Securities Purchase Agreement, dated as of November 13, 2012, by and among Pernix Therapeutics Holdings, Inc., Cypress Pharmaceuticals, Inc., all of the stockholders of Cypress Pharmaceuticals, Inc. and an individual as agent of all of the stockholders of Cypress Pharmaceuticals, Inc

(a) Schedule 2.23 sets for a true, complete and correct list of all insurance policies of the Company for the current policy year, all of which are in full force and effect, and true complete and correct copies of such insurance policies have been provided to the Buyer.  The Company and the Subsidiaries comply in all material respects with the terms and provisions of such insurance policies.  Schedule 2.23 sets forth an accurate list of all claims or losses currently outstanding and claims made during the two (2) years prior to the date hereof, with a valuation of such claims and losses provided by the Company to each applicable insurance company.  All premiums due to date under such policies have been paid.  Schedule 2.23 contains the following information with respect to all insurance policies carried by the Company or the Subsidiaries for the current policy year:  (i) insurer, (ii) type of policy, (iii) coverage period, (iv) the premium, (v) policy limits and (vi) amounts of deductibles.  None of these insurance policies contain self-insured retention or retrospective loss limit provisions, nor are such insurance policies subject to retroactive premium adjustments.  All of such policies are “claims made” policies.  Any open claims or losses as of the Closing Date are recoverable under such policies, except to the extent of any applicable deductible or loss retention as set forth on Schedule 2.23.

 

(b) All of the insurance policies to which the Company or the Subsidiaries are a party or that provide coverage to the Company, the Subsidiaries or any of their directors or officers (or persons performing similar functions) (i) are sufficient for compliance with all Legal Requirements and the Contractual Obligations to which the Company or the Subsidiaries are a party or by which they are bound and (ii) will continue in full force and effect following the Closing Date.  Neither the Company nor the Subsidiaries has received any refusal of coverage or any notice that a defense will be afforded with reservation of rights, or any notice of cancellation or any other indication that any such insurance policy is no longer in full force or effect or will not be renewed or any other notification that the issuer of any policy is not willing or able to perform its obligations thereunder.

 

2.24. Affiliate Transactions.  Except for employment relationships and the payment of compensation and benefits in the ordinary course of business and except as otherwise disclosed on Schedule 2.24, neither the Company nor any Subsidiary is a party to any material agreement or contract with any officer, director, Affiliate of the Company, Seller or related parties of any Seller.

 

2.25. Brokers.  Except as set forth on Schedule 2.25, neither the Company nor any Subsidiary has dealt with any broker, finder or similar agent with respect to the transactions contemplated by this Agreement, and the Company and its Subsidiaries are under no obligation to pay any broker’s fee, finder’s fee or commission in connection with the consummation of the transactions contemplated by this Agreement as a result of any agreement of the Company or any Subsidiary.

2.26. Accounts Receivable and Accounts Payable.

 

(a) Schedule 2.26(a) sets forth an accurate list of the accounts and notes receivable of the Company and the Subsidiaries in excess of $1,000 outstanding as of a date that is within five (5) days prior to the date hereof, including an accurate aging of all such amounts and notes receivable due in 30-day aging categories. Receivables from and advances to employees, the Sellers and any Persons related to or Affiliated with the Sellers as of such date are separately identified on Schedule 2.26(a).  The accounts and notes receivable of the Company and the Subsidiaries reflected in the Financial Statements and on Schedule 2.26(a) arose from, and the accounts receivable existing as of the date hereof and the Closing Date will have arisen from, bona fide transactions in the ordinary course of business.  The trade and other accounts and notes receivable of the Company and the Subsidiaries which are classified as current assets on the Financial Statements or are listed on Schedule 2.26(a) are bona fide  receivables, are stated in accordance with GAAP and are reasonably expected to be collectible in the ordinary course of business, subject to any reserve for uncollectible debts reflected in the Financial Statements.  No counterclaims or offsetting claims with respect to such accounts and notes receivables are pending or, to the knowledge of the Company, threatened.

 

(b) Schedule 2.26(b) sets forth an accurate list of all accounts payable of the Company and the Subsidiaries in excess of $1,000 as of a date that is within five (5) days prior to the date hereof.  All accounts and notes payable reflected in the Financial Statements and all accounts and notes payable arising thereafter and before the date hereof arose, and before the Closing Date will have arisen, from bona fide transactions in the ordinary course of business consistent with past practice and are stated in accordance with GAAP. All such accounts and notes payable have been paid or are not yet due and payable under the standard procedures of the Company and the Subsidiaries, which procedures have been furnished to the Buyer, or are being contested by the Company and the Subsidiaries in good faith, details of which have been provided to the Buyer.

 

(c) As of the Closing, there are no related party accounts and notes receivable or accounts payable between any Seller or his, her or its Affiliates and the Company or any Subsidiary.

 

2.27. Inventories.  As of the date of this Agreement, the inventories of the Company and its Subsidiaries consist of raw materials, work in progress and finished goods and are saleable or useable in the ordinary course of business of the Company or the Subsidiaries.  All inventories are carried on the books of the Company or the Subsidiaries at the lower of cost or market pursuant to the normal inventory valuation policy of the Company or the Subsidiaries including appropriate reserves.  Except as set forth in Schedule 2.27, no items included in inventory of the Company or the Subsidiaries are pledged as collateral or are held by the Company or the Subsidiaries on consignment from others.  Neither the Company nor any Subsidiary is committed to purchase inventories in amounts greater than are reasonably required in the ordinary course of business.  With respect to inventories in the hands of suppliers, such inventories are capable of being used in the ordinary course of business of the Company or the Subsidiaries as it is presently conducted.

2.28. Bank and Brokerage Accounts; Powers of Attorney. Schedule 2.28 sets forth a true, complete and correct list, as of the date of this Agreement, of (a) the name of each financial institution or brokerage firm in which the Company or any Subsidiary has accounts or safe deposit boxes, (b) the names in which the accounts or boxes are held, (c) the type of account and the cash, cash equivalents and securities held in such account as of a date that is within five (5) days prior to the date hereof; and (d) the name of each Person authorized to draw thereon or have access thereto.  No Person holds a general or special power of attorney from the Company or the Subsidiaries.

 

2.29. Customary Business Practice. Neither the Company, nor any Subsidiary or any employee, officer, director or agent of the Company or any Subsidiary has, directly or indirectly, made or authorized the making of any offer, payment or promise to pay any money or give anything of value to (a) any official or employee of a Governmental Authority in violation of any Legal Requirement, (b) any political party or official thereof or any candidate for political office in violation of any Legal Requirement or (c) except entertainment usual or customary in the industry and gifts of nominal value, any customer, supplier or competitor of the Company or any Subsidiary, or any employee, officer or director thereof in order to assist the Company or any Subsidiary in obtaining or retaining business for or with, or directing business to, any Person, nor engaged in any other practice (including violation of any antitrust law or law regulating minority business enterprises), which would subject the Company or any Subsidiary to any damage or penalty in any civil, criminal or governmental litigation or proceeding or which would be used as the basis for termination or modification of any Contractual Obligation to which the Company or any Subsidiary is a party.

 

2.30. Books and Records.  Except for deficiencies that individually or in the aggregate are not material, the books of account, minute books, share record books, and other records of the Company and the Subsidiaries, all of which have been delivered or made available to Buyer, are true, accurate and complete.  Except for deficiencies that individually or in the aggregate are not material, the minute books of the Company and the Subsidiaries contain accurate, complete and current records of all meetings held of, and corporate action taken by, the shareholders, the boards of directors and committees thereof of the Company and the Subsidiaries, and no such meetings have been held for which minutes have not been prepared and are not contained in such minute books.  At the Closing, all of those books and records will be in the possession of Buyer.

Each Seller severally, but not jointly, represents and warrants solely as to such Seller (and not as to any other Seller) that each of the statements contained in this ARTICLE III is true and correct as of the date of this Agreement.  Except for the representations and warranties expressly set forth in this ARTICLE III, no Seller makes any other representation or warranty (either express or implied).

 

3.1. Title.  Such Seller owns such Seller’s Shares set forth opposite such Seller’s name on Schedule 2.7, free and clear of any and all Liens other than restrictions on transfers under applicable securities laws and the applicable agreements set forth on a Schedule to this Agreement.

3.2. Capitalization.  Such Seller has not as of the Closing Date and shall not have as of the Closing entered into any Contract Obligation or commitment or granted or agreed to grant any rights to subscribe for, acquire or purchase any equity interests, equity securities or other securities of the Company or any Subsidiary, or entered into any Contractual Obligations or commitment granting or agreeing to grant any options, warrants, “phantom” stock rights, convertible or exchangeable securities, stock or equity appreciation rights, or other Contractual Obligations (other than this Agreement) granting to any Person any interest in or right to acquire at any time, or upon the happening of any event, any equity interests of the Company (including the Shares) or the Subsidiaries, or any preemptive rights, exchange rights, preferential rights, rights of first refusal or rights of first purchase with respect to any of the equity interest of the Company or the Subsidiaries.  Except as set forth in Schedule 3.2, there are no Contractual Obligations or commitments to which such Seller is a party restricting the transfer or other disposition of any Shares.  Such Seller is not a party to any voting trust or agreement, proxy, shareholders agreement, investors rights agreement or similar agreement or any pledge agreement relating to such Seller’s Shares.

 

3.3. Authority.  If an individual, such Seller is legally competent to execute and deliver this Agreement.  If not an individual, such Seller has the organizational power to enter into this Agreement and such Seller’s execution and delivery of this Agreement has been duly authorized by all necessary organizational action.

 

3.4. No Conflict.  Such Seller’s execution, delivery and performance of this Agreement will not result in any violation of, be in conflict with or constitute a default under any Legal Requirement or any material contract binding upon such Seller, except for any such violation, conflict or default that would not have a material adverse effect on such Seller’s ability to sell the Seller’s Shares to Buyer pursuant to the terms of this Agreement.

 

3.5. Enforceability.  This Agreement has been duly executed and delivered by the Sellers and this Agreement constitutes, and the documents contemplated hereby to be executed by the Sellers upon their execution and delivery as herein provided will constitute, the legal, valid and binding obligation of such Seller enforceable against such Seller in accordance with its terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, and by laws related to the availability of specific performance, injunctive relief or other equitable remedies.

 

3.6. Accredited Investor; Investment Intent.  Except as set forth in Schedule 3.6, each Seller qualifies as an “accredited investor” within the meaning of Rule 501(a) of Regulation D of the Securities Act.  Each Seller is acquiring the shares of Buyer Common Stock included in the Stock Consideration or otherwise to be issued in connection herewith for his, her or its own account for the purpose of investment and not with a view to, or for sale in connection with, the distribution thereof.  Each Seller understands that, as of Closing, the shares of Buyer Common Stock included in the Stock Consideration or otherwise to be issued in connection herewith have not been registered under the Securities Act, or the securities laws of any state or other jurisdiction, and hereby agrees not to make any sale, transfer or other dispositions of such shares unless either (i) such shares of Buyer Common Stock have been registered under the Securities Act as set forth in Section 5.18 or otherwise, and all applicable state and other securities laws and any such registration remains in effect or (ii) registration is not required under the Securities Act or applicable state securities laws with respect to such sale, transfer or other disposition.  Each Seller acknowledges that such Seller has been furnished with such financial or other information concerning the Buyer (including such information set forth in the Buyer SEC Reports) as such Seller considers necessary in connection with such Seller’s investment in shares of Buyer Common Stock.

3.7. Disclosure. No representation or warranty of the Seller in this Agreement and no statement in the Schedules to this Agreement, when all such disclosures are taken as a whole, omits to state a material fact necessary to make the statements herein or therein, in light of the circumstances in which they were made, not misleading.

The Buyer represents and warrants to the Company, the Sellers’ Agent and the Sellers that each of the statements contained in this ARTICLE IV is true and correct.  Except for the representations and warranties expressly set forth in this ARTICLE IV, Buyer makes no other representation or warranty (either express or implied).

 

4.1. Organization, Power and Standing.  The Buyer is a corporation, validly existing and in good standing under the laws of the State of Maryland, with all requisite power and authority to own its properties and to carry on its business as such business is now conducted.

 

4.2. Power and Authority; No-Conflict.  The Buyer has full entity power and authority and has taken all required action necessary to permit it to execute and deliver and to carry out the terms of this Agreement and all other agreements, instruments and documents of the Buyer required hereby and none of such actions will result in any violation of, be in conflict with or constitute a default under any charter, by-law, organizational document, Legal Requirement, contract, agreement or instrument to which the Buyer is a party or by which the Buyer is bound.

 

4.3. Consents and Approvals.  Except as set forth on Schedule 4.3, no consent, order, approval, authorization, declaration or filing from or with any Governmental Authority or third party is required on the part of the Buyer for the execution, delivery and performance of this Agreement or any other agreement, instrument or document contemplated hereby by the Buyer or for the consummation of the transactions contemplated herein or therein.

 

4.4. Validity and Enforceability.  This Agreement constitutes, and each other agreement, instrument and document of the Buyer contemplated hereby will be when executed and delivered by the Buyer, the valid and legally binding obligation of the Buyer, enforceable against it in accordance with its terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, and by laws related to the availability of specific performance, injunctive relief or other equitable remedies.

 

4.5. Brokers.  The Buyer is not under any obligation to pay any broker’s fee, finder’s fee, commission or similar amount in connection with the consummation of the transactions contemplated by this Agreement.

4.6. Financing Commitment.

 

(a) The Buyer has delivered to the Company a complete and correct copy of a fully executed commitment letter (the “Debt Commitment Letter”) dated as of November 13, 2012, between Buyer and the potential lender(s) set forth therein (the “Debt Financing Source”) pursuant to which the Debt Financing Source has committed, upon the terms and subject to the conditions set forth in the Debt Commitment Letter, to lend the amounts set forth therein (collectively, the “Debt Financing”) in connection with the transactions contemplated by this Agreement.

 

(b) As of the date hereof: (i) the Debt Commitment Letter is in full force and effect; (ii) all commitment fees required to be paid thereunder have been paid in full or shall have been paid in full when due; (ii) the Debt Commitment Letter has not been modified, amended, supplemented, withdrawn or terminated and no provision thereof has been waived; (iv) there is no breach by the Buyer, or to the knowledge of the Buyer, by any other party thereto, existing thereunder, nor does the Buyer have knowledge of any event that, with or without notice of the lapse of time, would constitute a default or breach thereof by the Buyer; and (v) the Debt Financing Source has advised the Buyer that it has completed its due diligence investigation of the Company (other than determining whether the Company will have met the Company Minimum EBITDA Condition prior to Closing) to its satisfaction.  As of the date hereof, the Buyer is not aware of any facts that would lead it reasonably to believe that it will be unable to satisfy on a timely basis any term or condition of closing the Debt Financing to be satisfied by it pursuant to the Debt Commitment Letter.

 

(c) The Buyer is, as of the date hereof, not aware of any fact, occurrence or condition existing on the date hereof that makes any of the assumptions or statements set forth in the Debt Commitment Letter inaccurate in any material respect or that would cause the commitment provided in the Debt Commitment Letters to be terminated or ineffective or any of the conditions contained therein not to be met.  With respect to the preceding sentence, the Buyer, together with the Company and its Subsidiaries, subject to the accuracy of the information set forth in Schedule 8.2(b) and the Financial Statements, has generated earnings before interest, taxes, depreciation and amortization sufficient to satisfy the condition set forth in item (iii) under the heading “Conditions to Initial Loans” in the Debt Commitment Letter for the trailing twelve months ended September 30, 2012.

 

(d) The aggregate proceeds contemplated by the Debt Commitment Letter, together with other funds available to the Buyer, will be sufficient to permit the Buyer at the Closing to pay the Closing Purchase Price and other repayment or refinancing of debt contemplated by the Debt Commitment Letter (if any) and to pay all related fees and expenses.

 

4.7. Independent Investigation; No Other Representations or Warranties of the Sellers or the Company.  The Buyer agrees that none of the Company, any Seller or any of their respective Affiliates or advisors have made and shall not be deemed to have made, nor has the Buyer or any of its Affiliates relied on, any representation, warranty, covenant or agreement, express or implied, with respect to the Company, its Subsidiaries, their business or the transactions contemplated by this Agreement, other than those representations, warranties, covenants and agreements explicitly set forth in this Agreement.  Without limiting the generality of the foregoing, the Buyer agrees that no representation or warranty, express or implied, is made with respect to any financial projections or budgets, including, without limitation, that the product development budgets set forth in Schedule 1.4(d) are sufficient to achieve the respective Milestone Events.

4.8. Buyer SEC Reports; Compliance.  The Buyer has filed all reports required to be filed with the U.S. Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended, since January 1, 2011 (collectively, the “Buyer SEC Reports”), and has previously furnished or made available (through EDGAR) to the Sellers true and complete copies of all Buyer SEC Reports and will promptly furnish or make available (through EDGAR) to the Sellers any Buyer SEC Reports filed between the date hereof and the Closing Date.   None of the Buyer SEC Reports contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading (in each case as of the date thereof).

 

4.9. Buyer Common Stock.  The shares of Buyer Common Stock included in the Stock Consideration, when issued to the Sellers in accordance with the terms and conditions of this Agreement, will be duly authorized and validly issued, fully paid and nonassessable.  Assuming the accuracy of the representations of each Seller in Section 3.6, the Stock Consideration will be issued in compliance with all applicable federal and state securities laws.

(a) If reasonably requested by the Buyer, the Company shall (i) permit the Buyer and its representatives (including the Debt Financing Source, subject to appropriate confidentiality undertakings) full and free access, upon reasonable notice and during normal business hours throughout the period prior to the Closing, to (A) the properties, books and records of the Company and its Subsidiaries, and (B) employees, advisors, consultants and other personnel of the Company and its Subsidiaries, (ii) furnish the Buyer and its representatives (including the Debt Financing Source) with such additional financial, operating and other information of the Company and its Subsidiaries to the extent reasonably requested by the Buyer and its representatives (including the Debt Financing Source) and (iii) otherwise cooperate and assist with the Buyer’s and its representatives’ (including the Debt Financing Source) investigation of the business, condition, properties and operations of the Company and its Subsidiaries.  Any such access shall at all times be managed by and conducted through those representatives of the Company identified by the Company, and shall be subject to such additional limitations as the Company may reasonably require to prevent disclosure of the transactions contemplated hereby, the disruption of the business of the Company or any Subsidiary, the disclosure of any confidential or legally privileged information, and/or the disclosure or use of any personal information other than in compliance with applicable privacy laws.

(b) The confidentiality agreement between the Company and the Buyer dated April 3, 2012 shall remain in full force and effect in accordance with its terms until the Closing, at which time it will terminate.  All information furnished by the Company to the Buyer and its Affiliates and representatives shall be subject to such confidentiality agreement.  For a period of three (3) years from the Closing Date, each Seller shall (except to the extent required for any such Seller who is employed by the Buyer or the Company or any of its Subsidiaries to fulfill his or her duties in the course of such employment) treat all trade secrets, customer and supplier lists, marketing arrangements, business plans, projections, financial information, training manuals, pricing manuals, product and service development plans, market strategies, internal performance statistics, business secrets or other confidential or proprietary information relating to the business of the Company or its Subsidiaries or any information that the Company or any Seller has obtained from the Buyer in connection with this Agreement with respect to the Buyer or any of its Affiliates (“Confidential Information”), as confidential, preserve the confidentiality thereof, not duplicate or use or disclose to any Person such Confidential Information and cause his, her or its employees, Affiliates and representatives who have had access to such Confidential Information to keep confidential and not to use any such Confidential Information.  For purposes hereof, the term Confidential Information shall not include information that (i) is or becomes publicly available other than by disclosure by such Seller or (ii) such Seller is required to disclose by Legal Requirement; provided, however, that such Seller shall give the Buyer adequate advance notice so that the Buyer may seek a protective order or take other reasonable actions to preserve the confidentiality of such information.  In addition, the TA Associates Entities and Madison Capital Funding LLC may disclose the financial terms of the sale of their respective Shares hereunder to their Affiliates, investors and advisers for the purpose of providing return and performance information with respect to their portfolio investments, consistent with their respective past practice and as otherwise required by Governmental Authorities.

 

(c) The Company will promptly notify the Buyer of any material change in the Company, Company Products or business operations, in any case prior to Closing.  This notification is for informational purposes only and the Buyer shall have no authority to approve or disapprove of any transaction, commitment or contingency in relation to the Company, subject to Section 5.2; provided, however, that such notification shall not be deemed to modify, amend or supplement the representations and warranties of the Company or any Seller, unless the Buyer consents to such modifications, amendment or supplement in writing.

 

5.2. Conduct of Business.  From the date of this Agreement until the Closing Date or the earlier termination of this Agreement, except as set forth on Schedule 5.2, as otherwise contemplated by this Agreement or required by any Legal Requirement, or as consented to in writing by the Buyer, the Company shall comply with the following covenants:

 

(a) Required Actions.  The Company shall, and shall cause each Subsidiary to:

(i) maintain its legal existence;

 

(ii) maintain in full force and effect all of its presently existing insurance coverage; and

 

(iii) conduct its business only in the ordinary course and using reasonable commercial efforts, including (A) maintaining, preserving and protecting its assets and the business, (B) making timely payment of its debts as they become due and not making any change to its cash management practices, including accelerating or delaying its debt payment practices, in a manner inconsistent with past practice, (C) keeping available the services of its present officers and employees and (D) preserving the present relationships with suppliers, customers, landlords, creditors, employees, agents and other Persons having dealings with it.

(i) except as set forth in Schedule 5.2(b)(i), effect any change to the Company Organizational Documents or the respective organizational documents of the Subsidiaries that is adverse to the Buyer;

 

(ii) acquire, lease, license or dispose of any material properties or assets, except in the ordinary course of business;

 

(iii) incur any indebtedness for borrowed money, other than pursuant to its current bank line of credit and in the ordinary course of business;

 

(iv) subject any of its properties or assets to any Lien, other than Permitted Liens;

 

(v) in the case of the Company only, make any non-cash dividend or distribution on any of its Shares or, except as required by the terms of existing Shares, issue, repurchase or redeem any Shares or other rights to acquire equity securities of the Company;

 

(vi) (A) enter into any contract which would constitute, (B) modify or amend in any material respect or (C) cancel or terminate a Material Contract, other than in the ordinary course of business;

 

(vii) make any material change in its Tax or accounting practices, other than any change required by GAAP or any Legal Requirement, make, change or revoke any Tax election, amend any Tax Return, settle or compromise any Tax claim or liability or enter into a settlement or compromise, except to the extent such election, amendment, settlement, compromise, or change (A) is in connection with a combined Tax Return or (B) does not materially increase any obligations of the Company or any Subsidiary thereof with respect to Taxes for a post-Closing period or affect any Tax attribute of the Company or any Subsidiary thereof for a post-Closing period and only with Buyer’s prior written consent;

 

(viii) acquire any business, whether by merger, consolidation, purchase of assets or equity interests or any other manner;

 

(ix) make any material increase in the cash compensation of any employee, other than the Sale Bonuses, salary raises, bonuses and other changes in compensation in the ordinary course of business;

(x) make any material change to any of the Benefit Plans, other than any changes in the ordinary course of business or required by any Legal Requirement; or

 

(xi) commit to do any of the foregoing.

5.3. Exclusivity.  From the date of this Agreement until the Closing Date or the earlier termination of this Agreement, the Company and each Seller shall not, nor shall the Company or any Seller directly or indirectly, through any officer, director, employee, representative or agent thereof, (a) solicit or encourage the initiation or submission of any inquiries, proposals or offers regarding any acquisition, merger, take-over bid, sale of all or substantially all of the assets of, or sales of capital stock or other securities of the Company or its Subsidiaries, whether or not in writing and whether or not delivered to the shareholders of the Company generally (including by way of a tender offer), or similar transactions involving the Company or its Subsidiaries (any of the foregoing inquiries or proposals being referred to herein as an “Acquisition Proposal”) or (b) negotiate with respect to or effect any transaction contemplated by an Acquisition Proposal.  The Company shall promptly notify the Buyer after receipt of any Acquisition Proposal or any request for nonpublic information relating to the Company or any Seller in connection with an Acquisition Proposal or for access to the properties, books or records of the Company or that informs the board of directors of the Company that the Person making the request is considering making or has made an Acquisition Proposal.  Such notice to the Buyer shall be made promptly orally and in writing and shall indicate in reasonable detail the identity of the offeror and the terms and conditions of such proposal, inquiry or contact.  Subject to their fiduciary duties, so long as this Agreement remains in effect and has not been terminated, the board of directors of the Company shall not (i) withdraw or modify, or propose to withdraw or modify, in a manner adverse to the Buyer the approval or recommendation by such board of this Agreement, the agreements contemplated herein or the transactions contemplated hereby, (ii) approve or recommend, or propose to approve or recommend, any Acquisition Proposal (other than as contemplated in this Agreement) or (iii) approve or authorize the entering into any agreement with respect to any Acquisition Proposal (other than as contemplated in this Agreement).  From the date of this Agreement until the Closing Date or earlier termination of this Agreement, no Seller will sell or otherwise transfer, or grant any option to purchase, any of such Seller’s Shares to a third party.

 

5.4. Third Party Consents and Governmental Approvals.  From the date of this Agreement until the Closing Date or the earlier termination of this Agreement:

 

(a) The Company shall use commercially reasonable efforts to obtain, as promptly as practicable, all third party consents which are listed on Schedule 2.5 and marked with an asterisk.

(b) The Buyer and the Company shall (i) cooperate fully and use their best efforts to obtain all governmental and regulatory approvals necessary to consummate the transactions contemplated by this Agreement as promptly as practicable; (ii) on or prior to November 21, 2012, make all required filings under the HSR Act and each other antitrust Legal Requirement applicable to the transactions contemplated by this Agreement that requires a filing prior to the Closing; (iii) furnish to the other such information and assistance as the other may reasonably request in connection with its preparation of any such filing; (iv) inform the other promptly of any communication made by or on behalf of such party to (including permitting the other party to review such communication in advance), or received from, any Governmental Authority relating to this Agreement or the transactions contemplated hereby; (v) to the maximum extent permitted by any Legal Requirement, furnish the other party with copies of all substantive or otherwise material correspondence, filings, and written communications between such party and its Affiliates or their respective representatives, on the one hand, and any Governmental Authority, on the other hand, with respect to this Agreement and the transactions contemplated hereby; (vi) not participate in any meeting with any Governmental Authority in respect of any filings, investigation or other inquiry relating to this Agreement or the transactions contemplated hereby unless it consults with the other in advance, and to the extent permitted by such Governmental Authority, gives the other the opportunity to attend and participate thereat; and (vii) use their commercially reasonable efforts to resolve any concerns raised by any Governmental Authority and to take promptly any and all actions necessary or advisable to avoid each and every impediment under any antitrust Legal Requirement to enable the parties to close the transactions contemplated by this Agreement as promptly as practicable.  The Buyer will be responsible for payment of all filing and other fees associated with obtaining such approvals.

 

(c) The Company shall obtain all consents required, if any, to the Real Property Lease(s) at Closing (the “Lease Consent(s)”) and estoppel certificates from the landlord under each Real Property Lease (the “Estoppel Certificate(s)”), which Lease Consent(s) and Estoppel Certificate(s) may be set forth in a combined certificate in the form attached hereto as Exhibit 5.4(c) or in separate instruments in forms reasonably acceptable to Buyer that together contain all the substantive provisions set forth in Exhibit 5.4(c).  In addition, to the extent requested by Buyer, the Company shall use commercially reasonable efforts to obtain Subordination and Non-Disturbance Agreements from third party landlords (and master landlords, where a Seller is a sublessee) and their lenders with respect to all Real Property Leases in form reasonably satisfactory to Buyer in instances where a third party holds a superior mortgage on the property that is the subject of the Real Property Lease (the “SNDA(s)”).  The Company shall be responsible for any payments required by the Real Property Lease(s) or the landlords, master landlords or their lenders in connection with obtaining any Lease Consent(s), Estoppel Certificate(s) or SNDA(s).

 

5.5. Further Assurances.  From the date of this Agreement until the Closing Date or the earlier termination of this Agreement, the parties agree to act in good faith and use all commercially reasonably efforts to satisfy the conditions specified in this Agreement necessary to consummate the transactions contemplated hereby.  The Sellers, on the one hand, and the Buyer, on the other hand, at any time after the Closing Date, will promptly execute, acknowledge and deliver any further deeds, assignments, conveyances and other assurances, documents and instruments of transfer, reasonably requested by the other parties and necessary to comply with the representations, warranties and covenants contained herein and will take any action consistent with the terms of this Agreement that may reasonably be requested by the other parties to accomplish the purposes of and the transactions contemplated by this Agreement and the documents executed in connection therewith.  

(a) The Company shall have the right to supplement the Schedules to this Agreement prior to the Closing to reflect any and all events, circumstances or changes that arise or become known to the Company after the date of this Agreement by delivery to the Buyer of one or more supplements (each, a “Disclosure Supplement”).

(b) Unless the existence of any matter set forth in a Disclosure Supplement (a “New Matter”) would have a Company Material Adverse Effect, the applicable Schedule(s) shall be deemed amended and supplemented by all information set forth in such Disclosure Supplement, each of the representations and warranties made in this Agreement shall be deemed qualified by the Disclosure Supplements, and no Buyer Indemnified Party shall make any claim in respect of the information disclosed in the Disclosure Supplements.

 

(c) If the existence of any New Matter would have a Company Material Adverse Effect, the Buyer shall have the right under Section 8.1(b) either to (i) terminate this Agreement by written notice to the Company within five (5) business days after receipt of the Disclosure Supplement that includes the New Matter, or (ii) to consummate the transactions contemplated by this Agreement.  If the Buyer elects to consummate the transactions contemplated by this Agreement, the applicable Schedule(s) shall be deemed amended and supplemented by all information set forth in such Disclosure Supplement, each of the representations and warranties made in this Agreement shall be deemed qualified by the Disclosure Supplements, and no Buyer Indemnified Party shall make any claim in respect of the information disclosed in the Disclosure Supplements.

(i) The Company’s tax year will end on the Closing Date.  The Buyer will prepare and file, or cause to be prepared and filed, all Tax Returns of the Company and/or any of its Subsidiaries for any period or partial period ending on or prior to the Closing Date (the “Pre-Closing Tax Period”) that are required to be filed after the Closing Date.  Such Pre-Closing Tax Period Tax Returns shall be prepared and filed in a manner consistent with the past practice of the Company and its Subsidiaries, except as otherwise required by any Legal Requirement.  To the extent not paid on or prior to the Closing Date, Buyer shall cause the Company to pay and discharge all Taxes shown to be due on such Pre-Closing Tax Returns before the same shall become delinquent and before penalties accrue thereon.  To the extent that such Tax Returns have not been filed on or prior to the Closing Date, the Buyer shall permit the Sellers’ Agent and its representatives to review and comment on each such Pre-Closing Tax Period Tax Return at least thirty (30) days prior to filing date and shall make such revisions to such Tax Returns as are reasonably requested by Sellers’ Agent and its representatives.  After the Closing, all refunds or other amounts received by the Buyer, the Company or any Subsidiary in respect of Pre-Closing Tax Periods shall be retained by the Buyer or the Company.  No such amounts shall be used or applied to pay Taxes that may be due in respect of any subsequent period.  Except as required by any Legal Requirement, neither the Buyer nor the Company shall amend the Tax Returns of the Company or any Subsidiary in respect of Taxes paid prior to the Closing or in respect of any period or partial period ending prior to or including the Closing without the prior written consent of the Sellers’ Agent, which such consent shall not be unreasonably withheld, and the Buyer, the Company and the Subsidiaries will cause any such Tax Returns to be amended in the manner requested by the Sellers’ Agent, as long as any such amendment does not materially adversely affect the Buyer, the Company or any Subsidiary.  To the extent that the amount of such Taxes so payable by the Company exceeds the amount of (i) any Taxes attributable to such period paid by the Company prior to the Closing, (ii) the amount of Tax reserves attributable to such period in the Financial Statements or (iii) the amount of any adjustment for Taxes attributable to such period made pursuant to Section 1.7(d), the amount of such excess shall be deemed to be an indemnifiable Loss pursuant to Article VII.  Any offset and/or payment under this Section 5.7 shall be treated as an increase or decrease to the Purchase Price for tax purposes, as applicable.

(ii) The Buyer shall prepare and timely file, or cause to be timely prepared and filed, all Tax Returns of the Company and/or any of its Subsidiaries for the Straddle Period (as defined herein).  Buyer shall cause the Company to pay and discharge all Taxes shown to be due on such Straddle Period Tax Returns before the same shall become delinquent and before penalties accrue thereon.  For purposes of this Agreement, in the case of any Taxes of the Company and/or any of its Subsidiaries that are imposed on a periodic basis and are payable for a Tax period that includes (but does not end on) the Closing Date (the “Straddle Period”), the portion of such Taxes which relates to the portion of such Tax period ending on the Closing Date shall (i) in the case of any Taxes other than Taxes based upon or related to income, gains or receipts (including sales and use Tax), or employment or payroll Taxes, be deemed to be the amount of such Tax for the entire Straddle Period multiplied by a fraction, the numerator of which is the number of days in the Straddle Period ending on the Closing Date, and the denominator of which is the number of days in the entire Straddle Period, and (ii) in the case of any Tax based upon or related to income, gains or receipts (including sales and use Tax), or employment or payroll Taxes, be deemed equal to the amount which would be payable if the Straddle Period ended on the Closing Date.  Any credits relating to the Straddle Period shall be apportioned between the Pre-Closing Tax Period and the Post-Closing Tax Period in a manner consistent with the apportionment of the Taxes subject to clause (i) above.  The Buyer shall permit the Sellers’ Agent and its representatives to review and comment on each such Tax Return for any period or partial period within the Straddle Period and ending prior to the Closing at least thirty (30) days prior to filing date and shall make such revisions to such Tax Returns as are reasonably requested by Sellers’ Agent and its representatives.  To the extent that the amount of Taxes so payable by the Company attributable to the portion of the Straddle Period that ends on and includes the Closing Date exceeds the amount of (i) any Taxes paid by the Company attributable to such period prior to the Closing, (ii) the amount of Tax reserves attributable to such period in the Financial Statements or (iii) the amount of any adjustment for Taxes attributable to such period made pursuant to Section 1.7(d), the amount of such excess shall be deemed to be an indemnifiable Loss pursuant to Article VII.

 

(b) The parties hereto agree and acknowledge that any deductions or other Tax benefits arising from the payment of the Sale Bonuses shall inure to the benefit of the Sellers and shall be treated for income Tax purposes as being attributable to a taxable period (or the portion of a taxable period) ending on or before the Closing Date.

 

(c) Each Seller shall be responsible for the preparation and filing (and all costs related thereto) of all Tax Returns (including any documentation related thereto) with respect to any transfer, documentation, sales, use, stamp, registration, or similar Taxes in connection with the transfer of its Shares.  Each Seller shall pay and indemnify the Buyer for any such Taxes.

(a) In the event of any threatened or actual claim, action, suit, proceeding or investigation, whether civil, criminal or administrative (each, a “Proceeding”), in which any Person who is now, or has been at any time prior to the Closing, a director, officer or Affiliate of the Company or any of its Subsidiaries (the “D&O Indemnified Persons”) is, or is threatened to be, made a party or witness thereto based in whole or in part on the fact that such Person is or was a director, officer or Affiliate of the Company or any of its Subsidiaries, whether in any case asserted or arising before, on or after the Closing, the Company and its Subsidiaries shall indemnify and hold harmless such D&O Indemnified Person from and against any and all losses, claims, damages, liabilities, costs, expenses (including reasonable attorneys’ fees and expenses in advance of the final disposition of any Proceeding to each D&O Indemnified Person to the fullest extent permitted by law), judgments, fines and amounts paid in settlement incurred in connection with or arising out of such Proceeding to the extent set forth in any Company Organizational Document, organizational documentation of any Subsidiary or as otherwise required by any Legal Requirements in effect as of the date hereof.  Notwithstanding anything contained herein to the contrary, in no event shall the preceding sentence or other indemnification obligation of the Company or any of its Subsidiaries to indemnify the D&O Indemnified Persons restrict, limit or otherwise affect any Buyer Indemnified Party’s rights to indemnification therefor as set forth in this Agreement.

 

(b) An Indemnified Person shall notify the Company of the existence of a Proceeding for which such Indemnified Person is entitled to indemnification hereunder as promptly as reasonably practicable after such Indemnified Person learns of such Proceeding; provided, that the failure to so notify shall not affect the obligations of the Company and its Subsidiaries under this Section 5.8 except to the extent such failure to notify actually prejudices the Company.  The Indemnified Person and the Company and its Subsidiaries shall cooperate fully with each other in connection with the defense of any Proceeding.  No settlement of a Proceeding may be made by the Company or any Subsidiary without the Indemnified Person’s consent, except for a settlement that requires no more than a monetary payment for which the Indemnified Person is fully indemnified and that does not require the admission of liability.

 

(c) The Buyer shall, or shall cause the Company to, maintain any Company directors’ and officers’ liability insurance, including any so called “tail” for such directors’ and officers’ liability insurance, covering Persons who are then covered by such insurance but only to the extent and for the term that such insurance has been fully paid by the Company at the time of Closing.  For the avoidance of doubt, the Buyer shall not be obligated to renew, obtain a “tail” or otherwise extend any such directors’ and officers’ liability insurance following the Closing.

 

(d) The provisions of this Section 5.8 are intended to be for the benefit of, and enforceable by, each Indemnified Person and such Indemnified Person’s estate, heirs and representatives, and nothing herein shall affect any indemnification rights that any Indemnified Person or such Indemnified Person’s estate, heirs and representatives may have under the Company Organizational Documents, the respective organizational documents of the Subsidiaries, any Legal Requirement, any contract or otherwise.

5.9. Books and Records; Post-Closing Access to Information.  Following the Closing, if reasonably requested by the Sellers’ Agent, the Buyer and/or Company shall permit the Sellers’ Agent and its representatives access, upon reasonable notice and during normal business hours, to (a) the books and records of the Company and its Subsidiaries, and (b) employees, advisors, consultants and other personnel of the Company and its Subsidiaries, in each case in connection with the determination of the Closing Purchase Price pursuant to Section 1.7, any claim for indemnification pursuant to Section 7.2 (or any dispute relating thereto) or with the preparation of the Sellers’ Tax Returns.  Any such access shall at all times be managed by and conducted through those representatives of the Buyer and/or Company identified by the Buyer, and shall be subject to such additional limitations as the Buyer may reasonably require to prevent the disruption of the business of the Company or any Subsidiary, the disclosure of any confidential or legally privileged information, and/or the disclosure or use of any personal information other than in compliance with applicable privacy laws.  In the event of any litigation or threatened litigation between the parties relating to this Agreement or the transactions contemplated hereby, the covenants contained in this Section 5.9 shall not be considered a waiver by any party of any right to assert the attorney-client privilege or any similar privilege.

 

5.10. Benefit Plans.  To the maximum extent permitted by law, for the purposes of any of the employee benefit and compensation plans, programs, policies and arrangements of the Buyer (collectively, the “Buyer’s Plans”) for which eligibility or vesting of benefits depends on length of service, and for any benefit for which the amount or level of benefits depends on length of service, the Buyer shall give (or cause to be given) to each employee full credit for past credited service with the Company and/or its Subsidiaries as of and through the Closing Date (“Prior Service”) under the plans, programs, policies and arrangements of the Company and its Subsidiaries in effect on the date of this Agreement (collectively, the “Company Plans”).  In addition, to the maximum extent permitted by law, each employee (a) shall be given credit for Prior Service for purposes of eligibility to participate, satisfaction of any waiting periods, evidence of insurability requirements, or the application of any pre-existing condition limitations; (b) shall be given credit for amounts paid under a corresponding Company Plan during the same period for purposes of applying deductibles, co-payments and out-of-pocket maximums as though such amounts had been paid in accordance with the terms and conditions of the Buyer’s Plans; and (c) shall be eligible to receive under the Buyer’s Plans such periods of vacation leave, sick leave, personal days, holidays and other similar periods of leave as were accrued and available to the employee under the Company Plans immediately prior to the Closing.

 

5.11. Noncompetition.

 

(a) This Section 5.11 shall not apply to the TA Associates Entities, Madison Capital Funding LLC or any of their respective Affiliates or to any non-management Sellers or directors who are listed on Schedule 5.11(a).

(b) In consideration of (i) each Seller’s intimate knowledge of the Company and its Subsidiaries’ Confidential Information, (ii) the Buyer’s agreement to consummate the transactions contemplated by this Agreement conditioned on each Seller’s agreement to abide by the covenants contained herein, and (iii) the Buyer’s payment of the Purchase Price, during the period from the Closing until the expiration of the applicable Noncompetition Period, no Seller will, directly or indirectly, own, manage, operate, control, invest in or acquire an interest in, or otherwise engage or participate (whether as a stockholder, partner, member, manager, employee, consultant, joint-venturer, investor, agent, sales representative, broker or other owner or participant) in any Person, other than the Buyer, the Company or a Subsidiary, that engages in or assists any other Person to engage in the development, manufacturing, marketing and sale of branded and generic pharmaceutical products, whether prescription or over-the-counter, anywhere in North America, the European Union, Brazil, China or Japan (the “Market”), without regard to (A) whether such Person has its office or other business facilities within the Market, (B) whether any of the activities of the Company or its Subsidiaries occur or are performed within the Market or (C) whether the Company or its Subsidiaries resides, or reports to an office, within the Market.  In consideration of the matters set forth above, and in addition to the foregoing, during the Noncompetition Period, no Seller will, directly or indirectly:

(i) solicit or endeavor to entice away from the Company or a Subsidiary, or interfere with the business relationship of the Company or a Subsidiary with, any Person who is then an employee, consultant, subcontractor or sales representative of the Company or a Subsidiary;

 

(ii) solicit or endeavor to entice away from the Company or a Subsidiary, endeavor to reduce the business conducted with the Company or a Subsidiary by, attempt to induce to terminate any contract with the Company or a Subsidiary or otherwise interfere with the business relationship of the Company or a Subsidiary with, any Person who is a customer or client of, supplier, vendor, lessor, lender or service provider to, or other Person having business relations with, the Company or a Subsidiary; or

 

(iii) denigrate or in any manner undertake to discredit the Buyer, the Company or any Affiliate (or any successors thereof) or any other Person associated with the transactions contemplated by this Agreement.

 

If the length of time, type of activity, geographic area or other restrictions set forth in the restrictions of this Section 5.11(b) are deemed unreasonable in any court proceeding, the parties hereto agree that the court may reduce such restrictions to ones it deems reasonable to protect the substantial investment by the Buyer, Company and their Affiliates in their respective businesses and the goodwill attached thereto.  Except as so modified by such court, any such reduction shall in no way affect the validity or enforceability of such restrictions.  If any provision cannot herein be modified, it shall be excised from this Agreement without affecting the validity, legality or enforceability of any of the remaining provisions of this Agreement.

 

(c) The Sellers acknowledge that any breach or threatened breach of the provisions of Section 5.11(b) may cause irreparable injury to the Buyer and the Company and its Subsidiaries for which an adequate monetary remedy may not exist.  Accordingly, in the event of any such breach, the Company shall be entitled, in addition to the exercise of other remedies, to seek injunctive and other equitable relief, without necessity of posting a bond, restraining the Sellers from committing such breach.  The right provided under this Section shall be in addition to, and not in lieu of, any other rights and remedies available to the Buyer and the Company.  The prevailing party in any legal action to interpret, determine or enforce its rights under Section 5.11(b) shall be entitled to recover all of its costs and expenses in connection therewith, including reasonable attorneys’ fees.

(d) Each Seller to whom this Section 5.11 applies (a) has carefully read and understands all of the provisions of this Agreement and has had the opportunity for this Agreement to be reviewed by counsel and (b) acknowledges that the duration, geographical scope and subject matter of Section 5.11(b) are reasonable and necessary to protect the goodwill, customer relationships, legitimate business interests, trade secrets and Confidential Information of the Company and its Subsidiaries, and (c) in the case of individual Sellers, will be able to earn a satisfactory livelihood without violating this Agreement.

 

5.12. Termination of Certain Agreements.  Effective as of the Closing, the Stockholders Agreement and the Registration Rights Agreement among the Company and certain of the Sellers dated as of November 26, 2003 shall terminate and be of no further force or effect.

 

5.13. Debt Financing Commitment.

 

(a) The Buyer agrees to use its commercially reasonable efforts to (i) satisfy on a timely basis all terms and conditions set forth in the Debt Commitment Letter that are applicable to the Buyer, (ii) enter into definitive agreements with respect to the Debt Financing on terms and conditions substantially in accordance with the Debt Commitment Letter and (iii) consummate the Debt Financing no later than the Closing.

 

(b) The Buyer agrees to notify the Company promptly if at any time prior to the Closing Date (i) the Debt Commitment Letter shall expire or be terminated for any reason, or (ii) the Debt Financing Source notifies the Buyer in writing that such source no longer intends to provide financing to the Buyer on the terms set forth therein.  The Buyer shall not, without the written consent of the Company, amend, alter or replace, or agree to amend, alter or replace, the Debt Commitment Letter if such amendment, alteration or replacement (i) reduces the aggregate amount of the Debt Financing, unless the Buyer can demonstrate to the reasonable satisfaction of the Company that it has funds available to it from other sources, or (ii) imposes new or additional material conditions or otherwise expands, amends or modifies any of the conditions to the receipt of the Debt Financing in a manner that would reasonably be expected to (x) materially delay or prevent the Closing Date, or (y) make the funding of the Debt Financing (or satisfaction of the conditions to obtaining the Debt Financing) materially less likely to occur; provided that the Buyer may amend or replace the Debt Commitment Letter to add lenders, lead arrangers, syndication agents or similar entities who had not executed the Debt Commitment Letter as of the date hereof.

(c) If any portion of the Debt Financing becomes unavailable on the terms and conditions contemplated in the Debt Commitment Letter, the Buyer shall promptly notify the Company and shall use its commercially reasonable efforts to arrange to obtain a new debt financing commitment from alternative debt sources on terms and conditions no less favorable, in the aggregate, to the Buyer and in an amount sufficient to consummate the transactions contemplated hereby at the Closing promptly following the occurrence of such event.  The Buyer shall promptly deliver to the Company complete and correct copies of all agreements pursuant to which any such alternative source shall have committed to provide the Buyer with any portion of the Debt Financing.  For purposes of this Section 5.13 and Section 4.6, references to “Debt Financing” shall include the financing contemplated by the Debt Commitment Letter as permitted by this Section 5.13 to be amended, altered or replaced and references to “Debt Commitment Letter” shall include such documents as permitted by this Section 5.13 to be amended, altered or replaced, in each case from and after such amendment, alteration or replacement.

 

(d) Prior to the Closing, the Company agrees to provide, and shall use its commercially reasonable efforts to cause the officers, employees and advisors (including legal and accounting advisors) of the Company to provide, to the Buyer all cooperation reasonably requested by the Buyer in connection with (i) the Debt Financing and the other transactions contemplated hereby and thereby and (ii) the Buyer’s satisfaction of the conditions in the Debt Commitment Letter, including (A) participation in meetings, presentations, road shows, drafting sessions and sessions with rating agencies, including direct contact between senior management and representatives and advisors of the Company and its Subsidiaries and the Debt Financing Source and potential lenders and investors in the Debt Financing, (B) assisting with the preparation of materials for rating agencies and rating agency presentations, lender and investor presentations and similar documents required in connection with the Debt Financing, and providing reasonable and customary authorization letters to the Debt Financing Source authorizing the distribution of information to prospective lenders and containing customary information, (C) preparing and furnishing the Buyer and the Debt Financing Source with all required financial information and assisting, and using commercially reasonable efforts to cause accounting advisors of the Company to assist, in the preparation of pro forma financial statements reasonably requested by the Buyer and the Debt Financing Source, (D) preparing and furnishing to the Buyer and the Debt Financing Source as promptly as practicable all other information and disclosures relating to the Company and its Subsidiaries (including its businesses, operations, financial projections and prospects) as may be reasonably requested by the Buyer, (E) obtaining accountants’ comfort letters and consents, as reasonably requested by the Buyer and (F) using commercially reasonable efforts to obtain such consents, approvals, authorizations, certificates and instruments from, and to make all necessary registrations, notifications and filings with, any Person or Governmental Authority which may be reasonably requested by the Buyer in connection with the Debt Financing and collateral arrangements.

 

5.14. Inventory; Returns.  The Company will maintain channel and warehouse inventory at levels consistent with normal business practices and consistent with its business plan that has been provided to the Buyer between the date of this Agreement and the Closing Date.  If an increased rate in the sale of inventory arises due to an event of material significance or not in the ordinary course of business the Company will advise the Buyer of such event in a timely manner.  Such advice is for informational purposes only and Buyer shall have no authority to approve or disapprove in relation to any sale of inventory, subject to Section 5.2.

5.15. Release.  Effective as of Closing, each Seller voluntarily, knowingly, unconditionally and irrevocably, on behalf of himself, herself or itself and his or her spouse (if applicable), heirs, successors, assigns, executors, personal representatives, beneficiaries, trusts and any other Person having a claim through or on behalf of such Seller (the “Releasing Parties”), fully and completely releases and forever discharges the Buyer, the Company, the Subsidiaries and their respective officers, directors, managers, employees, agents and Affiliates (the “Released Parties”) from any and all actions, agreements, amounts, claims, damages, expenses, liabilities and obligations of every kind, nature or description, known or unknown, arising or existing at or prior to the Closing relating to or otherwise connected with the Company and the Subsidiary  (each a “Released Claim”), except for (a) any rights of the Seller under this Agreement and any agreement with the Buyer or any of its Affiliates entered into pursuant to this Agreement, (b) to the extent that such Seller served as an officer or director of the Company or its Subsidiaries, any obligations of the Company or its Subsidiaries under their articles of organization or bylaws with respect to indemnification of such Seller in his or her capacity as a director or officer,  (c) to the extent that such Seller served as an officer or director of the Company or its Subsidiaries, any benefits under a directors and officers insurance policy maintained by the Company or any Subsidiary for the benefit of its directors and officers or (d) to the extent that such Seller served as an employee of the Company or its Subsidiaries, any accrued but unpaid compensation or benefits at the time of Closing.  Each Seller represents and warrants to the Released Parties that such Seller has not transferred, assigned or otherwise disposed of any part of or interest in any Released Claim.  Each Seller, for such Seller and on behalf of the Releasing Parties, irrevocably covenants that neither the Seller nor any of the Releasing Parties will, directly or indirectly, sue, commence any proceeding against, or make any demand upon the Released Parties in respect of any Released Claim.

 

5.16. No Trading in Buyer Securities. Neither the Company nor any Seller shall, and such parties shall instruct their respective employees, officers, directors, shareholders, representatives and agents having knowledge of the transactions contemplated by this Agreement not to, directly or indirectly purchase, sell or in any way trade in the securities (including common stock, options or other derivatives) of the Buyer from the Closing Date until three (3) business days following the date of the public announcement of the Closing.

 

5.17. Leased Real Properties.  The Company shall pay all rents due under the Real Property Lease(s) for the month in which Closing occurs (subject to Buyer’s obligation to reimburse the Company for Buyer’s prorated share of such costs pursuant to this Section).  Further, if any other Taxes, expenses and charges under the Real Property Lease(s) cannot be determined on the Closing Date, the proration shall be based on the latest available information, with an ultimate adjustment to be made promptly when actual amounts are available.  To the extent the "tenant" is responsible for the payment of any real estate and ad valorem taxes pursuant to the terms of any Real Estate Lease(s), the Company shall bear all real estate and ad valorem taxes with respect to the properties covered by the Real Property Lease(s) (the “Leased Real Properties”) for all years prior to the year in which the Closing occurs.

(a) Registration on Form S-3. The Buyer shall, (a) within thirty-four (34) calendar days following the Closing Date, file a registration statement on Form S-3 covering the resale of the shares of Buyer Common Stock included in the Stock Consideration and the Milestone Shares and (b) thereafter use its commercially reasonable efforts to cause such registration statement to become effective under the Securities Act as promptly as possible; provided, however, that the Buyer shall not be obligated to effect any such registration if Form S-3 is not available for such offering by the Sellers.  Following such registration statement becoming effective, the Buyer shall (i) use commercially reasonable efforts to keep such registration statement effective for a period of up to two (2) years thereafter or, if earlier, until the distribution contemplated in such registration statement has been completed, (ii) prepare and file with the U.S. Securities and Exchange Commission such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement and (iii) furnish to the Sellers such numbers of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as the Sellers may reasonably request in order to facilitate the disposition of such shares of Buyer Common Stock owned by the Sellers.  It shall be a condition precedent to the obligations of the Buyer to take any action pursuant to this Section 5.18 with respect to such shares of Buyer Common Stock owned by any Seller that such Seller shall furnish to the Buyer, within a reasonable period of time prior to the date on which the Buyer is required to file the registration statement described in Section 5.18(a), such information regarding himself, herself or itself, such shares of Buyer Common Stock held by it, and the intended method of disposition of such securities as shall be required to effect the registration thereof (including, without limitation, the information requested in the Selling Stockholder Questionnaire in substantially the form attached hereto as Exhibit 5.18(a) (the “Selling Stockholder Questionnaire”)).  The Buyer shall pay all expenses incurred in connection with the preparation and filing of such registration statement, including all registration and filing fees and printer, legal and accounting fees related thereto.

 

(b) Penalty for Failure to Register.  If the Buyer fails to comply with Section 5.18(a) on a timely basis, the Buyer will pay to the Sellers an amount equal to (i) the number of shares of Buyer Common Stock issued to the Sellers pursuant to the terms of this Agreement as of such date multiplied by (ii) an amount equal to (A) the Signing VWAP (or the Milestone VWAP in the case of any Milestone Shares), minus (B) the price at which each Seller’s shares of such Buyer Common Stock are ultimately sold, provided that such shares are sold at market price in the public market, or, to the extent such shares have not been sold by the date that is six (6) months following the Closing Date (or the date of the Milestone Event in the case of any Milestone Shares), the volume-weighted average price of a share of Buyer Common Stock as reported on the NYSE Amex for the thirty (30) trading days prior to the date that is six (6) months following the Closing (or the date of the Milestone Event in the case of any Milestone Shares).  For the avoidance of doubt, if the Signing VWAP or the Milestone VWAP, as the case may be, is less than the amount set forth in Section 5.18(b)(ii)(B) above, the Buyer shall have no obligation to make any payments to the Sellers under this Section 5.18(b).  Notwithstanding anything contained in this Section 5.18(b) to the contrary, if the Buyer files such registration statement contemplated by Section 5.18(a) prior to the issuance of Milestone Shares and such registration statement covers the resale of Milestone Shares thereafter issued, the Buyer shall have no obligation to make any payments to the Sellers with respect to such Milestone Shares under this Section 5.18(b).

(c) Piggyback Registration.  If at any time between the Closing and December 31, 2013 the Buyer proposes to register for sale to the public under the Securities Act both (i) for its own account any other securities not already so registered and (ii) for the account of any stockholder of the Buyer who is an officer or director of the Buyer (an “Insider”) any securities of the Buyer held by such Insider (other than (i) a registration effected solely to implement an employee benefit plan or a transaction to which Rule 145 of the Securities Act is applicable or (ii) a registration statement on Form S-4, Form S-8 or another form not available for registering the Stock Consideration and Milestone Shares for sale to the public by the Sellers), each such time it will give written notice to the Sellers’ Agent of its intention to do so.  Upon the written request of the Sellers’ Agent (given within twenty (20) days after receipt by the Sellers’ Agent of such notice) setting forth the names of the Sellers who wish to sell and the respective number of shares such Sellers wish to have registered, the Company shall use its commercially reasonable efforts to cause such Stock Consideration and Milestone Shares of the Sellers to be registered therewith under the Securities Act and qualified for sale under any state securities or “blue sky” law on a pro rata basis based on the amount of securities proposed to be registered for the account of Insiders or in such other amount as the Sellers and the Buyer mutually agree, all to the extent required to permit such sale or other disposition of such Stock Consideration and Milestone Shares.

 

5.19. Additional Buyer Common Stock Matters.

 

(a) If any Seller who holds shares of Buyer Common Stock issued pursuant to this Agreement (the “Subject Buyer Stock”) desires to sell, assign, transfer or otherwise dispose of 10,000 or more shares of Subject Buyer Stock within a period of any sixty (60) consecutive days, such Seller agrees that he, she or it shall provide at least two (2) trading days’ prior written notice to the Buyer of his, her or its intention to do so and specifying the number of shares of Subject Buyer Stock proposed to be sold or otherwise transferred in such period.  In the event such Seller does not sell such shares within such period, then such Seller must first comply with the provisions of this Section 5.19(a) prior to any subsequent sale of such shares of Subject Buyer Stock.  At the end of the Put Option Period applicable to any Subject Buyer Stock, the notice requirement set forth in this Section 5.19 shall expire with respect to such Subject Buyer Stock.

 

(b) During the period (i) commencing on the first (1st) anniversary of the issuance of (A) shares of Buyer Common Stock included in the Stock Consideration or (B) shares of Buyer Common Stock in satisfaction of a Milestone Payment as set forth in Section 1.4(d) (the “Milestone Shares”), as the case may be (collectively, the “Put Shares”), and (ii) ending at 5:00 p.m., Central Daylight Time, on the date that is thirty (30) days following the first (1st) anniversary of such issuance (the “Put Option Period”), any Seller who then holds Put Shares shall have the right (the “Put Right”) to require the Buyer to purchase all or any portion of the Put Shares at a price equal to fifty percent (50%) of the Signing VWAP, in the case of Stock Consideration, or the Milestone VWAP, in the case of the Milestone Shares.  In the event that any Seller desires to exercise his, her or its Put Right with respect to Put Shares, such Seller shall notify the Buyer in writing (the “Put Notice”), within the applicable Put Option Period, of his, her or its intention to do so, specifying the number of Put Shares to be sold to the Buyer and provide that such Put Shares shall be sold to the Buyer, free and clear of any and all Liens.  The closing of a purchase and sale of such Put Shares shall take place at the principal executive offices of the Buyer on the later of (i) the business day following the expiration of the applicable Put Option Period or (ii) three (3) business days following delivery of the Put Notice to the Buyer, at which time such Seller shall deliver to the Buyer the stock certificate or certificates representing the Put Shares sold (duly endorsed, accompanied by a duly executed stock power or assignment or other applicable form necessary to effect transfer of ownership to the Buyer) against such Seller’s receipt of payment of the purchase price therefor.

5.20. Financial Statements.  The Sellers and the Company shall use commercially reasonable efforts to cause the Company’s independent auditors to furnish their consent to the inclusion of the audited Financial Statements and the auditor’s reports with respect thereto in any applicable filings of the Buyer as required by the Securities Act and the Securities Exchange Act of 1934, as amended, and the rules of the U.S. Securities and Exchange Commission promulgated thereunder.  Buyer will bear all costs of the foregoing.

6.1. Conditions Precedent to the Buyer’s Obligations.  The obligation of the Buyer to consummate the transactions contemplated by this Agreement is expressly subject to the fulfillment or express written waiver signed by the Buyer of the following conditions on or prior to the Closing Date:

 

(a) Representations and Warranties True.  The representations and warranties of the Company contained in ARTICLE II shall be true and correct in all material respects (except in the case of representations and warranties containing a materiality qualification, in which case such representations and warranty shall be true and correct in all respects) as though made at and as of the Closing except (i) to the extent that any such representation or warranty is expressly made as of an earlier date (in which case such representation or warranty shall be true and correct as of such date) and (ii) for changes resulting from any acts or omissions expressly required by this Agreement or consented to in writing by the Buyer.  The representations and warranties of the Sellers contained in ARTICLE III shall be true and correct in all material respects as though made at and as of the Closing.

 

(b) Covenants Performed.  The Company shall have performed in all material respects, on or before the Closing Date, all obligations contained in this Agreement that by the terms hereof are required to be performed by it on or before the Closing Date.

 

(c) Compliance Certificate.  The Buyer shall have received a certificate signed by an officer of the Company certifying as to the matters set forth in Sections 6.1(a) and (b).

 

(d) Required Consents.  All of the approvals and consents listed on Schedule 2.5 and marked with an asterisk shall have been obtained.

 

(e) Escrow Agreement.  The Sellers’ Agent and the Escrow Agent shall have entered into the Escrow Agreement.

 

(f) HSR Act.  The waiting period under the HSR Act applicable to the transactions contemplated hereby shall have expired or been terminated.

(g) No Injunction.  There shall not be any order of any court or Governmental Authority restraining or invalidating the transactions which are the subject of this Agreement.

 

(h) Section 1.3 Deliverables.  The Company shall have delivered the certificates and other deliverables required by Section 1.3(b).

 

(i) Instruments of Transfer.  The Sellers shall have delivered to the Buyer original certificates representing all Shares, along with instruments of transfer sufficient to transfer title of the Shares, to the Buyer, in a form reasonably satisfactory to the Buyer.

 

(j) Officer’s Certificate.  The Buyer shall have received a certificate signed by an officer of the Company certifying as of the Closing Date to (i) true and correct copies of the resolutions of the board of directors of the Company authorizing the transactions contemplated by this Agreement and the execution, delivery and performance by the Company of this Agreement and the other documents contemplated hereby, (ii) true and correct copies of the Articles of Incorporation and bylaws of the Company, and (iii) the incumbency of those officers authorized to execute this Agreement and the other documents and agreements contemplated by this Agreement to be executed by the Company.

 

(k) Lease Consent(s)/Estoppel Certificate(s).  The Company shall have delivered to the Buyer a Lease Consent for each Real Property Lease and an Estoppel Certificate from each landlord under each Real Property Lease for which the Company is a tenant or lessee, each in a form contemplated by Section 5.4(c).

 

(l) Resignations.  The Buyer shall have received resignations from all positions as officer or director of the Company and its Subsidiaries as the Buyer has requested, and each such Seller shall provide such executed documents as may be reasonable requested by the Buyer to relinquish all signatory authority with respect to Company bank and other accounts.

 

(m) No Company Material Adverse Effect.  As of the Closing, there shall not have occurred any Company Material Adverse Effect.

 

(n) Opinion.  The Buyer shall have received an opinion of counsel to the Company and the Sellers, in a form acceptable to the Buyer.

 

(o) Good Standing.  The Buyer shall have received as of a date within three (3) days prior to the Closing Date, for each of the Company and its Subsidiaries, a good standing certificate (or its equivalent) issued by the appropriate Governmental Authority in the jurisdiction of incorporation and a good standing certificate (or its equivalent) issued by each other applicable jurisdiction where such entity is qualified or licensed to transact business.

 

(p) Debt Financing.  The Buyer shall have obtained the Debt Financing.

 

6.2. Conditions Precedent to the Company’s and Sellers’ Obligations.  The obligation of the Company and the Sellers to consummate the transactions contemplated by this Agreement is expressly subject to the fulfillment or express written waiver signed by the Sellers’ Agent of the following conditions on or prior to the Closing Date:

(a) Representations and Warranties True.  Each of the representations and warranties of the Buyer contained in ARTICLE IV shall be true and correct in all material respects as though made at and as of the Closing.

 

(b) Obligations Performed.  The Buyer shall have performed in all material respects, on or before the Closing Date, all obligations contained in this Agreement that by the terms hereof are required to be performed by the Buyer on or before the Closing Date.

 

(c) Compliance Certificate.  The Company and the Sellers’ Agent shall have received a certificate signed by an authorized officer of the Buyer certifying as to the matters set forth in Sections 6.2(a) and (b).

 

(d) Required Consents.  All of the approvals and consents listed on Schedule 2.5 and marked with an asterisk shall have been obtained.

 

(e) Escrow Agreement.  The Buyer and the Escrow Agent shall have entered into the Escrow Agreement.

 

(f) Officer’s Certificate.  The Sellers’ Agent shall have received a certificate signed by an officer of the Buyer certifying as of the Closing Date to (i) true and correct copies of the resolutions of the board of directors of the Buyer authorizing the transactions contemplated by this Agreement and the execution, delivery and performance by the Buyer of this Agreement and the other documents contemplated hereby and (ii) the incumbency of those officers authorized to execute this Agreement and the other documents and agreements contemplated by this Agreement to be executed by the Buyer.

 

(g) HSR Act.  The waiting period under the HSR Act applicable to the transactions contemplated hereby shall have expired or been terminated.

 

(h) No Injunction.  There shall not be any order of any court or Governmental Authority restraining or invalidating the material transactions which are the subject of this Agreement.

 

(i) Closing Cash Payments.  The Buyer shall have made the Closing Cash Payments in accordance with Section 1.4(a).

 

(j) Stock Consideration.  The Buyer shall have delivered irrevocable instructions to its transfer agent to issue the Stock Consideration to the Sellers in accordance with Section 1.4(b).

7.1. Survival.  The representations and warranties contained in this Agreement and in any certificate delivered at the Closing pursuant to this Agreement shall survive the Closing until the date that is eighteen (18) months following the Closing, except for (a) claims arising out of the representations and warranties set forth in Section 2.18 (‘Taxes’), Section  2.21 (‘Compensation; Benefit Plans’) and Section 2.22 (‘Environmental Laws’) which shall survive until sixty (60) days after the expiration of the statute of limitations period (including all extensions thereof) applicable to the underlying subject matter being represented; and (b) claims arising out of the Fundamental Representations which shall survive indefinitely after the Closing.  All covenants and agreements contained in this Agreement that are required to be performed prior to the Closing shall survive until the Closing and all other covenants and agreements shall survive in accordance with their respective terms or, if no survival period is specified, shall survive indefinitely.  As used herein, the term “Cut-Off Date” means the date of survival of such representation, warranty or covenant as set forth in this Section 7.1.  Any claim for breach of any representation, warranty or covenant must be brought on or before the applicable Cut-Off Date by the delivery of a Claim Notice in accordance with Section 7.5(a).

 

7.2. Indemnification of the Buyer by Sellers from Escrow Fund.  Subject to the other terms of this ARTICLE VII, the Sellers, jointly and severally, shall indemnify and hold the Buyer and its Affiliates (including the Company and its Subsidiaries following the Closing) (the “Buyer Indemnified Parties”) harmless from all Losses incurred by the Buyer Indemnified Parties that arise or result from: (a) any breach of any of the representations or warranties contained in ARTICLE II or the inaccuracy of any statement or other information contained in any certificate delivered at the Closing by the Company pursuant to this Agreement; (b) the failure of the Company or the Sellers to perform any of their covenants or agreements under the terms of this Agreement; (c) claims from or obligations due to any Person on account of the return of Company Products shipped by the Company to such Person on or prior to the Closing Date and for which shipments the Company has previously recognized revenue or has received payment therefor; or (d) any Taxes of the Company or its Subsidiaries relating to periods on or prior to the Closing Date (but net of any Tax refunds or credits received by the Company subsequent to the Closing that relate to Pre-Closing Tax Periods to the extent such refunds or credits are attributable to Taxes paid by the Company or taxable periods of the Company prior to the Closing or by the Sellers following the Closing); (e) any claim by any Person for brokerage or finder’s fees or commissions or similar payments based on any agreement or understanding made, or alleged to have been made, by any such Person with any Seller or the Company or its Subsidiaries (or any Person acting on their behalf) in connection with the transactions contemplated by this Agreement; (f) Sellers’ Expenses; (g) Closing Indebtedness; (h) any liabilities or obligations to any past or present shareholders of the Company or its Subsidiaries (other than as expressly set forth in this Agreement); and (i) any adjustments to the net purchase price for on-hand inventory of Company Products or other products of the Company or its Subsidiaries held by purchasers thereof (i.e. shelf stock adjustments) which arise or result from actions or omissions of the Company or its Subsidiaries on or prior to the Closing Date, which are known to the Company as of the Closing; in each case with respect to clauses (a)–(i), only to the extent such Losses are in excess of the amounts accrued or reserved for in the Financial Statements or have not resulted in an adjustment pursuant to Section 1.7(d).  Notwithstanding the foregoing, the Buyer Indemnified Parties’ right to indemnification under Section 7.2(a) (except for Fundamental Representations) shall be subject to the following limitations and conditions:

 

(i) No claim shall be made with respect to any single Loss (or series of related or similar Losses) of less than $15,000.

(ii) No claim shall be made (A) unless the cumulative amount of Losses incurred by the Buyer Indemnified Parties (including Losses for which indemnification would not be available as a result of clause (i) above) exceeds $500,000, and then the Buyer Indemnified Parties shall be entitled to recover the full amount of such Losses in excess of $500,000 or (B) for aggregate Losses in excess of $13,500,000 plus fifteen percent (15%) of all Milestone Payments paid or payable by the Buyer.

 

(iii) The Seller Holdback (to the extent not already due and payable, and in no case after the end of the Holdback Period or including any Holdback Increases), the Escrow Fund, and any Milestone Payments not yet due and payable shall be the sole and exclusive sources of payment for any and all such claims and Losses.

 

(iv) No claim shall be made with respect to Section 2.22 (Environmental Laws) except to the extent such Losses represent amounts actually incurred by the Company or any Subsidiary for the performance of a removal, remedial or other response action or the payment of any fine, penalty, damage award or any other requirement, or, with the consent of the Sellers’ Agent, which consent shall not be unreasonably withheld, in reasonable settlement thereof, in each case ordered by any court or Governmental Authority resulting from an Environmental Claim or noncompliance with any Environmental Laws asserted or required by any Governmental Authority or asserted by any other third party, including related out-of-pocket fees and expenses.

 

(v) The Sellers shall not be obligated to indemnify or hold harmless the Buyer with respect to Losses arising out of breaches of the representations or warranties contained in ARTICLE II to the extent that the Company has made a corresponding accrual or reserve for the matter to which such Losses relate in the Financial Statements or there has been an adjustment pursuant to Section 1.7(d).

 

(vi) No claim shall be made with respect to Losses arising out of any breach of the representations or warranties contained in ARTICLE II to the extent there has been a corresponding reduction in the calculation of the Closing Purchase Price pursuant to Section 1.7.

7.3. Additional Indemnification of Buyer by Sellers.  Subject to the other terms of this ARTICLE VII, each Seller shall severally, but not jointly, indemnify and hold the Buyer Indemnified Parties harmless from all Losses incurred by them that arise or result from any breach of the representations and warranties of such Seller contained in ARTICLE III of this Agreement, an inaccuracy of any statement in the Selling Stockholder Questionnaire or any breach by such Seller of such Seller’s covenants or agreements contained herein.  In no event, however, will any Seller be liable under this Agreement (a) for an amount in excess of the total payments of the Purchase Price actually received by such Seller or paid by the Buyer to the Sellers’ Agent Fund attributable to the interest of such Seller in the Purchase Price or (b) for breach of any representation, warranty, covenant or agreement made by any other Seller.

 

7.4. Indemnification of Sellers and Sellers’ Agent.  Subject to the other terms of this ARTICLE VII, from and after the Closing, the Buyer shall indemnify and hold each of the Sellers, the Sellers’ Agent and their respective Affiliates (collectively, the “Seller Indemnified Parties”) harmless from all Losses incurred by them that arise or result from (a) any breach of any of the representations and warranties of the Buyer contained in this Agreement or in any certificate delivered pursuant to this Agreement, (b) the failure of the Buyer to perform any of its covenants or agreements set forth herein, (c) the failure of the Company or any Subsidiary to perform any covenant or agreement set forth herein that by its terms is to be performed after the Closing or (d) the arrangement of the Debt Financing contemplated by the Debt Commitment Letter and any information utilized in connection therewith (other than information furnished by or on behalf of the Company or the Sellers).

 

7.5. Procedure for Indemnification.

 

(a) Any party entitled to make or asserting a claim for indemnification hereunder (an “Indemnified Person”) shall notify (a “Claim Notice”) the Sellers’ Agent or the Buyer (the Buyer or the Sellers, as the case may be, each an “Indemnifying Person”) of the claim in writing upon learning of such claim or the facts constituting such claim, describing the claim in reasonable detail, the amount thereof (if known), and the basis therefor; provided, however, that no failure or delay on the part of an Indemnified Person in notifying an Indemnifying Person will relieve the Indemnifying Person from its indemnification obligations hereunder except to the extent that the failure or delay materially prejudices the defense of such claim by such Indemnifying Person.  The Indemnifying Person shall respond to each such claim within thirty (30) days of receipt of such Claim Notice.  No action shall be taken pursuant to the provisions of this Agreement or otherwise by the Indemnified Person (unless reasonably necessary to protect the rights of the Indemnified Person) until the expiration of the thirty (30) day response period.

 

(b) If a claim for indemnification hereunder is based on a claim by a third party (a “Third Party Claim”), the Indemnifying Person shall have the right to assume the entire control of the defense thereof, including at its own expense, employment of counsel reasonably satisfactory to the Indemnified Person; provided, however, that the Indemnified Person may also participate in any proceeding with counsel of its choice at its expense.  In such event, (i) the Indemnifying Person shall provide written notice to the Indemnified Person of its election to assume such defense prior to the expiration of the thirty (30) day response period, (ii) the Indemnifying Person shall diligently conduct the defense; and (iii) the Indemnifying Person shall have the right to settle or resolve any such Third Party Claim; provided, however, that any such settlement or resolution shall not be concluded without the prior written approval of the Buyer, in the event the Indemnified Person is a Buyer Indemnified Party, or the Sellers’ Agent, in the event the Indemnified Person is a Seller Indemnified Party, unless such approval is unreasonably withheld, delayed or conditioned.  For purposes of the preceding sentence, withholding, delaying or conditioning approval shall not be deemed unreasonable in the following circumstances relating to such settlement or resolution:  (A) a finding or admission of any violation by the Indemnified Person of any Legal Requirement or any rights of any Person; (B) failure to receive a full release of claims that may be made against the Indemnified Person; and (C) granting of any relief other than monetary Losses that are paid in full by the Indemnifying Person.

 

 

(c) In the event the Indemnifying Person does not elect to assume the defense of such Third Party Claim in the manner and within such thirty (30) day response period, or if the Indemnifying Person does not diligently conduct such defense, the Indemnified Person may conduct the defense of such claim at the expense of the Indemnifying Person or otherwise resolve such Third Party Claim, and the Indemnifying Person shall be bound by any settlement or resolution of such Third Party Claim effected by the Indemnified Person; provided, however, that such Third Party Claim is agreed by the Sellers’ Agent, or otherwise determined, to be an indemnifiable Loss pursuant to Section 7.2.

 

(d) Notwithstanding anything contained herein to the contrary, if an Indemnified Person determines in good faith that there is a reasonable probability that a Third Party Claim may adversely affect it or any other Buyer Indemnified Party or Seller Indemnified Party, as the case may be, other than as a result of monetary damages for which it would be entitled to indemnification hereunder, the Indemnified Person may, by notice to the Indemnifying Person, assume the entire control of the defense, settlement and resolution of such Third Party Claim.

 

(e) Each party shall cooperate fully with the party controlling such defense and shall make available to such party all pertinent information under his, her or its control. Without limiting the generality of the foregoing, upon reasonable request and upon reasonable advanced notice by the Sellers’ Agent, the Buyer will, and will cause employees of the Company and the Subsidiaries to, cooperate in a reasonable manner with the Sellers’ Agent in connection with any matter for which a Seller is the Indemnifying Person.  Such cooperation shall include (i) assisting in the collection and preparation of discovery materials, (ii) meeting with (and making employees available to meet with) the Sellers’ Agent and/or its counsel to prepare for and/or appear as witnesses at depositions, court proceedings and/or trial, and (iii) providing to the Sellers’ Agent and/or its counsel all information under the control of the Company or any of its Subsidiaries that is deemed necessary by the Sellers’ Agent and/or its counsel for the defense or prosecution of such matter.  Notwithstanding anything contained herein to the contrary, each party agrees that it shall use its best efforts, in respect of any Third Party Claim for which it has assumed the defense, to avoid production of Confidential Information and all information or communications subject to any applicable attorney-client or work-product privileges.

 

(f) With respect to a claim for indemnification hereunder that is not based on a Third Party Claim, if the Indemnifying Person does not notify the Indemnified Person within thirty (30) days from delivery of such Claim Notice that the Indemnifying Person disputes such claim, the amount or estimated amount of such claim as specified by the Indemnified Person shall be conclusively deemed a Loss for which the Indemnifying Person is responsible.  If the Indemnifying Party has timely disputed such claim, as provided above, such dispute shall be resolved by litigation in an appropriate court of competent jurisdiction or as the parties otherwise at such time agree.

 

7.6. Payment of Indemnity Claims; Right to Offset.  In the event that any Buyer Indemnified Party is determined to be entitled to indemnification hereunder, the amount of Losses for which such Buyer Indemnified Party is entitled to indemnification shall be paid as follows: (a) first, by offset from the Seller Holdback, to the extent not previously due and payable (and in no case after the end of the Holdback Period or including any Holdback Increases), (b) second, from the Escrow Fund, to the extent available, (c) third, by offset from the Milestone Payments, to the extent not previously paid but due and payable, and (d) finally, to the extent only that Losses relate to the Fundamental Representations and to indemnification obligations pursuant to Section 7.3 exceed all such amounts described in Section 7.6(a) through (c) above, directly from the Sellers (subject to the qualification in the following sentence) in immediately available funds. Notwithstanding the foregoing, in no event shall TA Associates Entities and Madison Capital Funding LLC be obligated to make any payments pursuant to subsection (d) above with respect to Losses arising or resulting from any breach of Fundamental Representations.  In the event the Buyer elects to exercise its right to assert an offset of any amount to which it may be entitled, in good faith, from the Sellers hereunder from and against the amount due and payable in respect of the Seller Holdback and the Milestone Payments, such exercise by the Buyer, whether or not ultimately determined to be entitled to indemnification hereunder, will not constitute a breach of this Agreement or any other agreement delivered pursuant to the terms hereof.  In the event that the Buyer is to be paid from the Escrow Fund any amount to which it is entitled from the Sellers hereunder, the Sellers’ Agent and the Buyer shall issue joint written instructions to the Escrow Agent authorizing distribution from the Escrow Fund of the amount of such Losses to the Buyer.  Neither the exercise nor failure to exercise such right to offset will constitute an election of remedies or limit the Buyer in any manner in the enforcement of any other remedies that may be available to it.  Notwithstanding the foregoing, if the Buyer fails to pay the Seller Holdback due to restrictions or limitations  in the Debt Financing Agreements, no indemnification offset shall be made against the Seller Holdback unless a Claim Notice with respect thereto has been asserted prior to the expiration of the Holdback Period.

 

7.7. Subrogation.  If (a) any Buyer Indemnified Party receives any indemnification payment under this Agreement, and (b) the Buyer, the Company or any Subsidiary has or may have a claim against a third party (including any insurer) in respect of the related Losses, the Sellers’ Agent, on behalf of the Sellers, shall be subrogated to the rights and claims of the Buyer, the Company and such Subsidiary, as the case may be, against such third party.  If the Sellers’ Agent (on behalf of the Sellers) collects aggregate payments from such third party or third parties in excess of the actual amount of the indemnification payment previously paid by any Seller or the Sellers’ Agent, on behalf of the Sellers, with respect to such Losses, the Sellers’ Agent will deliver the excess to the Buyer.  The Buyer and the Company will, and will cause the Subsidiaries to, execute and deliver to the Sellers’ Agent such documents and take such other actions as may reasonably be requested in order to give effect to this Section.

 

7.8. Determination of Losses.  In calculating Losses for purposes of indemnification hereunder, any materiality or similar qualifications in the representations, warranties, covenants and agreements shall be disregarded.  In determining the amount of any Losses for which a Buyer Indemnified Party is entitled to assert a claim for indemnification hereunder, the amount of any such Losses shall be determined after deducting therefrom the amount of any insurance proceeds (after giving effect to any applicable deductible or retention) and other third party recoveries actually received by the Buyer Indemnified Parties, the Company or any Subsidiary in respect of such Losses (which proceeds and recoveries the Buyer agrees to use commercially reasonable efforts to obtain) and the amount of any tax benefit related thereto.  If an indemnification payment is received by a Buyer Indemnified Party, and any Buyer Indemnified Party, the Company or any Subsidiary later receives insurance proceeds, other third party recoveries or tax benefits in respect of the related Losses, the Buyer shall immediately pay to the Sellers’ Agent, for the benefit of the Sellers, a sum equal to the lesser of (a) the actual amount of such insurance proceeds, other third party recoveries and tax benefits, or (b) the actual amount of the indemnification payment previously paid by any Seller or the Sellers’ Agent, on behalf of the Sellers, with respect to such Losses.  All parties shall use commercially reasonably efforts to mitigate the amount of Losses for which they may be entitled to indemnification hereunder.

 

7.9. Remedies Exclusive.  Except for claims for intentional misrepresentation or fraud and subject to the following sentence, the remedies provided in this ARTICLE VII shall be the sole and exclusive remedies for monetary damages of the Buyer Indemnified Parties and Seller Indemnified Parties and their heirs, successors and assigns with respect to this Agreement and the transactions contemplated by this Agreement, including any breach or non-performance of any representation, warranty, covenant or agreement contained herein.  No Buyer Indemnified Party or Seller Indemnified Party shall bring any claim with respect to this Agreement or the transactions contemplated hereby, whether in contract, tort or otherwise, except to bring a claim for (i) intentional misrepresentation or fraud against the party that committed such intentional misrepresentation or fraud, (ii) indemnification against the Sellers in accordance with Section 7.2, (iii) indemnification against a particular Seller in accordance with Section 7.3, (iv) indemnification against the Buyer in accordance with Section 7.4 or (v) enforcement of any covenant contemplating performance at or after the Closing by specific performance or other equitable relief.  The provisions of this ARTICLE VII constitute an integral part of the consideration given to the Sellers pursuant to this Agreement and were specifically bargained for and reflected in the total amount of the Purchase Price payable to the Sellers pursuant to this Agreement.

 

7.10. Tax Treatment of Indemnity Payments.  To the maximum extent permitted by law, it is the intention of the parties to treat any indemnity payment made under this Agreement as an adjustment to the Purchase Price for all purposes, and the parties agree to file their Tax Returns accordingly.

 

8.1. Termination.  Notwithstanding anything contained in this Agreement to the contrary, this Agreement may be terminated at any time prior to the Closing:

 

(a) by mutual written consent of the Company and the Buyer;

 

(b) by the Buyer, if (i) the representations and warranties of the Company or the Sellers set forth in this Agreement shall not be true and correct to the extent that the condition to Closing set forth in Section 6.1(a) would not be satisfied, or the Company or the Sellers shall have breached or failed to perform any of their obligations under this Agreement to the extent that the condition to Closing set forth in Section 6.1(b) would not be satisfied, and (ii) such breach, failure or misrepresentation is not cured within thirty (30) days after the Buyer gives the Company written notice identifying in reasonable detail such breach, failure or misrepresentation;

 

(c) by the Buyer, if the condition to Closing set forth in Section 6.1(q) (“Debt Financing”) would not be satisfied;

 

(d) by the Company, if (i) any of the representations and warranties of the Buyer set forth in this Agreement shall not be true and correct to the extent that the condition to Closing set forth in Section 6.2(a) would not be satisfied, or if the Buyer shall have breached or failed to perform any of its obligations, covenants or agreements under this Agreement to the extent that the condition to Closing set forth in Section 6.2(b) would not be satisfied, and (ii) such breach, failure or misrepresentation is not cured within thirty (30) days after the Company gives the Buyer written notice identifying in reasonable detail such breach, failure or misrepresentation;

 

(e) by either the Company or the Buyer, if any court or Governmental Authority has issued a final and non-appealable order, decree or ruling permanently restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated by this Agreement; or

 

(f) by either the Company or the Buyer, if the Closing has not occurred by December 28, 2012 or such other date, if any, as the Company and the Buyer may agree in writing; provided that the right to terminate this Agreement under this Section 8.1(f) shall not be available to any party whose willful and knowing failure to fulfill any obligation under this Agreement has contributed to the failure of the transactions contemplated by this Agreement to occur on or before such date.

 

8.2. Effect of Termination.

 

(a) If this Agreement is terminated as provided above (other than pursuant to Section 8.1(c)), the parties shall have no further obligations hereunder (including for costs and expenses incurred by other parties in connection with this Agreement and the transactions contemplated hereby), except as provided below and except that each party shall be liable for its willful and knowing breach of this Agreement and the other parties hereto shall be entitled to all rights and remedies provided by law in respect of such breach.  The parties agree that the purchase by the Buyer of the Shares is unique in character and if any party refuses to consummate the transactions contemplated herein for any reason other than (i) as set forth in Section 8.1, as applicable to such party, or (ii) because there has been a failure by an opposing party to satisfy any of the conditions (not otherwise waived by the Sellers’s Agent or the Buyer, as the case may be) set forth in ARTICLE VI, damages suffered by the non-satisfying party may not be readily ascertainable.  Accordingly, the Company and each Seller agree that the Buyer or Sellers, as applicable, at such party’s option, shall be entitled to seek the equitable remedy of specific performance.  Notwithstanding anything contained herein to the contrary, the termination of this Agreement will not relieve any party from liability for any breach of this Agreement prior to termination.

 

(b) In the event that this Agreement is terminated by the Buyer pursuant to Section 8.1(c) as a result of the Debt Financing Source’s determination not to consummate the Debt Financing due solely to the Company’s failure to satisfy a requirement to achieve minimum adjusted earnings before interest, taxes, depreciation and amortization (determined in accordance with Schedule 8.2(b) for any period subsequent to October 2012 (the “Company Minimum EBITDA Condition”), the Buyer shall not be obligated to pay any termination fee or other amount to the Company.  However, in the event that this Agreement is terminated by the Buyer pursuant to Section 8.1(c) for any reason other than the Company Minimum EBITDA Condition, the Buyer shall pay to the Company the amount of $2,500,000 by wire transfer of same-day funds not later than five (5) business days following the date of termination.

 

(c) The parties hereby agree that any amount payable pursuant to Section 8.2(b) above shall not constitute a penalty but shall constitute liquidated damages to compensate the Sellers and the Company, and the parties hereby further agree that any amount payable pursuant to Section 8.2(b) above shall be the sole and exclusive remedy against the Buyer as a result of the termination of this Agreement, and, upon the payment thereof, the Buyer shall have no further liability or obligation to the Sellers and the Company with respect to this Agreement or the transactions contemplated hereby (except as expressly set forth in Section 8.2(d) below).

 

(d) The obligations of the Buyer, the Company and their Affiliates and representatives under Section 5.1(b) shall survive the termination of this Agreement.

9.1. Notices.  Any notices, demands and communications to a party hereunder shall be in writing and shall be deemed to have been duly given and received (a) if delivered personally, as of the date received; (b) if delivered by certified mail, return receipt requested, three (3) business days after being mailed; (c) if delivered by a nationally recognized overnight delivery service, one (1) business day after being sent to such delivery service; or (d) if sent via email, as of the date received, to such party at its address set forth below (or such other address as it may from time to time designate in writing to the other parties hereto):

9.2. No Waiver.  No failure of any party to exercise and no delay in exercising any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right, power or remedy hereunder.

 

9.3. Amendments and Waivers.  The provisions of this Agreement may be modified, amended or waived at any time only by a writing signed by (a) the Buyer, (b) the Company, and (c) the Sellers’ Agent, and any such modification, amendment or waiver shall be binding on each of the parties hereto, including the Sellers (other than the TA Associates Entities and Madison Capital Funding LLC); and any such modification, amendment or waiver which affects the rights or obligations of the TA Associates Entities or Madison Capital Funding LLC shall require the written assent of such party.

 

9.4. Choice of Law; Forum; Waiver of Jury Trial.  This Agreement shall be governed by and construed in accordance with the laws of the State of Texas, without regard to conflicts of laws principles.  Any proceeding arising out of or relating to this Agreement may be brought in the state courts located in Montgomery County, Texas or federal courts located in Harris County, Texas.  This provision may be filed with any court as written evidence of the knowing and voluntary irrevocable agreement between the parties to waive any objections to jurisdiction, to venue or to convenience of forum.  EACH PARTY HERETO ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY THAT MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

 

9.5. Successors and Assigns.  This Agreement shall be binding upon and shall inure to the benefit of the parties and their respective heirs, successors and assigns, but may not be assigned by any party without the prior written consent of the Buyer, the Company and the Sellers’ Agent; provided, however, that the Buyer may collaterally assign its indemnification rights under this Agreement to its lenders.

 

9.6. Integration; Schedules.  This Agreement, together with the Exhibits and Schedules attached hereto and other documents to be delivered pursuant to this Agreement, embodies the entire agreement and understanding among the parties with respect to this transaction and supersedes all prior discussions, understandings and agreements concerning the matters covered hereby, except as set forth in Section 5.1(b).  The inclusion of an item on any Schedule hereto is not evidence of the materiality of such item for purposes of this Agreement or otherwise, or that such item is a disclosure required under the Agreement.  No disclosure in any Schedule hereto relating to any possible breach or violation of any agreement, Authorization or Legal Requirement shall be construed as an admission or indication that any such breach or violation exists or has actually occurred, or shall constitute an admission of liability to any third party.

 

9.7. Counterparts.  This Agreement may be executed in two or more counterparts, and with counterpart signature pages, each of which shall be an original, but all of which together shall constitute one and the same Agreement, binding on all of the parties hereto notwithstanding that all such parties have not signed the same counterpart.  Counterpart signature pages to this Agreement transmitted by facsimile transmission, by email in .pdf or similar form, or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document, will have the same effect as physical delivery of the paper document bearing an original signature.

 

9.8. Expenses.  All legal and other costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs and expenses, except as otherwise expressly provided herein.

 

9.9. No Third Party Beneficiaries.  Except as otherwise expressly set forth in this Agreement, nothing in this Agreement will be construed as giving any third party any right, remedy or claim under or in respect of this Agreement or any provision hereof.

 

9.10. Publicity.  The Buyer may prepare and disseminate a press release, satisfactory to the Sellers’ Agent in his, her or its reasonable judgment, announcing the execution of this Agreement and the Closing.  Neither the Sellers, the Company nor any Affiliate thereof shall make any public announcements without the prior written consent of the Buyer; provided, however, that the TA Associates Entities may provide notice of the sale and purchase of the Shares contemplated by this Agreement to their respective partners who are bound by obligations of confidentiality with respect thereto.

 

(a) Severability.  If any provision of this Agreement is unenforceable or illegal, such provision shall be enforced to the fullest extent permitted by law and the remainder of the Agreement shall remain in full force and effect.

 

(b) No Strict Construction.  The parties hereto have participated jointly in the negotiation and drafting of this Agreement and the other agreements and documents contemplated herein.  In the event an ambiguity or question of intent or interpretation arises under any provision of this Agreement or any other agreement or documents contemplated herein, this Agreement and such other agreements or documents shall be construed as if drafted jointly by the parties thereto, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of authoring any of the provisions of this Agreement or any other agreements or documents contemplated herein.

 

(c) Headings.  The headings of Articles and Sections herein are inserted for convenience of reference only and shall be ignored in the construction or interpretation hereof.

 

(d) Currency.  Unless otherwise specified herein, any references to “dollars,” “$” or other dollar amounts in this Agreement shall mean the lawful currency of the United States.

 

(e) Business Days.  Any reference to a “business day” is a reference to any day except Saturday, Sunday, any statutory holiday in the State of Texas or Mississippi or any other day on which banks in Texas or Mississippi are closed for business.

 

(f) Calculation of Days.  When calculating the period of time within which or following which any act is to be done or step taken pursuant to this Agreement, the date that is the reference date in calculating such period shall be excluded.  If the last day of such period is a non-business day, the period in question shall end on the next business day.

 

(g) Knowledge.  Any reference to “to the knowledge of the Company,” “to the Company’s knowledge,” or any other similar phrase shall mean the knowledge of Max Draughn, Jason Sanderson and Rob Lewis (but only with respect to Sections 2.13 and 2.16 in the case of Mr. Lewis), after reasonable inquiry.

 

(h) Pronouns.  All words and personal pronouns shall be read and construed as the number and gender of the party or parties referred to in each case require and the verb shall be construed as agreeing with the required word and pronoun.

 

(i) Legal Requirements and Documents.  Unless otherwise specified, (i) any references herein to any Legal Requirement shall be construed as a reference thereto as amended, restated and supplemented from time to time, and (ii) any reference to this Agreement or any other document is a reference to this Agreement or such other document as amended, restated and supplemented from time to time and includes all schedules and exhibits thereto.

 

(j) References to this Agreement.  The words “hereof,” “herein,” “hereto,” “hereunder,” “hereby” and other similar expressions refer to this Agreement as a whole and not to any particular section or portion of it.

 

(k) Including.  Where the word “including” or the word “includes” is used in this Agreement, it means “including (or includes) without limitation.”

 

(a) The Sellers’ Agent shall be irrevocably and exclusively authorized as the  attorney, with full power of substitution, of the Sellers (with the exception of TA Associates and Madison Capital Funding LLC) to take all actions and make all decisions and determinations on behalf of the Sellers in respect of this Agreement, any certificate, agreement or documents entered into by the Sellers pursuant to this Agreement, the Closing and the transactions contemplated hereby and thereby.  Without limiting the generality of the prior sentence, the Sellers’ Agent shall be exclusively authorized to (i) negotiate, execute and deliver all amendments, modifications and waivers to this Agreement or such certificates, agreements and documents; (ii) take all actions on behalf of the Sellers in connection with any claims or disputes with respect to this Agreement, such certificates, agreements and documents, and/or the transactions contemplated hereby or thereby (other than any claims against a Sellers under Section 7.3 of this Agreement); (iii) to initiate, prosecute, defend and/or settle such claims and disputes; (iv) to authorize payments from the Sellers’ Agent Fund; and (v) to take all actions and sign all documents necessary, convenient or advisable to accomplish any of the foregoing.  No Sellers shall be permitted to take any such actions without the prior written approval of the Sellers’ Agent.  This power of attorney is deemed coupled with an interest and shall survive the death, incapacity, disability, termination, liquidation, dissolution or any other event affecting any Seller.

 

(b) The Sellers’ Agent will provide prompt notice to Max Draughn and Jason Sanderson of any notices or other formal communications received by the Sellers’ Agent under this Agreement.  Prior to taking any material action authorized under the preceding Section, the Sellers’ Agent will inform Max Draughn and Jason Sanderson thereof and provide Max Draughn and Jason Sanderson with the opportunity to consult with the Sellers’ Agent with respect to such action.

 

(c) The Sellers’ Agent will not receive a fee for serving as the representative of the Sellers hereunder.  The Sellers’ Agent shall be entitled to engage counsel, accountants and other advisors, and the fees and expenses of such counsel and advisors and any out-of-pocket expenses incurred by Sellers’ Agent may be paid from the Sellers’ Agent Fund or from any other payment received hereunder by Sellers’ Agent, in its capacity as such.

 

(d) The Sellers’ Agent shall not be liable to any Seller for any action taken by Sellers’ Agent pursuant to this Agreement, and the Sellers (other than the TA Associates Entities and Madison Capital Funding LLC) shall severally, and not jointly, in proportion to their respective share of the Purchase Price, indemnify and hold the Sellers’ Agent harmless from and against any and all Losses arising out of or relating to Sellers’ Agent serving in this capacity, except in each case if and to the extent a court of competent jurisdiction has finally determined (from which no appeal may be taken) that the Sellers’ Agent has engaged in willful misconduct.

 

(e) The Sellers’ Agent is serving in this capacity solely for purposes of administrative convenience.  The Sellers’ Agent, as such, is not personally liable for any of the obligations of the Sellers hereunder, and the Buyer Indemnified Parties agree that they will not look to the underlying assets of the Sellers’ Agent for the satisfaction of any obligations of the Sellers.

 

(f) Any Person serving as an Sellers’ Agent hereunder may resign from such role upon at least ten (10) days prior written notice to the other persons then serving as Sellers’ Agent and the Buyer.  Sellers holding a majority of the Shares (as of immediately prior to the Closing, calculated on a fully diluted basis) may appoint a replacement Sellers’ Agent.  All rights of such Person to indemnification and exculpation hereunder shall survive such resignation.

 

(g) To the extent that the Buyer asserts any claim for indemnification against the TA Associates Entities or Madison Capital Funding LLC pursuant to Section 7.6(d), the Buyer will deal with such party exclusively, and not with the Sellers’ Agent, and the provisions of Article VII, insofar as they pertain to such claim, shall be read to substitute the TA Associates Entities or Madison Capital Funding, as the case may be, in lieu of the Sellers’ Agent.  For the avoidance of doubt, the Sellers’ Agent will have no responsibility to deal with any such claim on behalf of the TA Associates Entities or Madison Capital Funding LLC, and the Buyer will be relieved from any obligation to provide notices or other communications to, or to obtain any consent or agreement from, the Sellers’ Agent with respect to such matters.  The TA Associates Entities and Madison Capital Funding LLC agree that the Buyer may deal exclusively with the Sellers’ Agent with respect to all matters arising under this Agreement as to which the Sellers’ Agent is authorized to act except as set forth in this Section 9.12(g) and the last clause in Section 9.3.

 

9.13. Waiver of Conflicts.  Buyer (on behalf of itself and its Affiliates) hereby irrevocably acknowledges and agrees that: (a) each of the Sellers’ Agent and the Sellers shall have the right to retain Choate, Hall & Stewart LLP (the “Designated Firm”) to represent their respective interests in any dispute arising under or in connection with this Agreement, any agreement entered into pursuant to this Agreement, or the transactions contemplated hereby or thereby (a “Dispute”); (b) Buyer (on behalf of itself and its Affiliates) irrevocably waives, consents to and covenants not to assert any objection, based on conflict of interest or otherwise, to any representation of Sellers’ Agent or any Seller by the Designated Firm in any Dispute; (c) all communications between any of Sellers, the Company, or any of their respective Affiliates, directors, officers, employees, Sellers’ Agent or representatives, on the one hand, and the Designated Firm, on the other hand, made in connection with the negotiation, preparation, execution, delivery and Closing under, or any dispute arising in connection with, this Agreement or otherwise relating to any potential sale of the Company (the “Protected Seller Communications”), shall be deemed to be privileged and confidential communications of the Sellers and the Sellers’ Agent; (d) all rights to such Protected Seller Communications, and the control of the confidentiality and privilege applicable thereto, shall be retained by Sellers’ Agent; and (e) to the extent Buyer or any of its Affiliates (including the Company following the Closing) should discover in its possession after the Closing any Protected Seller Communications, it shall take reasonable steps to preserve the confidentiality thereof and promptly deliver the same to Sellers’ Agent, keeping no copies, and shall not by reason thereof assert any loss of confidentiality or privilege protection.

The following terms, as used in this Agreement, have the meanings specified below:

 

“Acquisition Proposal” has the meaning has set forth in Section 5.3.

 

“Affiliate” of a specified Person means any other Person that directly or indirectly controls, is controlled by, or is under common control with, such specified Person.  The term “control” (including, with correlative meaning, the terms “controlled by” and “under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.

 

“Aggregate Milestone Cap” has the meaning set forth in Section 1.4(c).

 

“Agreement”  has the meaning set forth in the Preamble.

 

 “Articles of Incorporation” means the Amended and Restated Articles of Incorporation of the Company filed with the Secretary of State of the State of Mississippi on November 26, 2003, as the same may be amended prior to the Closing.

 

“Authorizations” has the meaning set forth in Section 2.17.

 

“Assets” has the meaning set forth in Section 2.12(a).

 

“Benefit Plans” has the meaning set forth in Section 2.21(a).

 

“Buyer” has the meaning set forth in the Preamble.

 

“Buyer Common Stock” has the meaning set forth in Section 1.3(a).

 

“Company Material Adverse Effect” means a material adverse effect on the assets, properties or financial condition of the Company and its Subsidiaries, taken as a whole; provided that in no event shall any of the following be taken into account in the determination of whether a Company Material Adverse Effect has occurred: (a) any change in any Legal Requirement or GAAP; (b) any change resulting from conditions affecting any of the industries in which the Company or any Subsidiary operates or from changes in general business, financial, political, capital market or economic conditions (including any change resulting from any hostilities, war or military or terrorist attack); (c) any change resulting from the announcement or pendency of the transactions contemplated by this Agreement or attributable to the fact that the Buyer or any of its Affiliates are the prospective owners of the Company; (d) any event, condition or other matter disclosed on a Schedule to this Agreement; (e) any change resulting from any action by the Company or any Subsidiary contemplated by this Agreement; or (f) the failure of the Company or any Subsidiary to achieve any financial projections or budget; which, in the case of the foregoing clauses (a) and (b) does not disproportionately impact the Assets, the Company or Subsidiaries’ business or the industries in which the Company or Subsidiaries operate relative to other participants in the industry in which the Company or Subsidiaries’ business is operated.

 

“Company Organizational Documents” has the meaning set forth in Section 2.1.

 

“Company Plans” has the meaning set forth in Section 5.10.

 

“Company Products” has the meaning set forth in Section 2.16(d).

 

 “Confidential Information” has the meaning set forth in Section 5.1(b).

 

“Contractual Obligations” means, as to any Person, any provision of any security issued by such Person or of any agreement, lease, undertaking, contract, indenture, mortgage, deed of trust, license, or other instrument, whether written or oral, to which such Person is a party or by which it or any of its property is bound.

 

“Cut-Off Date” has the meaning set forth in Section 7.1.

 

“D&O Indemnified Person” has the meaning set forth in Section 5.8.

 

“Debt Commitment Letter” has the meaning set forth in Section 4.6(a).

 

“Debt Financing” has the meaning set forth in Section 4.6(a).

 

“Debt Financing Agreements” has the meaning set forth in Section 1.4(c).

 

“Debt Financing Source” has the meaning set forth in Section 4.6(a).

 

“Designated Firm” has the meaning set forth in Section 9.13.

 

“Disclosure Supplement” has the meaning set forth in Section 5.6(a).

 

“Dispute” has the meaning set forth in Section 9.13.

 

“Disputed Items” has the meaning set forth in Section 1.7(b).

 

“Disputed Items Notice” has the meaning set forth in Section 1.7(b).

 

“Escrow Agent” has the meaning set forth in Section 1.3(a).

 

“Escrow Agreement” has the meaning set forth in Section 1.3(a).

 

“Escrow Fund” has the meaning set forth in Section 1.3(a).

 

“Escrow Holdback” has the meaning set forth in Section 1.3(a).

 

“Escrow Wire Amount” has the meaning set forth in Section 1.4(c)(ii).

 

“Estimated Purchase Price Certificate” has the meaning set forth in Section 1.3(b).

 

“Environment” means soil, surface waters, groundwaters, wetlands, land, surface or subsurface strata, indoor air, ambient air, wildlife, aquatic species and vegetation.

 

“Environmental Claim” means any and all suits, losses, costs (including but not limited to emergency release, spill or leak response, remediation, removal, response, abatement, clean-up, investigative, and/or monitoring costs, and any other related costs and expenses, court costs, reasonable attorneys’ fees, expert consulting and expert witness fees and expenses), damages, assessments, liens, administrative, civil or criminal penalties and fines, and prejudgment and post judgment interest, incurred or to be incurred or imposed (a) pursuant to any order, notice, injunction, judgment or similar ruling arising out of or in connection with any Environmental Law, or (b) pursuant to any claim by a Governmental Authority or other Person for personal injury, death, property damage, damage to natural resources, remediation or similar costs or expenses incurred or asserted by such Governmental Authority or other Person to the extent arising out of or relating to Environmental Laws or Hazardous Materials.

 

“Environmental Laws” means all applicable federal, state, and local laws, statutes, ordinances, regulations, permits, and licenses now or hereafter in effect, and in each case as amended, and any judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree or judgment relating to the regulation and protection of the Environment and natural resources, including, without limitation, laws and regulations relating to emissions, discharges, releases or threatened releases of Hazardous Materials or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transportation, or handling of Hazardous Materials.  Environmental Laws include, but are not limited to the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (“CERCLA”); the Resource Conservation and Recovery Act, as amended; the Toxic Substances Control Act, as amended; the Clean Air Act, as amended; the Federal Water Pollution Control Act, as amended; the Safe Drinking Water Act, as amended; and their state and local counterparts or equivalents.

 

“ERISA” has the meaning set forth in Section 2.21(a).

 

“Estoppel Certificate(s)” has the meaning set forth in Section 5.4(c).

 

“Final Amounts” has the meaning set forth in Section 1.7(b).

 

“Financial Statements” has the meaning set forth in Section 2.8.

 

“Fundamental Representations” means the representations and warranties set forth in Section 2.1 (‘Organization, Power and Standing’), Section 2.4 (‘Due Authorization’), Section 2.6 (‘Validity and Enforceability’), Section 2.7 (‘Capitalization’), Sections 4.5 (‘Brokers’) and ARTICLE III.

 

“GAAP” means United States generally accepted accounting principles.

 

“Governmental Authority” means any:  (i) foreign, federal, state or local government, court, tribunal, administrative agency commission, board, bureau, regulatory authority instrumentality, department or judicial or administrative body having jurisdiction over the matter or matters in question; including but not limited to the U.S. Food and Drug Administration (“FDA”), the U.S. Environmental Protection Agency, the European Medicines Agency (“EMA”), and Health Canada, (ii) other governmental, government appointed or regulatory authority; or (iii) quasi-governmental authority exercising any regulatory, expropriation or taxing authority under or for the account of any of the above.

 

“Hazardous Materials” means any substance that is a “hazardous substance” as defined or used pursuant to Section 101 of CERCLA, “hazardous waste,” “toxic,” “toxic waste,” “pollutant,” “contaminant” or words of similar import under any Environmental Law, and any other substances regulated or subject to guidance from a Governmental Authority because of their effect or potential effect on public health and the Environment.

 

“Healthcare-Related Law” means (i) the Federal Food, Drug and Cosmetic Act, (ii) the Public Health Service Act, (iii) the Federal Healthcare Program Anti-Kickback Statute (42 U.S.C. § 1320a-7b(b) (known as the “Anti-Kickback Statute”)), (iv) the Medicare statute, federal and state Medicaid statutes, Sections 1128, 1128A, 1128B, 1128C and 1877 of the Social Security Act (42 U.S.C. §§ 1320a-7, 1320a-7a, 1320a-7b, 1320a-7c and 1395nn), (v) statutes governing TRICARE (10 U.S.C. § 1071 et seq.) or other U.S. federal government employee healthcare programs, (vi) the civil False Claims Act (31 U.S.C. § 3729 et seq.), (vii) criminal false claims and false statements statutes (e.g., 18 U.S.C. §§ 287 and 1001), (viii) the Program Fraud Civil Remedies Act (31 U.S.C. § 3801 et seq.), (ix) HIPAA, (x) Section 353 of the Public Health Services Act (42 U.S.C. § 263a) as revised by the Clinical Laboratory Improvement Amendments of 1988, (xi) all regulations, guidances, rules, standards, guidelines, policies and orders promulgated under any Healthcare-Related Law described in clauses (i)-(x) of this definition or otherwise administered or issued by any Governmental Authority created by or enforcing any such Healthcare-Related Law to the extent such materials have the force of law, and (xii) all other foreign, federal, state, provincial and local statutes, laws, regulations, directives, rules, standards, guidelines, policies and orders relating to the subject matter of any of the Healthcare-Related Laws described in clauses (i)-(x) of this definition, including those administered by the FDA, the EMA or Health Canada.

 

“Holdback Claims” has the meaning set forth in Section 1.4(c)(i).

 

“Holdback Increase” has the meaning set forth in Section 1.4(c).

 

“Holdback Period” has the meaning set forth in Section 1.3(a).

 

“HSR Act” has the meaning set forth in Section 2.4.

 

“In-Bound Licenses” has the meaning set forth in Section 2.13(d).

 

“Indemnified Persons” has the meaning set forth in Section 7.5(a).

 

“Indemnifying Person” has the meaning set forth in Section 7.5(a).

 

“Independent Accounting Firm” has the meaning set forth in Section 1.7(c).

 

“Intellectual Property” has the meaning set forth in Section 2.13(a).

 

 “IP Licenses” has the meaning set forth in Section 2.13(d).

 

“IRS” means the United States Internal Revenue Service or any successor agency, and, to the extent relevant, the United States Department of the Treasury.

 

“Largest Customers and Suppliers” has the meaning set forth in Section 2.14.

 

 “Lease Consent(s)” has the meaning set forth in Section 5.4(c).

 

“Leased Real Properties” has the meaning set forth in Section 5.17.

 

“Legal Requirement(s)” means, with respect to any Person, all foreign, federal, state and local statutes, laws, ordinances, judgments, decrees and orders and all governmental rules and regulations applicable to such Person.

 

“Lien” means any lien, security interest, mortgage, charge, pledge, hypothec, restriction, adverse claim or other encumbrance of any kind that secures the payment or performance of an obligation or otherwise adversely affects the right, title or interest of any property.

 

“Losses” means all damages, losses, expenses, costs and liabilities (including reasonable attorney’s fees and costs of collection), but excluding all consequential damages, punitive and exemplary damages, special damages, lost profits, incidental damages, indirect damages, unrealized expectations, damages based on any type of multiplier and other similar items (except to the extent such damages are awarded in a Third Party Claim).

 

“Market” has the meaning set forth in Section 5.11(b).

 

“Material Contracts” has the meaning set forth in Section 2.10(a).

 

“Milestone Event” has the meaning set forth in Section 1.4(d).

 

“Milestone Payment” has the meaning set forth in Section 1.4(d).

 

“Milestone VWAP” has the meaning set forth in Section 1.4(d).

 

“Milestone Shares” has the meaning set forth in Section 5.19(b).

 

“Minimum Working Capital” has the meaning set forth in Section 1.7(d).

 

“New Matter” has the meaning set forth in Section 5.6(b).

 

“Noncompetition Period” means (i) in the case of any management-level employee of Seller hired by the Buyer (or continuing employment with the Company or any of its Subsidiaries following the Closing) (except for the Persons identified in (ii) below), the later of the third (3rd) anniversary of the Closing Date or the third (3rd) anniversary of the termination of such Seller’s employment with the Buyer, the Company or a Subsidiary, (ii) in the case of James Christopher Boone, Christopher Alan Smith, Robert Leon Lewis, II and Gregory Thomas Stofko, six (6) months following the Closing Date or (iii) in the case of any Seller who is subject to Section 5.11 but is not described in (i) or (ii) above, the third (3rd) anniversary of the Closing Date.

 

“Out-Bound Licenses” has the meaning set forth in Section 2.13(d).

 

“Payment Certificate” has the meaning set forth in Section 1.3(b).

 

“Permitted Liens” has the meaning set forth in Section 2.12(a).

 

“Person” means any natural person, corporation, limited liability company, partnership, trust or other entity.

 

“Prior Service” has the meaning set forth in Section 5.10.

 

“Preliminary Amounts” has the meaning set forth in Section 1.7(a).

 

“Proceeding” has the meaning set forth in Section 5.8.

 

“Protected Seller Communications” has the meaning set forth in Section 9.13.

 

“Purchase Price” has the meaning set forth in Section 1.3(a).

 

“Put Notice” has the meaning set forth in Section 5.19(b).

 

“Put Option Period” has the meaning set forth in Section 5.19(b).

 

“Sale Bonuses” means the sale bonuses due and payable to employees of the Company or any Subsidiary in connection with the transactions contemplated by this Agreement as set forth on Schedule 10.1, which Sale Bonuses shall be paid in full by the Company prior to Closing.

 “SNDA(s)” has the meaning set forth in Section 5.4(c).

 

“Stock Consideration” has the meaning set forth in Section 1.3(a).

 

“Straddle Period” has the meaning set forth in Section 5.7(a)(ii).

 

“Subject Buyer Stock” has the meaning set forth in Section 5.19(a).

 

 “Subsidiary(ies)” has the meaning set forth in Section 2.2.

 

“TA Associates Entities” means TA IX L.P., a Delaware limited partnership, TA/Atlantic and Pacific IV L.P., a Delaware limited partnership, TA Strategic Partners Fund A L.P., a Delaware limited partnership, TA Strategic Partners Fund B L.P., a Delaware limited partnership, TA Investors LLC, a Delaware limited liability company and TA Subordinated Debt Fund, L.P., a Delaware limited partnership.

 

“Tax Laws” means the Code and the Treasury Regulations promulgated thereunder, and all foreign, federal, state, local or other statutes imposing a tax, including all treaties, conventions, rules, regulations, orders, and decrees of any jurisdiction.

 

“Tax Returns” means all reports, elections, returns, and other documents required to be filed under the provisions of any Tax Laws and any tax forms required to be filed, whether in connection with a tax return or not, under any provisions of any applicable Tax Laws.

 

“Tax” or “Taxes” means all taxes, assessments, charges, dues, duties, rates, fees, imposts, levies and similar charges of any kind lawfully levied, assessed or imposed by any Governmental Authority under any applicable Tax Law, including, foreign, federal, state, local or other income, capital, goods and services, sales, use, consumption, excise, value-added, business, real property, personal property, transfer, franchise, withholding, payroll, or employer health taxes, customs, import, anti-dumping or countervailing duties, pension plan contributions, employment insurance premiums, and workers’ compensation payments, including any interest, penalties and fines associated therewith.

 

“Third Party Claim” has the meaning set forth in Section 7.5(b).

 

“Working Capital” means current assets (including accounts receivable, inventories and prepaid expenses, refundable income Taxes and deferred Tax assets, but excluding Closing Cash) minus current liabilities (including accounts payable and accrued expenses) but excluding Closing Indebtedness, in each case with respect to the foregoing, as determined in accordance with GAAP (with the exception of Closing Cash and Closing Indebtedness, which shall be determined in accordance with this Agreement).  By way of example only, set forth in Schedule 10.2 is a calculation of Working Capital based upon the current assets and current liabilities of the Company as set forth in the Company’s unaudited balance sheet as of October 31, 2012.