neither the Company nor any Subsidiary has received any written notice of cancellation or termination in respect of any such policy or is in default thereunder in any material respect.

 

3.20                                          Employees; Labor Relations.  The Company and its Subsidiaries are, and have at all times within the past five years been, in compliance in all material respects with all Laws relating to the employment of labor, including any provision thereof relating to wages, hours, collective bargaining, labor relations, employment practices, prohibited discrimination, immigration status, worker classification (including the proper classification of working as independent contractors and consultants and exempt or non-exempt), equal opportunity, leave issues, unemployment insurance, workers’ compensation, affirmative action, plant closing, layoffs, and employee health, safety and welfare.  Neither the Company nor any Subsidiary is the subject of any Actions or Proceedings or other legal controversies, including strikes, slowdowns, work stoppages, lockouts or other material labor dispute, that is pending or, to the Knowledge of Sellers, threatened, which involve any past or current employees or contractors of the Company or any of its Subsidiaries, and no such Actions or Proceedings or other legal controversies have occurred within the past five (5) years.  Neither the Company nor any of its Subsidiaries is or has been party to (or required to be a party to) or bound by any collective bargaining, or contract with a union or other similar labor-related representative or organization, and, to the Knowledge of Sellers, there exists no current union organizational effort with respect to any employees of the Company or any of its Subsidiaries. To the knowledge of Sellers, no employees of the Company or any of its Subsidiaries are represented by a union or similar employee representative or organization. No officer of the Company has notified the Company that he or she intends to terminate his or her employment with the Company. To the Knowledge of Sellers, no past or current employee of or consultant to the Company or any of its Subsidiaries is currently in violation of any Restrictive Covenant owing (i) to the Company or any of its Subsidiaries or (ii) to any other Person that would reasonably be expected to adversely affect the right or ability of any such individual to work for or provide services to the Company or any of its Subsidiaries.

 

3.21                                          Certain Payments.  None of the Company, any Subsidiary, any director, officer, manager or, to the Knowledge of the Sellers, any agent or employee of the Company or any Subsidiary, or any other Person associated with or acting for or on behalf of the Company or any Subsidiary, has directly or indirectly (a) made any contribution, gift (other than routine business gifts and entertainment of nominal value), bribe, rebate, payoff, influence payment, kickback or other payment to any Person, private or public, regardless of form, whether in money, property or services to (i) obtain favorable treatment in securing business, (ii) to pay for favorable treatment for business secured or (iii) to obtain special concessions or for special concessions already obtained, for or in request of the Company or any Subsidiary, in each case that would violate any legal requirement, or (b) established or maintained any fund or asset on

 

28

 

behalf of the Company or any Subsidiary that has not been recorded in the books and records of the Company or Subsidiary, as applicable.

 

3.22                                          Related Party Transactions.  Except as set forth on Section 3.22 of the Disclosure Schedule, (i) neither any Seller nor any Related Person of any Seller has, directly or indirectly, any interest in any property (other than the Excluded Assets) (whether real, personal, or mixed and whether tangible or intangible) used by the Company or its Subsidiaries or in any Contract to which the Company or any Subsidiary is a party, (ii)  there is no indebtedness, obligations or other Liabilities owed by the Company or any Subsidiary to any Seller or any Related Person of any Seller or by any Seller or any Related Person of any Seller to the Company or any Subsidiary, and (iii) neither the Company nor any Subsidiary has guaranteed any indebtedness or other obligation or liability owed by any Seller or any Related Person of any Seller.  Except as set forth on Section 3.22 of the Disclosure Schedule, no Related Person of the Company or its Subsidiaries has any interest in any property (other than the Excluded Assets) (whether real, personal, or mixed and whether tangible or intangible) used by the Company or its Subsidiaries and there are no Contracts or Liabilities between the Company or any Subsidiary, on the one hand, and any such Related Person, on the other hand.

 

3.23                                          Brokers.  All negotiations relative to this Agreement and the transactions contemplated hereby have been carried out by Sellers directly with Purchaser without the intervention of any Person on behalf of Sellers in such manner as to give rise to any valid claim by any Person against Purchaser, the Company or any Subsidiary for a finder’s fee, brokerage commission or similar payment.

 

3.24                                          Environmental Matters.  To the Knowledge of Sellers, there are no hazardous substances, materials or pollutants located or managed in, on or under any of the real property leased or subleased by the Company or any Subsidiary in violation of applicable Law.

 

3.25                                          Representations Complete.  None of the representations or warranties made by the Company in this Agreement contains any untrue statement of a material fact, or omits to state any material fact necessary in order to make the statements contained herein, in the light of the circumstances under which they were made, not misleading.

 

ARTICLE IV
 REPRESENTATIONS AND WARRANTIES OF SELLERS

 

Except as set forth in the applicable section of the Disclosure Schedule (it being agreed that any matter disclosed in any section or subsection of the Disclosure Schedule shall be deemed disclosed in any other section or subsection thereof to the extent that such information is reasonably apparent to be applicable to such other section or subsection), each Seller, severally and not jointly, hereby represents and warrants to Purchaser, as of the date hereof and as of the Closing Date, as follows:

 

4.01                                          Organization; Good Standing.  Such Seller is duly organized, validly existing and in good standing under the Laws of its jurisdiction of organization.  Such Seller has full power and authority to execute and deliver this Agreement and to perform its

 

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obligations hereunder and to consummate the transactions contemplated hereby, including without limitation to own, hold, sell and transfer (pursuant to this Agreement) the Units.

 

4.02                                          Authority.  Such Seller has all requisite trust or limited liability company, as applicable, power and authority to execute and deliver this Agreement and each Ancillary Agreement, to perform its obligations hereunder under thereunder and to consummate the transactions contemplated hereby and thereby.  This Agreement has been, and at Closing each Ancillary Agreement will be, duly and validly executed and delivered by such Seller.  This Agreement constitutes, and each Ancillary Agreement will at Closing constitute, a legal, valid and binding obligation of such Seller enforceable against such Seller in accordance with its terms (assuming in each case due execution and delivery by each other party to the applicable agreement).

 

4.03                                          Ownership of Units.  Such Seller owns the Units listed opposite such Seller’s name in Section 4.03 of the Disclosure Schedule, beneficially and of record, free and clear of all Liens.  The delivery of such Seller’s assignment agreement, in the form of Exhibit A attached hereto, and an amendment to the LLC Agreement reflecting such transfer will transfer to Purchaser good and valid title to such Seller’s Units, free and clear of all Liens.  Except for the LLC Agreement, such Seller is not party to any agreement pursuant to which such Seller has granted preemptive rights, rights of first refusal, registration rights or similar rights with respect to the Units or any other equity interests of the Company or any agreement relating to voting of the Units or any other equity interests of the Company.

 

4.04                                          No Conflicts.  The execution and delivery such Seller of this Agreement or any Ancillary Agreement do and will not, and the performance by such Seller of its obligations under this Agreement or any Ancillary Agreement and the consummation of the transactions contemplated hereby or thereby will not:

 

(a)         conflict with or result in a violation or breach of any of the terms, conditions or provisions of the certificate or articles of incorporation or by-laws (or other comparable organizational documents) of such Seller;

 

(b)         subject to obtaining the consents, approvals and actions, making the filings and giving the notices disclosed in Section 3.06 of the Disclosure Schedule, conflict with or result in a violation or breach of any term or provision of any Law or Order applicable to such Seller or any of its Assets and Properties (other than such conflicts, violations or breaches as would occur solely as a result of the identity or the legal or regulatory status of Purchaser or any of its Affiliates); or

 

(c)          except as disclosed in Section 4.04 of the Disclosure Schedule, (i) conflict with or result in a violation or breach of, (ii) constitute (with or without notice or lapse of time or both) a default under, (iii) require such Seller to obtain any consent, approval or action of, make any filing with or give any notice to any Person as a result or under the terms of, (iv) result in or give to any Person any right of termination, cancellation, acceleration or modification of or with respect to any Contract or License to which such Seller is a party or by which any of its respective Assets and Properties is bound, or (v) result in the creation or imposition of any Lien upon such Seller, such Seller’s Units, any of such Seller’s respective Assets and Properties.

 

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4.05                                          Governmental Approvals and Filings.  Except as disclosed in Section 3.07 of the Disclosure Schedule, no consent, approval or action of, filing with or notice to any Governmental or Regulatory Authority, including any Gaming Authority, on the part of such Seller is required in connection with the execution, delivery and performance of this Agreement or the consummation of the transactions contemplated hereby.

 

4.06                                          Legal Proceedings.  Except as disclosed in Section 4.06 of the Disclosure Schedule, there are no Actions or Proceedings pending or threatened against, relating to or affecting such Seller or any of its respective Assets and Properties or any of its directors, officers, employees or agents (in their capacities as such) that relate to or affect the Company or any Subsidiary or any of their respective Assets and Properties or that are seeking to prevent, hinder or delay any transaction contemplated under this Agreement.

 

4.07                                          Representations Complete.  None of the representations or warranties made by the Sellers in this Agreement contains any untrue statement of a material fact, or omits to state any material fact necessary in order to make the statements contained herein, in the light of the circumstances under which they were made, not misleading.

 

ARTICLE V
 REPRESENTATIONS AND WARRANTIES OF PURCHASER

 

Except as set forth in the applicable section of the Disclosure Schedule (it being agreed that any matter disclosed in any section or subsection of the Disclosure Schedule shall be deemed disclosed in any other section or subsection thereof to the extent that such information is reasonably apparent to be applicable to such other section or subsection), Purchaser hereby represents and warrants to Sellers, as of the date hereof and as of the Closing Date, as follows:

 

5.01                                          Organization.  Purchaser is a limited liability company duly organized, validly existing and in good standing under the Laws of the State of Nevada.  Purchaser has full limited liability company power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby.

 

5.02                                          Authority.  The execution and delivery by Purchaser of this Agreement and each Ancillary Agreement, and the performance by Purchaser of its obligations hereunder and thereunder, have been duly and validly authorized by the Board of Managers of Purchaser, no other limited liability company action on the part of Purchaser being necessary.  This Agreement has been, and at Closing each Ancillary Agreement will be, duly and validly executed and delivered by Purchaser.  This Agreement constitutes, and each Ancillary Agreement will at Closing constitute, a legal, valid and binding obligation of Purchaser enforceable against Purchaser in accordance with its terms (assuming in each case due execution and delivery by each other party to the applicable agreement).

 

5.03                                          No Conflicts.  The execution and delivery by Purchaser of this Agreement or any Ancillary Agreement do not and will not, and the performance by Purchaser of its obligations under this Agreement or any Ancillary Agreement and the consummation of the transactions contemplated hereby and thereby will not:

 

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(a)         conflict with or result in a violation or breach of any of the terms, conditions or provisions of the certificate of formation or limited liability company agreement of Purchaser;

 

(b)         subject to obtaining the consents, approvals and actions, making the filings and giving the notices disclosed pursuant to Section 3.06 of the Disclosure Schedule, conflict with or result in a violation or breach of any term or provision of any Law, including Gaming Laws, or Orders applicable to Purchaser or any of its Assets and Properties; or

 

(c)          except as disclosed pursuant to Section 3.06 or 4.04(c) of the Disclosure Schedule, (i) conflict with or result in a violation or breach of, (ii) constitute (with or without notice or lapse of time or both) a default under, (iii) require Purchaser to obtain any consent, approval or action of, make any filing with or give any notice to, any Person as a result or under the terms of, or (iv) result in the creation or imposition of any Lien upon Purchaser or any of its Assets or Properties under, any Contract or License to which Purchaser is a party or by which any of its Assets and Properties is bound.

 

5.04                                          Governmental Approvals and Filings.  Except as disclosed in Section 4.04 of the Disclosure Schedule, no consent, approval or action of, filing with or notice to any Governmental or Regulatory Authority, including any Gaming Authority, on the part of Purchaser is required in connection with the execution, delivery and performance of this Agreement or the consummation of the transactions contemplated hereby.

 

5.05                                          Legal Proceedings.  There are no Actions or Proceedings pending or, to the knowledge of Purchaser, threatened against, relating to or affecting Purchaser or any of its Assets and Properties which could reasonably be expected to result in the issuance of an Order restraining, enjoining or otherwise prohibiting or making illegal the consummation of any of the transactions contemplated by this Agreement.

 

5.06                                          Purchase for Investment.  The Units will be acquired by Purchaser (or, if applicable, its assignee pursuant to Section 14.10(b)(i)) for its own account for the purpose of investment, it being understood that the right to dispose of such Units shall be entirely within the discretion of Purchaser (or such assignee, as the case may be).

 

5.07                                          Brokers.  Except as set forth in Section 5.07 of the Disclosure Schedule, all negotiations relative to this Agreement and the transactions contemplated hereby have been carried out by Purchaser directly with Sellers without the intervention of any Person on behalf of Purchaser in such manner as to give rise to any valid claim by any Person against Sellers, the Company or any Subsidiary for a finder’s fee, brokerage commission or similar payment.

 

5.08                                          Representations Complete.  None of the representations or warranties made by Purchaser in this Agreement contains any untrue statement of a material fact, or omits to state any material fact necessary in order to make the statements contained herein, in the light of the circumstances under which they were made, not misleading.

 

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ARTICLE VI
 COVENANTS OF SELLERS

 

Each Seller covenants and agrees with Purchaser that, at all times from and after the date hereof until the Closing and, with respect to any covenant or agreement by its terms to be performed in whole or in part after the Closing, for the period specified therein or, if no period is specified therein, indefinitely, such Seller will comply with all covenants and provisions of this Article V, except to the extent Purchaser may otherwise consent in writing.

 

6.01                                          Regulatory, Gaming and Other Approvals.  Such Seller will, and will cause the Company and the Subsidiaries to, as promptly as practicable, (a) use reasonable best efforts to obtain all consents, approvals or actions of, make all filings with and give all notices to Governmental or Regulatory Authorities, including Gaming Authorities, or any other Person required of such Seller, the Company or any Subsidiary to consummate the transactions contemplated hereby, including without limitation those described in Sections 3.06 and 3.07 of the Disclosure Schedule, (b) provide such other information and communications to such Governmental or Regulatory Authorities, including Gaming Authorities, or other Persons as Purchaser or such Governmental or Regulatory Authorities or other Persons may reasonably request in connection therewith and (c) cooperate with Purchaser in connection with the performance of its obligations under Sections 6.01 and 6.02.  Until the Closing, such Seller will provide prompt notification to Purchaser when any such consent, approval, action, filing or notice referred to in clause (a) above is obtained, taken, made or given, as applicable, and will advise Purchaser of any communications (and, unless precluded by Law, provide copies of any such communications that are in writing) with any Governmental or Regulatory Authority, including Gaming Authorities, or other Person regarding any of the transactions contemplated by this Agreement.

 

6.02                                          HSR Filings.  In addition to and not in limitation of such Seller’s covenants contained in Section 6.01, such Seller will, and will cause the Company to, (a) take promptly all actions necessary to make the filings required of such Seller or its Affiliates under the HSR Act, (b) comply at the earliest practicable date with any request for additional information received by such Seller or its Affiliates from the Federal Trade Commission or the Antitrust Division of the Department of Justice pursuant to the HSR Act and (c) cooperate with Purchaser in connection with Purchaser’s filing under the HSR Act and in connection with resolving any investigation or other inquiry concerning the transactions contemplated by this Agreement commenced by either the Federal Trade Commission or the Antitrust Division of the Department of Justice or state attorneys general.

 

6.03                                          Investigation by Purchaser.  Sellers will, and will cause the Company and the Subsidiaries to, (a) provide (i) Purchaser, (ii) any Person who is considering providing financing to Purchaser to finance all or any portion of the Purchase Price, (iii) the underwriters engaged by Purchaser in connection with the IPO Transactions (the “Underwriters”), and their respective officers, directors, employees, agents, counsel, accountants, financial advisors, consultants and other representatives (together “Representatives”) with full access, upon reasonable prior notice and during normal business hours, to all officers, employees, agents and accountants of the Company and the Subsidiaries and their Assets and Properties and Books and Records, and (b) furnish Purchaser and such other Persons with all

 

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such information and data concerning the business and operations of the Company and the Subsidiaries as Purchaser or any of such other Persons reasonably may request in connection with such investigation.

 

6.04                                          Conduct of Business.  Sellers will cause the Company and the Subsidiaries to conduct business only in the ordinary course.  Without limiting the generality of the foregoing, at all times prior to Closing, Sellers will cause the Company and the Subsidiaries to:

 

(a)                                 Use their reasonable best efforts to (i) preserve intact the present business organization and reputation of the Company and the Subsidiaries, (ii) keep available (subject to dismissals for cause and retirements in the ordinary course of business) the services of the officers and employees of the Company and the Subsidiaries, (iii) maintain the Assets and Properties of the Company and the Subsidiaries in good working order and condition, ordinary wear and tear excepted, and (iv) maintain the good will of key customers, suppliers and lenders and other Persons with whom the Company or any Subsidiary otherwise has significant business relationships; and

 

(b)                                 Not, without the prior written consent of Purchaser (not to be unreasonably withheld, conditioned or delayed):

 

(i)                                                             amend the LLC Agreement or any other organizational document of the Company or any Subsidiary;

 

(ii)                                                          (A) declare, set aside or pay any dividend (whether in cash, equity interests or property), or make any other distribution (whether in cash, equity interests or property), in respect of the outstanding equity interests of the Company or any Subsidiary, other than (x) any distributions of Excluded Assets and (y) any distributions of cash in excess of the working capital requirements of the Company and its Subsidiaries; (B) split, combine or reclassify any of the outstanding equity interests of the Company or any Subsidiary or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for the outstanding equity interests of the Company or any Subsidiary; (C) purchase, redeem or otherwise acquire any equity interests of the Company or any Subsidiary or any rights, warrants or options to acquire any such equity interests; or (D) issue, sell or grant any equity interests in the Company or any Subsidiary or any securities convertible into, or any rights, warrants or options to acquire, any such equity interests or convertible securities;

 

(iii)                                                       (A) acquire (by merger, consolidation, acquisition of stock or assets or otherwise) any corporation, partnership or other business organization or assets comprising a business or any substantial amount of property or assets in or of any other Person or (B) dispose, transfer or lease any property or assets, except for (x) acquisitions or dispositions effected in the ordinary course of business consistent with past practice and (y) transfers of Excluded Assets;

 

(iv)                                                      incur (A) any material Liabilities or (B) any non-material Liabilities not in the ordinary course of business consistent with past practice;

 

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(v)                                                         make any material change in its Tax accounting or financial accounting principles that could have an impact on the business of the Company and/or the Subsidiaries following the Closing, except insofar as may be required by a change in applicable Law or GAAP;

 

(vi)                                                      make any Tax election that could have an impact on the business of the Company and/or the Subsidiaries following the Closing, other than in the ordinary course of business;

 

(vii)                                                   mortgage, pledge or otherwise encumber any material assets of the Company and any of its Subsidiaries, except for Permitted Liens incurred in the ordinary course of business;

 

(viii)                                                make any capital expenditures, capital additions or capital improvements in excess of One Hundred Thousand Dollars ($100,000) individually or in excess of Five Hundred Thousand Dollars ($500,000) in the aggregate;

 

(ix)                                                      enter into any Contract understanding or commitment (A) that would have been a Material Contract if entered into prior to the date hereof, or violate, amend or otherwise modify or waive any of the material terms of any Material Contracts or (B) that restrains, restricts or limits the ability of the Company or any of its Subsidiaries to compete with or conduct any business or line of business in any geographic area or solicit the employment of any persons;

 

(x)                                                         enter into any Contract understanding or commitment that restrains, restricts or limits the ability of the Company or any of its Subsidiaries to compete with or conduct any business or line of business in any geographic area or solicit the employment of any persons;

 

(xi)                                                      grant to or acquire from any Person, or dispose of or permit to lapse any rights to, any material items of Company Owned Intellectual Property (other than Excluded Assets constituting Intellectual Property) or disclose to any Person, other than representatives of Purchaser, any material trade secret;

 

(xii)                                                   settle, compromise, discharge or agree to settle any litigation, investigation, arbitration or proceeding other than those that (A) do not involve the payment by the Company or any of its Subsidiaries of monetary damages of Five Hundred Thousand Dollars ($500,000) individually or in excess of One Million Dollars ($1,000,000) in the aggregate, plus applicable reserves and any applicable insurance coverage, and do not involve any material injunctive or other non-monetary relief or impose material restrictions on the business or operations of the Company or its Subsidiaries, and (B) provide for a complete release of the Company and its Subsidiaries from all claims and do not provide for any admission of liability by the Company or any of its Subsidiaries;

 

(xiii)                                                (A) recognize any new labor union, labor organization or similar employee representative; (B) negotiate, enter into, amend, modify or terminate any collective bargaining agreement or any other Contract with any labor union, labor organization, or similar employee representative; (C) waive, release, limit, or condition any Restrictive

 

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Covenant obligation of any current or former employee or contractor of the Company or any of its Subsidiaries; or (D) except as required by the terms of any Benefit Plan as of the date of this Agreement or as expressly contemplated by this Agreement, (i) amend any Benefit Plan to increase benefits thereunder or take any action to accelerate the vesting or payment of any benefits under a Benefit Plan or (ii) establish or adopt any new plan, agreement or arrangement that would be a Benefit Plan if in effect on the date of this Agreement; or

 

(xiv)                                               enter into any Contract, agreement, commitment or arrangement to do any of the foregoing.

 

6.05                                          Financial Statements and Reports; Cooperation in IPO Transactions.

 

(a)         As promptly as practicable and in any event no later than forty five (45) days after the end of each fiscal quarter ending after the date hereof and before the Closing Date (other than the fourth quarter) or ninety (90) days after the end of each fiscal year ending after the date hereof and before the Closing Date, as the case may be, the Seller Representative will deliver to Purchaser true and complete copies of (in the case of any such fiscal year) the audited and (in the case of any such fiscal quarter) the unaudited consolidated balance sheet, and the related audited or unaudited consolidated statements of operations, stockholders’ equity and cash flows, of the Company and its consolidated Subsidiaries, in each case as of and for the fiscal year then ended or as of and for each such fiscal quarter and the portion of the fiscal year then ended, as the case may be, together with the notes, if any, relating thereto, which financial statements shall be prepared on a basis consistent with the Audited Financial Statements.

 

(b)         As promptly as practicable, the Seller Representative will deliver to Purchaser true and complete copies of such other regularly-prepared financial statements, reports and analyses as may be prepared or received by Sellers, the Company or any Subsidiary relating to the business or operations of the Company or any Subsidiary.

 

(c)          Sellers shall cause the Company and the Subsidiaries to provide reasonable cooperation in connection with the IPO Transactions, including by:

 

(i)                                                             assisting in the preparation for and participation by executives with appropriate seniority and expertise in meetings, drafting sessions, presentations, road shows and due diligence sessions (including accounting due diligence sessions) and sessions with prospective investors in connection with the IPO Transaction;

 

(ii)                                                          furnishing Purchaser and the Underwriters as promptly as practicable with financial and other pertinent information regarding the Company and the Subsidiaries as may be reasonably requested by Purchaser or the Underwriters to consummate the IPO Transactions and that is customary to be included in a prospectus relating to the IPO Transactions;

 

(iii)                                                       using reasonable best efforts to obtain accountants’ consent letters (including consents of accountants for use of their reports in any materials relating

 

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to the IPO Transactions), legal opinions, surveys, title insurance and landlord estoppel letters as reasonably requested by Purchaser in connection with the IPO Transactions;

 

(iv)                                                      arranging for customary payoff letters, lien terminations and instruments of discharge to be delivered at Closing providing for the payoff, discharge and termination on the Closing Date of all Indebtedness contemplated by any such debt financing to be paid off, discharged and terminated on the Closing Date; and

 

(v)                                                         using reasonable best efforts to take all other actions necessary or desirable in connection with the IPO Transactions.

 

6.06                                          Certain Restrictions.  Sellers will cause the Company and the Subsidiaries to refrain from violating, breaching or defaulting under in any material respect, or taking or failing to take any action that (with or without notice or lapse of time or both) would constitute a material violation or breach of, or default under, any term or provision of any License, including any Gaming License, held or used by the Company or any Subsidiary or any Contract to which the Company or any Subsidiary is a party or by which any of their respective Assets and Properties is bound.

 

6.07                                          Books and Records.  On the Closing Date, Sellers will deliver or make available to Purchaser at the offices of the Company and the Subsidiaries all of the Books and Records, and if at any time after the Closing Sellers discover in their possession or under their control any other Books and Records, they will forthwith deliver such Books and Records to Purchaser.

 

6.08                                          Notice and Cure.  The Seller Representative will notify Purchaser in writing (where appropriate, through updates to the Disclosure Schedule) of, and contemporaneously will provide Purchaser with true and complete copies of any and all information or documents relating to, and will use all reasonable best efforts to cure before the Closing, any event, transaction or circumstance, as soon as practicable after it becomes Known to Sellers, occurring after the date of this Agreement that causes or may reasonably be expected to cause any covenant or agreement of Sellers under this Agreement to be breached or that renders or may reasonably be expected to render untrue any representation or warranty of Sellers contained in this Agreement as if the same were made on or as of the date of such event, transaction or circumstance.  No notice given pursuant to this Section, including any updates on the Disclosure Schedules, shall have any effect on the representations, warranties, covenants or agreements contained in this Agreement for purposes of determining satisfaction of any condition contained herein or shall in any way limit Purchaser’s right to seek indemnity under Article XII.

 

6.09                                          Satisfaction of Conditions.  Sellers will, and will cause the Company and each Subsidiary to (a) execute and deliver at the Closing each agreement, certificate, instrument or other document that Sellers, the Company or Subsidiary, as applicable, is required hereby to execute and deliver as a condition to the Closing and (b) use reasonable best efforts and proceed diligently and in good faith to satisfy each condition to the obligations of Purchaser contained in this Agreement and will not, and will not permit the Company or any

 

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Subsidiary to, take or fail to take any action that could reasonably be expected to result in the nonfulfillment of any such condition.

 

6.10                                          Affiliate Agreements.  Except as set forth in Section 6.10 of the Disclosure Schedule, the Sellers shall cause all Affiliate Agreements to be terminated effective as of the Closing, without any further right, obligation or liability of any Person thereunder.

 

6.11                                          Certification regarding Indemnification Claims.  On the date that is thirty (30) days immediately preceding each of the first and second anniversaries of the Closing Date (or, if such day is not a Business Day, on the immediately succeeding Business Day), each Seller shall deliver to Purchaser a certificate from such Seller (certified by such Seller and an executive officer of the Company), in the form attached hereto as Exhibit E (each a “Seller Certificate”), confirming that, except as expressly set forth in reasonable detail in such certificate, (a) no circumstances exist or events have occurred that constitute or may constitute a breach with respect to any representation or warranty set forth in Articles III or IV that is then surviving in accordance with the terms of this Agreement, and (b) there is no basis for any right to indemnification by any Purchaser Indemnified Party under Article XII.  Absent a determination by the Committee in accordance with Sections 2.09 and 12.02(c) that any disclosures on the Seller Certificates give rise to a right to indemnification by a Purchaser Indemnified Party under Article XII, such disclosures shall not, in and of themselves, constitute an admission by Sellers that any such right to indemnification exists.  Promptly upon receipt of each Seller Certificate, Purchaser shall provide a copy thereof to each member of the Board of Managers of Purchaser.

 

6.12                                          Pre-Roadshow Bring Down.  On the third Business Day immediately preceding commencement of the “roadshow” to be conducted for purposes of the IPO Transactions, each Seller shall deliver to Purchaser a certificate from such Seller (certified by such Seller and an executive officer of the Company), in the form attached hereto as Exhibit F (each a “Pre-Roadshow Bring Down Certificate”), confirming that, except as expressly set forth in reasonable detail in such certificate, (a) each representation or warranty made by such Seller or made by the Company in this Agreement is true on and as of such Business Day, as though such representation or warranty was made on and as of such Business Day, and (b) no circumstances exist or events have occurred that could reasonably be expected to result in the failure of any condition set forth in Article VIII to be satisfied at Closing (the certifications in clauses (a) and (b), being the “Preliminary Confirmations”).  Promptly upon receipt of each Seller Certificate, Purchaser shall provide a copy thereof to each director of Purchaser.

 

ARTICLE VII
 COVENANTS OF PURCHASER

 

Purchaser covenants and agrees with Sellers that, at all times from and after the date hereof until the Closing, Purchaser will comply with all covenants and provisions of this Article VII, except to the extent Sellers may otherwise consent in writing.

 

7.01                                          Regulatory, Gaming and Other Approvals.  Purchaser will as promptly as practicable (a) use reasonable best efforts to obtain all consents, approvals or actions

 

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of, make all filings with and give all notices to Governmental or Regulatory Authorities, including Gaming Authorities, or any other Person required of Purchaser to consummate the transactions contemplated hereby, including without limitation those described in Sections 4.03 and 4.04 of the Disclosure Schedule, (b) provide such other information and communications to such Governmental or Regulatory Authorities, including Gaming Authorities, or other Persons as Sellers or such Governmental or Regulatory Authorities or other Persons may reasonably request in connection therewith and (c) cooperate with Sellers, the Company and the Subsidiaries in connection with the performance of their obligations under Sections 5.01 and 4.02.  Purchaser will provide prompt notification to the Seller Representative when any such consent, approval, action, filing or notice referred to in clause (a) above is obtained, taken, made or given, as applicable, and will advise the Seller Representative of any communications (and, unless precluded by Law, provide copies of any such communications that are in writing) with any Governmental or Regulatory Authority, including Gaming Authorities, or other Person regarding any of the transactions contemplated by this Agreement.

 

7.02                                          HSR Filings.  Purchaser will (i) take promptly all actions necessary to make the filings required of Purchaser or its Affiliates under the HSR Act, (ii) comply at the earliest practicable date with any request for additional information received by Purchaser or its Affiliates from the Federal Trade Commission or the Antitrust Division of the Department of Justice pursuant to the HSR Act and (iii) cooperate with Sellers in connection with Sellers’ filing under the HSR Act and in connection with resolving any investigation or other regulatory inquiry concerning the transactions contemplated by this Agreement commenced by either the Federal Trade Commission or the Antitrust Division of the Department of Justice or state attorneys general.

 

7.03                                          Governmental or Regulatory Authorities.  Notwithstanding anything to the contrary in Section 7.01 or 7.02, Purchaser shall not be required to (a) defend or contest any Actions or Proceedings by any Governmental or Regulatory Authority, (b) take any action to have vacated, lifted, reversed or overturned any Order of any Governmental or Regulatory Authority, (c) otherwise participate in any Action by any Governmental or Regulatory Authority or other Person commenced or threatened to be commenced which questions the validity or legality of the transactions contemplated hereby, (d) divest or transfer any assets, (e) discontinue any operations, (f) hold separate any assets or operations, (g) make any commitment regarding future operations, or (h) license or otherwise make available any Intellectual Property.

 

7.04                                          Indemnification and Insurance of Officers and Managers.

 

(a)         Purchaser agrees that, for a period of six (6) years after the Closing, Purchaser will not, and will not permit the Company or any of its Subsidiaries to, amend, repeal or otherwise modify any provision in the their respective limited liability company agreements in any manner that would materially adversely affect the rights to indemnification, liability limitation or exculpation thereunder of individuals who, as of the date hereof and prior to the Closing Date, were managers, officers, employees or agents of the Company or any Subsidiary, unless such modification is required by applicable law.

 

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(b)         The managers, officers, employees and agents of the Company and the Subsidiaries entitled to the indemnification, liability limitation or exculpation set forth in this Section 7.04 are intended to be third party beneficiaries of this Section 7.04.  This Section 7.04 shall survive the consummation of the transactions contemplated by this Agreement and shall be binding on all successors and assigns of Sellers and Purchaser.

 

(c)          Purchaser shall maintain for a period of six (6) years after the Closing an officers’ and directors’ liability insurance policy in respect of acts or omissions that occurred prior to or at the Closing and covering each person currently covered by the Company’s officers’ and directors’ liability insurance policies on terms with respect to coverage and amount not materially less favorable than those of such policy in effect on the date of this Agreement.

 

7.05                                          Notice and Cure.  Purchaser will notify the Seller Representative in writing of, and, to the extent not prohibited pursuant to confidentiality or other agreements, contemporaneously will provide the Seller Representative with true and complete copies of any and all information or documents relating to, and will use all commercially reasonable efforts to cure before the Closing, any event, transaction or circumstance, as soon as practicable after it becomes known to Purchaser, occurring after the date of this Agreement that causes or will cause any covenant or agreement of Purchaser under this Agreement to be breached or that renders or will render untrue any representation or warranty of Purchaser contained in this Agreement as if the same were made on or as of the date of such event, transaction or circumstance.  No notice given pursuant to this Section shall have any effect on the representations, warranties, covenants or agreements contained in this Agreement for purposes of determining satisfaction of any condition contained herein or shall in any way limit Sellers’ right to seek indemnity under Article XII.

 

7.06                                          Satisfaction of Conditions.  Purchaser will use reasonable best efforts and proceed diligently and in good faith to satisfy each condition to the obligations of Sellers contained in this Agreement and will not take or fail to take any action that could reasonably be expected to result in the nonfulfillment of any such condition.

 

7.07                                          Employee Matters.

 

(a)         From and after the Closing, Purchaser shall, or shall cause its applicable Subsidiary (including the Company) to, honor all Benefit Plans (other than the Zuffa LLC 401(k) Profit Sharing Plan and Trust (the “Zuffa 401(k) Plan”)) in accordance with their terms as in effect immediately prior to the Closing.  For a period of one year following Closing (or, if earlier, the date of termination of the relevant employee), Purchaser shall, or shall cause its Subsidiaries (including the Company) to, provide each employee of the Company or its Subsidiaries as of immediately prior to the Closing (the “Company Employees”) with (i) base compensation and annual cash bonus opportunities that, in each case, are not less than the base compensation and annual cash bonus opportunities that were provided to the applicable Company Employee immediately prior to the Closing, and (ii) all other compensation and employee benefits (excluding any equity-based compensation, which shall be determined by Purchaser’s Board of Managers in its sole discretion) that are not less favorable in the aggregate than the other compensation and employee benefits that were provided to the applicable Company Employee immediately prior to the Closing.

 

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(b)         For all purposes (including for purposes of vesting, eligibility to participate and level of benefits) under the compensation and benefit plans, programs, policies, contracts, agreements and arrangements of Purchaser and its Subsidiaries (including the Company) providing compensation or benefits to any Company Employees after the Closing (the “New Plans”), each Company Employee shall be credited with his or her years of service with the Company and its Subsidiaries and their respective predecessors before the Closing, to the same extent as such Company Employee was entitled, before the Closing, to credit for such service under any similar Benefit Plan in which such Company Employee participated or was eligible to participate immediately prior to the Closing; provided that the foregoing shall not apply with respect to benefit accrual under any defined benefit pension plan or to the extent that its application would result in a duplication of benefits with respect to the same period of service.  In addition, and without limiting the generality of the foregoing, (i) each Company Employee and his or her eligible dependents and domestic partners shall be immediately eligible to participate, without any waiting time, in any and all New Plans to the extent coverage under such New Plan replaces coverage under a comparable Benefit Plan in which such Company Employee participated immediately before the Closing (such plans, collectively, the “Old Plans”), and (ii) for purposes of each New Plan providing medical, dental, pharmaceutical and/or vision benefits to any Company Employee, Purchaser shall cause all pre-existing condition exclusions and actively-at-work requirements of such New Plan to be waived for such employee and his or her covered dependents, unless such conditions would not have been waived under the comparable plans of the Company or its Subsidiaries in which such employee participated immediately prior to the Closing, and Purchaser shall cause any eligible expenses incurred by such employee and his or her covered dependents during the portion of the plan year of the Old Plans ending on the date such employee’s participation in the corresponding New Plan begins to be taken into account under such New Plan for purposes of satisfying all deductible, coinsurance and maximum out-of-pocket requirements applicable to such employee and his or her covered dependents for the applicable plan year as if such amounts had been paid in accordance with such New Plan.

 

(c)          Prior to the Closing Date, Purchaser shall ensure that any defined contribution plans in which Company Employees shall be eligible to participate after the Closing that is or are tax-qualified under applicable provisions of the Code will accept eligible rollover distributions of the account balances of Company Employees (in cash and, in the form of a direct rollover, loan notes, if any, evidencing loans to such Company Employees as of the date of distribution) from the Zuffa 401(k) Plan.  Sellers shall take all actions necessary to ensure that the Zuffa 401(k) Plan allows Company Employees to rollover distributions of the account balances of the Company Employees (in cash and in loan notes, if any, evidencing loans to such Company Employees as of the date of distribution).

 

(d)         Nothing in this Section 7.07 or any other provision of this Agreement shall (i) confer upon any Company Employee or any other Person any right to continue in the employ or service of Sellers, Purchaser, the Company or any of their respective Affiliates, or shall interfere with or restrict in any way the rights of Sellers, Purchaser, the Company or any of their respective Affiliates, which rights are hereby expressly reserved, to discharge or terminate the services of any Company Employee or any other Person at any time for any reason whatsoever, with or without cause, except to the extent expressly provided otherwise in a written agreement between Sellers, Purchaser, the Company or any of their respective Affiliates, and the applicable

 

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Person; (ii) be construed to establish, amend, or modify any compensation or benefit plan, program, agreement, contract, policy or arrangement; or (iii) limit the ability of Sellers, Purchaser, the Company or any of their respective Affiliates to amend, modify or terminate in accordance with its terms any compensation or benefit plan, program, agreement, contract, policy or arrangement at any time adopted, assumed, established, sponsored or maintained by any of them.  Notwithstanding any provision in this Agreement to the contrary, nothing in this Section 7.07 shall create any third-party rights in any Person, including any current or former director, officer, employee or other service provider of Sellers, Purchaser, the Company or any of their respective Affiliates, or any participant in any Benefit Plan or other compensation or benefit plan, program, agreement, contract, policy or arrangement (or any beneficiaries or dependents thereof).

 

(e)          Immediately prior to the Closing Date, each employee who is a participant in the Company’s annual performance incentive plan or other bonus plan or agreement shall be paid by the Company (less applicable withholdings) a pro-rata portion of the employee’s (i) annual bonus awarded for the fiscal year in which the Closing Date occurs and (ii) any other bonus as determined by the Company, the performance period of which spans one or more years including the fiscal year in which the Closing Date occurs, based on the number of days elapsed in such fiscal year as of the Closing Date in the case of an annual performance bonus, or the number of days elapsed in the performance period prior to the Closing Date in the case of a multi-year arrangement.  Any such payments and the related obligation allocable to the pre-Closing period shall not be a Liability of the Company following the Closing Date.

 

(f)           Notwithstanding anything to the contrary in this Section 7.07, in no event shall the execution or performance of, or the exercise of any rights under, any employment agreement entered into in accordance with Sections 8.08 and 9.08 hereof constitute, or result in, a breach of this Section 7.07.

 

ARTICLE VIII
 CONDITIONS TO OBLIGATIONS OF PURCHASER

 

The obligations of Purchaser hereunder to effect the Closing are subject to the satisfaction, at or before the Closing, of each of the following conditions (all or any of which may, to the extent permitted by Law, be waived in writing in whole or in part by Purchaser in its sole discretion except for the condition set forth in Section 8.06(b) which may not be waived by any party hereto):

 

8.01                                          Representations and Warranties.  Each of the Company/Seller Fundamental Representations shall be true and correct in all respects on and as of the date hereof and on and as of the Closing Date as though such representation or warranty was made on and as of the Closing Date.  Each other representation or warranty made by the Company or any or all of the Sellers in this Agreement (other than those made as of a specified date earlier than the Closing Date) shall be true and correct in all material respects on and as of the date hereof and on and as of the Closing Date as though such representation or warranty was made on and as of the Closing Date, and any representation or warranty made as of a specified date earlier than the Closing Date shall have been true and correct in all material respects on and as of such earlier date; provided that to the extent that any representation or warranty is qualified as to materiality

 

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or Company Material Adverse Effect pursuant to the terms of such representation or warranty, such representation or warranty shall be true and correct in all respects on and as of the date hereof and on and as of the Closing Date as though such representation or warranty was made on and as of the Closing Date unless such representation or warranty was made as of a specified date earlier than the Closing Date in which case such representation shall be true and correct in all respects on and as of such earlier date.

 

8.02                                          Performance.  Sellers shall have performed and complied with, in all material respects, each agreement, covenant and obligation required by this Agreement to be so performed or complied with by Sellers at or before the Closing.

 

8.03                                          Seller Deliverables.  Sellers shall have delivered to Purchaser:

 

(a)         a statement setting forth the aggregate amount of the Closing Indebtedness, along with applicable wire transfer instructions;

 

(b)         the Payoff Letters;

 

(c)          a certificate from each Seller (certified by such Seller and an executive officer of the Company), dated the Closing Date, substantially in the form and to the effect of Exhibit B hereto;

 

(d)         a copy of a good standing certificate with respect to the Company and each Subsidiary from the secretary of state of the state under whose laws the applicable entity was formed, in each case as of a date not earlier than ten Business Days prior to the Closing Date; and

 

(e)          written resignations effective as of the Closing, in a form reasonably acceptable to Purchaser, of each officer and each director of the Company or any Subsidiary, other than those officers and directors set forth on Section 8.03(d) of the Disclosure Schedule.

 

8.04                                          Orders and Laws.  There shall not be in effect on the Closing Date any Order or Law, including any Gaming Laws, restraining, enjoining or otherwise prohibiting or making illegal the consummation of any of the transactions contemplated by this Agreement or which could reasonably be expected to otherwise result in a material diminution of the benefits of the transactions contemplated by this Agreement to Purchaser, and there shall not be pending on the Closing Date any Action or Proceeding in, before or by any Governmental or Regulatory Authority which could reasonably be expected to result in the issuance of any such Order or the enactment, promulgation or deemed applicability to Purchaser, the Company, any Subsidiary or the transactions contemplated by this Agreement of any such Law.

 

8.05                                          Regulatory Consents and Approvals.  All consents, approvals and actions of, filings with and notices to any Governmental or Regulatory Authority, including any Gaming Authority, necessary to permit Purchaser and Sellers to perform their obligations under this Agreement and to consummate the transactions contemplated hereby (a) shall have been duly obtained, made or given, (b) shall be in form and substance reasonably satisfactory to Purchaser, (c) shall not be subject to the satisfaction of any condition that has not been satisfied or waived and (d) shall be in full force and effect, and all terminations or expirations of waiting

 

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periods imposed by any Governmental or Regulatory Authority necessary for the consummation of the transactions contemplated by this Agreement, including under the HSR Act, shall have occurred.

 

8.06                                          Third Party Consents.

 

(a)         Sellers shall have obtained and delivered to Purchaser all consents (or in lieu thereof waivers) listed on Schedule 8.06 attached hereto to the performance by Purchaser and Sellers of their obligations under this Agreement or to the consummation of the transactions contemplated hereby.  Such consents (or in lieu thereof waivers) (i) shall be in form and substance reasonably satisfactory to Purchaser, (ii) shall not be subject to the satisfaction of any condition that has not been satisfied or waived and (iii) shall be in full force and effect.

 

(b)         The Lender Directors’ Consent shall have been obtained.

 

8.07                                          IPO Transactions.  The IPO Transactions shall have been consummated and Purchaser or its Affiliates shall have entered into the ancillary agreements described in the prospectus therefor, in each case in form and substance satisfactory to Purchaser.

 

8.08                                          Availability of Funds.  Purchaser or its Affiliates shall have funds available (including the availability of financing on terms reasonably satisfactory to Purchaser) in an amount at least equal to the sum of the Purchase Price, the amount of Closing Indebtedness and the expenses of Purchaser incurred in connection with the negotiation, preparation, execution and delivery of this Agreement and the consummation of the transactions contemplated hereby.

 

8.09                                          Availability of Specified Executives.  None of the Specified Executives shall have resigned from his employment or provided the Company or Purchaser or any of their Affiliates with verbal or written notice of his intention to resign.

 

ARTICLE IX
 CONDITIONS TO OBLIGATIONS OF SELLERS

 

The obligations of Sellers hereunder to effect the Closing are subject to the satisfaction, at or before the Closing, of each of the following conditions (all or any of which may, to the extent permitted by Law, be waived in writing in whole or in part by Seller Representative on behalf of Sellers in his sole discretion, except for the condition set forth in Section 9.06(b) which may not be waived by any party hereto):

 

9.01                                          Representations and Warranties.  Each of the Purchaser Fundamental Representations shall be true in all respects on and as of the date hereof and on and as of the Closing Date as though such representation or warranty was made on and as of the Closing Date.  Each other representations and warranties made by Purchaser in this Agreement (other than those made as of a specified date earlier than the Closing Date) shall be true and correct in all material respects on and as of the date hereof and on and as of the Closing Date as though such representation or warranty was made on and as of the Closing Date and any representation or warranty made as of a specified date earlier than the Closing Date shall have been true and correct in all material respects as of such date; provided that to the extent that any representation or warranty is qualified as to materiality pursuant to the terms of such

 

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representation or warranty, such representation or warranty shall be true and correct in all respects as of the Closing Date unless such representation or warranty was made as of a specified date earlier that the Closing Date in which case such representation shall be true and correct in all respects on and as of such earlier date.

 

9.02                                          Performance.  Purchaser shall have performed and complied with, in all material respects, each agreement, covenant and obligation required by this Agreement to be so performed or complied with by Purchaser at or before the Closing.

 

9.03                                          Officers’ Certificates.  Purchaser shall have delivered to Sellers a certificate, dated the Closing Date and executed in the name and on behalf of Purchaser by the Chairman of the Board, the President or any Executive or Senior Vice President of Purchaser, substantially in the form and to the effect of Exhibit C hereto, and a certificate, dated the Closing Date and executed by the Secretary or any Assistant Secretary of Purchaser, substantially in the form and to the effect of Exhibit D hereto.

 

9.04                                          Orders and Laws.  There shall not be in effect on the Closing Date any Order or Law, including any Gaming Laws, that became effective after the date of this Agreement restraining, enjoining or otherwise prohibiting or making illegal the consummation of any of the transactions contemplated by this Agreement.

 

9.05                                          Regulatory Consents and Approvals.  All consents, approvals and actions of, filings with and notices to any Governmental or Regulatory Authority, including any Gaming Authority, necessary to permit Sellers and Purchaser to perform their obligations under this Agreement and to consummate the transactions contemplated hereby (a) shall have been duly obtained, made or given, (b) shall not be subject to the satisfaction of any condition that has not been satisfied or waived and (c) shall be in full force and effect, and all terminations or expirations of waiting periods imposed by any Governmental or Regulatory Authority necessary for the consummation of the transactions contemplated by this Agreement, including under the HSR Act, shall have occurred.

 

9.06                                          Third Party Consents.

 

(a)         All consents (or in lieu thereof waivers) to the performance by Sellers of their obligations hereunder and to the consummation of the transactions contemplated hereby as are required under the Contracts listed in Section 8.06 of the Disclosure Schedule (i) shall have been obtained, (ii) shall not be subject to the satisfaction of any condition that has not been satisfied or waived and (iii) shall be in full force and effect.

 

(b)         The Lender Directors’ Consent shall have been obtained.

 

9.07                                          IPO Transactions.  The IPO Transactions shall have been consummated and Purchaser or its Affiliates shall have entered into the ancillary agreements described in the prospectus therefor, in each case in form and substance satisfactory to Sellers.

 

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ARTICLE X
 TAX MATTERS

 

10.01                                   Tax Indemnity.  Sellers hereby agree, jointly and severally, to be liable for and to indemnify Purchaser from and against (a) all Taxes of the Company and each Subsidiary (or any predecessor thereof) for any Pre-Closing Tax Period (determined as provided in Section 10.02); and (b) all Transfer Taxes for which Sellers are responsible pursuant to Section 10.05.

 

10.02                                   Allocations; Straddle Periods.  In the case of any Taxes other than property and ad valorem Taxes, obligations shall be allocated to the Pre-Closing Tax Period or the Post-Closing Tax Period, as applicable, by assuming that the Pre-Closing Tax Period and the Post-Closing Tax Period consisted of two (2) taxable years or periods, one of which ended at the close of the Closing Date and the other of which began at the beginning of the day following the Closing Date and items of income, gain, deduction, loss or credit shall be allocated between such two (2) taxable years or periods on a “closing of the books basis” by assuming that the books were closed at the close of the Closing Date.  In the case of any property or ad valorem Taxes, obligations shall be allocated to the Pre-Closing Tax Period and the Post-Closing Tax Period based upon a fraction, the numerator of which is the number of calendar days in the period ending on the close of the Closing Date, in the case of an allocation to a Pre-Closing Tax Period, or the number of calendar days in the period beginning the day following the Closing Date and ending on the last day of the period, in the case of an allocation to a Post-Closing Tax Period, and in each case the denominator of which is the number of calendar days in the entire period.

 

10.03                                   Tax Returns.

 

(a)         Sellers shall, at the sole cost and expense of the Sellers, prepare (or cause to be prepared) all Tax Returns of the Company and the Subsidiaries, including IRS Form 1065, for each taxable year that ends on or prior to the Closing Date (each a “Seller Prepared Return”).  Each Seller Prepared Return shall be prepared in accordance with the past practices and customs of the Company and the Subsidiaries except as otherwise required by Law.  Subject to the Seller Representative’s prior written consent, neither the Company nor any Subsidiary shall amend or file any Tax Return, or make any retroactive Tax election, relating to any tax period ending on or before the Closing Date.

 

(b)         Purchaser shall, at the sole cost and expense of Purchaser, prepare (or cause to be prepared) all Tax Returns of the Company and each Subsidiary for each Straddle Period (each, a “Shared Return”).  Each Shared Return shall be prepared on a basis consistent with past practices and customs of each Company and Subsidiary and shall be delivered to the Seller Representative, for the review and approval of the Seller Representative, at least ten (10) days prior to the due date for such Tax Return (including any applicable extensions).  The Purchaser shall cause the Shared Return to incorporate any changes reasonably requested by the Seller Representative that are consistent with the past practices and customs of the Company and each Subsidiary, as applicable. The Seller Representative and the Purchaser shall attempt in good faith to resolve any disagreements regarding the Shared Returns subject to the dispute resolution procedures of Section 10.08.  In no event shall the provision of comments by the Seller Representative prevent the Purchaser from timely filing any Shared Return, subject to

 

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amendment to reflect the resolution when rendered by the Arbitrating Accountants.  Any Pre-Closing Tax Obligations owed by Sellers on a Shared Return shall be paid by Sellers to Purchaser by the due date of such Shared Return.

 

10.04                                   Cooperation.  After the Closing Date, Sellers and Purchaser shall cooperate fully, as and to the extent reasonably requested by the other party, in connection with the preparation of all Tax Returns pursuant to this Article X, in connection with any Tax investigation, audit or other proceeding and any other matters relating to Taxes.  Such cooperation shall include the retention and (upon the other party’s request) the provision of records and information that are reasonably relevant to any such Tax Return, investigation, audit or other proceeding, and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder.

 

10.05                                   Transfer Taxes.  Each of Purchaser, on the one hand, and Sellers, jointly and severally, on the other hand, shall pay 50% of all sales, use, transfer, real property transfer, recording, gains, stock transfer and other similar taxes and fees (“Transfer Taxes”) arising out of or in connection with the transactions effected pursuant to this Agreement. Purchaser shall file all necessary documentation and Tax Returns with respect to such Transfer Taxes, and Sellers shall cooperate in the preparation and filing of such Tax Returns, including by joining in the execution of any such Tax Return and/or providing documentation required to establish an exemption from Transfer Taxes as required or allowed by law.

 

10.06                                   Tax Refunds.  Any Tax refunds that are received by Purchaser, the Company or any Subsidiary, and any amounts credited against Taxes to which Purchaser, the Company or any Subsidiary becomes entitled, in each case that relate to any Pre-Closing Tax Period, shall be for the account of Sellers and shall be forwarded by Purchaser to Sellers promptly following receipt, but in no event later than fifteen (15) days after receipt or entitlement thereto, provided, however, that Sellers shall not be entitled to any refund that is attributable to the carryback of losses arising in or attributable to a Post-Closing Tax Period.

 

10.07                                   Tax Audits.

 

(a)         If notice of any judicial, administrative or arbitral actions, suits, mediation, investigation, inquiry, proceedings or claims (including counterclaims) by or before any Governmental or Regulatory Authority with respect to Taxes of the Company or any Subsidiary (a “Tax Claim”) shall be received by any party for which another party would be liable pursuant to this Article X, the notified party shall notify such other parties in writing of such Tax Claim.

 

(b)         The Seller Representative may elect, within 30 days of receiving such notice, to direct any Tax Claim, at Sellers expense, that relates solely to a Pre-Closing Tax Period (a “Seller Tax Contest”) and to employ counsel of its choice; provided, however, that Purchaser shall have the right, at its expense, to consult with the Seller Representative regarding such Seller Tax Contest.  Purchaser, at its expense, shall have the right to control all other Tax Claims (each a “Purchaser’s Tax Contest”); provided, however, that the Seller Representative shall have the right, at its expense, to consult with Purchaser regarding a Purchaser’s Tax Contest if Sellers would be liable for a portion of the Taxes that may result from the Purchaser’s Tax Contest; and provided, further, that Purchaser may not agree to settle any such Purchaser’s Tax Contest

 

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without the Seller Representative’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed, unless the Purchaser agrees to assume and become liable for all Taxes resulting from the Purchaser’s Tax Contest.  In the event of a conflict between the provisions of this Section 10.07, on the one hand, and the provisions of Section 12.02, on the other, the provisions of this Section 10.07 shall control.

 

10.08                                   Disputes.  Notwithstanding the terms and conditions of Section 14.14, any dispute as to any matter covered under this Article X (a “Tax Dispute”) shall be resolved through binding arbitration administered by tax experts of the Arbitrating Accountants.  The place of the arbitration shall be Las Vegas, Nevada and the arbitration shall be conducted in the English language.  The Arbitrating Accountants shall be instructed to resolve the Tax Dispute and such resolution shall be (A) set forth in writing and signed by the Arbitrating Accountants, (B) delivered to each party involved in the Tax Dispute as soon as practicable after the Tax Dispute is submitted to the Arbitrating Accountants but no later than the fifteenth (15th) day after the Arbitrating Accountants are instructed to resolve the Tax Dispute, (C) made in accordance with this Agreement, and (D) final, binding and conclusive on the parties involved in the Tax Dispute on the date of delivery of such resolution.  The Arbitrating Accountants shall only be authorized on any one issue to decide in favor of and choose the position of either of the parties involved in the Tax Dispute or to decide upon a compromise position between the ranges presented by the Parties to the Arbitrating Accountants.  The Arbitrating Accountants shall base their decision solely upon the presentations of the parties to the Arbitrating Accountants at a hearing held before the Arbitrating Accountants and upon any materials made available by either party and not upon independent review.  The fees and expenses of the Arbitrating Accountants shall be borne by Purchaser, on the one hand, and Sellers, on the other hand, in accordance with the principles set forth in the last two sentences of Section 2.04(d).  Purchaser and Sellers shall keep the decision of the Arbitrating Accountants confidential, except to the extent required by Law or pursuant to disclosure of Tax Returns.

 

10.09                                   Purchase Price Adjustment.  For federal, state and local Tax purposes, any payments made under this Article X shall be treated by the Purchaser and Sellers as an adjustment to the Purchase Price except as otherwise required by applicable Law or pursuant to a good faith resolution of a Tax Claim.

 

ARTICLE XI
 SURVIVAL OF REPRESENTATIONS, WARRANTIES,
 COVENANTS AND AGREEMENTS

 

11.01                                   Survival of Representations, Warranties, Covenants and Agreements.  Notwithstanding any right of Purchaser (whether or not exercised) to investigate the affairs of the Company and the Subsidiaries or any right of any party (whether or not exercised) to investigate the accuracy of the representations and warranties of the other party contained in this Agreement, Sellers and Purchaser have the right to rely fully upon the representations, warranties, covenants and agreements of the other contained in this Agreement.  Except as provided in the following sentence, each of the representations and warranties contained in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Closing until the later of (x) the date that is twelve (12) months after the Closing and (y) the date that is thirty (30) days after Purchaser’s receipt of the report by its external auditors

 

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on the audited balance sheets of Purchaser and its consolidated subsidiaries (including the Company and the Subsidiaries) and the related audited consolidated statements of operations, members’ equity and cash flow with respect to the year ended December 31, 2016.  Notwithstanding the foregoing, the representations, warranties, covenants and agreements of Sellers and Purchaser contained in this Agreement will survive the Closing (a) until the date that is eighteen (18) months after the Closing with respect to the representations and warranties contained in Section 3.12; (b) indefinitely with respect to (i) the representations and warranties contained in (A) Sections 3.02, 3.03, 3.05(b), 3.23, 4.02, 4.03, 4.04(b) (the “Company/Seller Fundamental Representations”) and (B) Sections 5.02 and 5.07 (the “Purchaser Fundamental Representations”) and (ii) the covenants and agreements contained in Sections 2.06 and 14.04; (c) until sixty (60) days after the expiration of all applicable statutes of limitation (including all periods of extension, whether automatic or permissive) with respect to matters covered by Sections 3.09 and Article X; (d) for six (6) months in the case of any covenant or agreement to be performed in whole or in part on or prior to the Closing; or (e) with respect to each other covenant or agreement contained in this Agreement, until sixty (60) days following the last date on which such covenant or agreement is to be performed or, if no such date is specified, indefinitely; provided that any representation, warranty, covenant or agreement that would otherwise terminate in accordance with clause (a), (c), (d) or (e) above will continue to survive if a Claim Notice or Indemnity Notice (as applicable) shall have been timely given under Article XII on or prior to such termination date, until the related claim for indemnification has been satisfied or otherwise resolved as provided in Article XII.  Following the expiration of a representation, warranty, covenant or agreement as set forth above, no Action or Proceeding may be initiated by any Purchaser Indemnified Party or Seller Indemnified Party with respect thereto, regardless of any statute of limitations period that would otherwise apply.

 

ARTICLE XII
 INDEMNIFICATION

 

12.01                                   Indemnification.

 

(a)         Subject to paragraphs (c) of this Section 12.01 and the other Sections of this Article XII,

 

(i)                                                             each Seller shall indemnify the Purchaser Indemnified Parties in respect of, and hold each of them harmless from and against, any and all Losses suffered, incurred or sustained by any of them or to which any of them becomes subject, whether or not involving a third-party claim, directly or indirectly resulting from, arising out of or relating to any breach of any representation or warranty made by such Seller; and

 

(ii)                                                          Sellers shall, jointly and severally, indemnify the Purchaser Indemnified Parties in respect of, and hold each of them harmless from and against, any and all Losses suffered, incurred or sustained by any of them or to which any of them becomes subject, whether or not involving a third-party claim, directly or indirectly resulting from, arising out of or relating to (A) any breach of any representation or warranty made by the Company in this Agreement, (B) nonfulfillment of or failure to perform any covenant or agreement on the part of Sellers contained in this Agreement, (C) the Excluded Assets, including all obligations and liabilities related thereto or (D) the matters set forth in Section 3.08 of the Disclosure Schedule.

 

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(b)         Subject to the other Sections of this Article XII, Purchaser shall indemnify the Seller Indemnified Parties in respect of, and hold each of them harmless from and against, any and all Losses suffered, incurred or sustained by any of them or to which any of them becomes subject, resulting from, arising out of or relating to (i) any breach of representation or warranty made by Purchaser in this Agreement or (ii) nonfulfillment of or failure to perform any covenant or agreement on the part of Purchaser contained in this Agreement.

 

(c)          Notwithstanding anything to the contrary in this Section 12.01, Sellers shall have no obligation to indemnify any Purchaser Indemnified Parties pursuant to Section 12.01(a)(ii)(A) (i) unless and until such time as the aggregate amount of all Losses suffered by, imposed on or incurred by the Purchaser Indemnified Parties exceeds an amount equal to Four Million Dollars ($4,000,000) (the “Threshold”), and then only for such excess, or (ii) for any claim or series of related claims for which the Losses aggregate less than One Hundred Fifty Thousand Dollars ($150,000) (the “Basket”) (provided, if such Losses do aggregate to or exceed such amount, the Purchaser Indemnified Parties shall be entitled to indemnification for the entire aggregate amount of such Losses, irrespective of the Basket but subject to the Threshold); provided, however, that (A) neither the Threshold nor the Basket shall apply to Losses arising from any breach of any Company/Seller Fundamental Representation or of any of those representations and warranties set forth in Section 3.08 or 3.09 or in the case of fraud or criminal or willful misconduct, (B) the cumulative aggregate indemnity obligations of Sellers under Section 12.01(a)(ii)(A) with respect to representations and warranties other than (x) the Company/Seller Fundamental Representations, (y) any representations and warranties set forth in Section 3.08 or 3.09, or (z) in the case of fraud or criminal or willful misconduct shall in no event exceed Forty Six Million Dollars ($46,000,000), and (C) the cumulative aggregate indemnity obligations of Sellers under Section 12.01(a)(i) or 12.01(a)(ii)(A) with respect to the Company/Seller Fundamental Representations or any representations and warranties set forth in Section 3.08 or 3.09 shall in no event exceed the Purchase Price (determined without regard to Section 12.04), other than in the case of fraud or criminal or willful misconduct.

 

(d)         The indemnification obligation of any particular Seller for Losses arising under Section 12.01(a)(i) or 12.01(a)(ii)(A) shall not, other than in the case of fraud or criminal or willful misconduct of such Seller, exceed such Seller’s allocable portion of the Purchase Price.  The indemnification obligation of any Purchaser for Losses arising under Section 12.01(b)(i) shall not, other than in the case of fraud or criminal or willful misconduct of Purchaser, exceed the Purchase Price (determined without regard to Section 12.04).

 

(e)          No Seller shall have, and no Seller shall exercise or assert (or attempt to exercise or assert), any right of contribution, reimbursement, subrogation or indemnity against the Company or any Subsidiary in connection with any indemnification obligation to which such Seller may become subject pursuant to this Agreement.  From and after the Closing Date, Sellers hereby irrevocably waive and release the Company and each Subsidiary from any such right of contribution, reimbursement, subrogation or indemnity.

 

(f)           For purposes of determining the occurrence of a breach of a representation or warranty or the amount of any Losses under this Section 12.01, any materiality qualifiers (including Company Material Adverse Effect), or monetary thresholds to similar effect contained

 

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in the applicable representation and warranty shall be deemed to be deleted and shall be given no force or effect.

 

12.02                                   Method of Asserting Claims.  All claims for indemnification by any Indemnified Party under Section 12.01 will be asserted and resolved as follows:

 

(a)                                 In the event any claim or demand in respect of which an Indemnified Party might seek indemnity under Section 12.01 is asserted against or sought to be collected from such Indemnified Party by a Person other than Sellers or any Affiliate of Sellers or of Purchaser (a “Third Party Claim”), the Indemnified Party shall deliver a Claim Notice with reasonable promptness to the Indemnifying Party.  If the Indemnified Party fails to provide the Claim Notice with reasonable promptness after the Indemnified Party receives notice of such Third Party Claim, the Indemnifying Party will not be obligated to indemnify the Indemnified Party with respect to such Third Party Claim to the extent that the Indemnifying Party’s ability to defend has been irreparably prejudiced by such failure of the Indemnified Party.  The Indemnifying Party will notify the Indemnified Party as soon as practicable whether the Indemnifying Party disputes its liability to the Indemnified Party under Section 12.01 and whether the Indemnifying Party desires, at its sole cost and expense, to defend the Indemnified Party against such Third Party Claim.  The Indemnifying Party will be entitled to participate in such Third Party Claim and, to the extent that it wishes (unless (i) the indemnifying party is also a party to such Third Party Claim and the Indemnified Party determines in good faith that joint representation would be inappropriate, or (ii) the Indemnifying Party fails to provide reasonable assurance to the Indemnified Party of its financial capacity to defend such Third Party Claim and provide indemnification with respect to such Third Party Claim), to assume the defense of such Third Party Claim with counsel satisfactory to the Indemnified Party and, after notice from the Indemnifying Party to the Indemnified Party of its election to assume the defense of such Third Party Claim, the Indemnifying Party will not, as long as it diligently conducts such defense, be liable to the Indemnified Party under Section 12.01 for any fees of other counsel or any other expenses with respect to the defense of such Third Party Claim, in each case subsequently incurred by the Indemnified Party in connection with the defense of such Third Party Claim.  The Indemnifying Party will have fifteen (15) days from receipt of a notice of a Third Party Claim from an Indemnified Party to assume the defense thereof.  The Indemnifying Party shall keep the Indemnified Party reasonably informed of the status of defense.

 

(b)         Subject to Section 12.02(c), in the event any Indemnified Party should have a claim under Section 12.01 against any Indemnifying Party that does not involve a Third Party Claim, the Indemnified Party shall deliver an Indemnity Notice with reasonable promptness to the Indemnifying Party.  The failure by any Indemnified Party to give the Indemnity Notice shall not impair such party’s rights hereunder except to the extent that an Indemnifying Party demonstrates that it has been irreparably prejudiced thereby.  If the Indemnifying Party notifies the Indemnified Party that it does not dispute the claim described in such Indemnity Notice or fails to notify the Indemnified Party within thirty (30) days following receipt of such Indemnity Notice whether the Indemnifying Party disputes the claim described in such Indemnity Notice, the Loss arising from the claim specified in such Indemnity Notice will be conclusively deemed a liability of the Indemnifying Party under Section 12.01 and the Indemnifying Party shall pay the amount of such Loss to the Indemnified Party on demand following the final determination thereof.  If the Indemnifying Party has timely disputed its liability with respect to such claim, the

 

51

 

Indemnifying Party and the Indemnified Party will proceed in good faith to negotiate a resolution of such dispute.

 

(c)          Notwithstanding anything in Section 12.02(b) to the contrary but without limiting the rights of any Purchaser Indemnified Party under Section 12.02(a) with respect to Third Party Claims, the determination of whether any Purchaser Indemnified Party makes any claim or demand for indemnification under Section 12.01(a)(i) that is based on any disclosures set forth in the Seller Certificates shall be vested exclusively in the Committee.  The Committee shall have sole authority to determine whether any Purchaser Indemnified Party shall assert any such indemnification claim and, in making such determination, may be assisted by independent legal and financial advisors of its choosing, the costs of which shall be borne by Purchaser and shall not be taken into account in determining the amount of indemnifiable Losses, if any.

 

12.03                                   Release. Effective as of the Closing, each Seller, on behalf of itself and its Affiliates, hereby releases and discharges the Company and each Subsidiary, and each of Representatives of any of the foregoing, from any and all Liabilities arising in respect of any period ending on or prior to the Closing other than any Liabilities (a) arising under this Agreement or (b) in respect of indemnification rights specified in Section 7.04.

 

12.04                                   Purchase Price Adjustment.  For federal, state and local Tax purposes, any payments made under this Article XII shall be treated by the Purchaser and Sellers as an adjustment to the Purchase Price except as otherwise required by applicable Law or pursuant to the good faith resolution of a Tax Claim.

 

ARTICLE XIII
 TERMINATION

 

13.01                                   Termination.  This Agreement may be terminated, and the transactions contemplated hereby may be abandoned:

 

(a)         at any time before the Closing, by mutual written agreement of the Seller Representative on behalf of Sellers and Purchaser;

 

(b)         at any time before the Closing, by the Seller Representative on behalf of Sellers or Purchaser, in the event (i) of a material breach hereof by the non-terminating party if such non-terminating party fails to cure such breach within twenty (20) Business Days following notification thereof by the terminating party or (ii) upon notification of the non-terminating party by the terminating party that the satisfaction of any condition to the terminating party’s obligations under this Agreement becomes impossible or impracticable with the use of commercially reasonable efforts if the failure of such condition to be satisfied is not caused by a breach hereof by the terminating party;

 

(c)          at any time before the Closing, by the Seller Representative on behalf of Sellers or by Purchaser, in the event that any Order or Law becomes effective restraining, enjoining or otherwise prohibiting or making illegal the consummation of any of the transactions contemplated by this Agreement, upon notification of the non-terminating party by the terminating party;

 

52

 

(d)         at any time after May 31, 2016 (the “Termination Date”) by the Seller Representative or Purchaser upon notification of the non-terminating party by the terminating party if the Closing shall not have occurred on or before such date and such failure to consummate is not caused by a breach of this Agreement by the terminating party; provided, that if all of the conditions to Closing shall have been satisfied, shall be capable of being satisfied at such time or would be capable of being satisfied at such time but for the fact that the conditions set forth in Sections 8.05, 8.07 and 9.05 are not satisfied, the Termination Date may be extended by Purchaser or the Seller Representative from time to time by written notice to the other to a date not later than July 31, 2016; or

 

(e)          at any time prior to commencement of the “roadshow” to be conducted for purposes of the IPO Transactions, by Purchaser, in the event that (i) any Seller fails to timely deliver a Pre-Roadshow Bring Down Certificate in accordance with Section 13.03, or (ii) any Pre-Roadshow Bring Down Certificate delivered to Purchaser fails to make the Preliminary Confirmations without qualification thereof or exception thereto.

 

13.02                                   Effect of Termination.  If this Agreement is validly terminated pursuant to Section 13.01, this Agreement will forthwith become null and void, and there will be no liability or obligation (other than any liabilities or obligations resulting from fraud or criminal or willful misconduct) on the part of Sellers or Purchaser (or any of their respective officers, directors, employees, agents or other representatives or Affiliates), except that the provisions with respect to expenses in Section 14.04 and confidentiality in Section 14.05 will continue to apply following any such termination.

 

ARTICLE XIV
 MISCELLANEOUS

 

14.01                                   Notices.  All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given:  (a) on the date of service if served personally on the party to whom notice is to be given; (b) on the day of transmission if sent via facsimile transmission to the facsimile number given below, and telephonic confirmation of receipt is obtained promptly after completion of transmission; (c) on the day after delivery to Federal Express or similar overnight courier or the Express Mail service maintained by the United States Postal Service; or (d) on the fifth day after mailing, if mailed to the party to whom notice is to be given, by first class mail, registered or certified, postage prepaid and properly addressed, to the party as follows:

 

If to Purchaser, to:

 

Station Casinos LLC
 1505 South Pavilion Center Drive

Las Vegas, Nevada 89135

Facsimile No.:  702-795-4245
 Attention:  General Counsel

 

with a copy, which shall not constitute notice, to:

 

53

 

The Special Committee of Station Casinos LLC

c/o Station Casinos LLC

1505 South Pavilion Center Drive

Las Vegas, Nevada 89135

Facsimile No.:  702-795-4245

Attention:  Dr. James Nave

 

with a copy, which shall not constitute notice, to each Lender Director, in each case at such address as Purchaser or such Lender Director may from time to time specify by notice to Sellers.

 

If to Sellers, to the Seller Representative:

 

Frank J. Fertitta III
 1505 South Pavilion Center Drive

Las Vegas, Nevada 89135

Facsimile No.:  702-692-3701

 

with a copy, which shall not constitute notice, to:

 

Milbank, Tweed, Hadley & McCloy LLP
 601 S. Figueroa Street, 30th Floor

Los Angeles, CA 90017
 Facsimile No.:  213-892-4733
 Attention:  Kenneth J. Baronsky

 

Any party from time to time may change its address, facsimile number or other information for the purpose of notices to that party by giving notice specifying such change to the other party hereto.

 

14.02                                   Specific Performance.  The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached.  Accordingly, the parties agree that, in addition to any other remedies, each party shall be entitled to enforce the terms of this Agreement by a decree of specific performance without the necessity of proving the inadequacy of money damages as a remedy.  Each party hereby waives any requirement for the securing or posting of any bond in connection with such remedy.  Each party further agrees that the only permitted objection that it may raise in response to any action for equitable relief is that it contests the existence of a breach or threatened breach of this Agreement.

 

14.03                                   Entire Agreement.  This Agreement supersedes all prior discussions and agreements between the parties with respect to the subject matter hereof and contains the sole and entire agreement between the parties hereto with respect to the subject matter hereof.

 

14.04                                   Expenses.  Whether or not the transactions contemplated hereby are consummated, Purchaser shall pay its own costs and expenses and shall pay or reimburse

 

54

 

Sellers for the out-of-pocket fees and expenses incurred in connection with the negotiation, execution and closing of this Agreement and the transactions contemplated hereby; provided, that Purchaser shall not, directly or indirectly, bear, pay or reimburse any fees and expenses or portion thereof in respect of any premium, bonus, success or similar non-standard and non-hourly-based consideration for legal or accounting services.

 

14.05                                   Public Announcements.  At all times at or before the Closing, Sellers and Purchaser will not, and Sellers will cause the Company not to, issue or make any reports, statements or releases to the public with respect to this Agreement or the transactions contemplated hereby without the consent of the other, which consent shall not be unreasonably withheld; provided, that Purchaser may include a summary description of this Agreement in the prospectus included in the registration statement filed in connection with the IPO Transactions and file a copy of this Agreement with the U.S. Securities and Exchange Commission.  Subject to the foregoing proviso, if either party is unable to obtain the approval of its public report, statement or release from the other party and such report, statement or release is, in the opinion of legal counsel to such party, required by Law in order to discharge such party’s disclosure obligations, then such party may make or issue the legally required report, statement or release and promptly furnish the other party with a copy thereof.  Sellers and Purchaser will also obtain the other party’s prior approval of any press release to be issued immediately following the Closing announcing the consummation of the transactions contemplated by this Agreement.

 

14.06                                   Confidentiality Each party hereto will hold, and will use its best efforts to cause its Affiliates, and in the case of Purchaser, any Person who has provided, or who is considering providing, financing to Purchaser to finance all or any portion of the Purchase Price or who is providing or considering providing underwriting services in connection with the IPO Transactions, and their respective Representatives to hold, in strict confidence from any Person (other than any such Affiliate, Representative, or Person who has provided, or who is considering providing, financing or underwriting services), unless (i) compelled to disclose by judicial or administrative process (including without limitation in connection with obtaining the necessary approvals of this Agreement and the transactions contemplated hereby of Governmental or Regulatory Authorities) or by other requirements of Law or (ii) disclosed in an Action or Proceeding brought by a party hereto in pursuit of its rights or in the exercise of its remedies hereunder, all documents and information concerning the other party or any of its Affiliates furnished to it by the other party or such other party’s Representatives in connection with this Agreement or the transactions contemplated hereby, except to the extent that such documents or information can be shown to have been (a) previously known by the party receiving such documents or information, (b) in the public domain (either prior to or after the furnishing of such documents or information hereunder) through no fault of such receiving party or (c) later acquired by the receiving party from another source if the receiving party is not aware that such source is under an obligation to another party hereto to keep such documents and information confidential; provided that following the Closing the foregoing restrictions will not apply to Purchaser’s use of documents and information concerning the Company and the Subsidiaries furnished by Sellers hereunder.  In the event the transactions contemplated hereby are not consummated, upon the request of the other party, each party hereto will, and will cause its Affiliates, any Person who has provided, or who is considering providing, financing to such party and their respective Representatives to, promptly (and in no event later than five (5) Business Days after such request) redeliver or cause to be redelivered all copies of documents

 

55

 

and information furnished by the other party in connection with this Agreement or the transactions contemplated hereby and destroy or cause to be destroyed all notes, memoranda, summaries, analyses, compilations and other writings related thereto or based thereon prepared by the party furnished such documents and information or its Representatives.

 

14.07                                   Waiver.  Any term or condition of this Agreement may be waived at any time by the party that is entitled to the benefit thereof, but no such waiver shall be effective unless set forth in a written instrument duly executed by or on behalf of the party waiving such term or condition.  No waiver by any party of any term or condition of this Agreement, in any one or more instances, shall be deemed to be or construed as a waiver of the same or any other term or condition of this Agreement on any future occasion.  All remedies, either under this Agreement or by Law or otherwise afforded, will be cumulative and not alternative.

 

14.08                                   Amendment.  This Agreement may be amended, supplemented or modified only by a written instrument duly executed by or on behalf of each party hereto; provided, however, that no amendment or other modification may be made to this Agreement that has the effect of waiving or otherwise altering the overall effect of Sections 8.06(b) or 9.06(b) without the prior written approval of the Lender Directors.

 

14.09                                   No Third-Party Beneficiary.  The terms and provisions of this Agreement are intended solely for the benefit of each party hereto and their respective successors or permitted assigns, and it is not the intention of the parties to confer third-party beneficiary rights upon any other Person other than any Person entitled to indemnity under Article XII, except that the Lender Directors shall be third-party beneficiaries with a right of enforcement only of the conditions set forth in Section 8.06(b) and 9.06(b).

 

14.10                                   No Assignment; Binding Effect.  Neither this Agreement nor any right, interest or obligation hereunder may be assigned by any party hereto without the prior written consent of the other party hereto and any attempt to do so will be void, except (a) for assignments and transfers by operation of Law and (b) that Purchaser may assign any or all of its rights, interests and obligations hereunder (including without limitation its rights under Article XI) to (i) a wholly-owned subsidiary, provided that any such subsidiary agrees in writing to be bound by all of the terms, conditions and provisions contained herein, (ii) any post-Closing purchaser of all of the issued and outstanding membership interests of the Company or a substantial part of its assets or (iii) any financial institution providing purchase money or other financing to Purchaser or the Company from time to time as collateral security for such financing, but no such assignment referred to in clause (i) or (ii) shall relieve Purchaser of its obligations hereunder.  Subject to the preceding sentence, this Agreement is binding upon, inures to the benefit of and is enforceable by the parties hereto and their respective successors and assigns.

 

14.11                                   Headings; Schedules.  The headings used in this Agreement have been inserted for convenience of reference only and do not define or limit the provisions hereof. Each exception to the any representation or warranty disclosed on one section of the Disclosure Schedule shall constitute an exception to all other applicable representations and warranties

 

56

 

made in this Agreement requiring disclosure of such exception to the extent that such exception is reasonably apparently from a plain reading of the disclosure contained in such section.

 

14.12                                   Invalid Provisions.  If any provision of this Agreement is held to be illegal, invalid or unenforceable under any present or future Law, and if the rights or obligations of any party hereto under this Agreement will not be materially and adversely affected thereby, (a) such provision will be fully severable, (b) this Agreement will be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof, and (c) the remaining provisions of this Agreement will remain in full force and effect and will not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom.

 

14.13                                   Governing Law.  This Agreement shall be governed by and construed in accordance with the Laws of the State of Delaware applicable to a Contract executed and performed in such State, without giving effect to the conflicts of laws principles thereof.

 

14.14                                   Disputes.  Any dispute, claim or controversy arising out of or relating to this Agreement that cannot be resolved amicably by the parties, including the scope or applicability of this agreement to arbitrate, shall be determined by binding arbitration pursuant to Section 349 of the Rules of the Court of Chancery of the State of Delaware if it is eligible for such arbitration.  If the dispute claim or controversy is not eligible for such arbitration, it shall be settled by arbitration administered by the American Arbitration Association (“AAA”) in accordance with its Commercial Rules and judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction thereof.  Any AAA arbitration proceeding shall be conducted in the State of Delaware.  The AAA arbitrator shall have the authority to award any remedy or relief that a court of competent jurisdiction could order or grant, including the issuance of an injunction or other equitable relief.  However, any party may, without inconsistency with this arbitration provision, apply to any court having jurisdiction hereof and seek interim provisional, injunctive or other equitable relief until the arbitration award is rendered or the controversy is otherwise resolved.  Except as necessary in court proceedings to enforce this arbitration provision or an award rendered hereunder, or to obtain interim relief, neither a party nor an arbitrator may disclose the existence, content, or results of any arbitration hereunder without the prior written consent of both parties.  TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ALL RIGHT OF TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTER-CLAIM, ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY MATTER ARISING HEREUNDER.

 

14.15                                   Counterparts.  This Agreement may be executed in any number of counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

 

14.16                                   Seller Representative.  Each Seller, by the execution of this Agreement, shall be deemed to have irrevocably appointed, authorized and directed Frank J. Fertitta III, in his capacity as the Seller Representative, to act as such Seller’s agent, representative, proxy and attorney-in-fact for the purpose of effecting the consummation of the

 

57

 

transactions contemplated by this Agreement and exercising, on behalf of all Sellers, the rights and powers of Sellers hereunder and thereunder.  Without limiting the generality of the foregoing, the Seller Representative shall have full power and authority, and is hereby directed, for and on behalf of all Sellers, to take such action, and to exercise such rights, power and authority, as are authorized, delegated and granted to the Seller Representative hereunder in connection with the transactions contemplated hereby and to exercise such rights, power and authority as are incidental thereto, to represent any Seller at and after the Closing, to give or receive any notices required or permitted to be given hereunder and thereunder, to accept service of process on behalf of any Seller, to execute and deliver, or hold in escrow and release, any exhibits or amendments to this Agreement, or any other agreements, certificates, statements, notices, approvals, extensions or waivers relating to the transactions contemplated hereby or thereby, to conduct or cease to conduct the defense of all claims against any Seller in connection with this Agreement, and to settle all such claims on behalf of all Sellers.  The appointment and agency created hereby is irrevocable, and shall be deemed to be coupled with an interest.  The Seller Representative shall serve as such from the date hereof until the earlier of his resignation, death or incapacity or the completion of his obligations hereunder.  In the event that Frank J. Fertitta III is unable or unwilling to continue to serve as the Seller Representative, or otherwise ceases to be Sellers Representative, his successor shall be promptly appointed by Sellers.

 

[Signature Page Follows]

 

58

 

IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized officer of each party hereto as of the date first above written.

 

	
 
    	
STATION CASINOS LLC
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Richard J. Haskins
    
	
 
    	
 
    	
Name: Richard J.   Haskins
    
	
 
    	
 
    	
Title: Executive Vice   President
    

 

 

	
 
    	
FERTITTA ENTERTAINMENT   LLC
    
	
 
    	
 
    
	
 
    	
By: FERTITTA HOLDCO LLC
    
	
 
    	
Its: Manager
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Frank J. Fertitta   III
    
	
 
    	
 
    	
Name: Frank J. Fertitta   III
    
	
 
    	
 
    	
Title: Manager
    
	
 
    	
 
    
	
 
    	
FERTITTA BUSINESS   MANAGEMENT LLC
    
	
 
    	
 
    
	
 
    	
By: F & J   FERTITTA FAMILY BUSINESS TRUST
    
	
 
    	
Its: Member
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Frank J. Fertitta   III
    
	
 
    	
 
    	
Name: Frank J. Fertitta   III
    
	
 
    	
 
    	
Title: Trustee
    
	
 
    	
 
    
	
 
    	
By: L & T   FERTITTA FAMILY BUSINESS TRUST
    
	
 
    	
Its: Member
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Lorenzo J. Fertitta
    
	
 
    	
 
    	
Name: Lorenzo J.   Fertitta
    
	
 
    	
 
    	
Title: Trustee
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
LNA INVESTMENTS, LLC
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Lorenzo J. Fertitta
    
	
 
    	
 
    	
Name: Lorenzo J.   Fertitta
    
	
 
    	
 
    	
Title: Manager
    
	
 
    	
 
    
	
 
    	
KVF INVESTMENTS, LLC
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Frank J. Fertitta   III
    
	
 
    	
 
    	
Name: Frank J. Fertitta   III
    
	
 
    	
 
    	
Title: Manager
    

 

 

	
 
    	
FE EMPLOYEECO LLC
    
	
 
    	
 
    
	
 
    	
By: FERTITTA HOLDCO LLC
    
	
 
    	
Its: Manager
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Frank J. Fertitta   III
    
	
 
    	
 
    	
Name: Frank J. Fertitta   III
    
	
 
    	
 
    	
Title: Manager
    
	
 
    	
 
    
	
 
    	
/s/   Frank J. Fertitta III
    
	
 
    	
Frank J. Fertitta III,   as the Seller RepresentativeExhibit 4.1

RIGHTS AGREEMENT

by and between

SUPPORT.COM, INC.

and

COMPUTERSHARE TRUST COMPANY, N.A.,

as Rights Agent,

Dated as of October 13, 2015

 

TABLE OF CONTENTS

	 	 	
Page

	 	 	 
	
Section 1.

	
Certain Definitions

	
1

	 	 	 
	
Section 2.

	
Appointment of the Rights Agent

	
9

	 	 	 
	
Section 3.

	
Issuance of Rights Certificates

	
9

	 	 	 
	
Section 4.

	
Form of Rights Certificates

	
11

	 	 	 
	
Section 5.

	
Countersignature and Registration

	
12

	 	 	 
	
Section 6.

	
Transfer, Split-Up, Combination, and Exchange of Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates

	
12

	 	 	 
	
Section 7.

	
Exercise of Rights; Purchase Price; Expiration Date of Rights

	
13

	 	 	 
	
Section 8.

	
Cancellation and Destruction of Rights Certificates

	
15

	 	 	 
	
Section 9.

	
Reservation and Availability of Capital Stock

	
15

	 	 	 
	
Section 10.

	
Preferred Shares Record Date

	
17

	 	 	 
	
Section 11.

	
Adjustment of Purchase Price, Number and Kind of Shares, or Number of Rights

	
18

	 	 	 
	
Section 12.

	
Certificate of Adjusted Purchase Price or Number of Shares

	
25

	 	 	 
	
Section 13.

	
Consolidation, Merger, or Sale or Transfer of Assets, Cash Flow or Earning Power

	
25

	 	 	 
	
Section 14.

	
Fractional Rights and Fractional Shares

	
28

	 	 	 
	
Section 15.

	
Rights of Action

	
29

	 	 	 
	
Section 16.

	
Agreement of Rights Holders

	
30

	 	 	 
	
Section 17.

	
Rights Certificate Holder Not Deemed a Stockholder

	
30

	 	 	 
	
Section 18.

	
Concerning the Rights Agent

	
31

	 	 	 
	
Section 19.

	
Merger or Consolidation or Change of Name of the Rights Agent

	
31

	 	 	 
	
Section 20.

	
Duties of the Rights Agent

	
32

	 	 	 
	
Section 21.

	
Change of the Rights Agent

	
34

	 	 	 
	
Section 22.

	
Issuance of New Rights Certificates

	
35

	 	 	 
	
Section 23.

	
Redemption and Termination

	
35

	 	 	 
	
Section 24.

	
Exchange of Rights

	
36

	 	 	 
	
Section 25.

	
Notice of Certain Events

	
38

	 	 	 
	
Section 26.

	
Notices

	
39

	 	 	 
	
Section 27.

	
Supplements and Amendments

	
40

 

i

	
Section 28.

	
Successors

	
40

	 	 	 
	
Section 29.

	
Determinations and Actions by the Board

	
40

	 	 	 
	
Section 30.

	
Benefits of this Agreement

	
41

	 	 	 
	
Section 31.

	
Severability

	
41

	 	 	 
	
Section 32.

	
Governing Law

	
41

	 	 	 
	
Section 33.

	
Counterparts; Facsimiles and PDFs

	
41

	 	 	 
	
Section 34.

	
Descriptive Headings

	
42

	 	 	 
	
Section 35.

	
Force Majeure

	
42

 

ii

RIGHTS AGREEMENT

RIGHTS AGREEMENT, dated as of October 13, 2015 (this “Agreement”), between Support.com, Inc., a Delaware corporation (the “Company”), and Computershare Trust Company, N.A., as rights agent (the “Rights Agent”).

RECITALS

WHEREAS, on October 13, 2015 (the “Rights Dividend Declaration Date”), the Board of Directors of the Company (the “Board”) adopted this Agreement and authorized and declared a dividend distribution of one preferred share purchase right (each, a “Right” and collectively, the “Rights”) for each Common Share outstanding at the Close of Business (as hereinafter defined) on October 30, 2015 (the “Record Date”), each Right initially representing the right to purchase one one-thousandth of a Preferred Share (as such number may be adjusted pursuant to the provisions of this Agreement) and having the rights, preferences and privileges set forth in the form of Certificate of Designation of Series A Junior Participating Preferred Stock attached hereto as Exhibit A, upon the terms and subject to the conditions set forth herein; and

WHEREAS, the Board further authorized and directed the issuance of one Right (as such number may hereinafter be adjusted pursuant to the provisions of Section 11(p) hereof) with respect to each Common Share that becomes outstanding between the Record Date (whether originally issued or delivered from the Company’s treasury) and, except as otherwise provided in Section 22, the earlier of the Distribution Date and the Expiration Date, each Right initially evidencing the right to purchase one one-thousandth of a Preferred Share, upon the terms and subject to the conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties, intending to be legally bound hereby, agree as follows:

Section 1.             Certain Definitions. For purposes of this Agreement, the following terms have the meanings indicated:

(a)           “Acquiring Person” shall mean any Person who or which, together with all Related Persons of such Person, from and after the date of this Agreement, shall be the Beneficial Owner of 15% or more of the Common Shares then outstanding, but shall not include an Exempt Person or a Grandfathered Stockholder. Notwithstanding the foregoing: (i) any Person who becomes the Beneficial Owner of 15% or more of the Common Shares then outstanding as a result of a reduction in the number of Common Shares outstanding due to the repurchase of Common Shares by the Company shall not be deemed an “Acquiring Person” unless and until such Person acquires Beneficial Ownership of any additional Common Shares (other than as a result of a stock dividend, stock split, or similar transaction effected by the Company in which all registered holders of Common Shares are treated substantially equally) while the Beneficial Owner of 15% or more of the Common Shares then outstanding; and (ii) if the Board determines in good faith that a Person who would otherwise be an Acquiring Person has become such inadvertently (including, without limitation, because (A) such Person was unaware that it beneficially owned a percentage of Common Shares that would otherwise cause such Person to be an Acquiring Person or (B) such Person was aware of the extent of its Beneficial Ownership of Common Shares but had no actual knowledge of the consequences of such Beneficial Ownership under this Agreement and had no intention of changing or influencing control of the Company), and such Person divests as promptly as practicable (and in any event within five (5) Business Days after being so requested by the Company) a sufficient number of Common Shares so that such Person is no longer the Beneficial Owner of 15% or more of the Common Shares then outstanding or, in the case solely of Derivative Interests, such Person terminates as promptly as practicable (and in any event within five (5) Business Days after being so requested by the Company) the subject derivative transaction or transactions or disposes of the subject derivative security or securities as promptly as practicable (and in any event within five (5) Business Days after being so requested by the Company), or establishes to the satisfaction of the Board that such Derivative Interests are not held with any intention of changing or influencing control of the Company, then such Person shall not be deemed to be or ever to have been an “Acquiring Person” for any purposes of this Agreement as a result of such inadvertent acquisition.

 

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(b)           “Act” shall mean the Securities Act of 1933, as amended.

(c)           A Person shall be deemed to be “Acting in Concert” with another Person if such Person knowingly acts (whether or not pursuant to an express agreement, arrangement or understanding) at any time after the first public announcement of the adoption of this Agreement, in concert or in parallel with such other Person, or towards a common goal with such other Person, relating to changing or influencing the control of the Company or in connection with or as a participant in any transaction having that purpose or effect, where (i) each Person is conscious of the other Person’s conduct and this awareness is an element in their respective decision-making processes and (ii) at least one additional factor supports a determination by the Company’s Board of Directors that such Persons intended to act in concert or in parallel, which such additional factors may include, without limitation, exchanging information, attending meetings, conducting discussions, or making or soliciting invitations to act in concert or in parallel; provided that the additional factor required shall not include actions by an officer or director of the Company acting in such capacities. A Person who is Acting in Concert with another Person shall also be deemed to be Acting in Concert with any third party who is also Acting in Concert with such other Person. No Person shall be deemed to be Acting in Concert with another Person solely as a result of (i) making or receiving a solicitation of, or granting or receiving, revocable proxies or consents given in response to a public proxy or consent solicitation made to more than 10 holders of shares of a class of stock of the Company registered under Section 12 of the Exchange Act, or (ii) soliciting or being solicited for tenders of, or tendering or receiving tenders of, securities in a public tender or exchange offer made pursuant to, and in accordance with, Section 14(d) of the Exchange Act by means of a tender offer statement filed on Schedule TO.

(d)           “Adjustment Shares” shall have the meaning set forth in Section 11(a)(ii) hereof.

(e)           “Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b 2 of the General Rules and Regulations under the Exchange Act; provided, however, that no director or officer of the Company shall be deemed an Affiliate or Associate of any other director or officer of the Company solely as a result of his or her being a director or officer of the Company.

 

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(f)           “Agreement” shall have the meaning set forth in the preamble of this Agreement, as it may from time to time be supplemented, amended, renewed, restated or extended pursuant to the applicable provisions hereof.

(g)           “Amended and Restated Certificate of Incorporation” shall mean the Company’s Amended and Restated Certificate of Incorporation, as such may be amended, modified or restated from time to time.

(h)           A Person shall be deemed the “Beneficial Owner” of, shall be deemed to have “Beneficial Ownership” of, and shall be deemed to “beneficially own,” any securities:

(i)             which such Person or any of such Person’s Related Persons beneficially owns, directly or indirectly (as determined pursuant to Rule 13d 3 of the General Rules and Regulations under the Exchange Act);

(ii)           which such Person or any of such Person’s Related Persons, directly or indirectly, has the right to acquire (whether such right is exercisable immediately or only after the passage of time or upon the satisfaction of one or more conditions (whether or not within the control of such Person), compliance with regulatory requirements or otherwise) pursuant to any agreement, arrangement or understanding (whether or not in writing and other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities) or upon the exercise of conversion rights, exchange rights, other rights, warrants, or options, or otherwise; provided, however, that a Person shall not be deemed the “Beneficial Owner” of, to have “Beneficial Ownership” of, or to “beneficially own,” (A) securities tendered pursuant to a tender offer or exchange offer made in accordance with the General Rules and Regulations under the Exchange Act by or on behalf of such Person or any of such Person’s Related Persons until such tendered securities are accepted for purchase or exchange, (B) securities issuable upon exercise of Rights at any time prior to the occurrence of a Triggering Event, or (C) securities issuable upon exercise of Rights from and after the occurrence of a Triggering Event, which Rights were acquired by such Person or any of such Person’s Related Persons prior to the Distribution Date or pursuant to Section 3(a) or Section 22 hereof (the “Original Rights”) or pursuant to Section 11(i) or Section 11(p) hereof in connection with an adjustment made with respect to any Original Rights;

(iii)          which such Person or any of such Person’s Related Persons, directly or indirectly, has the right to vote or dispose of, including pursuant to any agreement, arrangement, or understanding (whether or not in writing); provided, however, that a Person shall not be deemed the “Beneficial Owner” of, to have “Beneficial Ownership” of, or to “beneficially own,” any security as a result of an agreement, arrangement or understanding (whether or not in writing) to vote such security if such agreement, arrangement or understanding: (A) arises solely from a revocable proxy or consent (as such terms are defined in Regulation 14A under the Exchange Act) given in response to a public proxy or consent solicitation made to more than 10 holders of shares of a class of stock of the Company registered under Section 12 of the Exchange Act, (B) is not also then reportable by such Person on Schedule 13D under the Exchange Act (or any comparable or successor report); or (C) arises solely because such security has been tendered pursuant to a tender or exchange offer made by such Person or any Related Persons thereof until such tendered security is accepted for payment or exchange;

 

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(iv)          which are beneficially owned, directly or indirectly, by any other Person (or any Related Person thereof) with which such Person (or any of such Person’s Related Persons) has any agreement, arrangement or understanding (whether or not in writing) for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy as described in the proviso to Section 1(g)(iii)), or disposing of any voting securities of the Company; provided, however, that nothing in this Section 1(g)(iv) shall cause a Person engaged in business as an underwriter of securities to be the “Beneficial Owner” of, to have “Beneficial Ownership” of, or to “beneficially own,” any securities acquired or which such Person has the right to acquire through such Person’s participation in good faith in a firm commitment underwriting until the expiration of forty (40) days after the date of such acquisition, and then only if such securities continue to be owned by such Person at such expiration of forty (40) days; or

(v)           which are the subject of, or the reference securities for, or that underlie, any Derivative Interest of such Person or any of such Person’s Related Persons, with the number of Common Shares deemed beneficially owned being the notional or other number of Common Shares specified in the documentation evidencing the Derivative Interest as being subject to being acquired upon the exercise or settlement of the Derivative Interest or as the basis upon which the value or settlement amount of such Derivative Interest is to be calculated in whole or in part or, if no such number of Common Shares is specified in such documentation, as determined by the Board in its sole discretion to be the number of Common Shares to which the Derivative Interest relates.

Notwithstanding anything in this definition of Beneficial Ownership to the contrary, for all purposes of this Agreement, the phrase “then outstanding,” when used with reference to a Person’s Beneficial Ownership of securities of the Company, shall mean the number of such securities then issued and outstanding together with the number of such securities not then actually issued and outstanding that such Person, together with all Related Persons, would be deemed to Beneficially Own hereunder. The number of Common Shares not outstanding that such Person, together with all Related Persons of such Person, is otherwise deemed to Beneficially Own for purposes of this Agreement shall be deemed to be outstanding for the purpose of computing the percentage of the outstanding number of Common Shares owned by such Person, together with all Related Persons of such Person, but shall not be deemed to be outstanding for the purpose of computing the percentage of outstanding Common Shares owned by any other Person.

No Person who is an officer, director or employee of an Exempt Person shall be deemed, solely by reason of such Person’s status or authority as such, to be the “Beneficial Owner” of, to have “Beneficial Ownership” of or to “Beneficially Own” any securities that are “Beneficially Owned”(as defined in this Section 1(g)), including, without limitation, in a fiduciary capacity, by an Exempt Person or by any other such officer, director or employee of an Exempt Person.

 

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Notwithstanding any of the foregoing, no Person shall be deemed to be the “Beneficial Owner” of, to have “Beneficial Ownership” of or to “Beneficially Own” any securities which such Person or any of such Person’s Related Persons would otherwise be deemed to “Beneficially Own” pursuant to this Section 1(g) solely as a result of any merger or other acquisition agreement between the Company and such Person (or one or more of such Person’s Related Persons), or any tender, voting or support agreement entered into by such Person (or one or more of such Person’s Related Persons) in connection therewith, if, prior to such Person becoming an Acquiring Person, the Board has approved such merger or other acquisition agreement, or such tender, voting or support agreement.

(i)            “Board” shall have the meaning set forth in the recitals to this Agreement and also includes any duly authorized committee thereof.

(j)            “Business Day” shall mean any day other than a Saturday, Sunday or a day on which banking institutions in the State of California or the State of New York are authorized or obligated by law or executive order to close.

(k)           “Close of Business” on any given date shall mean 5:00 p.m., New York City time, on such date; provided, however, that if such date is not a Business Day, it shall mean 5:00 p.m., New York City time, on the next succeeding Business Day.

(l)            “Closing Price” of any security on any given day shall be the last sale price, regular way, of such security or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, on the principal trading market on which such security is then traded.

(m)          “Common Shares” shall mean the shares of common stock, par value $.0001 per share, of the Company or any other shares of capital stock of the Company into which such shares shall be reclassified or changed, except that “Common Shares” when used with reference to any Person other than the Company shall mean the capital stock of such Person with the greatest voting power, or the equity securities or other equity interests having power to control or direct the management of such Person.

(n)           “Common Stock Equivalents” shall have the meaning set forth in Section 11(a)(iii) hereof.

(o)           “Company” shall have the meaning set forth in the preamble hereto, except as otherwise provided in Section 13(a) hereof.

(p)           “Current Market Price” shall have the meaning set forth in Section 11(d) hereof.

(q)           “Current Value” shall have the meaning set forth in Section 11(a)(iii) hereof.

(r)            “Derivative Interest” shall mean any derivative securities (as defined under Rule 16a-1 under the Exchange Act) that increase in value as the value of the underlying equity increases, including, but not limited to, a long convertible security, a long call option and a short put option position, in each case, regardless of whether (i) such interest conveys any voting rights in such security, (ii) such interest is required to be, or is capable of being, settled through delivery of such security or (iii) transactions hedging the economic effect of such interest.

 

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(s)           “Distribution Date” shall mean the earlier of (i) the Close of Business on the 10th Business Day (or such later date as may be determined from time to time by action of a majority of the Board prior to the Distribution Date that would otherwise have occurred) after the Shares Acquisition Date (or, if the 10th Business Day after the Shares Acquisition Date occurs before the Record Date, then the Close of Business on the Record Date), or (ii) the Close of Business on the 10th Business Day (or such later date as may be determined from time to time by action of the Board prior to the Distribution Date that would otherwise have occurred) after the date of the commencement of, or first public announcement of the intent of any Person (other than an Exempt Person) to commence (within the meaning of Rule 14d-2(a) of the General Rules and Regulations under the Exchange Act) following the date hereof, a tender or exchange offer the consummation of which would result in any Person (other than an Exempt Person) becoming an Acquiring Person. The Board may, if deferral is allowed in clause (i) or (ii) of the preceding sentence, defer the date set forth in such clause, as applicable, to a specified later date or an unspecified later date to be determined by a subsequent action or event.

(t)            “Equivalent Preferred Shares” shall have the meaning set forth in Section 11(b) hereof.

(u)           “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

(v)           “Exchange Property” shall have the meaning set forth in Section 24(f) hereof.

(w)          “Exchange Ratio” shall have the meaning set forth in Section 24(a) hereof.

(x)            “Exchange Recipients” shall have the meaning set forth in Section 24(f) hereof.

(y)           “Exempt Person” shall mean (i) the Company, (ii) any Subsidiary of the Company, (iii) any employee stock ownership plan, employee benefit plan or other compensation program or arrangement of the Company or of any of its Subsidiaries, or any Person holding Common Shares for or pursuant to the terms of any such plan, program or arrangement or for the purpose of funding any such plan, program or arrangement, and (iv) any Person organized, appointed or established by the Company or any of its Subsidiaries for or pursuant to the terms of any such plan, program or arrangement during the time such Person acts in such capacity.

(z)            “Expiration Date” shall have the meaning set forth in Section 7(a) hereof.

 

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(aa)         “Final Expiration Date” shall have the meaning set forth in Section 7(a) hereof.

(bb)        “Grandfathered Stockholder” shall mean any Person who or which would, as of the public announcement of this Rights Agreement (including any shares Beneficial Ownership of which is acquired on the date of such announcement pursuant to orders placed prior to becoming aware of such announcement), be deemed an “Acquiring Person,” unless and until such Person (together with all Related Persons) shall acquire after the adoption of this Rights Agreement, without the prior approval of the Board of Directors, Beneficial Ownership of any additional Common Shares (other than as a result of (i) a stock dividend, stock split, or similar transaction effected by the Company in which all registered holders of Common Shares are treated substantially equally, (ii) the grant or issuance to such Person of options or rights to acquire Common Shares, and the subsequent exercise of such options or rights, pursuant to a stock option or stock incentive plan adopted by the Board and approved by the stockholders of the Company, or (iii) the grant or issuance to such Person of restricted Common Shares and the subsequent vesting of such shares, pursuant to a restricted stock plan adopted by the Board and approved by the stockholders of the Company) while the Beneficial Owner of 15% or more of the Common Shares then outstanding.

(cc)         “Nasdaq” shall mean The NASDAQ Global Select Market.

(dd)        “Original Rights” shall have the meaning set forth in Section 1(h)(ii) hereof.

(ee)         “Ownership Statement” shall have the meaning set forth in Section 3(a) hereof.

(ff)          “Person” shall mean any individual, firm, corporation, partnership, limited liability company, limited liability partnership, trust, association, syndicate or other entity, and shall include any successor (by merger or otherwise) of such entity.

(gg)        “Preferred Shares” shall mean shares of Series A Junior Participating Preferred Stock, par value $.0001 per share, of the Company having the rights and preferences set forth in the form of Certificate of Designation attached to this Agreement as Exhibit A, and, to the extent that there are not a sufficient number of shares of Series A Junior Participating Preferred Stock authorized to permit the full exercise of the Rights, any other series of preferred stock of the Company designated for such purpose containing terms substantially similar to the terms of the Series A Junior Participating Preferred Stock.

(hh)        “Principal Party” shall have the meaning set forth in Section 13(b) hereof.

(ii)           “Purchase Price” shall have the meaning set forth in Section 7(b) hereof.

(jj)           “Record Date” shall have the meaning set forth in the recital hereto.

 

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(kk)         “Redemption Period” shall have the meaning set forth in Section 23(a) hereof.

(ll)           “Redemption Price” shall have the meaning set forth in Section 23(a) hereof.

(mm)       “Related Person” shall mean, as to any Person, any Affiliates or Associates of such Person, and any other Person with whom such Person or such Person’s Affiliates or Associates is Acting in Concert (or any Affiliate or Associate of such other Person).

(nn)        “Right” shall have the meaning set forth in the recital to this Agreement.

(oo)        “Rights Agent” shall have the meaning set forth in the preamble of this Agreement, except as otherwise provided in Section 19 and Section 21 hereof.

(pp)        “Rights Certificate” shall have the meaning set forth in Section 3(a) hereof.

(qq)        “Rights Dividend Declaration Date” shall have the meaning set forth in the recital to this Agreement.

(rr)           “Section 11(a)(ii) Event” shall have the meaning set forth in Section 11(a)(ii) hereof.

(ss)         “Section 11(a)(ii) Trigger Date” shall have the meaning set forth in Section 11(a)(iii) hereof.

(tt)           “Section 13 Event” shall mean any event described in Section 13(a)(i), Section 13(a)(ii) or Section 13(a)(iii) hereof.

(uu)        “Shares Acquisition Date” shall mean the first date of public announcement (which, for purposes of this definition, shall include, without limitation, a report filed or amended pursuant to Section 13(d) under the Exchange Act) by the Company or an Acquiring Person that an Acquiring Person has become such.

(vv)        “Spread” shall have the meaning set forth in Section 11(a)(iii) hereof.

(ww)       “Subsidiary” shall mean, with reference to any Person, any corporation or other entity of which an amount of voting securities (or other ownership interests having ordinary voting power) sufficient to elect at least a majority of the directors (or other Persons performing similar functions) of such corporation or other entity is beneficially owned, directly or indirectly, by such first mentioned Person, or otherwise controlled by such first mentioned Person.

(xx)          “Substitution Period” shall have the meaning set forth in Section 11(a)(iii) hereof.

 

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(yy)        “Summary of Rights” shall have the meaning set forth in Section 3(b) hereof.

(zz)          “Trading Day” shall have the meaning set forth in Section 11(d)(i) hereof.

(aaa)       “Triggering Event” shall mean a Section 11(a)(ii) Event or any Section 13 Event.

Section 2.             Appointment of the Rights Agent. The Company hereby appoints the Rights Agent to act as rights agent for the Company in accordance with the express terms and conditions hereof (and not implied terms and conditions), and the Rights Agent hereby accepts such appointment. The Company may from time to time appoint such co-rights agents as it may deem necessary or desirable, upon ten (10) days’ prior written notice to the Rights Agent. In the event the Company appoints one or more co-Rights Agents, the respective duties of the Rights Agent and any co-Rights Agents under the provisions of this Agreement shall be as the Company reasonably determines, and the Company shall notify, in writing, the Rights Agent and any co-Rights Agents of such duties. The Rights Agent shall have no duty to supervise, and shall in no event be liable for, the acts or omissions of any such co-rights agent.

Section 3.               Issuance of Rights Certificates.

(a)           Until the Distribution Date (i) the Rights will be evidenced (subject to Section 3(b) and Section 3(c) hereof) by the certificates for the Common Shares registered in the names of the holders of the Common Shares (which certificates for Common Shares shall be deemed also to be certificates for Rights) or by the book entry Common Shares registered in the name of the holders, evidenced by current ownership statements issued with respect to uncertificated Common Shares in lieu of such certificates (“Ownership Statements”) (which Ownership Statements shall be deemed also to be certificates for Rights) and not by separate certificates, and the registered holders of the Common Shares shall also be the registered holders of the associated Rights, and (ii) the Rights will be transferable only in connection with the transfer of the underlying Common Shares (including a transfer to the Company). As soon as practicable after the Distribution Date, the Company shall prepare and execute, and upon the written request of the Company, the Rights Agent shall countersign and the Company will send or cause to be sent (and the Rights Agent will, if so requested and provided with all necessary information and documents will, at the expense of the Company) send, in accordance with Section 26 hereof, to each record holder of the Common Shares as of the Close of Business on the Distribution Date (other than an Acquiring Person or any Related Person of an Acquiring Person), one or more rights certificates, in substantially the form of Exhibit B attached hereto (the “Rights Certificates”), evidencing one Right for each Common Share so held, subject to adjustment as provided herein. In the event that an adjustment in the number of Rights per Common Share has been made pursuant to Section 11(i) or Section 11(p) hereof, at the time of distribution of the Rights Certificates, the Company shall not be required to issue Rights Certificates evidencing fractional Rights but may, in lieu thereof, make the necessary and appropriate rounding adjustments (in accordance with Section 14(a) hereof) so that Rights Certificates evidencing only whole numbers of Rights are distributed and cash is paid in lieu of any fractional Rights. As of and after the Distribution Date, the Rights will be evidenced solely by such Rights Certificates. The Company shall promptly notify the Rights Agent in writing upon the occurrence of the Distribution Date. Until such written notice is received by the Rights Agent, the Rights Agent may presume conclusively for all purposes that the Distribution Date has not occurred.

 

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(b)           As promptly as practicable following the Record Date, the Company shall make available a copy of a Summary of Rights, in substantially the form attached hereto as Exhibit C (the “Summary of Rights”), to each record holder of Common Shares as of the Close of Business on the Record Date who may so request a copy from time to time prior to the Expiration Date. With respect to Common Shares outstanding as of the Record Date, or issued subsequent to the Record Date, until the earlier of the Distribution Date and the Expiration Date, the Rights associated with such Common Shares will be evidenced by the certificate or Ownership Statement for such Common Shares registered in the names of the holders thereof, in each case together with the Summary of Rights. Until the earlier of the Distribution Date and the Expiration Date, the surrender for transfer of any certificate or Ownership Statement for Common Shares outstanding on the Record Date, with or without a copy of the Summary of Rights, shall also constitute the transfer of the Rights associated with the Common Shares evidenced by such certificate or Ownership Statement.

(c)           Rights shall without any further action, be issued in respect of all Common Shares that are issued (whether originally issued or from the Company’s treasury) after the Record Date but prior to the earlier of the Distribution Date and the Expiration Date and, to the extent provided in Section 22 hereof, in respect of Common Shares issued after the Distribution Date. Certificates and Ownership Statements evidencing such Common Shares shall have printed or otherwise affixed to them a legend in substantially the following form:

“This [certificate/statement] also evidences and entitles the registered holder hereof to certain Rights as set forth in the Rights Agreement between Support.com, Inc. (the “Company”) and Computershare Trust Company, N.A., dated as of October 13, 2015 (the “Rights Agreement”), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal offices of the Company. Under certain circumstances, as set forth in the Rights Agreement, such Rights will be evidenced by separate certificates and will no longer be evidenced by this [certificate/statement]. The Company will mail to the registered holder of this [certificate/statement] a copy of the Rights Agreement, as in effect on the date of mailing, without charge, promptly after receipt of a written request therefor. Under certain circumstances set forth in the Rights Agreement, Rights beneficially owned by any Person who is, was, or becomes an Acquiring Person or any Related Person thereof (as such capitalized terms are defined in the Rights Agreement), whether currently beneficially owned by or on behalf of such Person or by any subsequent beneficial owner, may become null and void.”

 

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With respect to such certificates or Ownership Statements containing the foregoing legend, until the earlier of the Distribution Date and the Expiration Date, the Rights associated with the Common Shares evidenced by such certificates or Ownership Statements shall be evidenced by such certificates or Ownership Statements alone and the surrender for transfer of any certificate or Ownership Statement for Common Shares shall also constitute the transfer of the Rights associated with the Common Shares evidenced by such certificate or Ownership Statement. Notwithstanding this Section 3(c) or anything to the contrary that may be contained elsewhere in this Agreement, the omission of a legend shall not affect the enforceability of any part of this Agreement or the rights of any registered holder of Rights Certificates. In the event the Company purchases or otherwise acquires any Common Shares after the Record Date but prior to the Distribution Date, any Rights associated with such Common Shares shall be deemed cancelled and retired so that the Company shall not be entitled to exercise any Rights associated with such Common Shares that are no longer outstanding.

After the Record Date but prior to the earlier of the Distribution Date and the Expiration Date, if new certificate(s) representing Common Shares are issued in connection with the transfer, split-up, combination or exchange of certificate(s) representing Common Shares or if new certificate(s) representing Common Shares are issued to replace any certificate(s) that have been mutilated, destroyed, lost, or stolen, then such new certificate(s) shall bear a legend in substantially the form of the foregoing.

Section 4.              Form of Rights Certificates.

(a)           The Rights Certificates (and the forms of election to purchase and of assignment and the certificates contained therein to be printed on the reverse thereof) shall each be substantially in the form attached hereto as Exhibit B and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate (but which do not affect the rights, duties, liabilities or responsibilities of the Rights Agent) and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any national securities exchange on which the Rights may from time to time be listed, or to conform to usage. Subject to the provisions of Section 22 hereof, the Rights Certificates, whenever distributed, shall be dated as of the Record Date and on their face shall entitle the registered holders thereof to purchase such number of one one-thousandths of a Preferred Share as shall be set forth therein at the Purchase Price, but the amount and type of securities, cash or other assets that may be acquired upon the exercise of each Right and the Purchase Price thereof shall be subject to adjustment as provided herein.

(b)           Any Rights Certificate issued pursuant hereto that represents Rights beneficially owned by: (i) an Acquiring Person or any Related Person of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such Related Person) who becomes a transferee after the Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person (or of any such Related Person) who becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person (or any such Related Person) to holders of equity interests in such Acquiring Person or to any Person with whom such Acquiring Person has any continuing agreement, arrangement or understanding (whether or not in writing) regarding the transferred Rights or (B) a transfer which the Board, in its sole discretion, has determined is part of a plan, arrangement or understanding which has as a primary purpose or effect the avoidance of Section 7(e) hereof, and any Rights Certificate issued pursuant to Section 6 or Section 11 hereof upon transfer, exchange, replacement or adjustment of any other Rights Certificate referred to in this sentence, shall contain (to the extent feasible, and only if the Company has provided specific written instructions to the Rights Agent) a legend in substantially the following form:

 

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“The Rights evidenced by this Rights Certificate are or were beneficially owned by a Person who was or became an Acquiring Person or a Related Person of an Acquiring Person (as such terms are defined in the Rights Agreement). Accordingly, this Rights Certificate and the Rights evidenced hereby may become null and void in the circumstances specified in Section 7(e) of the Rights Agreement.”

The Company shall give written notice to the Rights Agent promptly after it becomes aware of the existence and identity of any Acquiring Person or any Related Person thereof. Until such notice is received by the Rights Agent, the Rights Agent may presume conclusively for all purposes that no Person has become an Acquiring Person or a Related Person of an Acquiring Person. The Company shall instruct the Rights Agent in writing of the Rights which should be so legended.

Notwithstanding this Section 4(b) or anything to the contrary that may be contained elsewhere in this Agreement, the omission of the foregoing legend or any legend substantially similar thereto shall not affect the enforceability of any part of this Agreement or the rights of any registered holder of Rights Certificates.

Section 5.              Countersignature and Registration.

(a)           The Rights Certificates shall be duly executed on behalf of the Company by its Chairman of the Board, its Chief Executive Officer, its President or any Vice President of the Company, and by the Secretary, an Assistant Secretary, the Treasurer/Chief Financial Officer or an Assistant Treasurer, either manually or by facsimile or portable document format signature. The Rights Certificates shall be countersigned by an authorized signatory of the Rights Agent, either manually or by facsimile or portable document format signature, and shall not be valid for any purpose unless so countersigned. In case any officer of the Company who shall have signed any of the Rights Certificates shall cease to be such officer of the Company before countersignature by an authorized signatory of the Rights Agent and issuance and delivery by the Company, such Rights Certificates, nevertheless, may be countersigned by an authorized signatory of the Rights Agent and issued and delivered by the Company with the same force and effect as though the Person who signed such Rights Certificates had not ceased to be such officer of the Company; and any Rights Certificates may be signed on behalf of the Company by any Person who, at the actual date of the execution of such Rights Certificate, shall be a proper officer of the Company to sign such Rights Certificate, although at the date of the execution of this Agreement any such Person was not such an officer.

 

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(b)           Following the Distribution Date, and receipt by the Rights Agent of written notice to that effect and all other relevant and necessary information and documents referred to in Section 3(a), the Rights Agent will keep, or cause to be kept, at its office or offices designated as the appropriate place for surrender of Rights Certificates upon exercise or transfer, books for registration and transfer of the Rights Certificates issued hereunder. Such books shall show the names and addresses of the respective holders of the Rights Certificates, the number of Rights evidenced on its face by each of the Rights Certificates, and the date of each of the Rights Certificates.

Section 6.              Transfer, Split-Up, Combination, and Exchange of Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.

(a)           Subject to the provisions of Section 4(b), Section 7(e) and Section 14 hereof, at any time after the Close of Business on the Distribution Date, and at or prior to the Close of Business on the Expiration Date, any Rights Certificate or Certificates (other than Rights Certificates representing Rights that have become null and void pursuant to Section 7(e) hereof, or evidencing Rights that have been redeemed or exchanged pursuant to Section 23 or Section 24 hereof) may be transferred, split-up, combined or exchanged for another Rights Certificate or Certificates, entitling the registered holder to purchase a like number of one one-thousandths of a Preferred Share (or, following the occurrence of a Triggering Event, Common Shares, other securities, cash or other assets, as the case may be) as the Rights Certificate or Certificates surrendered then entitles such holder (or former holder in the case of a transfer) to purchase. Any registered holder desiring to transfer, split-up, combine or exchange any Rights Certificate or Certificates shall make such request in writing delivered to the Rights Agent, and shall surrender, together with any required form of assignment duly executed and properly completed, the Rights Certificate or Certificates to be transferred, split-up, combined, or exchanged, with the form of assignment and certificate contained therein properly completed and duly executed and with all signatures guaranteed, at the office or offices of the Rights Agent designated for such purpose. Neither the Rights Agent nor the Company shall be obligated to take any action whatsoever with respect to the transfer of any such surrendered Rights Certificate until the registered holder shall have properly completed and duly executed the certificate contained in the form of assignment on the reverse side of such Rights Certificate and shall have provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) of the Rights represented by such Rights Certificate or Related Persons thereof as the Company or the Rights Agent shall reasonably request. Thereupon the Rights Agent shall, subject to Section 4(b), Section 7(e), Section 14 and Section 24 hereof, countersign and deliver to the Person entitled thereto a Rights Certificate or Rights Certificates, as the case may be, as so requested. The Company may require payment from a registered holder of a Rights Certificate of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer, split-up, combination, or exchange of Rights Certificates. If and to the extent the Company does require payment of any such taxes or charges, the Company shall give the Rights Agent prompt written notice thereof and the Rights Agent shall not deliver any Rights Certificate unless and until it is satisfied that all such payments have been made, and the Rights Agent shall forward any such sum collected by it to the Company or to such Persons as the Company specifies by written notice. The Rights Agent shall have no duty or obligation to take any action with respect to a holder of a Rights Certificate under any Section of this Agreement which requires the payment by such holder of a Rights Certificate of applicable taxes and/or charges unless and until it is satisfied that all such taxes and/or charges have been paid.

 

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(b)           Subject to the provisions of this Agreement, at any time after the Distribution Date and prior to the Expiration Date, upon receipt by the Company and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Rights Certificate, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to them, and reimbursement to the Company and the Rights Agent of all reasonable expenses incidental thereto, and upon surrender to the Rights Agent and cancellation of the Rights Certificate, if mutilated, the Company will execute and deliver a new Rights Certificate of like tenor to the Rights Agent for countersignature and delivery to the registered holder in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated.

Section 7.               Exercise of Rights; Purchase Price; Expiration Date of Rights.

(a)           Subject to Section 7(e) hereof, at any time after the Distribution Date the registered holder of any Rights Certificate may exercise the Rights evidenced thereby (except as otherwise provided herein including, without limitation, the restrictions on exercisability set forth in Section 9(c), Section 11(a)(iii), and Section 23(a) hereof) in whole or in part upon surrender of the Rights Certificate, with the form of election to purchase and the certificate contained therein properly completed and duly executed, to the Rights Agent at the office or offices of the Rights Agent designated for such purpose, together with payment of the aggregate Purchase Price with respect to the total number of one one-thousandths of a Preferred Share (or, following the occurrence of a Triggering Event, Common Shares, other securities, cash or other assets, as the case may be) as to which such surrendered Rights are then exercisable, at or prior to the earliest of (i) the Close of Business on October 10, 2016 (the “Final Expiration Date”), (ii) the time at which the Rights are redeemed as provided in Section 23 hereof, and (iii) the time at which the Rights are exchanged in full as provided in Section 24 hereof (the earliest of (i), (ii), and (iii) being herein referred to as the “Expiration Date”).

(b)           The purchase price for each one one-thousandth of a Preferred Share pursuant to the exercise of a Right initially shall be $2.25, shall be subject to adjustment from time to time as provided in Section 11 and Section 13(a) hereof, and shall be payable in accordance with Section 7(c) hereof (such purchase price, as so adjusted, the “Purchase Price”).

(c)           Upon receipt of a Rights Certificate evidencing exercisable Rights, with the form of election to purchase and the certificate contained therein properly completed and duly executed, accompanied by payment, with respect to each Right so exercised, of the Purchase Price (as such amount may be adjusted as provided herein) per one one-thousandth of a Preferred Share (or, following the occurrence of a Triggering Event, Common Shares, other securities, cash or other assets, as the case may be) to be purchased as set forth below and an amount equal to any applicable tax or charge, the Rights Agent shall, subject to Section 7(f) and Section 20(k) hereof, thereupon promptly (i) (A) requisition from any transfer agent of the Preferred Shares (or make available, if the Rights Agent is the transfer agent for such shares) certificates for the total number of one one-thousandths of a Preferred Share to be purchased and the Company hereby irrevocably authorizes its transfer agent to comply with all such requests, or (B) if, subject to Section 14 hereof, the Company shall have elected to deposit the total number of Preferred Shares issuable upon exercise of the Rights hereunder with a depositary agent, requisition from the depositary agent of depositary receipts evidencing such number of one one-thousandths of a Preferred Share as are to be purchased (in which case certificates for the Preferred Shares evidenced by such receipts shall be deposited by the transfer agent with the depositary agent) and the Company will direct the depositary agent to comply with such request, (ii) if necessary to comply with this Agreement, requisition from the Company the amount of cash, if any, to be paid in lieu of fractional shares in accordance with Section 14 hereof, (iii) after receipt of such certificates or depositary receipts, subject to Section 7(f) below, cause the same to be delivered to or upon the order of the registered holder of such Rights Certificate, registered in such name or names as may be designated by such holder, and (iv) if necessary to comply with this Agreement, after receipt thereof, subject to Section 7(f) below, deliver such cash, if any, to or upon the order of the registered holder of such Rights Certificate. The payment of the Purchase Price (as such amount may be reduced pursuant to Section 11(a)(iii) hereof) shall be made in cash or by certified bank check or bank draft payable to the order of the Company. In the event that the Company is obligated to issue other securities (including Common Shares) of the Company, pay cash or distribute other property pursuant to Section 11(a) hereof, the Company will make all arrangements necessary so that such other securities, cash or other property are available for distribution by the Rights Agent, if and when necessary to comply with this Agreement, and until so received, the Rights Agent shall have no duties or obligations with respect to such securities, cash and/or other property. The Company reserves the right to require prior to the occurrence of a Triggering Event that, upon any exercise of Rights, a number of Rights be exercised so that only whole Preferred Shares would be issued.

 

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(d)           In case the registered holder of any Rights Certificate shall exercise less than all the Rights evidenced thereby, a new Rights Certificate evidencing the Rights remaining unexercised shall be issued by the Rights Agent and delivered to, or upon the order of, the registered holder of such Rights Certificate, registered in such name or names as may be designated by such holder, subject to the provisions of Sections 6 and 14 hereof.

(e)           Notwithstanding anything in this Agreement to the contrary, from and after the first occurrence of a Section 11(a)(ii) Event, any Rights beneficially owned by (i) an Acquiring Person or a Related Person of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such Related Person) who becomes a transferee after the Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person (or of any such Related Person) who becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person (or any such Related Person) to holders of equity interests in such Acquiring Person (or any such Related Person) or to any Person with whom the Acquiring Person (or any such Related Person) has any continuing agreement, arrangement or understanding (whether or not in writing) regarding the transferred Rights or (B) a transfer that the Board, in its sole discretion, has determined is part of a plan, arrangement or understanding (whether or not in writing) that has as a primary purpose or effect the avoidance of this Section 7(e), shall become null and void without any further action and no holder of such Rights shall have any rights whatsoever with respect to such Rights, whether under any provision of this Agreement, the Rights Certificates or otherwise (including, without limitation, the rights and preferences pursuant to Sections 7, 11, 13, 23 and 24 hereof). The Company shall use all reasonable efforts to ensure that the provisions of this Section 7(e) and Section 4(b) hereof are complied with, but shall have no liability to any holder of Rights Certificates or any other Person as a result of its failure to make any determinations with respect to an Acquiring Person or any of its Related Persons or transferees hereunder.

 

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(f)           Notwithstanding anything in this Agreement or any Rights Certificate to the contrary, neither the Rights Agent nor the Company shall be obligated to undertake any action with respect to a registered holder of a Rights Certificate upon the occurrence of any purported exercise as set forth in this Section 7 unless such registered holder shall have (i) properly completed and duly executed the certificate contained in the form of election to purchase set forth on the reverse side of the Rights Certificate surrendered for such exercise, and (ii) provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) of the Rights represented by the Rights Certificate or Related Persons of such Beneficial Owner as the Company shall reasonably request.

Section 8.              Cancellation and Destruction of Rights Certificates. All Rights Certificates surrendered for the purpose of exercise, transfer, split-up, combination or exchange shall, if surrendered to the Company or any of its agents, be delivered to the Rights Agent for cancellation or in cancelled form, or, if surrendered to the Rights Agent, shall be cancelled by it, and no Rights Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Agreement. The Company shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent shall so cancel and retire, any other Rights Certificate purchased or acquired by the Company otherwise than upon the exercise thereof. The Rights Agent shall deliver all cancelled Rights Certificates to the Company, or shall, at the written request of the Company, destroy or cause to be destroyed such cancelled Rights Certificates, and in such case shall deliver a certificate of destruction thereof to the Company.

Section 9.               Reservation and Availability of Capital Stock.

(a)           The Company covenants and agrees that at all times prior to the Expiration Date it will cause to be reserved and kept available out of its authorized and unissued Preferred Shares (and, following the occurrence of a Triggering Event, out of its authorized and unissued Common Shares or other securities as may be issuable upon exercise of the Rights and/or out of its securities held in treasury, as the case may be), the number of Preferred Shares (and, following the occurrence of a Triggering Event, Common Shares or other securities, as the case may be) that, as provided in this Agreement, including, but not limited to, Section 11(a)(iii) hereof, will be sufficient to permit the exercise in full of all of the outstanding Rights. Upon the occurrence of any events resulting in an increase in the aggregate number of Preferred Shares (or other equity securities of the Company) issuable upon exercise of all outstanding Rights above the number then reserved, the Company shall make appropriate increases in the number of shares so reserved.

 

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(b)           So long as the Preferred Shares (and, following the occurrence of a Triggering Event, Common Shares or other securities, as the case may be) issuable and deliverable upon the exercise of the Rights may be listed on any national securities exchange or quoted on a quotation system, the Company shall use its best efforts to cause, from and after such time as the Rights become exercisable through the Expiration Date, all shares reserved for such issuance to be listed on such exchange or quoted on such quotation system, as the case may be, upon official notice of issuance upon such exercise.

(c)           The Company shall use its best efforts to (i) file, as soon as practicable following the earliest date after the first occurrence of a Section 11(a)(ii) Event on which the consideration to be delivered by the Company upon exercise of the Rights has been determined in accordance with Section 11(a) hereof, a registration statement on an appropriate form under the Act, with respect to the securities purchasable upon exercise of the Rights, (ii) cause such registration statement to become effective as soon as practicable after such filing, and (iii) cause such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Act) until the earlier of (A) the date as of which the Rights are no longer exercisable for such securities, and (B) the date of the expiration of the Rights. The Company will also take such action as may be appropriate under, or to ensure compliance with, the securities or “blue sky” laws of the various states in connection with the exercisability of the Rights. The Company may temporarily suspend, for a period of time not to exceed 90 days after the date set forth in clause (i) of the first sentence of this Section 9(c), the exercisability of the Rights in order to prepare and file such registration statement and permit it to become effective. Upon any such suspension, the Company shall issue a public announcement (with prompt written notice thereof to the Rights Agent; and until such written notice is received by the Rights Agent, the Rights Agent may presume conclusively that no such suspension has occurred) stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement at such time as the suspension is no longer in effect (with prompt written notice thereof to the Rights Agent; and until such written notice is received by the Rights Agent, the Rights Agent may presume conclusively that such suspension is still in effect). In addition, if the Company shall determine that a registration statement is required following the Distribution Date, the Company similarly may temporarily suspend the exercisability of the Rights until such time as a registration statement has been declared effective. Notwithstanding any provision of this Agreement to the contrary, the Rights shall not be exercisable in any jurisdiction if the requisite qualification in such jurisdiction shall not have been obtained, the exercise thereof shall not be permitted under applicable law, or a registration statement shall not have been declared effective.

(d)           The Company covenants and agrees that it will take all such action as may be necessary to ensure that all one one-thousandths of a Preferred Share (and, following the occurrence of a Triggering Event, Common Shares or other securities, as the case may be) delivered upon exercise of the Rights shall, at the time of delivery of the certificates or depositary receipts for such shares (subject to payment of the Purchase Price), be duly and validly authorized and issued and fully paid and nonassessable.

(e)           The Company further covenants and agrees that it will pay when due and payable any and all federal and state taxes and charges that may be payable in respect of the issuance or delivery of the Rights Certificates and of any certificates, entries in the book entry account system of the transfer agent, or depositary receipts for a number of one one-thousandths of a Preferred Share (or, following the occurrence of a Triggering Event, Common Shares or other securities, cash or other assets, as the case may be) upon the exercise of Rights. The Company shall not, however, be required to pay any tax or charge that may be payable in respect of any transfer or delivery of Rights Certificates or depositary receipts or entries in the book entry account system of the transfer agent to a Person other than, or the issuance or delivery of a number of one one-thousandths of a Preferred Share (or, following the occurrence of a Triggering Event, Common Shares or other securities, cash or other assets, as the case may be) in a name other than that of the registered holder of the Rights Certificates evidencing Rights surrendered for exercise or to issue or deliver any certificates or depositary receipts or entries in the book entry account system of the transfer agent for a number of one one-thousandths of a Preferred Share (or, following the occurrence of a Triggering Event, Common Shares or other securities, cash or other assets as the case may be) in a name other than that of the registered holder upon the exercise of any Rights until such tax or charge shall have been paid (any such tax or charge being payable by the registered holder of such Rights Certificates at the time of surrender) or until it has been established to the Company’s or to the Rights Agent’s satisfaction that no such tax or charge is due.

 

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Section 10.            Preferred Shares Record Date. Each Person in whose name any certificate or entry in the book entry account system of the transfer agent for a number of one one-thousandths of a Preferred Share (or, following the occurrence of a Triggering Event, Common Shares or other securities, cash or other assets, as the case may be) is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of such fractional Preferred Shares (or, following the occurrence of a Triggering Event, Common Shares or other securities, cash, or other assets as the case may be) evidenced thereby on, and such certificate or entry shall be dated, the date upon which the Rights Certificate evidencing such Rights was duly surrendered and payment of the Purchase Price (and all applicable taxes and charges) was made; provided, however, that, if the date of such surrender and payment is a date upon which the Preferred Shares (or, following the occurrence of a Triggering Event, Common Shares or other securities, cash or other assets, as the case may be) transfer books of the Company are closed, such Person shall be deemed to have become the record holder of such shares (fractional or otherwise) on, and such certificate or entry shall be dated, the next succeeding Business Day on which the Preferred Shares (or, following the occurrence of a Triggering Event, Common Shares or other securities, cash, or other assets as the case may be) transfer books of the Company are open and provided further, that if delivery of the Preferred Shares is delayed pursuant to Section 9(c), when such Preferred Shares first becomes deliverable. Prior to the exercise of the Rights evidenced thereby, the registered holder of a Rights Certificate shall not be entitled to any rights of a stockholder of the Company with respect to shares for which the Rights shall be exercisable, including, without limitation, the right to vote, to receive dividends or other distributions, or to exercise any preemptive rights, and shall not be entitled to receive any notice of any proceedings of the Company, except as provided herein.

Section 11.            Adjustment of Purchase Price, Number and Kind of Shares, or Number of Rights. The Purchase Price, the number and kind of shares, or fractions thereof, purchasable upon exercise of each Right, and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 11.

 

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(a)           (i)             In the event the Company shall at any time after the date of this Agreement (A) declare or pay a dividend on the Preferred Shares payable in Preferred Shares, (B) subdivide or split the outstanding Preferred Shares, (C) combine or consolidate the outstanding Preferred Shares into a smaller number of shares, or (D) issue any shares of its capital stock in a reclassification of the Preferred Shares (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation), except as otherwise provided in this Section 11(a) and Section 7(e) hereof, the Purchase Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, split, combination, consolidation, or reclassification, and the number and kind of Preferred Shares or fractions thereof (or other capital stock, as the case may be), issuable on such date, shall be proportionately adjusted so that the registered holder of any Right exercised after such time shall be entitled to receive, upon payment of the Purchase Price then in effect, the aggregate number and kind of Preferred Shares or fractions thereof (or other capital stock, as the case may be), which, if such Right had been exercised immediately prior to such date (whether or not such Right was then exercisable) and at a time when the Preferred Share (or other capital stock, as the case may be) transfer books of the Company were open, such holder would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, split, combination, consolidation, or reclassification. If an event occurs that would require an adjustment under both this Section 11(a)(i) and Section 11(a)(ii) hereof, the adjustment provided for in this Section 11(a)(i) shall be in addition to, and shall be made prior to, any adjustment required pursuant to Section 11(a)(ii) hereof.

(ii)           In the event any Person shall become an Acquiring Person (a “Section 11(a)(ii) Event”), then, promptly following the occurrence of such Section 11(a)(ii) Event, proper provision shall be made so that, upon expiration of the Redemption Period, each registered holder of a Right (except as provided below in Section 11(a)(iii) and in Sections 7(e), 13 and 24 hereof) shall thereafter have the right to receive, upon exercise thereof at the then current Purchase Price in accordance with the terms of this Agreement, in lieu of a number of one one-thousandths of a Preferred Share, such number of Common Shares of the Company as shall equal the result obtained by (A) multiplying the then current Purchase Price by the then number of one one-thousandths of a Preferred Share for which a Right was exercisable immediately prior to the first occurrence of a Section 11(a)(ii) Event, and (B) dividing that product (which, following such first occurrence, shall thereafter be referred to as the “Purchase Price” for each Right and for all purposes of this Agreement) by fifty percent (50%) of the Current Market Price per Common Share on the date of such first occurrence (such number of shares, the “Adjustment Shares”).

(iii)          In the event that (A) the number of Common Shares authorized by the Amended and Restated Certificate of Incorporation, but not outstanding or reserved for issuance for purposes other than upon exercise of the Rights, is not sufficient to permit the exercise in full of the Rights in accordance with Section 11(a)(ii) hereof or (B) the Board otherwise shall determine to do so in its sole discretion, the Company, acting by resolution of the Board, shall (1) determine the value of the Adjustment Shares issuable upon the exercise of a Right (the “Current Value”), and (2) with respect to each Right (subject to Section 7(e) hereof), make adequate provision to substitute for the Adjustment Shares, upon the exercise of such Right and payment of the applicable Purchase Price, (u) cash, (v) a reduction in the Purchase Price, (w) Common Shares or other equity securities of the Company (including, without limitation, shares, or units of shares, of preferred stock, such as the Preferred Shares, which the Board has deemed to have essentially the same value or economic rights as Common Shares (such shares of preferred stock being referred to as “Common Stock Equivalents”)), (x) debt securities of the Company, (y) other assets, or (z) any combination of the foregoing, having an aggregate value equal to the Current Value, where such aggregate value has been determined by the Board based upon the advice of a nationally recognized investment banking firm selected by the Board; provided, however, that, if, under the circumstances set forth in clause (A) above, the Company shall not have made adequate provision to deliver value pursuant to clause (2) above within thirty (30) days following the later of (I) the first occurrence of a Section 11(a)(ii) Event and (II) the date on which the Company’s right of redemption pursuant to Section 23(a) hereof expires (the later of (I) and (II) being referred to herein as the “Section 11(a)(ii) Trigger Date”), then the Company shall be obligated to deliver, upon the surrender for exercise of a Right and without requiring payment of the Purchase Price, Common Shares (to the extent available) and then, if necessary, cash, which shares and cash have an aggregate value equal to the Spread. For purposes of the preceding sentence, the term “Spread” shall mean the excess of the Current Value over the Purchase Price. If the Board determines in good faith that it is likely that sufficient additional Common Shares could be authorized for issuance upon exercise in full of the Rights, the 30 day period set forth above may be extended to the extent necessary, but not more than 90 days after the Section 11(a)(ii) Trigger Date, in order that the Company may seek stockholder approval for the authorization of such additional shares (such 30 day period, as it may be extended, is herein called the “Substitution Period”). To the extent that action is to be taken pursuant to the first or third sentences of this Section 11(a)(iii), the Company shall provide, subject to Section 7(e) hereof, that such action shall apply uniformly to all outstanding Rights, and the Company may suspend the exercisability of the Rights until the expiration of the Substitution Period in order to seek such stockholder approval for such authorization of additional shares or to decide the appropriate form of distribution to be made pursuant to such first sentence and to determine the value thereof. In the event of any such suspension, the Company shall issue a public announcement (with prompt written notice thereof to the Rights Agent) stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement (with prompt written notice thereof to the Rights Agent) at such time as the suspension is no longer in effect. For purposes of this Section 11(a)(iii), the value of each Adjustment Share shall be the Current Market Price per Common Share on the Section 11(a)(ii) Trigger Date and the per share or per unit value of any Common Stock Equivalent shall be deemed to equal the Current Market Price per Common Share on such date.

 

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(b)           In case the Company shall fix a record date for the issuance of rights, options, or warrants to all registered holders of Preferred Shares entitling them to subscribe for or purchase (for a period expiring within forty-five (45) calendar days after such record date) Preferred Shares (or shares having the same rights, privileges and preferences as the Preferred Shares (“Equivalent Preferred Shares”)) or securities convertible into Preferred Shares or Equivalent Preferred Shares at a price per Preferred Share or Equivalent Preferred Share (or having a conversion price per share, if a security convertible into Preferred Shares or Equivalent Preferred Shares) less than the Current Market Price per Preferred Share on such record date, the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of Preferred Shares outstanding on such record date, plus the number of Preferred Shares that the aggregate offering price of the total number of Preferred Shares or Equivalent Preferred Shares so to be offered (or the aggregate initial conversion price of the convertible securities so to be offered) would purchase at such Current Market Price, and the denominator of which shall be the number of Preferred Shares outstanding on such record date plus the number of additional Preferred Shares or Equivalent Preferred Shares to be offered for subscription or purchase (or into which the convertible securities so to be offered are initially convertible). In case such subscription price may be paid by delivery of consideration, part or all of which may be in a form other than cash, the value of such consideration shall be as determined in good faith by the Board, whose determination shall be described in a statement filed with the Rights Agent and shall be binding and conclusive for all purposes on the Rights Agent and the holders of the Rights. Preferred Shares owned by or held for the account of the Company shall not be deemed outstanding for the purpose of any such computation. Such adjustments shall be made successively whenever such a record date is fixed, and in the event that such rights, options, or warrants are not so issued, the Purchase Price shall be adjusted to be the Purchase Price that would then be in effect if such record date had not been fixed.

 

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(c)           In case the Company shall fix a record date for a distribution to all registered holders of Preferred Shares (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing or surviving corporation) of cash (other than a regular cash dividend out of the earnings or retained earnings of the Company), assets (other than a dividend payable in Preferred Shares, but including any dividend payable in stock other than Preferred Shares) or evidences of indebtedness, or of subscription rights or warrants (excluding those referred to in Section 11(b) hereof), the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the Current Market Price per Preferred Share on such record date, less the fair market value (as determined in good faith by the Board, whose determination shall be described in a statement filed with the Rights Agent and shall be binding and conclusive for all purposes) of the portion of the cash, assets or evidences of indebtedness so to be distributed, or of such subscription rights or warrants applicable to a Preferred Share, and the denominator of which shall be such Current Market Price per Preferred Share. Such adjustments shall be made successively whenever such a record date is fixed, and in the event that such distribution is not so made, the Purchase Price shall be adjusted to be the Purchase Price that would then be in effect if such record date had not been fixed.

(d)           (i)            For the purpose of any computation hereunder, other than computations made pursuant to Section 11(a)(iii) hereof, the “Current Market Price” per Common Share on any date shall be deemed to be the average of the daily Closing Prices per Common Share for the thirty (30) consecutive Trading Days immediately prior to such date, and for purposes of computations made pursuant to Section 11(a)(iii) hereof, the “Current Market Price” per Common Share on any date shall be deemed to be the average of the daily Closing Prices per Common Share for the ten (10) consecutive Trading Days immediately following such date; provided, however, that in the event that the Current Market Price per Common Share is determined during a period following the announcement by the issuer of such Common Share of (A) a dividend or distribution on such Common Shares payable in Common Shares or securities convertible into such Common Shares (other than the Rights), or (B) any subdivision, combination, consolidation, reverse stock split or reclassification of such Common Shares, and the ex-dividend date for such dividend or distribution, or the record date for such subdivision, combination, consolidation, reverse stock split or reclassification shall not have occurred prior to the commencement of the requisite thirty (30) Trading Day or ten (10) Trading Day period, as set forth above, then, and in each such case, the Current Market Price shall be properly adjusted to take into account ex-dividend trading. The Closing Price for each day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the Nasdaq or, if the Common Shares are not listed or admitted to trading on the Nasdaq, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Common Shares are listed or admitted to trading or, if the Common Shares are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported on a quotation system then in use, or, if on any such date the Common Shares are not so quoted, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Common Shares selected by the Board. If on any such date the Common Shares are not publicly held and are not so listed, admitted to trading, or quoted, and no market maker is making a market in the Common Shares, the “Current Market Price” per Common Share shall mean the fair value per share on such date as determined in good faith by the Board, which determination shall be described in a statement filed with the Rights Agent and shall be binding and conclusive for all purposes on the Rights Agent and the holders of the Rights. The term “Trading Day” shall mean a day on which the principal national securities exchange on which the Common Shares are listed or admitted to trading is open for the transaction of business or, if the Common Shares are not listed or admitted to trading on any national securities exchange, a Business Day.

 

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(ii)           For the purpose of any computation hereunder, the “Current Market Price” per Preferred Share shall be determined in the same manner as set forth above for the Common Shares in Section 11(d)(i) hereof (other than the penultimate sentence thereof). If the Current Market Price per Preferred Share cannot be determined in the manner provided above or if the Preferred Shares are not publicly held or listed, admitted to trading, or quoted in a manner described in Section 11(d)(i) hereof, the Current Market Price per Preferred Share shall be conclusively deemed to be an amount equal to 1000 (as such number may be appropriately adjusted for such events as stock splits, stock dividends and recapitalizations with respect to the Common Shares occurring after the date of this Agreement) multiplied by the Current Market Price per Common Share. If neither the Common Shares nor the Preferred Shares are publicly held or listed, admitted to trading, or quoted, the “Current Market Price” per Preferred Share shall mean the fair value per share as determined in good faith by a majority of the Board, whose determination shall be described in a statement filed with the Rights Agent and shall be binding and conclusive for all purposes on the Rights Agent and the holders of the Rights. For all purposes of this Agreement, the Current Market Price of one one-thousandth of a Preferred Share shall be equal to the Current Market Price of one Preferred Share divided by 1000.

 

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(e)           Anything herein to the contrary notwithstanding, no adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least one percent (1%) in the Purchase Price; provided, however, that any adjustments which by reason of this Section 11(e) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 11 shall be made to the nearest cent or to the nearest thousandth of a Common Share or other share or one-millionth of a Preferred Share, as the case may be. Notwithstanding the first sentence of this Section 11(e), any adjustment required by this Section 11 shall be made no later than the earlier of (i) three years from the date of the transaction that mandates such adjustment and (ii) the Expiration Date.

(f)            If as a result of an adjustment made pursuant to Section 11(a)(ii) or Section 13(a) hereof, the registered holder of any Right thereafter exercised shall become entitled to receive any shares of capital stock other than Preferred Shares, thereafter the number of such other shares so receivable upon exercise of any Right and the Purchase Price thereof shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Preferred Shares contained in Sections 11(a), (b), (c), (d), (e), (g), (h), (i), (j), (k), (l) and (m), and the provisions of Sections 7, 9, 10, 13 and 14 hereof with respect to the Preferred Shares shall apply on like terms to any such other shares.

(g)           All Rights originally issued by the Company subsequent to any adjustment made to the Purchase Price hereunder shall evidence the right to purchase, at the adjusted Purchase Price, the number of one one-thousandths of a Preferred Share (or other securities or amount of cash or combination thereof) purchasable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein.

(h)           Unless the Company shall have exercised its election as provided in Section 11(i) hereof, upon each adjustment of the Purchase Price as a result of the calculations made in Section 11(b) and Section 11(c) hereof, each Right outstanding immediately prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Purchase Price, that number of one one-thousandths of a Preferred Share (calculated to the nearest one-millionth) obtained by (i) multiplying (x) the number of one one-thousandths of a share covered by a Right immediately prior to this adjustment, by (y) the Purchase Price in effect immediately prior to such adjustment of the Purchase Price, and (ii) dividing the product so obtained by the Purchase Price in effect immediately after such adjustment of the Purchase Price.

(i)            The Company may elect on or after the date of any adjustment of the Purchase Price to adjust the number of Rights, in lieu of any adjustment in the number of one one-thousandths of a Preferred Share purchasable upon the exercise of a Right pursuant to Section 11(h) hereof. Each of the Rights outstanding after the adjustment in the number of Rights shall be exercisable for the number of one one-thousandths of a Preferred Share for which a Right was exercisable immediately prior to such adjustment. Each Right held of record prior to such adjustment of the number of Rights shall become that number of Rights (calculated to the nearest one one-thousandth) obtained by dividing the Purchase Price in effect immediately prior to adjustment of the Purchase Price by the Purchase Price in effect immediately after adjustment of the Purchase Price. The Company shall make a public announcement, and notify the Rights Agent in writing, of its election to adjust the number of Rights, indicating the record date for the adjustment, and, if known at the time, the amount of the adjustment to be made. This record date may be the date on which the Purchase Price is adjusted or any day thereafter, but, if the Rights Certificates have been issued, shall be at least ten (10) days later than the date of the public announcement. If Rights Certificates have been issued, upon each adjustment of the number of Rights pursuant to this Section 11(i), the Company shall, as promptly as practicable, cause to be distributed to holders of record of Rights Certificates on such record date Rights Certificates evidencing, subject to Section 14 hereof, the additional Rights to which such holders shall be entitled as a result of such adjustment, or, at the option of the Company, shall cause to be distributed to such holders of record in substitution and replacement for the Rights Certificates held by such holders prior to the date of adjustment, and upon surrender thereof, if required by the Company, new Rights Certificates evidencing all the Rights to which such holders shall be entitled after such adjustment. Rights Certificates so to be distributed shall be issued, executed and delivered by the Company, and countersigned and delivered by the Rights Agent, in the manner provided for herein (and may bear, at the option of the Company, the adjusted Purchase Price) and shall be registered in the names of the holders of record of Rights Certificates on the record date specified in the public announcement.

 

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(j)            Irrespective of any adjustment or change in the Purchase Price or the number of one one-thousandths of a Preferred Share issuable upon the exercise of the Rights, the Rights Certificates theretofore and thereafter issued may continue to express the Purchase Price per one one-thousandth of a share and the number of one one-thousandths of a share that were expressed in the initial Rights Certificates issued hereunder.

(k)           Before taking any action that would cause an adjustment reducing the Purchase Price below the then stated value, if any, of the number of one one-thousandths of a Preferred Share issuable upon exercise of the Rights, the Company shall take any corporate action that may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue, fully paid and nonassessable, such number of one one-thousandths of a Preferred Share at such adjusted Purchase Price.

(l)            In any case in which this Section 11 shall require that an adjustment in the Purchase Price be made effective as of a record date for a specified event, the Company may elect to defer (and shall notify the Rights Agent in writing of any such election) until the occurrence of such event the issuance to the registered holder of any Right exercised after such record date of the number of one one-thousandths of a Preferred Share and other capital stock or securities of the Company, if any, issuable upon such exercise over and above the number of one one-thousandths of a Preferred Share and other capital stock or securities of the Company, if any, issuable upon such exercise on the basis of the Purchase Price in effect prior to such adjustment; provided, however, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder’s right to receive such additional shares (fractional or otherwise) or securities upon the occurrence of the event requiring such adjustment.

 

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(m)          Anything in this Section 11 to the contrary notwithstanding, prior to the Distribution Date, the Company shall be entitled to make such reductions in the Purchase Price, in addition to those adjustments expressly required by this Section 11, as and to the extent that the Board, in its good faith judgment, shall determine to be advisable in order that any (i) consolidation or subdivision of the Preferred Shares, (ii) issuance wholly for cash of any Preferred Shares at less than the Current Market Price, (iii) issuance wholly for cash of Preferred Shares or securities that by their terms are convertible into or exchangeable for Preferred Shares, (iv) stock dividends or (v) issuance of rights, options or warrants referred to in this Section 11, hereafter made by the Company to registered holders of its Preferred Shares shall not be taxable to such stockholders or shall reduce the taxes payable by such holders.

(n)           The Company covenants and agrees that in the event that a Section 11(a)(ii) Event occurs and the Rights shall then be outstanding, it shall not, (i) consolidate with any other Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof), (ii) merge with or into any other Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof), or (iii) sell or otherwise transfer (or permit any Subsidiary to sell or otherwise transfer), in one transaction, or a series of related transactions, assets, cash flow or earning power aggregating fifty percent (50%) or more of the assets, cash flow or earning power of the Company and its Subsidiaries (taken as a whole and calculated on the basis of the Company’s most recent regularly prepared financial statements) to any other Person or Persons (other than the Company or any of its Subsidiaries in one or more transactions each of which complies with Section 11(o) hereof), if (x) at the time of or immediately after such consolidation, merger, sale or transfer there are any charter or bylaw provisions, rights, warrants or other instruments or securities outstanding or agreements in effect that would substantially diminish or otherwise eliminate the benefits intended to be afforded by the Rights or (y) prior to, simultaneously with or immediately after such consolidation, merger, sale or transfer the stockholders of the Person who constitutes, or would constitute, the “Principal Party” for purposes of Section 13(a) hereof shall have received a distribution of Rights previously owned by such Person or any of its Related Persons; provided, however, that this Section 11(n) shall not affect the ability of any Subsidiary of the Company to consolidate with, merge with or into, or sell or transfer assets or earning power to, any other Subsidiary of the Company. .

(o)           The Company covenants and agrees that after the Distribution Date and so long as any Rights shall then be outstanding (other than Rights that have become null and void pursuant to Section 7(e) hereof), it will not, except as permitted by Section 23, Section 24, or Section 27 hereof, take (or permit any Subsidiary to take) any action if at the time such action is taken it is reasonably foreseeable that such action will diminish substantially or otherwise eliminate the benefits intended to be afforded by the Rights.

(p)           Anything in this Agreement to the contrary notwithstanding, in the event that the Company shall at any time after the Rights Dividend Declaration Date and prior to the Distribution Date (i) declare or pay a dividend on the outstanding Common Shares payable in Common Shares, (ii) subdivide or split the outstanding Common Shares, (iii) combine or consolidate the outstanding Common Shares into a smaller number of shares, or (iv) issue any shares of its capital stock in a reclassification of Common Shares (including any such reclassification in connection with a consolidation or merger in which the Company is a continuing or surviving corporation), the number of Rights associated with each Common Share then outstanding, or issued or delivered thereafter but prior to the Distribution Date (or issued or delivered on or after the Distribution Date pursuant to Section 22 hereof), shall be proportionately adjusted so that the number of Rights thereafter associated with each Common Share following any such event shall equal the result obtained by multiplying the number of Rights associated with each Common Share immediately prior to such event by a fraction, the numerator of which shall be the total number of Common Shares outstanding immediately prior to the occurrence of the event and the denominator of which shall be the total number of Common Shares outstanding immediately following the occurrence of such event. The adjustments provided for in this Section 11(p) shall be made successively whenever such a dividend is declared or paid or such a subdivision, combination or reclassification is effected. If an event occurs that would require an adjustment under Section 11(a)(ii) and this Section 11(p), the adjustments provided for in this Section 11(p) shall be in addition and prior to any adjustment required pursuant to Section 11(a)(ii).

 

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Section 12.            Certificate of Adjusted Purchase Price or Number of Shares. Whenever an adjustment is made as provided in Section 11 or Section 13 hereof, the Company shall (a) promptly prepare a certificate setting forth such adjustment and a brief reasonably detailed statement of the facts, computations and methodology accounting for such adjustment, (b) promptly file with the Rights Agent, and with each transfer agent for the Preferred Shares and the Common Shares, a copy of such certificate and (c) if a Distribution Date has occurred, mail a brief summary thereof to each registered holder of a Rights Certificate in accordance with Section 26 hereof. The Rights Agent shall be fully protected in relying on any such certificate and on any adjustment or statement therein contained and shall have no duty or liability with respect to, and shall not be deemed to have knowledge of, any adjustment or any such event unless and until it shall have received such a certificate.

Section 13.            Consolidation, Merger, or Sale or Transfer of Assets, Cash Flow or Earning Power.

(a)           In the event that, at any time after a Person has become an Acquiring Person, directly or indirectly,

(i)            the Company shall consolidate with, or merge with and into, any other Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof), and the Company shall not be the continuing or surviving corporation or other entity of such consolidation or merger;

(ii)           any Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof) shall consolidate with, or merge with or into, the Company, and the Company shall be the continuing or surviving corporation of such consolidation or merger and, in connection with such consolidation or merger, all or part of the outstanding Common Shares shall be changed into or exchanged for stock or other securities of any other Person (or the Company) or cash or any other property; or

 

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(iii)           the Company shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise transfer), in one transaction or a series of related transactions, assets, cash flow or earning power aggregating fifty percent (50%) or more of the assets, cash flow or earning power of the Company and its Subsidiaries (taken as a whole and calculated on the basis of the Company’s most recent regularly prepared financial statements) to any Person or Persons (other than the Company or any Subsidiary of the Company in one or more transactions each of which complies with Section 11(o) hereof);

then, and in each such case (except as may be contemplated by Section 13(d) hereof), proper provision shall be made so that: (A) each registered holder of a Right, except as provided in Section 7(e) hereof, shall thereafter have the right to receive, upon the exercise thereof at the then current Purchase Price multiplied by the number of one one-thousandths of a share of Preferred Shares for which a Right is then exercisable in accordance with the terms of this Agreement, such number of validly authorized and issued, fully paid, nonassessable and freely tradeable Common Shares of the Principal Party, not subject to any liens, encumbrances, rights of first refusal, transfer restrictions, preemptive rights or other adverse claims of any nature whatsoever, as shall be equal to the result obtained by (1) multiplying the number of one one-thousandths of a Preferred Share for which a Right was exercisable immediately prior to the first occurrence of a Section 11(a)(ii) Event by the Purchase Price in effect immediately prior to such first occurrence of a Section 11(a)(ii) Event, and (2) dividing that product (which, following the first occurrence of a Section 13 Event, shall be referred to as the “Purchase Price” for each Right and for all purposes of this Agreement) by fifty percent (50%) of the Current Market Price per Common Share of such Principal Party on the date of consummation of such Section 13 Event; (B) such Principal Party shall thereafter be liable for, and shall assume, by virtue of such Section 13 Event, all the obligations and duties of the Company pursuant to this Agreement; (C) the term “Company” shall thereafter be deemed to refer to such Principal Party, it being specifically intended that the provisions of Section 11 hereof shall apply only to such Principal Party following the first occurrence of a Section 13 Event; (D) such Principal Party shall take such steps (including, but not limited to, the reservation of a sufficient number of Common Shares) in connection with the consummation of any such transaction as may be necessary to assure that the provisions hereof shall thereafter be applicable, as nearly as reasonably may be, in relation to its Common Shares thereafter deliverable upon the exercise of the Rights; provided, however, that upon the subsequent occurrence of any merger, consolidation, sale of all or substantially all assets, recapitalization, reclassification of shares, reorganization or other extraordinary transaction in respect of such Principal Party, each holder of a Right shall thereupon be entitled to receive, upon exercise of a Right and payment of the Purchase Price, such cash, shares, rights, options warrants and other property which such holder would have been entitled to receive had he, she or it at the time of such transaction, owned the Common Shares of the Principal Party purchasable upon the exercise of a Right, and such Principal Party shall take such steps (including, but not limited to, reservation of shares of stock) as may be necessary to permit the subsequent exercise of the Rights in accordance with the terms hereof for such cash, shares, rights, warrants, options and other property; and (E) the provisions of Section 11(a)(ii) hereof shall be of no effect with respect to events occurring at any time following the first occurrence of any Section 13 Event, and the Rights that have not theretofore been exercised shall thereafter become exercisable in the manner described in this Section 13.

 

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(b)           “Principal Party” shall mean:

(i)             in the case of any transaction described in Section 13(a)(i) or Section 13(a)(ii) hereof, the Person (including the Company as successor thereto or as the surviving entity) that is the issuer of any securities into which Common Shares of the Company are converted, changed, or exchanged in such merger or consolidation or, if there is more than one such issuer, the issuer of Common Shares of such issuer that has the highest aggregate current market price (determined pursuant to Section 11(d) hereof) and if no securities or other equity interests are so issued, the Person (including the Company as successor thereto or as the surviving entity) that is the other party to such merger or consolidation, or, if there is more than one such Person, the Person that is a constituent party to such merger or consolidation, the Common Shares of such Person of which has the highest aggregate current market price (determined pursuant to Section 11(d) hereof); and

(ii)           in the case of any transaction described in Section 13(a)(iii) hereof, the Person that is the party receiving the greatest portion of the assets, cash flow or earning power transferred pursuant to such transaction or transactions, or if each Person that is a party to such transaction or transactions receives the same portion of the assets, cash flow or earning power transferred pursuant to such transaction or transactions, or if the Person receiving the largest portion of the assets, cash flow or earning power cannot be determined, whichever of such Persons is the issuer of Common Shares having the greatest aggregate value of shares outstanding (as determined pursuant to Section 11(d) hereof); provided, however, that in any such case, (A) if the Common Shares of such Person (who, but for this proviso, would be the Principal Party) are not at such time and have not been continuously over the preceding twelve (12) month period registered under Section 12 of the Exchange Act, and such Person is a direct or indirect Subsidiary of another Person the Common Shares of which are and have been so registered, “Principal Party” shall refer to such other Person; and (B) in case such Person is a Subsidiary, directly or indirectly, of more than one Person, the Common Shares of two or more of which are and have been so registered, “Principal Party” shall refer to whichever of such Persons is the issuer of the Common Shares having the greatest aggregate market value.

(c)           The Company shall not consummate a Section 13 Event unless the Principal Party shall have a sufficient number of authorized Common Shares that have not been issued or reserved or that are held in treasury for issuance to permit the exercise in full of the Rights in accordance with this Section 13 and unless prior thereto the Company and such Principal Party shall have executed and delivered to the Rights Agent a supplemental agreement confirming that the requirements of Section 13(a) and Section 13(b) hereof shall promptly be performed in accordance with their terms and further providing that, as soon as practicable after the date of any such Section 13 Event, the Principal Party, as soon as practicable after the execution of such agreement, will:

 

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(i)            prepare and file a registration statement under the Act, with respect to the Rights and the securities purchasable upon exercise of the Rights on an appropriate form, and will use its best efforts to cause such registration statement to (A) become effective as soon as practicable after such filing and (B) remain effective (with a prospectus at all times meeting the requirements of the Act) until the Expiration Date;

(ii)            take all such other action as may be necessary to enable the Principal Party to issue the securities purchasable upon exercise of the Rights, including but not limited to the registration or qualification of such securities under all requisite securities laws of jurisdictions of the various states and the listing of such securities on such exchanges and trading markets as may be necessary or appropriate; and

(iii)          deliver to registered holders of the Rights historical financial statements for the Principal Party and each of its Affiliates that comply in all respects with the requirements for registration on Form 10 (or any successor form) under the Exchange Act.

(d)           The provisions of this Section 13 shall similarly apply to successive mergers or consolidations or sales or other transfers. In the event that a Section 13 Event shall occur at any time after the occurrence of a Section 11(a)(ii) Event, the Rights that have not theretofore been exercised shall thereafter become exercisable in the manner described in Section 13(a) hereof.

(e)           In case the Principal Party that is to be a party to a transaction referred to in this Section 13 has at the time of such transaction, or immediately following such transaction will have, a provision in any of its authorized securities or in its certificate of incorporation or bylaws or other instrument governing its affairs, or any other agreements or arrangements, which provision would have the effect of (i) causing such Principal Party to issue, in connection with, or as a consequence of, the consummation of a transaction referred to in this Section 13, shares of Common Shares of such Principal Party at less than such then current market price (other than to holders of Rights pursuant to this Section 13); (ii) providing for any special payment, tax, or similar provisions in connection with the issuance of the Common Shares of such Principal Party pursuant to the provisions of Section 13; or (iii) otherwise eliminating or substantially diminishing the benefits intended to be afforded by the Rights in connection with, or as a consequence of, the consummation of a transaction referred to in this Section 13; then, in such event, the Company shall not consummate any such transaction unless prior thereto the Company and such Principal Party shall have executed and delivered to the Rights Agent a supplemental agreement providing that the provision in question of such Principal Party shall have been cancelled, waived, or amended, or that the authorized securities shall be redeemed, so that the applicable provision will have no effect in connection with, or as a consequence of, the consummation of the proposed transaction.

Section 14.            Fractional Rights and Fractional Shares.

(a)           The Company shall not be required to issue fractions of Rights, except prior to the Distribution Date as provided in Section 11(p) hereof, or to distribute Rights Certificates that evidence fractional Rights. In lieu of such fractional Rights, the Company shall pay to the registered holders of the Rights Certificates with regard to which such fractional Rights would otherwise be issuable, an amount in cash equal to the same fraction of the current market price of a whole Right. For purposes of this Section 14(a), the current market price of a whole Right shall be the Closing Price of the Rights for the Trading Day immediately prior to the date on which such fractional Rights would have been otherwise issuable. The Closing Price of the Rights for any Trading Day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the Nasdaq or, if the Rights are not listed or admitted to trading on the Nasdaq, as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the principal national securities exchange on which the Rights are listed or admitted to trading, or if the Rights are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by a quotation system then in use or, if on any such date the Rights are not so quoted, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Rights, selected by the Board. If on any such date the Rights are not publicly held and are not so listed, admitted to trading, or quoted, and no market maker is making a market in the Rights, the current market value of a Right shall mean the fair value of a Right on such date as determined in good faith by the Board, which determination shall be described in a statement filed with the Rights Agent and delivered to the holders of the Rights and shall be binding and conclusive for all purposes.

 

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(b)           The Company shall not be required to issue fractions of Preferred Shares (other than fractions that are integral multiples of one one-thousandth of a Preferred Share) upon exercise of the Rights or to distribute certificates or make any entries in the book entry account system of the transfer agent that evidence fractional Preferred Shares (other than fractions that are integral multiples of one one-thousandth of a Preferred Share). In lieu of fractional Preferred Shares that are not integral multiples of one one-thousandth of a Preferred Share, the Company may pay to the registered holders of Rights Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market price of one one-thousandth of a Preferred Share. For purposes of this Section 14(b), the current market price of one one-thousandth of a Preferred Share shall be one one-thousandth of the Closing Price of a Preferred Share or, if unavailable, the appropriate alternative price (in each case, as determined pursuant to Section 11(d)(ii) hereof) for the Trading Day immediately prior to the date of such exercise.

(c)           Following the occurrence of a Triggering Event, the Company shall not be required to issue fractions of Common Shares upon exercise of the Rights or to distribute certificates or Ownership Statements that evidence fractional Common Shares. In lieu of fractional Common Shares, the Company may pay to the registered holders of Rights Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of one Common Share. For purposes of this Section 14(c), the current market value of one Common Share shall be the Closing Price of one Common Share or, if unavailable, the appropriate alternative price (in each case, as determined pursuant to Section 11(d)(i) hereof) on the Trading Day immediately prior to the date of such exercise.

 

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(d)           The registered holder of a Right by the acceptance of that Right expressly waives such holder’s right to receive any fractional Rights or any fractional shares upon exercise of a Right, except as permitted by this Section 14.

(e)           Whenever a payment for fractional Rights or fractional shares is to be made by the Rights Agent under this Agreement, the Company shall (i) promptly prepare and deliver to the Rights Agent a certificate setting forth in reasonable detail the facts related to such payments and the prices and formulas utilized in calculating such payments; and (ii) provide sufficient funds to the Rights Agent in the form of fully collected funds to make such payments. The Rights Agent shall be fully protected in relying upon such a certificate and has no duty with respect to, and will not be deemed to have knowledge of, any payment for fractional Rights or fractional shares under any Section of this Agreement relating to the payment of fractional Rights or fractional shares unless and until the Rights Agent has received such a certificate and sufficient monies.

Section 15.            Rights of Action. All rights of action in respect of this Agreement, excepting the rights of action given to the Rights Agent hereunder, are vested in the respective registered holders of the Rights Certificates (and, prior to the Distribution Date, of the Common Shares); and any registered holder of any Rights Certificate (and, prior to the Distribution Date, of the Common Shares), without the consent of the Rights Agent or of the registered holder of any other Rights Certificate (or, prior to the Distribution Date, of the Common Shares), may, on such holder’s own behalf and for such holder’s own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, such holder’s right to exercise the Rights evidenced by such Rights Certificate in the manner provided in such Rights Certificate and in this Agreement. Without limiting the foregoing or any remedies available to the registered holders of Rights, it is specifically acknowledged that the registered holders of Rights would not have an adequate remedy at law for any breach of this Agreement by the Company and shall be entitled to specific performance of the obligations hereunder and injunctive relief against actual or threatened violations of the obligations hereunder by the Company of any Person subject to this Agreement.

Section 16.           Agreement of Rights Holders. Every registered holder of a Right, by accepting the same, consents and agrees with the Company and the Rights Agent and with every other registered holder of a Right that:

(a)           prior to the Distribution Date, the Rights shall be evidenced by the balances indicated in Ownership Statements in the names of the holders of Common Shares (which Common Shares shall also be deemed to represent certificates for Rights) or, in the case of certificated shares, the certificates for the Common Shares registered in the names of the holders of the Common Stock (which certificates for shares of Common Shares also constitute certificates for Rights) and each Right will be transferable only in connection with the transfer of Common Shares;

 

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(b)           after the Distribution Date, the Rights Certificates are transferable only on the registry books of the Rights Agent if surrendered at the office or offices of the Rights Agent designated for such purposes, duly endorsed or accompanied by a proper instrument of transfer and with the appropriate forms and certificates contained therein properly completed and duly executed;

(c)           subject to Section 6(a) and Section 7(f) hereof, the Company and the Rights Agent may deem and treat the Person in whose name a Rights Certificate (or, prior to the Distribution Date, a Common Share certificate or Ownership Statement) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Rights Certificates or the Common Share certificate or Ownership Statement made by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent, subject to the last sentence of Section 7(e) hereof, shall be required to be affected by any notice to the contrary; and

(d)           notwithstanding anything in this Agreement to the contrary, neither the Company nor the Rights Agent shall have any liability to any registered holder of a Right or other Person as a result of its inability to perform any of its obligations under this Agreement by reason of any preliminary or permanent injunction or other order, decree, judgment or ruling (whether interlocutory or final) issued by a court of competent jurisdiction or by a governmental, regulatory or administrative agency or commission, or any statute, rule, regulation or executive order promulgated or enacted by any governmental authority, prohibiting or otherwise restraining performance of such obligation; provided, however, that the Company must use its best efforts to have any such injunction, order, decree, judgment or ruling lifted or otherwise overturned as soon as possible.

Section 17.            Rights Certificate Holder Not Deemed a Stockholder. No registered holder, as such, of any Rights Certificate shall be entitled to vote, receive dividends or be deemed for any purpose the registered holder of the number of one one-thousandths of a Preferred Share or any other securities of the Company that may at any time be issuable on the exercise of the Rights evidenced thereby, nor shall anything contained herein or in any Rights Certificate be construed to confer upon the registered holder of any Rights Certificate, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in Section 25 hereof), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by such Rights Certificate shall have been exercised in accordance with the provisions hereof.

Section 18.            Concerning the Rights Agent.

(a)           The Company agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder and, from time to time, on demand of the Rights Agent, reimbursement for its reasonable expenses and counsel fees and disbursements and other disbursements incurred in the preparation, delivery, amendment, administration and execution of this Agreement and the exercise and performance of its duties hereunder. The Company also agrees to indemnify the Rights Agent for, and to hold it harmless against, any loss, liability, damage, judgment, fine, penalty, claim, demand, settlement, cost, or expense, incurred without gross negligence, bad faith or willful misconduct (each as determined by a final non-appealable judgment of a court of competent jurisdiction) on the part of the Rights Agent, for any action taken, suffered or omitted by the Rights Agent in connection with the acceptance, administration, exercise and performance of its duties under this Agreement, including reasonable attorneys’ fees and expenses and the costs and expenses of defending against any claim of liability in the premises. The costs and expenses incurred in enforcing this right of indemnification shall be paid by the Company.

 

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(b)           The Rights Agent may conclusively rely upon and shall be protected and shall incur no liability for or in respect of any action taken, suffered or omitted to be taken by it in connection with its acceptance and administration of this Agreement or the exercise or performance of its duties hereunder in reliance upon any Rights Certificate or certificate for Common Shares or for other securities of the Company or an Ownership Statement, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statement, or other paper or document believed by it to be genuine and to have been signed, executed and, where necessary, verified or acknowledged, by the proper Person or Persons, or otherwise upon the advice of counsel as set forth herein. The Rights Agent shall not be deemed to have knowledge of any event of which it was supposed to receive notice thereof hereunder, and the Rights Agent shall be fully protected and shall incur no liability for failing to take any action in connection therewith, unless and until it has received such notice.

(c)           The provisions of this Section 18, Section 20 and Section 29 hereof shall survive the termination or expiration of this Agreement, the exercise or expiration of the Rights and the resignation, replacement or removal of the Rights Agent

Section 19.            Merger or Consolidation or Change of Name of the Rights Agent.

(a)           Any Person into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any Person resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any Person succeeding to the corporate trust, stock transfer or other stockholder services business of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto; but only if such Person would be eligible for appointment as a successor Rights Agent under the provisions of Section 21 hereof. In case at the time such successor Rights Agent shall succeed to the agency created by this Agreement, any of the Rights Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of an authorized signatory of a predecessor Rights Agent and deliver such Rights Certificates so countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, an authorized signatory of any successor Rights Agent may countersign such Rights Certificates either in the name of the predecessor or in the name of the successor Rights Agent; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement.

 

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(b)           In case at any time the name of the Rights Agent shall be changed and at such time any of the Rights Certificates shall have been countersigned but not delivered, the Rights Agent may adopt the countersignature of an authorized signatory under the Rights Agent’s prior name and deliver Rights Certificates so countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, an authorized signatory of the Rights Agent may countersign such Rights Certificates either in the prior name of the Rights Agent or in the changed name of the Rights Agent; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement.

Section 20.           Duties of the Rights Agent. The Rights Agent undertakes to perform only the duties and obligations expressly imposed by this Agreement (and no implied duties or obligations) upon the following terms and conditions, by all of which the Company and the registered holders of Rights Certificates, by their acceptance thereof, shall be bound:

(a)           The Rights Agent may consult with legal counsel (who may be legal counsel for the Company or an employee of the Rights Agent), and the advice or opinion of such counsel shall be full and complete authorization and protection to the Rights Agent and the Rights Agent shall incur no liability for or in respect of any action taken, suffered or omitted to be taken by it in the absence of bad faith, gross negligence or willful misconduct (which bad faith, gross negligence, or willful misconduct must be determined by a final, non-appealable judgment of a court of competent jurisdiction) and in accordance with such advice or opinion.

(b)           Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter (including, without limitation, the identity of any Acquiring Person and the determination of Current Market Price) be proved or established by the Company prior to the Rights Agent taking or suffering or omitting to take any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by the Chairman of the Board, the Chief Executive Officer, the President, any Vice President, the Secretary, any Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company and delivered to the Rights Agent; and such certificate shall be full and complete authorization and protection to the Rights Agent, and the Rights Agent shall incur no liability, for or in respect of any action taken or suffered or omitted to be taken by it in the absence of bad faith, gross negligence or willful misconduct (which bad faith, gross negligence, or willful misconduct must be determined by a final, non-appealable judgment of a court of competent jurisdiction) under the provisions of this Agreement in reliance upon such certificate.

(c)           The Rights Agent shall be liable hereunder only for its own gross negligence, bad faith or willful misconduct (which gross negligence, bad faith or willful misconduct must be determined by a final, non-appealable judgment of a court of competent jurisdiction). Notwithstanding anything in this Agreement to the contrary, in no event will the Rights Agent be liable for special, punitive, indirect, incidental or consequential loss or damage of any kind whatsoever (including but not limited to lost profits), even if the Rights Agent has been advised of the likelihood of such loss or damage and regardless of the form of action. Any liability of the Rights Agent under this Agreement will be limited to the amount of annual fees paid by the Company to the Rights Agent.

 

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(d)           The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Rights Certificates and it shall not be required to verify the same (except as to a countersignature by one of its authorized signatories on such Rights Certificates), but all such statements and recitals are and shall be deemed to have been made by the Company only.

(e)           The Rights Agent shall not have any liability for or be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution and delivery hereof by the Rights Agent) or in respect of the validity or execution of any Rights Certificate (except a countersignature by one of its authorized signatories on any such Rights Certificate); nor shall it be responsible for any breach by the Company of any covenant or failure by the Company to satisfy any condition contained in this Agreement or in any Rights Certificate; nor shall it be responsible for any change in the exercisability of the Rights (including the Rights becoming null and void pursuant to Section 7(e) hereof) or any adjustment required under the provisions of Section 11, Section 13, Section 23 or Section 24 hereof or responsible for the manner, method or amount of any such change or adjustment or the ascertaining of the existence of facts that would require any such change or adjustment (except with respect to the exercise of Rights evidenced by Rights Certificates after receipt by the Rights Agent of a certificate describing any such adjustment, delivered pursuant to Section 12); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any Common Shares or Preferred Shares or any other securities to be issued pursuant to this Agreement or any Rights Certificate or as to whether any shares of Common Shares or Preferred Shares will, when so issued, be validly authorized and issued, fully paid and nonassessable.

(f)            The Company agrees that it will perform, execute, acknowledge, and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments, and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Agreement.

(g)           The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from the Chairman of the Board, the Chief Executive Officer, the President, any Vice President, the Secretary, any Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company, and to apply to such officers for advice or instructions in connection with its duties, and such instructions shall be full authorization and protection to the Rights Agent and the Rights Agent shall not be liable for any action taken, suffered, or omitted to be taken by it in the absence of bad faith, gross faith and willful misconduct (which bad faith, gross negligence, or willful misconduct must be determined by a final, non-appealable judgment of a court of competent jurisdiction) in accordance with instructions of any such officer or for any delay in acting while waiting for those instructions. The Rights Agent shall be fully authorized and protected in relying upon the most recent instructions received by any such officer.

 

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(h)           The Rights Agent and any stockholder, Affiliate, director, officer or employee of the Rights Agent may buy, sell, or deal in any of the Rights or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not the Rights Agent under this Agreement. Nothing herein shall preclude the Rights Agent or any such stockholder, Affiliate, director, officer or employee from acting in any other capacity for the Company or for any other Person.

(i)            The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself (through its directors, officers, and employees) or by or through its attorneys or agents, and the Rights Agent shall not be answerable or accountable for any act, default, neglect or misconduct of any such attorneys or agents or for any loss to the Company or any other Person resulting from any such act, default, neglect, or misconduct, absent gross negligence, bad faith, or willful misconduct (which gross negligence, bad faith or willful misconduct must be determined by a final, non-appealable judgment of a court of competent jurisdiction) of the Rights Agent in the selection and continued employment thereof.

(j)            No provision of this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers if there shall be reasonable grounds for believing that repayment of such funds or adequate indemnification against such risk or liability is not reasonably assured to it.

(k)           If, with respect to any Rights Certificate surrendered to the Rights Agent for exercise or transfer, the certificate contained in the form of assignment or form of election to purchase, as the case may be, has either not been properly completed or duly executed or indicates an affirmative response to clause 1 or 2 thereof, the Rights Agent shall not take any further action with respect to such requested exercise or transfer without first consulting with the Company.

Section 21.            Change of the Rights Agent. The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon thirty (30) days’ notice given to the Company (or such lesser notice as is acceptable to the Company in its sole discretion) in accordance with Section 26 hereof, and to the extent that the Rights Agent or one of its Affiliates is not also the transfer agent for the Company, to each transfer agent of the Common Shares and Preferred Shares by registered or certified mail. In the event the transfer agency relationship in effect between the Company and the Rights Agent terminates, the Rights Agent will be deemed to have resigned automatically and be discharged from its duties under this Agreement as of the effective date of such termination, and the Company shall be responsible for sending any required notice. The Company may remove the Rights Agent or any successor Rights Agent upon thirty (30) days’ notice given to the Rights Agent or successor Rights Agent, as the case may be, in accordance with Section 26 hereof, and to each transfer agent of the Common Shares and Preferred Shares by registered or certified mail, and, if such removal occurs after the Distribution Date, to the registered holders of the Rights Certificates in accordance with Section 26 hereof. If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Rights Agent. If the Company shall fail to make such appointment within a period of thirty (30) days after giving proper notice of such removal or after it has been properly notified of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the registered holder of a Rights Certificate (who shall, with such notice, submit such holder’s Rights Certificate for inspection by the Company), then any registered holder of any Rights Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be (a) a legal business entity organized and doing business under the laws of the United States or of any State thereof, in good standing, which is authorized under such laws to exercise stockholder services powers and which has at the time of its appointment as Rights Agent a combined capital and surplus of at least $50,000,000 or (b) an Affiliate of a legal business entity described in clause (a) of this sentence. After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties, and responsibilities as if it had been originally named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for that purpose. Not later than the effective date of any such appointment, the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Common Shares and the Preferred Shares, and, if such appointment occurs after the Distribution Date, give notice thereof to the registered holders of the Rights Certificates in accordance with Section 26 hereof. Failure to give any notice provided for in this Section 21, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be.

 

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Section 22.            Issuance of New Rights Certificates. Notwithstanding any of the provisions of this Agreement or of the Rights to the contrary, the Company may, at its option, issue new Rights Certificates evidencing Rights in such form as may be approved by the Board to reflect any adjustment or change in the Purchase Price and the number or kind or class of shares or other securities or property purchasable under the Rights Certificates made in accordance with the provisions of this Agreement. In addition, in connection with the issuance or sale of Common Shares following the Distribution Date and prior to the Expiration Date, the Company (a) shall, with respect to Common Shares so issued or sold pursuant to the exercise of stock options or under any employee plan or arrangement, granted or awarded as of the Distribution Date, or upon the exercise, conversion, or exchange of securities hereinafter issued by the Company, and (b) may, in any other case, if deemed necessary or appropriate by the Board, issue Rights Certificates evidencing the appropriate number of Rights in connection with such issuance or sale; provided, however, that (i) no such Rights Certificate shall be issued if, and to the extent that, the Company shall be advised by counsel that such issuance would create a significant risk of material adverse tax consequences to the Company or the Person to whom such Rights Certificate would be issued, and (ii) no such Rights Certificate shall be issued if, and to the extent that, appropriate adjustment shall otherwise have been made in lieu of the issuance thereof.

Section 23.             Redemption and Termination.

 

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(a)           The Board may, at its option, at any time prior to the earlier of (i) the Close of Business on the tenth (10th) Business Day following the Shares Acquisition Date (or, if the tenth (10th) Business Day following the Shares Acquisition Date occurs before the Record Date, the Close of Business on the Record Date) and (ii) the Final Expiration Date (the “Redemption Period”), direct the Company to, and if directed the Company shall, redeem all but not less than all of the then outstanding Rights at a redemption price of $0.001 per Right, as such amount may be appropriately adjusted to reflect any stock split, stock dividend, or similar transaction occurring after the date hereof (such redemption price, as adjusted, being hereinafter referred to as the “Redemption Price”). Notwithstanding anything contained in this Agreement to the contrary, the Rights shall not be exercisable after the first occurrence of a Section 11(a)(ii) Event until such time as the right of redemption hereunder has expired. The Company may, at its option, pay the Redemption Price in cash, Common Shares (based on the Current Market Price of the Common Shares at the time of redemption) or any other form of consideration deemed appropriate by the Board.

(b)           Immediately upon the action of the Board directing the Company to redeem the Rights, evidence of which shall have been filed with the Rights Agent and without any further action and without any notice, the right to exercise the Rights will terminate and the only right thereafter of the registered holders of Rights shall be to receive the Redemption Price for each Right so held. Promptly after the action of the Board directing the Company to make the redemption of the Rights, the Company shall give notice of such redemption to the Rights Agent and the registered holders of the then outstanding Rights in accordance with Section 26 hereof. Any notice given in accordance with Section 26 hereof shall be deemed given whether or not the holder receives the notice. Each such notice of redemption will state the method by which the payment of the Redemption Price will be made. Neither the Company nor any of its Affiliates or Associates may redeem, acquire, or purchase for value any Rights at any time in any manner other than specifically set forth in this Section 23 or in Section 24 hereof, or other than in connection with the purchase of Common Shares or the conversion or redemption of Common Shares in accordance with the applicable provisions of the Company’s Amended and Restated Certificate of Incorporation prior to the Distribution Date.

Section 24.             Exchange of Rights.

(a)           The Board may, at its option, at any time after the occurrence of a Section 11(a)(ii) Event, direct the Company to, and if directed the Company shall, exchange all or part of the then outstanding and exercisable Rights (which shall not include Rights that have become null and void pursuant to the provisions of Section 7(e) hereof) for Common Shares at an exchange ratio of one Common Share per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (such exchange ratio being hereinafter referred to as the “Exchange Ratio”). The exchange of the Rights by the Board may be made effective at such time, on such basis, and with such conditions as the Board in its sole discretion may establish. Notwithstanding the foregoing, the Board shall not be empowered to direct the Company to effect such exchange at any time after any Person (other than an Exempt Person), together with all Related Persons of such Person, becomes the Beneficial Owner of fifty percent (50%) or more of the Common Shares then outstanding.

 

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(b)           Immediately upon the action of the Board directing the Company to exchange any Rights pursuant to Section 24(a) hereof and without any further action and without any notice, the right to exercise such Rights shall terminate and the only right thereafter of a registered holder of such Rights shall be to receive that number of Common Shares equal to the number of such Rights held by such holder multiplied by the Exchange Ratio. The Company shall promptly give public notice of any such exchange (with prompt written notice thereof to the Rights Agent); provided, however, that the failure to give, or any defect in, such notice shall not affect the validity of such exchange. The Company promptly shall give notice of any such exchange to all of the registered holders of such Rights in accordance with Section 26 hereof. Any notice given in accordance with Section 26 hereof shall be deemed given whether or not the holder receives the notice. Each such notice of exchange will state the method by which the exchange of the Common Shares for Rights will be effected and, in the event of any partial exchange, the number of Rights that will be exchanged. Any partial exchange shall be effected pro rata based on the number of Rights (other than Rights that have become null and void pursuant to the provisions of Section 7(e) hereof) held by each registered holder of Rights.

(c)           In any exchange pursuant to this Section 24, the Company, at its option, may substitute Preferred Shares (or Equivalent Preferred Shares) for Common Shares exchangeable for Rights, at the initial rate of one one-thousandth of a Preferred Share (or Equivalent Preferred Shares) for each Common Share, as appropriately adjusted to reflect stock splits, stock dividends, and other similar transactions after the date hereof.

(d)           In the event the number of Common Shares authorized by the Amended and Restated Certificate of Incorporation, but which are not outstanding or reserved for issuance for purposes other than upon exercise of the Rights, is not sufficient to permit any exchange of Rights as contemplated in accordance with this Section 24, the Company may either take such action as may be necessary to authorize additional Common Shares for issuance upon exchange of the Rights or alternatively, at the option of the Board, substitute to the extent of such insufficiency for each Common Share that would otherwise be issuable upon exchange of a Right, cash, debt securities of the Company, other assets, or any combination of the foregoing, in any event having an aggregate value, as determined in good faith by the Board (whose determination shall be described in a statement filed with the Rights Agent and shall be binding and conclusive for all purposes on the Rights Agent and the holders of the Rights), equal to the Current Market Price per Common Share (as determined pursuant to Section 11(d)(i)) for the Trading Day immediately prior to the date of exchange pursuant to this Section 24.

(e)           The Company shall not be required to issue fractions of Common Shares or to distribute certificates or Ownership Statements that evidence fractional Common Shares. In lieu of such fractional Common Shares, there shall be paid to the registered holders of the Rights Certificates with regard to which such fractional Common Shares would otherwise be issuable, an amount in cash equal to the same fraction of the current market price of a whole Common Share. For the purposes of this Section 24(e), the current market price of a whole Common Share shall be the Closing Price of a Common Share (as determined pursuant to the second sentence of Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of exchange pursuant to this Section 24.

 

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(f)           Notwithstanding anything in this Section 24 to the contrary, the exchange of the Rights may be made effective at such time, on such basis and with such conditions as the Board in its sole discretion may establish. Without limiting the preceding sentence, the Board may (i) in lieu of issuing Common Shares or any other securities contemplated by this Section 24 to the Persons entitled thereto in connection with the exchange (such Persons, the “Exchange Recipients,” and such shares and other securities, together with any dividends or distributions made on such shares or other securities, the “Exchange Property”) issue, transfer or deposit the Exchange Property to or into a trust or other entity that may hold such Exchange Property for the benefit of the Exchange Recipients (provided that such trust or other entity may not be controlled by the Company or any of its Related Persons and provided further that the trustee or similar fiduciary of the trust or other entity will attempt to distribute the Exchange Property to the Exchange Recipients as promptly as practicable), (ii) permit such trust or other entity to exercise all of the rights that a stockholder of record would possess with respect to any shares deposited in such trust or entity and (iii) impose such procedures as are necessary to verify that the Exchange Recipients are not Acquiring Persons or Related Persons of Acquiring Persons as of any time periods established by such trust or entity.

Section 25.            Notice of Certain Events.

(a)           In case the Company shall propose, at any time after the Distribution Date, (i) to pay any dividend payable in stock of any class to the registered holders of Preferred Shares or to make any other distribution to the registered holders of Preferred Shares (other than a regular periodic cash dividend out of earnings or retained earnings of the Company), or (ii) to offer to the registered holders of Preferred Shares rights or warrants to subscribe for or to purchase any additional Preferred Shares or shares of stock of any class or any other securities, rights or options, or (iii) to effect any reclassification of its Preferred Shares (other than a reclassification involving only the subdivision of outstanding Preferred Shares), or (iv) to effect any consolidation or merger into or with any other Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o)), or to effect any sale or other transfer (or to permit one or more of its Subsidiaries to effect any sale or other transfer), in one transaction or a series of related transactions, of fifty percent (50%) or more of the assets, cash flow or earning power of the Company and its Subsidiaries (taken as a whole and calculated on the basis of the Company’s most recent regularly prepared financial statements) to any other Person or Persons (other than the Company and/or any of its Subsidiaries in one or more transactions each of which complies with Section 11(o) hereof), or (v) to effect the liquidation, dissolution, or winding up of the Company, then, in each such case, the Company shall give to each registered holder of a Rights Certificate, to the extent feasible and in accordance with Section 26 hereof, a notice of such proposed action, which shall specify the record date for the purposes of such stock dividend, distribution of rights or warrants, or the date on which such reclassification, consolidation, merger, sale, transfer, liquidation, dissolution, or winding up is to take place and the date of participation therein by the registered holders of the Preferred Shares, if any such date is to be fixed, and such notice shall be so given in the case of any action covered by clause (i) or (ii) above at least twenty (20) days prior to the record date for determining registered holders of the Preferred Shares for purposes of such action, and in the case of any such other action, at least twenty (20) days prior to the date of the taking of such proposed action or the date of participation therein by the registered holders of the Preferred Shares, whichever shall be the earlier; provided, however, that no such action shall be taken pursuant to this Section 25(a) that will or would conflict with any provision of the Company’s Amended and Restated Certificate of Incorporation; provided, further, that no such notice shall be required pursuant to this Section 25, if any Subsidiary of the Company effects a consolidation or merger with or into, or effects a sale or other transfer of assets or earning power to, any other Subsidiary of the Company.

 

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(b)           In case a Section 11(a)(ii) Event shall occur, then, in any such case, (i) the Company shall as soon as practicable thereafter give to the Rights Agent, and, to the extent feasible, each registered holder of a Rights Certificate, to the extent feasible and in accordance with Section 26 hereof, a notice of the occurrence of such event, which shall specify the event and the consequences of the event to registered holders of Rights under Section 11(a)(ii) hereof, and (ii) all references in Section 25(a) to Preferred Shares shall be deemed thereafter to refer to Common Shares or, if appropriate, other securities.

Notwithstanding anything to the contrary that may be contained in this Section 25 or elsewhere in this Agreement, the failure to give, or any defect in, any notice required to be given pursuant to this Section 25 shall not affect the legality or validity of the transaction or event to which the notice requirement was applicable.

In case any Section 13 Event shall occur, then the Company shall, as soon as practicable thereafter, give to each registered holder of a Rights Certificate, to the extent feasible, and to the Rights Agent in accordance with Section 26 hereof, a written notice of the occurrence of such event, which notice shall describe such event and the consequences of such event to the holders of Rights under Section 13(a) hereof.

Section 26.            Notices. Notices or demands authorized by this Agreement to be given or made by the Rights Agent or by the holder of any Rights Certificate to or on the Company will be sufficiently given or made if in writing and sent by a recognized national overnight delivery service, fax (when such fax is transmitted to the fax number set forth below and confirmation of transmission is received) or first-class mail, postage prepaid, addressed (until another address is filed in writing with the Rights Agent by the Company) as follows:

Support.com, Inc.

900 Chesapeake Drive, 2nd Floor

Redwood City, CA 94063

Attention: General Counsel

Fax: (650) 556-1194

with a copy (which will not constitute notice) to:

Morgan, Lewis & Bockius LLP

1111 Pennsylvania Avenue, N.W.

Washington, DC 20004

Attention: Keith E. Gottfried, Esq.

Fax: (202) 739-3001

 

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Subject to the provisions of Section 21, any notice or demand authorized by this Agreement to be given or made by the Company or by the registered holder of any Rights Certificate to or on the Rights Agent shall be sufficiently given or made if sent by (i) first-class mail, postage prepaid, (ii) a recognized national overnight delivery service, prepaid, or (iii) courier or messenger service, in each case addressed (until another address is filed in writing by the Rights Agent with the Company) as follows:

Computershare Trust Company, N.A.

8742 Lucent Blvd., Suite 225

Highlands Ranch, CO 80129

Attention: Client Services

with a copy (which shall not constitute notice) to:

Computershare Trust Company, N.A.

250 Royall Street

Canton, MA 02021

Attention: General Counsel

Notices or demands authorized by this Agreement to be given or made by the Company or the Rights Agent to the registered holder of any Rights Certificate (or, if prior to the Distribution Date, of the Common Shares) shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the registry books of the Rights Agent (or, if prior to the Distribution Date, of the transfer agent for the Common Shares).

Section 27.            Supplements and Amendments. Prior to the Distribution Date, and except as otherwise provided in this Section 27, the Company, by action of the Board, may from time to time, in its sole and absolute discretion, and the Rights Agent shall if the Company so directs, supplement or amend any provision of this Rights Agreement in any respect (including, without limitation, any extension of the period in which the Rights may be redeemed, any increase in the Purchase Price and any extension of the Final Expiration Date) without the approval of any holders of certificates representing the Common Shares; provided, however, that the adoption by the Board of any amendment to this Agreement that extends the Final Expiration Date shall be submitted for ratification by the Company’s stockholders within one year of the date of the adoption of such an amendment. From and after the Distribution Date, and except as otherwise provided in this Section 27, the Company and the Rights Agent shall, if the Company so directs, supplement or amend this Rights Agreement without the approval of any holders of Rights in order to (i) cure any ambiguity, (ii) correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein, (iii) shorten or lengthen any time period hereunder, or (iv) change or supplement the provisions hereunder in any manner which the Company may deem necessary or desirable; provided, however, that no such supplement or amendment shall adversely affect the interests of the holders of Right Certificates (other than an Acquiring Person or any Related Person thereof), and no such amendment may cause the Rights again to become redeemable or cause this Rights Agreement again to become amendable as to an Acquiring Person or any Related Person thereof other than in accordance with this sentence. Any such supplement or amendment shall be evidenced by a writing executed by the Company and the Rights Agent. Upon the delivery of a certificate from an appropriate officer of the Company which states that the proposed supplement or amendment is in compliance with the terms of this Section 27, the Rights Agent shall execute such supplement or amendment; provided, that the Rights Agent shall not be obligated to enter into any supplement or amendment that adversely affects the rights, duties or obligations of the Rights Agent under this Agreement.

 

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Section 28.            Successors. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder.

Section 29.             Determinations and Actions by the Board. For all purposes of this Agreement, any calculation of the number of Common Shares or any other class of capital stock outstanding at any particular time, including for purposes of determining the particular percentage of such outstanding Common Shares of which any Person is the Beneficial Owner, shall be made in accordance with the last sentence of Rule 13d 3(d)(1)(i) of the General Rules and Regulations under the Exchange Act. The Board shall have the exclusive power and authority to administer this Agreement and to exercise all rights and powers specifically granted to the Board or to the Company, or as may be necessary or advisable in the administration of this Agreement, including, without limitation, the right and power to (a) interpret the provisions of this Agreement and (b) make all determinations deemed necessary or advisable for the administration of this Agreement (including a determination to redeem or not redeem the Rights or to amend this Agreement). All such actions, calculations, interpretations and determinations (including, for purposes of clause (y) below, all omissions with respect to the foregoing) that are done or made by the Board in good faith, shall (x) be final, conclusive and binding on the Company, the Rights Agent, the registered holders of the Rights and all other parties, and (y) not subject the Board, or any member thereof, to any liability to the registered holders of the Rights. The Rights Agent is entitled always to assume the Company’s Board acted in good faith and shall be fully protected and incur no liability in reliance thereon.

Section 30.            Benefits of this Agreement. Nothing in this Agreement shall be construed to give to any Person other than the Company, the Rights Agent and the registered holders of the Rights Certificates (and, prior to the Distribution Date, of the Common Shares) any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent and the registered holders of the Rights Certificates (and, prior to the Distribution Date, of the Common Shares).

Section 31.            Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, null and void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated; provided, however, that notwithstanding anything in this Agreement to the contrary, if any such excluded term, provision, covenant or restriction shall materially and adversely affect the rights, immunities, duties or obligations of the Rights Agent, the Rights Agent shall be entitled to resign immediately upon written notice to the Company pursuant to the requirements of Section 26 of this Agreement; and provided, further, that notwithstanding anything in this Agreement to the contrary, if any such term, provision, covenant or restriction is held by such court or authority to be invalid, null and void or unenforceable and the Board determines in its good faith judgment that severing the invalid language from this Agreement would adversely affect the purpose or effect of this Agreement, the right of redemption set forth in Section 23 hereof shall be reinstated and shall not expire until the Close of Business on the tenth (10th) Business Day following the date of such determination by the Board. Without limiting the foregoing, if any provision requiring a specific group of directors of the Company to act is held by any court of competent jurisdiction or other authority to be invalid, null and void or unenforceable, such determination shall then be made by the Board in accordance with applicable law and the Amended and Restated Certificate of Incorporation and the Amended and Restated By-laws.

 

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Section 32.            Governing Law. This Agreement, each Right and each Rights Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of the Delaware and for all purposes shall be governed by and construed in accordance with the laws of such jurisdiction applicable to contracts made and to be performed entirely within such jurisdiction; provided, however, that all provisions regarding the rights, duties, and obligations of the Rights Agent shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely within such State.

Section 33.            Counterparts; Facsimiles and PDFs. This Agreement and any supplements or amendments hereto may be executed in any number of counterparts and each of such counterparts will for all purposes be deemed to be an original, and all such counterparts will together constitute one and the same instrument, it being understood that all parties need not sign the same counterpart. A signature to this Agreement executed or transmitted electronically (including by fax and .pdf) will have the same authority, effect and enforceability as an original signature. No party hereto may raise the use of such electronic execution or transmission to deliver a signature, or the fact that any signature or agreement or instrument was transmitted or communicated through such electronic transmission, as a defense to the formation of a contract, and each party forever waives any such defense, except to the extent such defense relates to lack of authenticity.

Section 34.           Descriptive Headings. Descriptive headings of the several sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof.

Section 35.            Force Majeure. Notwithstanding anything to the contrary contained herein, the Rights Agent shall not be liable for any delays or failures in performance resulting from acts beyond its reasonable control including, without limitation, acts of God, terrorist acts, shortage of supply, breakdowns or malfunctions, interruptions or malfunction of computer facilities, or loss of data due to power failures or mechanical difficulties with information storage or retrieval systems, labor difficulties, war, or civil unrest.

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.

	 	
SUPPORT.COM, INC.

	 
	 	 	 	 
	 	
By:   

	
/s/ Elizabeth Cholawsky

	 
	 	
Name: Elizabeth Cholawsky

	 
	 	
Title: President and Chief Executive Officer

	 
	 	 	 	 
	 	
COMPUTERSHARE TRUST COMPANY, N.A., AS RIGHTS AGENT

	 
	 	 	 	 
	 	
By:

	
/s/ Vice President & Manager

	 
	 	
Name: Patrick Hayes

	 
	 	
Title: Vice President & Manager

	 

 

EXHIBIT A

CERTIFICATE OF DESIGNATION

OF

SERIES A JUNIOR PARTICIPATING PREFERRED STOCK

OF

SUPPORT.COM, INC.

(Pursuant to Section 151 of the Delaware General Corporation Law)

______________________________

Support.com, Inc. (the “Corporation”), a corporation organized and existing under the General Corporation Law of the State of the Delaware, as amended (the “DGCL”), hereby certifies that, pursuant to the authority granted by Article IV of the Amended and Restated Certificate of Incorporation of the Corporation, as amended (the “Amended and Restated Certificate of Incorporation”), and in accordance with Section 151 of the DGCL, the Board of Directors of the Corporation (hereinafter being referred to as the “Board of Directors” or the “Board”), at a meeting duly called and held on October 13, 2015, has adopted the following resolution with respect to the designations, number of shares, preferences, voting powers and other rights and the restrictions and limitations thereof, of the Series A Junior Participating Stock:

RESOLVED, that, pursuant to the authority granted to and vested in the Board of Directors in accordance with the provisions of the Amended and Restated Certificate of Incorporation, the designations, number of shares, preferences, voting powers and other rights and the restrictions and limitations thereof of the Series A Junior Participating Stock are as follows:

1.            Designation and Amount. The shares of such series shall be designated as “Series A Junior Participating Preferred Stock” (the “Series A Preferred Stock”) and the number of shares constituting the Series A Preferred Stock shall be 150,000. Such number of shares may be increased or decreased by resolution of the Board of Directors prior to issuance; provided, that no decrease shall reduce the number of shares of the Series A Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation convertible into the Series A Preferred Stock; provided, further, that if more than a total of 150,000 shares of Series A Preferred Stock shall be issuable upon the exercise of Rights (the “Rights”) issued pursuant to the Rights Agreement, dated as of October 13, 2015, by and between the Corporation and Computershare Trust Company, N.A., as Rights Agent (the “Rights Agreement”), the Board of Directors of the Corporation, pursuant to Section 151(g) of the DGCL, shall direct by resolution or resolutions that a certificate be properly executed, acknowledged, filed and recorded, in accordance with the provisions of Section 103 of the DGCL, providing for the total number of shares of Series A Preferred Stock authorized to be issued to be increased (to the extent that the Certificate of Incorporation then permits) to the largest number of whole shares (rounded up to the nearest whole number) issuable upon exercise of such Rights.

 

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2.             Dividends and Distributions.

(a)           Subject to the rights of the holders of any shares of any series of Preferred Stock of the Corporation (the “Preferred Stock”) (or any similar stock) ranking prior and superior to the shares of Series A Preferred Stock with respect to dividends, the holders of shares of the Series A Preferred Stock, in preference to the holders of common stock, par value $.0001 per share, of the Corporation (the “Common Stock”) and of any other stock of the Corporation ranking junior to the Series A Preferred Stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds of the Corporation legally available for the payment of dividends, quarterly dividends payable in cash on the last day of each fiscal quarter of the Corporation in each year, or such other dates as the Board of Directors shall approve (each such date being referred to herein as a “Quarterly Dividend Payment Date”), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of the Series A Preferred Stock (the “Issue Date”), in an amount per share (rounded to the nearest cent) equal to the greater of (i) $1.00 or (ii) subject to the provision for adjustment hereinafter set forth, 1000 times the aggregate per share amount of all cash dividends, and 1000 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of the Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Preferred Stock. In the event the Corporation shall at any time after the Issue Date (A) declare and pay any dividend on the Common Stock payable in shares of Common Stock, or (B) effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under clause (ii) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. In the event the Corporation shall at any time declare or pay any dividend on the Series A Preferred Stock payable in shares of Series A Preferred Stock, or effect a subdivision, combination or consolidation of the outstanding shares of Series A Preferred Stock (by reclassification or otherwise than by payment of a dividend in shares of Series A Preferred Stock) into a greater or lesser number of shares of Series A Preferred Stock, then in each such case the amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under clause (ii) of the first sentence of this Section 2(a) shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Series A Preferred Stock that were outstanding immediately prior to such event and the denominator of which is the number of shares of Series A Preferred Stock outstanding immediately after such event.

(b)           The Corporation shall declare a dividend or distribution on the Series A Preferred Stock as provided in paragraph (a) of this Section 2 immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); and the Corporation shall pay such dividend or distribution on the Series A Preferred Stock before the dividend or distribution declared on the Common Stock is paid or set apart; provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per share on the Series A Preferred Stock shall nevertheless be payable, when, as and if declared, on such subsequent Quarterly Dividend Payment Date.

 

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(c)           Dividends shall begin to accrue and be cumulative, whether or not declared, on outstanding shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than 60 days prior to the date fixed for the payment thereof.

3.             Voting Rights. The holders of shares of Series A Preferred Stock shall have the following voting rights:

(a)           Subject to the provision for adjustment hereinafter set forth and except as otherwise provided in the Amended and Restated Certificate of Incorporation or required by law, each share of Series A Preferred Stock shall entitle the holder thereof to 1000 votes on all matters upon which the holders of the Common Stock of the Corporation are entitled to vote. In the event the Corporation shall at any time after the Issue Date (i) declare or pay any dividend on the Common Stock payable in shares of Common Stock, or (ii) effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the number of votes per share to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. In the event the Corporation shall at any time declare or pay any dividend on the Series A Preferred Stock payable in shares of Series A Preferred Stock, or effect a subdivision, combination or consolidation of the outstanding shares of Series A Preferred Stock (by reclassification or otherwise than by payment of a dividend in shares of Series A Preferred Stock) into a greater or lesser number of shares of Series A Preferred Stock, then in each such case the number of votes per share to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Series A Preferred Stock that were outstanding immediately prior to such event and the denominator of which is the number of shares of Series A Preferred Stock outstanding immediately after such event.

 

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(b)           Except as otherwise provided herein, in the Amended and Restated Certificate of Incorporation or in any other Certificate of Designations creating a series of Preferred Stock or any similar stock, and except as otherwise required by law, the holders of shares of Series A Preferred Stock and the holders of shares of Common Stock and any other capital stock of the Corporation having general voting rights shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation.

(c)           (i)             If at any time dividends on any Series A Preferred Stock shall be in arrears in an amount equal to six quarterly dividends thereon, the holders of the Series A Preferred Stock, voting as a separate series from all other series of Preferred Stock and classes of capital stock, shall be entitled to elect two members of the Board in addition to any Directors elected by any other series, class or classes of securities and the authorized number of Directors will automatically be increased by two. Promptly thereafter, the Board of the Corporation shall, as soon as may be practicable, call a special meeting of holders of Series A Preferred Stock for the purpose of electing such members of the Board. Such special meeting shall in any event be held within 45 days of the occurrence of such arrearage.

(ii)           During any period when the holders of Series A Preferred Stock, voting as a separate series, shall be entitled and shall have exercised their right to elect two Directors, then, and during such time as such right continues, (a) the then authorized number of Directors shall be increased by two, and the holders of Series A Preferred Stock, voting as a separate series, shall be entitled to elect the additional Directors so provided for, and (b) each such additional Director shall serve until the next annual meeting of stockholders for the election of Directors, or until his successor shall be elected and shall qualify, or until his right to hold such office terminates pursuant to the provisions of this Section 3(c).

(iii)          A Director elected pursuant to the terms hereof may be removed with or without cause by the holders of Series A Preferred Stock entitled to vote in an election of such Director.

(iv)          If, during any interval between annual meetings of stockholders for the election of Directors and while the holders of Series A Preferred Stock shall be entitled to elect two Directors, there is no such Director in office by reason of resignation, death or removal, then, promptly thereafter, the Board shall call a special meeting of the holders of Series A Preferred Stock for the purpose of filling such vacancy and such vacancy shall be filled at such special meeting. Such special meeting shall in any event be held within 45 days of the occurrence of such vacancy.

(v)           At such time as the arrearage is fully cured, and all dividends accumulated and unpaid on any shares of Series A Preferred Stock outstanding are paid, and, in addition thereto, at least one regular dividend has been paid subsequent to curing such arrearage, the term of office of any Director elected pursuant to this Section 3(c), or his successor, shall automatically terminate, and the authorized number of Directors shall automatically decrease by two, the rights of the holders of the shares of the Series A Preferred Stock to vote as provided in this Section 3(c) shall cease, subject to renewal from time to time upon the same terms and conditions, and the holders of shares of the Series A Preferred Stock shall have only the limited voting rights elsewhere herein set forth.

 

A-4

(d)           Except as set forth herein, or as otherwise provided by law, holders of Series A Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action.

  

4.             Certain Restrictions.

(a)           Whenever quarterly dividends or other dividends or distributions payable on the Series A Preferred Stock as provided in Section 2 hereof are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Preferred Stock outstanding shall have been paid in full, the Corporation shall not:

(i)            declare or pay dividends, or make any other distributions, on any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock;

(ii)           declare or pay dividends, or make any other distributions, on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except dividends paid ratably on the Series A Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled;

(iii)           redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A Preferred Stock or rights, warrants or options to acquire such junior stock; or

(iv)          redeem or purchase or otherwise acquire for consideration any shares of Series A Preferred Stock, or any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.

(b)           The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (a) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner.

 

A-5

5.            Reacquired Shares. Any shares of Series A Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued, without designation as to series until such shares are once more designated as part of a particular series of Preferred Stock by resolution or resolutions of the Board of Directors, subject to the conditions and restrictions on issuance set forth herein, in the Amended and Restated Certificate of Incorporation, or in any other Certificate of Designations creating a series of Preferred Stock or any similar stock or as otherwise required by law.

6.            Liquidation, Dissolution or Winding Up. (b) Upon any liquidation, dissolution or winding up of the Corporation, no distribution shall be made (i) to the holders of the Common Stock or of shares of any other stock of the Corporation ranking junior, either as to dividends or upon liquidation, dissolution or winding up, to the Series A Preferred Stock unless, prior thereto, the holders of shares of Series A Preferred Stock shall have received $1000 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, provided that the holders of shares of Series A Preferred Stock shall be entitled to receive an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to 1000 times the aggregate amount to be distributed per share to holders of shares of Common Stock, or (ii) to the holders of shares of stock ranking on a parity either as to dividends or upon liquidation, dissolution or winding up with the Series A Preferred Stock, except distributions made ratably on the Series A Preferred Stock and all such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. In the event, however, that there are not sufficient assets available to permit payment in full of the Series A Preferred Stock liquidation preference and the liquidation preferences of all other classes and series of stock of the Corporation, if any, that rank on a parity with the Series A Preferred Stock in respect thereof, then the assets available for such distribution shall be distributed ratably to the holders of the Series A Preferred Stock and the holders of such parity shares in the proportion to their respective liquidation preferences. In the event the Corporation shall at any time after the Issue Date (A) declare or pay any dividend on the Common Stock payable in shares of Common Stock, or (B) effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the aggregate amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under the proviso in clause (i) of this Section 6(a) shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. In the event the Corporation shall at any time declare or pay any dividend on the Series A Preferred Stock payable in shares of Series A Preferred Stock, or effect a subdivision, combination or consolidation of the outstanding shares of Series A Preferred Stock (by reclassification or otherwise than by payment of a dividend in shares of Series A Preferred Stock) into a greater or lesser number of shares of Series A Preferred Stock, then in each such case the aggregate amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under the proviso in clause (1) of paragraph (A) of this Section 6 shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Series A Preferred Stock that were outstanding immediately prior to such event and the denominator of which is the number of shares of Series A Preferred Stock outstanding immediately after such event.

 

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(b)           Neither the merger, consolidation or other business combination of the Corporation into or with another entity nor the merger, consolidation or other business combination of any other entity into or with the Corporation (nor the sale, lease, exchange or conveyance of all or substantially all of the property, assets or business of the Corporation) shall be deemed to be a liquidation, dissolution or winding up of the Corporation within the meaning of this Section 6.

7.            Consolidation, Merger, etc. Notwithstanding anything to the contrary contained herein, in case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are converted into, exchanged for or changed into other stock or securities, cash and/or any other property (payable in kind), then in any such case each share of Series A Preferred Stock shall at the same time be similarly converted into, exchanged for or changed into an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 1000 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is converted or exchanged. In the event the Corporation shall at any time after the Issue Date (i) declare or pay any dividend on the Common Stock payable in shares of Common Stock, or (ii) effect a subdivision or combination or consolidation (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) of the outstanding shares of Common Stock into a greater or lesser number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the conversion, exchange or change of shares of Series A Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. In the event the Corporation shall at any time declare or pay any dividend on the Series A Preferred Stock payable in shares of Series A Preferred Stock, or effect a subdivision, combination or consolidation of the outstanding shares of Series A Preferred Stock (by reclassification or otherwise than by payment of a dividend in shares of Series A Preferred Stock) into a greater or lesser number of shares of Series A Preferred Stock, then in each such case the amount set forth in the first sentence of this Section 7 with respect to the exchange or change of shares of Series A Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Series A Preferred Stock that were outstanding immediately prior to such event and the denominator of which is the number of shares of Series A Preferred Stock outstanding immediately after such event.

8.             No Redemption. The shares of Series A Preferred Stock shall not be redeemable from any holder.

 

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9.            Rank. The Series A Preferred Stock shall rank, with respect to the payment of dividends and the distribution of assets upon liquidation, dissolution or winding up of the Corporation, junior to all series of any other class of the Preferred Stock issued either before or after the issuance of the Series A Preferred Stock, unless the terms of any such series shall provide otherwise, and shall rank senior to the Common Stock.

10.           Amendment. At such time as any shares of Series A Preferred Stock are outstanding, if any proposed amendment to the Amended and Restated Certificate of Incorporation (including this Certificate of Designation) would materially alter, change or repeal any of the preferences, powers or special rights given to the Series A Preferred Stock so as to affect the Series A Preferred Stock adversely, then the holders of the Series A Preferred Stock shall be entitled to vote separately as a class upon such amendment, and the affirmative vote of two-thirds of the outstanding shares of the Series A Preferred Stock, voting separately as a single class, shall be necessary for the adoption thereof, in addition to such other vote as may be required by the Delaware Business Corporation Act.

11.           Fractional Shares. Series A Preferred Stock may be issued in fractions of a share that shall entitle the holder, in proportion to such holder’s fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series A Preferred Stock.

IN WITNESS WHEREOF, the undersigned have signed and attested this Certificate of Designation on the 13th day of October, 2015.

	 	
SUPPORT.COM, INC.

	 
	 	 	 	 
	 	
By: ___________________________

	 
	 	 	
Name:

	 
	 	 	
Title:

	 

Attest:

__________________________________

______________, Secretary

 

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EXHIBIT B

[Form of Rights Certificate]

	
Certificate No. R-

	
Rights

NOT EXERCISABLE AFTER 5:00 P.M., NEW YORK CITY TIME, ON OCTOBER 10, 2016 UNLESS THE RIGHTS ARE EARLIER REDEEMED OR EXCHANGED. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $0.001 PER RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS BENEFICIALLY OWNED BY ANY PERSON WHO IS, WAS OR BECOMES AN ACQUIRING PERSON OR ANY RELATED PERSON THEREOF (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT), WHETHER CURRENTLY BENEFICIALLY OWNED BY OR ON BEHALF OF SUCH PERSON OR BY ANY SUBSEQUENT BENEFICIAL OWNER, MAY BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY OR ON BEHALF OF A PERSON WHO IS, WAS OR BECAME AN ACQUIRING PERSON OR A RELATED PERSON OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF SUCH AGREEMENT.]1

RIGHTS CERTIFICATE

SUPPORT.COM, INC.

This certifies that ___________, or registered assigns, is the registered owner of the number of Rights set forth above, each of which entitles the owner thereof, subject to the terms, provisions and conditions of the Rights Agreement, dated as of October 13, 2015 (the “Rights Agreement”), between Support.com, Inc., a Delaware corporation (the “Company”), and Computershare Trust Company, N.A. (the “Rights Agent”), to purchase from the Company after the Distribution Date (as such term is defined in the Rights Agreement) and at any time prior to 5:00 p.m., New York City time, on October 10, 2016 unless the Rights are previously redeemed or exchanged, at the office or offices of the Rights Agent designated for such purpose, or its successors as Rights Agent, one one-thousandth of a fully paid, nonassessable share of Series A Junior Participating Preferred Stock of the Company (a “Preferred Share”), at a purchase price of $2.25 in cash per one one-thousandth of a share (such purchase price, as may be adjusted, the “Purchase Price”), upon presentation and surrender of this Rights Certificate with the Form of Election to Purchase and related certificate duly executed. The number of Rights evidenced by this Rights Certificate (and the number of shares that may be purchased upon exercise thereof) set forth above, and the Purchase Price per share set forth above, are the number and Purchase Price as of the Close of Business on October 13, 2015, based on the Preferred Shares as constituted at such date. The Company reserves the right to require prior to the occurrence of a Triggering Event (as such term is defined in the Rights Agreement) that a number of Rights be exercised so that only whole Preferred Shares will be issued. Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to such terms in the Rights Agreement.

1 The portion of the legend in brackets shall be inserted only if applicable and shall replace the preceding sentence.

 

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In certain circumstances described in the Rights Agreement, the Rights evidenced thereby may entitle the registered holder thereof to purchase capital stock of an entity other than the Company or receive capital stock, cash, or other assets of an entity other than the Company, all as provided in the Rights Agreement. Upon the occurrence (whether prior to, on or after the date of this Rights Certificate) of a Section 11(a)(ii) Event (as such term is defined in the Rights Agreement), if the Rights evidenced by this Rights Certificate are beneficially owned by (i) an Acquiring Person or a Related Person of any such Acquiring Person (as such terms are defined in the Rights Agreement), (ii) a transferee of any such Acquiring Person or of any such Related Person thereof who becomes a transferee after the Acquiring Person becomes an Acquiring Person, or (iii) under certain circumstances specified in the Rights Agreement, a transferee of a person who, concurrently with or prior to such transfer, became an Acquiring Person, or a Related Person of an Acquiring Person, such Rights shall become null and void and no holder hereof shall have any right with respect to such Rights from and after the occurrence of such Section 11(a)(ii) Event.

As provided in the Rights Agreement, the Purchase Price, and the number and kind of Preferred Shares or other securities issuable upon exercise of a Right and the number of Rights outstanding are subject to modification and adjustment upon the happening of certain events, including Triggering Events.

This Rights Certificate is subject to all of the terms, provisions and conditions of the Rights Agreement, which terms, provisions and conditions are hereby incorporated herein by reference and made a part hereof and to which Rights Agreement reference is hereby made for a full description of the rights, limitations of rights, obligations, duties and immunities hereunder of the Rights Agent, the Company and the holders of the Rights Certificates, which limitations of rights include the temporary suspension of the exercisability of such Rights under the specific circumstances set forth in the Rights Agreement. Copies of the Rights Agreement are on file at the above-mentioned office of the Rights Agent and are also available upon written request to the Rights Agent.

This Rights Certificate, with or without other Rights Certificates, upon surrender at the office or offices of the Rights Agent designated for such purpose, with the Form of Election and Certificate set forth on the reverse side properly completed and duly executed, may be exchanged for another Rights Certificate or Rights Certificates of like tenor and date evidencing Rights entitling the holder to purchase a like aggregate number of one one-thousandths of a Preferred Share as the Rights evidenced by the Rights Certificate or Rights Certificates surrendered shall have entitled such holder to purchase. If this Rights Certificate shall be exercised in part, the holder shall be entitled to receive upon surrender hereof another Rights Certificate or Rights Certificates for the number of whole Rights not exercised.

 

B-2

Subject to the provisions of the Rights Agreement, the Rights evidenced by this Rights Certificate may be redeemed by the Company at its option at a redemption price of $0.001 per Right, payable in cash or other securities or property of the Company, at any time prior to the earlier of (i) the Close of Business on the tenth Business Day (or such later date as may be determined by the Board pursuant to clause (i) of the first sentence of Section 3(a) of the Rights Agreement with respect to the Distribution Date) following the Shares Acquisition Date (or, if the Shares Acquisition Date shall have occurred prior to the Record Date, the Close of Business on the tenth Business Day following the Record Date), and (ii) the Final Expiration Date. In addition, subject to the provisions of the Rights Agreement, under certain circumstances following the occurrence of a Section 11(a)(ii) Event but before any person acquires beneficial ownership of fifty percent (50%) or more of the Common Shares (as such term is defined in the Rights Agreement), the Rights may be exchanged, in whole or in part, for Common Shares, Preferred Shares, or shares of other preferred stock of the Company having essentially the same value or economic rights as such share, subject to adjustment for certain events as provided in the Rights Agreement. Immediately upon the action of the Board of Directors of the Company authorizing any such redemption or exchange, and without any further action or any notice, the Rights (other than Rights that are not subject to such redemption or exchange) will terminate and the Rights will only enable holders to receive the redemption price or the shares issuable upon such exchange, as applicable.

No fractional Preferred Shares will be issued upon the exercise of any Right or Rights evidenced hereby (other than fractions that are integral multiples of one one-thousandth of a Preferred Share, which may, at the election of the Company, be evidenced by depositary receipts), but in lieu thereof a cash payment may be made, as provided in the Rights Agreement.

No holder of this Rights Certificate, as such, shall be entitled to vote or receive dividends or be deemed for any purpose the holder of Preferred Shares or of any other securities of the Company which may at any time be issuable on the exercise hereof, nor shall anything contained in the Rights Agreement or herein be construed to confer upon the holder hereof, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give consent to or withhold consent from any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as may otherwise be provided in the Rights Agreement), or to receive dividends or subscription rights, or otherwise, unless and until the Right or Rights evidenced by this Rights Certificate shall have been exercised as provided in the Rights Agreement.

This Rights Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by the Rights Agent.

WITNESS the facsimile signature or portable document format of the proper officers of the Company.

Dated as of __, 201__.

 

B-3

	 	
SUPPORT.COM, INC.

	 
	 	 	 	 
	 	
By:

	                               	 
	 	
Name:

	                              	 
	 	
Title:

	                             	 
	 	 	 	 
	 	
By:

	                           	 
	 	
Name:

	                                	 
	 	
Title:

	                                	 
	 	 	 	 
	 	
Countersigned:

	 
	 	 	 	 
	 	
COMPUTERSHARE TRUST COMPANY, N.A., as Rights Agent

	 
	 	 	 	 
	 	
By:

	                         	 
	 	
Name:

	                                 	 
	 	
Title:

	                               	 

 

B-4

[Form of Reverse Side of Rights Certificate]

FORM OF ASSIGNMENT

(To be executed by the registered holder if such

holder desires to transfer the Rights Certificate.)

FOR VALUE RECEIVED __________________________________________ hereby sells, assigns and transfers unto _________________________________________

(Please print name and address of transferee)

(Please spell out and include in numerals the

number of Rights being transferred by this Agreement)

of the Rights evidenced by this Rights Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint _____ Attorney, to transfer the number of Rights indicated on the books of the within named Company, with full power of substitution.

Dated as of: __________ ___, 201__

SIGNATURE

	
By:

	                                    	 
	
Name:

	                                       	 
	
Title:

	                                 	 

Medallion Signature Guaranteed:

Signatures must be guaranteed by an eligible guarantor institution (a bank, stockbroker, savings and loan association or credit union with membership in an approved signature guarantee medallion program) at a guarantee level satisfactory to the Rights Agent. A notary public is not sufficient.

 

B-5

CERTIFICATE

The undersigned hereby certifies by checking the appropriate boxes that:

(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not being sold, assigned and transferred by or on behalf of a Person who is or was an Acquiring Person or a Related Person of any such Acquiring Person (as such terms are defined in the Rights Agreement); and

(2) after due inquiry and to the best knowledge of the undersigned, he, she or it [ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate from any Person who is, was or subsequently became an Acquiring Person or a Related Person of an Acquiring Person.

Dated as of: __________ ___, 201__

SIGNATURE

	
By:

	                                      	 
	
Name:

	                                         	 
	
Title:

	                                  	 

Medallion Signature Guaranteed:

Signatures must be guaranteed by an eligible guarantor institution (a bank, stockbroker, savings and loan association or credit union with membership in an approved signature guarantee medallion program) at a guarantee level satisfactory to the Rights Agent. A notary public is not sufficient.

 

B-6

NOTICE

The signature to the foregoing Assignment and Certificate must correspond to the name as written upon the face of this Rights Certificate in every particular, without alteration or enlargement or any change whatsoever.

 

B-7

[Form of Reverse Side of Rights Certificate – Continued]

FORM OF ELECTION TO PURCHASE

(To be executed by the registered holder if such holder desires to

exercise any or all Rights evidenced by the Rights Certificate.)

	To:	SUPPORT.COM, INC.

The undersigned hereby irrevocably elects to exercise __________ (_______) Rights evidenced by this Rights Certificate to purchase the Preferred Shares issuable upon the exercise of the Rights (or such other securities of the Company or of any other person which may be issuable upon the exercise of the Rights) and requests that certificates for such shares be issued in the name of and delivered to or that such shares be credited to the book entry account of:

(Please print name, address and social security,

tax identification or other identifying number.)

If such number of Rights shall not be all the Rights evidenced by this Rights Certificate, a new Rights Certificate for the balance of such Rights shall be registered in the name of and delivered to:

(Please print name, address and social security,

tax identification or other identifying number.)

Dated: __________ ___, ____

SIGNATURE

	
By:

	                                     	 
	
Name:

	                                          	 
	
Title:

	                                  	 

Medallion Signature Guaranteed:

Signatures must be guaranteed by an eligible guarantor institution (a bank, stockbroker, savings and loan association or credit union with membership in an approved signature guarantee medallion program) at a guarantee level satisfactory to the Rights Agent. A notary public is not sufficient.

 

B-8

CERTIFICATE

The undersigned hereby certifies by checking the appropriate boxes that:

(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not being exercised by or on behalf of a Person who is or was an Acquiring Person or a Related Person of any such Acquiring Person (as such terms are defined pursuant to the Rights Agreement); and

(2) after due inquiry and to the best knowledge of the undersigned, he, she or it [ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate from any Person who is, was or became an Acquiring Person or a Related Person of an Acquiring Person.

Dated: __________ ___, ____

SIGNATURE

	
By:

	                                   	 
	
Name:

	                                        	 
	
Title:

	                                   	 

Medallion Signature Guaranteed:

Signatures must be guaranteed by an eligible guarantor institution (a bank, stockbroker, savings and loan association or credit union with membership in an approved signature guarantee medallion program) at a guarantee level satisfactory to the Rights Agent. A notary public is not sufficient.

 

B-9

NOTICE

The signature to the foregoing Election to Purchase and Certificate must correspond to the name as written upon the face of this Rights Certificate in every particular, without alteration or enlargement or any change whatsoever.

 

B-10

EXHIBIT C

SUPPORT.COM, INC.

SUMMARY OF RIGHTS

TO PURCHASE PREFERRED STOCK

On October 13, 2015, the Board of Directors of Support.com, Inc., a Delaware corporation (the “Company”), declared a dividend distribution of one right (each, a “Right”) for each outstanding share of common stock, par value $.0001 per share, of the Company (the “Common Shares”). The dividend is payable to holders of record as of the close of business on October 30, 2015 (the “Record Date”).

The following is a summary description of the Rights. This summary is intended to provide a general description only and is subject to the detailed terms and conditions of the Rights Agreement (the “Rights Agreement”), dated as of October 13, 2015, by and between the Company and Computershare Trust Company, N.A., as Rights Agent (the “Rights Agent”).

1.             Issuance of Rights

Each holder of Common Shares as of the Record Date will receive a dividend of one Right per Common Share. One Right will also be issued together with each Common Share issued by the Company after the Record Date and prior to the Distribution Date (as defined in Section 2 below), and in certain circumstances, after the Distribution Date. New certificates (or, if uncertificated, by the book entry account that evidences record ownership of such shares) for Common Shares issued after the Record Date will contain a notation incorporating the Rights Agreement by reference.

Until the Distribution Date:

		•	the Rights will not be exercisable;

		•	the Rights will be evidenced by the certificates for Common Shares (or, if uncertificated, by the book entry account that evidences record ownership of such shares) and not by separate rights certificates; and

		•	the Rights will be transferable by, and only in connection with, the transfer of Common Shares.

2.             Distribution Date; Exercise of Rights; Beneficial Ownership

The Rights are not exercisable until the Distribution Date. As of and after the Distribution Date, the Rights will separate from the Common Shares and each Right will become exercisable to purchase one one-thousandth of a share of Series A Junior Participating Preferred Stock, par value $0.0001 per share, of the Company (each whole share, a “Preferred Share”) at a purchase price of $2.25 (such purchase price, as may be adjusted, the “Purchase Price”). This portion of a Preferred Share would give the holder thereof approximately the same dividend, voting, and liquidation rights as would one Common Share.

 

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The “Distribution Date” is the earlier of:

		•	the close of business on the tenth (10th) business day following a public announcement that any person, together with such person’s related persons (other than the Company or certain related entities), has become the beneficial owner of 15% or more of the then outstanding Common Shares other than as a result of repurchases of Common Shares by the Company or certain inadvertent acquisitions (such person is an “Acquiring Person” and such date is the “Shares Acquisition Date”); provided, however, that stockholders who beneficially own 15% or more of the outstanding Common Shares as of the date of this Rights Agreement will not be considered an Acquiring Person unless and until such stockholder or any Related Person acquires beneficial ownership of any additional Common Shares, subject to certain exceptions; and

		•	the close of business on the tenth (10th) business day (or such later date as the Board of Directors of the Company shall determine prior to the occurrence of a Distribution Date) after the date of the commencement of, or first public announcement of the intent of any person (other than the Company or certain related entities) to commence (within the meaning of Rule 14d-2(a) of the General Rules and Regulations under the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”), a tender or exchange offer that, if completed, would result in such person becoming an Acquiring Person.

A person will be deemed to “beneficially own” any Common Shares if such person or any Related Person:

		•	is considered a “beneficial owner” of the Common Shares under Rule 13d-3 of the General Rules and Regulations under the Exchange Act;

		•	has the right to acquire the Common Shares, either immediately or in the future, pursuant to any agreement, arrangement, or understanding (other than a customary underwriting agreement relating to a bona fide public offering of the Common Shares) or upon the exercise of conversion rights, exchange rights, rights, warrants or options, or otherwise, except that a person will not be deemed to be a beneficial owner of (a) Common Shares tendered pursuant to a tender offer or exchange offer by or on behalf of such person or any affiliated or associated persons of such person until the tendered Common Shares are accepted for purchase or exchange, (b) securities issuable upon exercise of a Right before the occurrence of a Triggering Event (as defined in Section 5 below), or (c) securities issuable upon exercise of a Right after the occurrence of a Triggering Event if the Rights are originally issued Rights or were issued in connection with an adjustment to originally issued Rights;

 

C-2

		•	has the right to vote or dispose of the Common Shares pursuant to any agreement, arrangement, or understanding (other than a right to vote arising from the granting of a revocable proxy or consent that is not also then reportable on a Schedule 13D); or

		•	has an agreement, arrangement, or understanding with another person who beneficially owns Common Shares and the agreement, arrangement, or understanding is for the purpose of acquiring, holding, voting, or disposing of any securities of the Company (other than customary underwriting agreements relating to a bona fide public offering of Common Shares or a right to vote arising from the granting of a revocable proxy or consent that is not also then reportable on a Schedule 13D).

For purposes of the Rights Agreement, a “Related Person” means, as to any person, any Affiliates or Associates of such person, and any other person with whom such person or such person’s Affiliates or Associates is Acting in Concert (or any Affiliate or Associate of such other person). For purposes of the Rights Agreement, “Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Exchange Act.

A Person shall be deemed to be “Acting in Concert” with another person if such person knowingly acts (whether or not pursuant to an express agreement, arrangement or understanding) at any time after the first public announcement of the adoption of the Rights Agreement, in concert or in parallel with such other person, or towards a common goal with such other person, relating to changing or influencing the control of the Company or in connection with or as a participant in any transaction having that purpose or effect, where (i) each person is conscious of the other person’s conduct and this awareness is an element in their respective decision-making processes and (ii) at least one additional factor supports a determination by the Company’s Board of Directors that such persons intended to act in concert or in parallel, which such additional factors may include, without limitation, exchanging information, attending meetings, conducting discussions, or making or soliciting invitations to act in concert or in parallel; provided that the additional factor required shall not include actions by an officer or director of the Company acting in such capacities. A person who is Acting in Concert with another person shall also be deemed to be Acting in Concert with any third party who is also Acting in Concert with such other person. No person shall be deemed to be Acting in Concert with another person solely as a result of (i) making or receiving a solicitation of, or granting or receiving, revocable proxies or consents given in response to a public proxy or consent solicitation made to more than 10 holders of shares of a class of stock of the Company registered under Section 12 of the Exchange Act, or (ii) soliciting or being solicited for tenders of, or tendering or receiving tenders of, securities in a public tender or exchange offer made pursuant to, and in accordance with, Section 14(d) of the Exchange Act by means of a tender offer statement filed on Schedule TO.

Certain synthetic interests in securities created by derivative positions — whether or not such interests are considered to be ownership of the underlying Common Shares or are reportable for purposes of Regulation 13D of the Securities Exchange Act — are treated as beneficial ownership of the number of Common Shares specified in the documentation evidencing the derivative position as being subject to be acquired upon the exercise or settlement of the derivative position or as the basis upon which the value or settlement amount of such derivative position is to be calculated in whole or in part.

 

C-3

3.             Issuance of Rights Certificates

As soon as practicable after the Distribution Date, the Rights Agent will mail rights certificates to holders of record of the Common Shares as of the close of business on the Distribution Date and, thereafter, the separate rights certificates alone will evidence the Rights.

4.             Expiration of Rights

The Rights will expire on the earliest of (a) 5:00 p.m., New York City time, on October 10, 2016, (b) the time at which the Rights are redeemed (as described in Section 6 below), and (c) the time at which the Rights are exchanged in full (as described in Section 7 below).

5.             Change of Exercise of Rights Following Certain Events

The following described events are referred to as “Triggering Events.”

(a)           “Flip-In” Event. In the event that a person becomes an Acquiring Person, each holder of a Right will thereafter have the right to receive, upon exercise, Common Shares (or, in certain circumstances, other securities, cash, or other assets of the Company) having a value equal to two times the Purchase Price. Notwithstanding the foregoing, following the occurrence of a person becoming an Acquiring Person, all Rights that are, or (under certain circumstances specified in the Rights Agreement) were, beneficially owned by any Acquiring Person (or by certain related parties) will be null and void. However, Rights are not exercisable following the occurrence of a person becoming an Acquiring Person until such time as the Rights are no longer redeemable by the Company as set forth in Section 6 below.

(b)           “Flip-Over” Events. In the event that, at any time after a person has become an Acquiring Person, (i) the Company engages in a merger or other business combination transaction in which the Company is not the continuing or surviving corporation or other entity, (ii) the Company engages in a merger or other business combination transaction in which the Company is the continuing or surviving corporation and the Common Shares of the Company are changed or exchanged, or (iii) fifty percent (50%) or more of the Company’s assets or earning power is sold or transferred, each holder of a Right (except Rights that have previously become null and void as set forth above) shall thereafter have the right to receive, upon exercise, common shares of the acquiring company having a value equal to two times the Purchase Price.

6.             Redemption

At any time until ten (10) business days following the Shares Acquisition Date (as defined in Section 2 above), the Board of Directors of the Company may direct the Company to redeem the Rights in whole, but not in part, at a price of $0.001 per Right (payable in cash, Common Shares, or other consideration deemed appropriate by the Board of Directors of the Company). Immediately upon the action of the Board of Directors of the Company directing the Company to redeem the Rights, the Rights will terminate and the only right of the holders of Rights will be to receive the $0.001 redemption price.

 

C-4

7.             Exchange of Rights

At any time after a person becomes an Acquiring Person but before such person acquires beneficial ownership of fifty percent (50%) or more of the outstanding Common Shares, the Board of Directors of the Company may direct the Company to exchange the Rights (other than Rights owned by such person or certain related parties, which will have become null and void), in whole or in part, at an exchange ratio of one Common Share per Right (subject to adjustment). The Company may substitute Preferred Shares (or shares of a class or series of the Company’s preferred stock having equivalent rights, preferences, and privileges) for Common Shares at an initial rate of one one-thousandth of a Preferred Share (or of a share of a class or series of the Company’s preferred stock having equivalent rights, preferences, and privileges) per Common Share. Immediately upon the action of the Board of Directors of the Company directing the Company to exchange the Rights, the Rights will terminate and the only right of the holders of Rights will be to receive the number of Common Shares (or one one-thousandth of a Preferred Share or of a share of a class or series of the Company’s preferred stock having equivalent rights, preferences, and privileges) equal to the number of Rights held by such holder multiplied by the exchange ratio.

8.             Adjustments to Prevent Dilution; Fractional Shares

The Board of Directors of the Company may adjust the Purchase Price, the number of Preferred Shares or other securities or assets issuable upon exercise of a Right, and the number of Rights outstanding to prevent dilution that may occur (a) in the event of a stock dividend on, or a subdivision, combination, or reclassification of, the Preferred Shares, (b) in the event of a stock dividend on, or a subdivision or combination of, the Common Shares, (c) if holders of the Preferred Shares are granted certain rights, options, or warrants to subscribe for Preferred Shares or convertible securities at less than the current market price of the Preferred Shares, or (d) upon the distribution to holders of the Preferred Shares of evidences of indebtedness or assets (excluding regular periodic cash dividends) or of subscription rights or warrants (other than those referred to above).

With certain exceptions, no adjustment in the Purchase Price will be required until cumulative adjustments amount to at least one percent (1%) of the Purchase Price. No fractional Preferred Shares will be issued (other than fractions that are integral multiples of one one-thousandth of a Preferred Share), and in lieu thereof, an adjustment in cash may be made based on the market price of the Preferred Shares on the last trading date prior to the date of exercise.

9.             No Stockholder Rights Prior to Exercise; Tax Considerations

Until a Right is exercised, the holder thereof, as such, will have no rights as a stockholder of the Company, including, without limitation, the right to vote or to receive dividends. While the distribution of the Rights will not be taxable to stockholders or to the Company, stockholders may, depending upon the circumstances, recognize taxable income in the event that the Rights become exercisable for Common Shares (or other consideration) of the Company or for common shares of the acquiring company or in the event of the redemption of the Rights as set forth in Section 6 above.

 

C-5

10.           Amendment of Rights Agreement

The Company (by action of the Board of Directors) may supplement or amend any provision of the Rights Agreement in order to (a) cure any ambiguity, (b) correct or supplement any provision contained in the Rights Agreement that may be defective or inconsistent with other provisions of the Rights Agreement, (c) shorten or lengthen any time period under the Rights Agreement, or (d) make any other provisions with respect to the Rights that the Company deems necessary or desirable; provided, however, that no supplement or amendment made after the time any person becomes an Acquiring Person may adversely affect the interests of the registered holders of rights certificates (other than an Acquiring Person or any affiliated or associated person of an Acquiring Person or certain of their transferees). Without limiting the foregoing, the Company may at any time before any person becomes an Acquiring Person amend the Rights Agreement to make the provisions of the Rights Agreement inapplicable to a particular transaction by which a person might otherwise become an Acquiring Person or to otherwise alter the terms and conditions of the Rights Agreement as they may apply with respect to any such provision.

11.           Availability of Rights Agreement

The Company has filed a copy of the Rights Agreement with the Securities and Exchange Commission as an exhibit to a Current Report on Form 8-K filed on October 14, 2015. In addition, a copy of the Rights Agreement is available free of charge from the Company. This summary description of the Rights does not purport to be complete and is qualified in its entirety by reference to the Rights Agreement.

 

 

C-6

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