Filed by Ares
Capital Corporation
pursuant to Rule 425 under the Securities Act of 1933
and deemed filed under Rule 14a-12 of the Securities Exchange Act of 1934
Subject
Company: Allied Capital Corp.
Commission File No. 814-00138
On October 26,
2009, Ares Capital Corporation, a Maryland corporation (Ares Capital),
entered into an Agreement and Plan of Merger (the Merger Agreement) with Allied
Capital Corporation, a Maryland corporation (Allied Capital), and ARCC
Odyssey Corp., a Maryland corporation and wholly owned subsidiary of Ares
Capital (Merger Sub). The Merger Agreement provides that, upon the terms and
subject to the conditions set forth in the Merger Agreement, Merger Sub will
merge with and into Allied Capital, with Allied Capital as the surviving
company (the Merger). Immediately
following the Merger, Allied Capital will merge with and into Ares Capital.
Upon
consummation of the Merger, each share of common stock, par value $0.0001 per
share, of Allied Capital issued and outstanding immediately prior to the
effective time of the Merger will be converted into and become exchangeable for
0.325 common shares, par value $0.001 per share, of Ares Capital. Based on the number of shares of Allied common
stock outstanding on the date of the Merger Agreement and not including the
effect of outstanding in-the-money options, this will result in approximately
58.3 million Ares Capital shares being exchanged for approximately 179.4
million outstanding Allied Capital shares, subject to adjustment in certain
limited circumstances.
Following
consummation of the transactions contemplated by the Merger Agreement, Ares
Capitals Board of Directors will continue as directors of Ares Capital. However, Ares Capitals Board of Directors
will be increased by at least one member and Ares Capital will submit the name
of one member of Allied Capitals current Board of Directors for consideration
to Ares Capitals Nominating and Governance Committee to fill the vacancy.
The Merger Agreement, which is included as Exhibit 2.1
to this current report on Form 8-K and incorporated herein by reference,
contains (a) customary representations and warranties of Allied Capital
and Ares Capital, including, among others: corporate organization,
capitalization, corporate authority and absence of conflicts, third party and
governmental consents and approvals, reports and regulatory matters, financial
statements, compliance with law and legal proceedings, absence of certain
changes, taxes, employee matters, intellectual property, insurance, investment
assets and certain contracts, (b) covenants of Allied Capital and Ares
Capital to conduct their respective businesses in the ordinary course until the
Merger is completed and (c) covenants of Allied Capital and Ares Capital
not to take certain actions during this interim period.
Among other things, Allied Capital has agreed to, and
will cause its affiliates, consolidated subsidiaries, and its and each of their
respective officers, directors, managers, employees and other advisors, representatives
and agents to, immediately cease and cause to be terminated all discussions and
negotiations with respect to a Takeover Proposal (as defined in the Merger
Agreement) from a third party and not to directly or indirectly solicit or take
any other action (including providing information) with the intent to solicit
any inquiry, proposal or offer with respect to a Takeover Proposal.
However, if Allied Capital receives a bona fide
unsolicited Takeover Proposal from a third party, and its Board of Directors
determines in good faith, after consultation with reputable outside legal
counsel and financial advisers experienced in such matters, that failure to
consider such proposal would breach the duties of the directors under
applicable law, and the Takeover Proposal constitutes or is reasonably likely
to result in a Superior Proposal (as defined in the Merger Agreement), Allied
Capital may engage in discussions and negotiations with such third party so
long as certain notice and other procedural requirements are satisfied. In addition, subject to certain procedural
requirements (including the ability of Ares Capital to revise its offer) and
the payment of a $30 million termination fee, Allied Capital may terminate the
Merger Agreement and enter into an agreement with a third party who makes a
Superior Proposal.
The
representations and warranties of each party set forth in the Merger Agreement (a) have
been qualified by confidential disclosures made to the other party in
connection with the Merger Agreement, (b) will not survive consummation of
the Merger and cannot be the basis for any claims under the Merger Agreement by
the other party after the Merger is consummated, (c) are qualified in
certain circumstances by a materiality standard which may differ from what may
be viewed as material by investors, (d) were made only as of the date of
the Merger Agreement or such other date as is specified in the Merger
Agreement, and (e) may have been included in the
2
Merger Agreement for the
purpose of allocating risk between Allied Capital and Ares Capital rather than
establishing matters as facts.
Accordingly,
the Merger Agreement is included with this filing only to provide investors
with information regarding the terms of the Merger Agreement, and not to
provide investors with any factual information regarding the parties or their
respective businesses. The Merger
Agreement should not be read alone, but should instead be read in conjunction
with the other information regarding the parties and the Merger that will be
contained in the joint proxy statement/prospectus that the parties will be
filing in connection with the Merger as well as in the Forms 10-K, Forms 10-Q
and other filings that each of Allied Capital and Ares Capital make with the
Securities and Exchange Commission (SEC).
Consummation
of the Merger, which is currently anticipated to occur by the end of the first
quarter of 2010, is subject to certain conditions, including, among others, Allied
Capital stockholder approval, Ares
Capital stockholder approval, required regulatory approvals (including
expiration of the waiting period under the Hart-Scott-Rodino Act), receipt of
certain Ares Capital and Allied Capital lender consents and other customary
closing conditions.
The
Merger Agreement also contains certain termination rights for Allied Capital
and Ares Capital and provides that, in connection with the termination of the
Merger Agreement under specified circumstances, Allied Capital may be required
to pay Ares Capital a termination fee of $30 million ($15 million if Allied
Capital stockholders do not approve the Merger) and Ares Capital may be
required to pay Allied Capital a termination fee of $30 million.
The
foregoing description of the Merger and the Merger Agreement does not purport
to be complete and is qualified in its entirety by reference to the Merger
Agreement, which is attached hereto as Exhibit 2.1 and is incorporated
into this current report on Form 8-K by reference.
The exhibits
to the Merger Agreement, which relate to certain tax opinions to be delivered
by counsel to Allied Capital and Ares Capital at closing, and schedules to the
Merger Agreement, which include lists of items required to be disclosed by, and
exceptions to, the representations, warranties and covenants contained in the
Merger Agreement, have not been filed.
Upon request, Ares Capital will furnish supplementally to the SEC a copy
of any omitted exhibit or schedule.
In a separate
transaction, on October 30, 2009, Ares Capital completed its acquisition
of Allied Capitals interests in the Senior Secured Loan Fund LLC (the SL
Fund, formerly known as the Unitranche Fund) for $165 million in cash.
With approximately $3.6 billion of committed capital, the SL Fund was formed in
December 2007 to invest in unitranche loans of middle-market
companies. The SL Fund currently holds unitranche loans totaling
approximately $900 million.
IMPORTANT ADDITIONAL INFORMATION WILL BE FILED WITH THE SEC
This communication is being made in respect of the
proposed business combination involving Ares Capital and Allied Capital. In connection with the proposed transaction,
Ares Capital plans to file with the SEC a Registration Statement on Form N-14
that includes proxy statements of Ares Capital and Allied Capital and that also
constitutes a prospectus of Ares Capital.
The definitive Joint Proxy Statement/Prospectus will be mailed to
stockholders of Ares Capital and Allied Capital, respectively. INVESTORS AND SECURITY HOLDERS OF ARES
CAPITAL AND ALLIED CAPITAL ARE URGED TO READ THE JOINT PROXY
STATEMENT/PROSPECTUS AND OTHER DOCUMENTS FILED WITH THE SEC CAREFULLY IN THEIR
ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT THE PROPOSED TRANSACTION.
Investors and security holders will be able to
obtain free copies of the Registration Statement and Joint Proxy
Statement/Prospectus (when available) and other documents filed with the SEC by
each of Ares Capital and Allied Capital through the web site maintained by the
SEC at www.sec.gov. Free copies of the
Registration Statement and Joint Proxy Statement/Prospectus (when available)
and other documents filed
3
with the
SEC can also be obtained on Ares Capitals website at www.arescapitalcorp.com
and on Allied Capitals website at www.alliedcapital.com.
PROXY SOLICITATION
Ares Capital, Allied Capital and their respective
directors, executive officers and certain other members of management and
employees may be soliciting proxies from Ares Capital and Allied Capital
stockholders in favor of the acquisition.
Information regarding the persons who may, under the rules of the
SEC, be considered participants in the solicitation of the Ares Capital and
Allied Capital stockholders in connection with the proposed acquisition will be
set forth in the Joint Proxy Statement/Prospectus when it is filed with the
SEC. You can find information about Ares
Capitals executive officers and directors in its definitive proxy statement
filed with the SEC on March 9, 2009.
You can find information about Allied Capitals executive officers and
directors in its definitive proxy statement filed with the SEC on April 1,
2009. You can obtain free copies of
these documents from Ares Capital and Allied Capital in the manner set forth
above.
Forward-Looking
Statements
Information
set forth in this current report on Form 8-K contains forward-looking
statements, which relate to future events or the future performance or financial
condition of Ares Capital or Allied Capital or the combined company following
the merger. Allied Capital and Ares
Capital caution readers that any forward-looking information is not a guarantee
of future performance, condition or results and involves a number of risks and
uncertainties. Actual results and
conditions could differ materially from those contained in the forward-looking
information as a result of a number of factors.
Such forward-looking statements include, but are not limited to, statements
about the benefits of the business combination transaction involving Allied
Capital and Ares Capital, including, among others, future financial and
operating results, Ares Capitals plans, objectives, expectations and
intentions and other statements that are not historical facts.
The
following factors, among others, could cause actual results to differ
materially from those set forth in the forward-looking statements: the failure
of Allied Capital stockholders and Ares Capital stockholders to approve the
transaction; the risk that the businesses will not be integrated successfully;
and disruption from the transaction making it more difficult to maintain
relationships with Allied Capitals and Ares Capitals private equity sponsors. Additional factors that may affect future
results are described in Allied Capitals and Ares Capitals filings with the
SEC, which are available at the SECs web site http://www.sec.gov or
http://www.alliedcapital.com or http://www.arescapitalcorp.com, respectively. Allied Capital and Ares Capital disclaim any
obligation to update and revise statements contained in these materials based
on new information or otherwise.
4
EXECUTION COPY
AGREEMENT
AND PLAN OF MERGER
among
ARES
CAPITAL CORPORATION
ARCC
ODYSSEY CORP.
and
ALLIED
CAPITAL CORPORATION
Dated as of October 26,
2009
Table of Contents
|
Page
|
|
|
ARTICLE
I THE MERGER
|
1
|
|
|
1.1 The Merger
|
1
|
1.2 Closing
|
1
|
1.3 Effective Time
|
2
|
1.4 Effects of the Merger
|
2
|
1.5 Conversion of Capital Stock
|
2
|
1.6 Stock Options
|
3
|
1.7 Charter and Bylaws of the Surviving Company
|
4
|
1.8 Directors and Officers
|
4
|
1.9 Effect on the Parent Common Stock
|
5
|
|
|
ARTICLE
II DELIVERY OF MERGER CONSIDERATION
|
5
|
|
|
2.1 Exchange Agent
|
5
|
2.2 Deposit of Merger Consideration
|
5
|
2.3 Delivery of Merger Consideration
|
5
|
|
|
ARTICLE
III REPRESENTATIONS AND WARRANTIES OF THE COMPANY
|
8
|
|
|
3.1 Corporate Organization
|
8
|
3.2 Capitalization
|
9
|
3.3 Authority; No Violation
|
10
|
3.4 Governmental Consents
|
12
|
3.5 Reports; Regulatory Matters
|
12
|
3.6 Company Financial Statements
|
13
|
3.7 Brokers Fees
|
16
|
3.8 Absence of Changes or Events
|
16
|
3.9 Compliance with Applicable Law
|
16
|
3.10 State Takeover Laws
|
18
|
3.11 Opinion
|
18
|
3.12 Company Information
|
19
|
3.13 Taxes and Tax Returns
|
19
|
3.14 Litigation
|
21
|
3.15 Employee Matters
|
21
|
3.16 Certain Contracts
|
25
|
3.17 Insurance Coverage
|
27
|
3.18 Investment Assets
|
28
|
3.19 [Reserved]
|
28
|
3.20 Intellectual Property
|
28
|
3.21 Environmental Matters
|
28
|
3.22 Real Property
|
29
|
3.23 Appraisal Rights
|
30
|
Table of Contents
(continued)
|
Page
|
|
|
3.24 Representations Regarding Ciena
|
30
|
3.25 Representations Regarding Callidus
|
30
|
|
|
ARTICLE
IV REPRESENTATIONS AND WARRANTIES OF PARENT
|
31
|
|
|
4.1 Corporate Organization
|
31
|
4.2 Capitalization
|
32
|
4.3 Authority; No Violation
|
33
|
4.4 Governmental Consents
|
34
|
4.5 Reports; Regulatory Matters
|
34
|
4.6 Parent Financial Statements
|
36
|
4.7 Brokers Fees
|
38
|
4.8 Absence of Changes or Events
|
38
|
4.9 Compliance with Applicable Law
|
39
|
4.10 Opinion
|
40
|
4.11 Parent Information
|
40
|
4.12 Taxes and Tax Returns
|
41
|
4.13 Litigation
|
43
|
4.14 Employee Matters
|
43
|
4.15 Certain Contracts
|
43
|
4.16 Insurance Coverage
|
46
|
4.17 Investment Assets
|
46
|
4.18 [Reserved]
|
47
|
4.19 Intellectual Property
|
47
|
4.20 Environmental Matters
|
47
|
4.21 Real Property
|
47
|
4.22 Investment Adviser and Administrator
|
47
|
|
|
ARTICLE
V COVENANTS RELATING TO CONDUCT OF BUSINESS
|
48
|
|
|
5.1 Conduct of Businesses Prior to the Effective Time
|
48
|
5.2 Company Forbearances
|
49
|
5.3 [Reserved]
|
52
|
5.4 Parent Forbearances
|
52
|
|
|
ARTICLE
VI ADDITIONAL AGREEMENTS
|
53
|
|
|
6.1 Further Assurances
|
53
|
6.2 Regulatory Matters
|
56
|
6.3 Stockholder Approval
|
56
|
6.4 NASDAQ Listing
|
58
|
6.5 Employee Matters
|
58
|
6.6 Indemnification; Directors and Officers Insurance
|
61
|
6.7 No Solicitation
|
63
|
6.8 Parent Recommendations
|
66
|
Table
of Contents
(continued)
|
Page
|
|
|
6.9 Access to Information
|
66
|
6.10 Takeover Statutes and Provisions
|
67
|
6.11 Tax Matters
|
67
|
6.12 Merger of Surviving Company
|
68
|
6.13 Stakeholder Litigation
|
68
|
6.14 Resignations
|
68
|
6.15 Section 16 Matters
|
68
|
6.16 Managed Funds Approvals
|
69
|
|
|
ARTICLE
VII CONDITIONS PRECEDENT
|
69
|
|
|
7.1 Conditions to Each Partys Obligation To Effect the
Merger
|
69
|
7.2 Conditions to Obligations of Parent
|
69
|
7.3 Conditions to Obligations of the Company
|
71
|
|
|
ARTICLE
VIII TERMINATION AND AMENDMENT
|
72
|
|
|
8.1 Termination
|
72
|
8.2 Termination Fee
|
74
|
8.3 Effect of Termination
|
75
|
8.4 Fees and Expenses
|
76
|
8.5 Amendment
|
76
|
8.6 Extension; Waiver
|
76
|
|
|
ARTICLE
IX CERTAIN DEFINITIONS
|
76
|
|
|
ARTICLE
X GENERAL PROVISIONS
|
87
|
|
|
10.1 Nonsurvival of Representations, Warranties and
Agreements
|
87
|
10.2 Notices
|
87
|
10.3 Interpretation
|
88
|
10.4 Counterparts
|
88
|
10.5 Entire Agreement
|
89
|
10.6 Governing Law; Jurisdiction
|
89
|
10.7 Publicity
|
89
|
10.8 Assignment; Third Party Beneficiaries
|
89
|
10.9 No Specific Performance
|
89
|
10.10 Disclosure Schedule
|
90
|
10.11 Conforming Amendment
|
90
|
Index
of Defined Terms
|
|
Section
|
|
|
|
|
Administration
Agreement
|
|
|
9
|
Administrator
|
|
|
4.22(a)
|
Affiliate
|
|
|
9
|
Agreement
|
|
|
Preamble
|
Articles of Merger
|
|
|
1.3
|
Bankruptcy and Equity
Exception
|
|
|
3.3(a)
|
Bankruptcy Code
|
|
|
9
|
Bankruptcy Event
|
|
|
9
|
Bankruptcy Laws
|
|
|
9
|
BDC
|
|
|
9
|
Business Day
|
|
|
9
|
Business Employees
|
|
|
6.5(b)
|
Callidus
|
|
|
9
|
Certificate
|
|
|
1.5(d)
|
Ciena
|
|
|
9
|
Closing
|
|
|
1.2
|
Closing Date
|
|
|
1.2
|
COBRA
|
|
|
9
|
Code
|
|
|
9
|
Company
|
|
|
Preamble
|
Company Adverse
Recommendation Change
|
|
|
6.7(c)
|
Company Articles
|
|
|
9
|
Company Benefit Plans
|
|
|
3.15(a)
|
Company Bylaws
|
|
|
9
|
Company Capitalization
Date
|
|
|
3.2(a)
|
Company Common Stock
|
|
|
1.5(b)
|
Company Credit
Agreement
|
|
|
9
|
Company D&O
Policies
|
|
|
6.6(b)
|
Company Disclosure
Schedule
|
|
|
10.10
|
Company Exemptive Order
|
|
|
9
|
Company Insurance
Policy
|
|
|
3.17(a)
|
Company Intellectual
Property Rights
|
|
|
3.20
|
Company Interim
Financials
|
|
|
9
|
Company Managed Funds
|
|
|
9
|
Company Material
Contract
|
|
|
3.16(a)
|
Company Matters
|
|
|
9
|
Company Outstanding
Debt
|
|
|
9
|
Company Private Note
Agreement
|
|
|
9
|
Company Private Notes
|
|
|
9
|
Company Property
|
|
|
3.22(a)
|
Company Public Notes
|
|
|
9
|
Company Quarterly
Report
|
|
|
9
|
Company Recommendation
|
|
|
6.7(c)
|
Company REIT
|
|
|
9
|
Index
of Defined Terms
(continued)
|
|
Section
|
|
|
|
|
Company Requisite
Regulatory Approvals
|
|
|
3.4
|
Company Right
|
|
|
9
|
Company SEC Reports
|
|
|
3.5(b)
|
Company Stock Option
|
|
|
1.6(a)
|
Company Stock Option
Plan
|
|
|
9
|
Company Stockholders
Meeting
|
|
|
6.3(a)
|
Confidentiality
Agreement
|
|
|
9
|
Conforming Amendment
|
|
|
10.11
|
Consolidated Subsidiary
|
|
|
9
|
Contract
|
|
|
9
|
Current Premium
|
|
|
6.6(b)
|
Disclosure Schedule
|
|
|
10.10
|
DOJ
|
|
|
6.1(a)
|
EDGAR
|
|
|
9
|
Effective Time
|
|
|
1.3
|
Employees
|
|
|
9
|
Environmental Laws
|
|
|
9
|
ERISA
|
|
|
9
|
ERISA Affiliate
|
|
|
3.15(d)
|
ERISA Plan
|
|
|
3.15(d)
|
Exchange Act
|
|
|
9
|
Exchange Agent
|
|
|
2.1
|
Exchange Agent
Agreement
|
|
|
2.1
|
Exchange Fund
|
|
|
2.2
|
Exchange Ratio
|
|
|
9
|
Financing Consents
|
|
|
9
|
FIRPTA Certificate
|
|
|
7.2(e)
|
FTC
|
|
|
6.1(a)
|
GAAP
|
|
|
9
|
Governmental Entity
|
|
|
9
|
HSR Act
|
|
|
9
|
Indemnified Liabilities
|
|
|
6.6(a)
|
Indemnified Parties
|
|
|
6.6(a)
|
Initial Shares
|
|
|
9
|
Intellectual Property
Rights
|
|
|
3.20
|
Investment Adviser
|
|
|
4.22(a)
|
Investment Advisers Act
|
|
|
9
|
Investment Advisory
Agreement
|
|
|
9
|
Investment Company Act
|
|
|
9
|
IRS
|
|
|
9
|
Joint Proxy
Statement/Prospectus
|
|
|
3.4
|
knowledge
|
|
|
9
|
Law
|
|
|
9
|
Lease
|
|
|
9
|
2
Index
of Defined Terms
(continued)
|
|
Section
|
|
|
|
|
Leased Real Property
|
|
|
3.22(b)
|
Letter of Transmittal
|
|
|
2.3(a)
|
liabilities
|
|
|
9
|
Liens
|
|
|
9
|
Managed Fund
|
|
|
9
|
Material Adverse Effect
|
|
|
9
|
Merger
|
|
|
Recitals
|
Mergers
|
|
|
Recitals
|
Merger Consideration
|
|
|
1.5(c)
|
Merger Sub
|
|
|
Preamble
|
Merger Sub Common Stock
|
|
|
1.5(a)
|
MGCL
|
|
|
9
|
Multiemployer Plan
|
|
|
3.15(d)
|
NASDAQ
|
|
|
9
|
NYSE
|
|
|
9
|
Notice of a Superior
Proposal
|
|
|
6.7(d)
|
Order
|
|
|
9
|
Organizational
Documents
|
|
|
9
|
Owned Real Property
|
|
|
3.22(b)
|
Parent
|
|
|
Preamble
|
Parent Adverse Recommendation Change
|
|
|
6.8(a)
|
Parent Articles
|
|
|
9
|
Parent Average Closing
Price
|
|
|
1.6(c)
|
Parent Benefit Plans
|
|
|
4.14
|
Parent Bylaws
|
|
|
9
|
Parent Capitalization
Date
|
|
|
4.2(a)
|
Parent Common Stock
|
|
|
9
|
Parent Disclosure
Schedule
|
|
|
10.10
|
Parent Insurance Policy
|
|
|
4.16
|
Parent Intellectual
Property Rights
|
|
|
4.19
|
Parent Interim
Financials
|
|
|
9
|
Parent Managed Fund
Contracts
|
|
|
9
|
Parent Managed Funds
|
|
|
9
|
Parent Material
Contracts
|
|
|
4.15(a)
|
Parent Matters
|
|
|
9
|
Parent Quarterly Report
|
|
|
9
|
Parent Recommendation
|
|
|
6.8(a)
|
Parent Requisite
Regulatory Approvals
|
|
|
4.4
|
Parent SEC Reports
|
|
|
4.5(b)
|
Parent Stockholders
Meeting
|
|
|
6.3(b)
|
party
|
|
|
9
|
PBGC
|
|
|
9
|
Permit
|
|
|
9
|
Person
|
|
|
9
|
3
Index
of Defined Terms
(continued)
|
|
Section
|
|
|
|
|
Previously Disclosed
|
|
|
9
|
Prior Quarter
|
|
|
6.11(b)
|
Proceeding
|
|
|
9
|
Property Agreements
|
|
|
9
|
REA
|
|
|
9
|
Real Property
|
|
|
3.22(b)
|
Reference Price
|
|
|
9
|
Registration Statement
|
|
|
3.4
|
Registration Statement Tax Opinion
|
|
|
9
|
Regulatory Approvals
|
|
|
9
|
REIT
|
|
|
3.13(c)
|
Representatives
|
|
|
6.7(a)
|
Reverse Termination Fee
|
|
|
8.2(a)
|
RIC
|
|
|
3.13(b)
|
Rights
|
|
|
3.2(a)
|
Sarbanes-Oxley Act
|
|
|
9
|
SEC
|
|
|
9
|
Securities Act
|
|
|
9
|
Schedule of Investments
|
|
|
5.3
|
SDAT
|
|
|
1.3
|
Second Merger
|
|
|
Recitals
|
Special Termination
Event
|
|
|
9
|
Special Termination Fee
|
|
|
8.2(a)(ii)
|
Superior Proposal
|
|
|
9
|
Surviving Company
|
|
|
Recitals
|
Takeover Approval
|
|
|
6.7(c)(ii)
|
Takeover Proposal
|
|
|
9
|
Takeover Statutes
|
|
|
3.10
|
Tax
|
|
|
9
|
Tax Dividend
|
|
|
9
|
Tax Return
|
|
|
9
|
Termination Date
|
|
|
8.1(b)(i)
|
Termination Fee
|
|
|
8.2(a)(i)
|
Transactions
|
|
|
9
|
Voting Debt
|
|
|
3.2(a)
|
WARN
|
|
|
3.15(k)
|
WARN Notice
|
|
|
6.5(g)
|
4
AGREEMENT
AND PLAN OF MERGER
AGREEMENT AND PLAN OF
MERGER, dated as of October 26, 2009 (this Agreement), among
Allied Capital Corporation, a Maryland corporation (the Company), Ares
Capital Corporation, a Maryland corporation (Parent), and ARCC Odyssey
Corp., a Maryland corporation and wholly owned direct Consolidated Subsidiary
of Parent (Merger Sub).
RECITALS
A. The Boards of Directors of the Company and Parent have
determined that it is advisable and in the best interests of their respective
companies and their respective stockholders to consummate the strategic
business combination transaction provided for in this Agreement in which Merger
Sub shall, on the terms and subject to the conditions set forth in this
Agreement, merge with and into the Company (the Merger), with the
Company as the surviving company in the Merger (sometimes referred to in such
capacity as the Surviving Company).
Immediately after the Merger, the Surviving Company shall merge with and
into Parent (the Second Merger, and together with the Merger, the Mergers).
B. The parties intend the Mergers together to be treated as
a reorganization within the meaning of Section 368(a) of the Code
and intend for this Agreement to constitute a plan of reorganization within
the meaning of the Code.
C. The parties desire to make certain representations,
warranties, covenants and other agreements in connection with the Merger and
also to prescribe certain conditions to the Merger.
NOW, THEREFORE, in
consideration of the representations, warranties, covenants and other
agreements contained in this Agreement, the parties agree as follows:
ARTICLE I
THE MERGER
1.1 The
Merger. Subject to the terms and
conditions of this Agreement, in accordance with the MGCL, at the Effective
Time, Merger Sub shall merge with and into the Company. The Company shall be the surviving company in
the Merger and shall continue its existence as a corporation under the Laws of
the State of Maryland, subject to Section 6.12. As of the Effective Time, the separate
corporate existence of Merger Sub shall cease.
1.2 Closing. On the terms and subject to the conditions
set forth in this Agreement, the closing of the Merger (the Closing)
shall take place at 10:00 a.m., New York City time, at the offices of
Proskauer Rose LLP, 1585 Broadway, New York, New York 10036-8299, on the date
that is three Business Days after the satisfaction or waiver of the latest to
occur of the conditions set forth in Article VII (other than those
conditions that by their nature are to be satisfied at the Closing, but subject
to the satisfaction or waiver of such conditions), unless otherwise agreed in
writing by the parties to this Agreement (the Closing Date).
1.3 Effective
Time. The Merger shall become
effective as set forth in the articles of merger (the Articles of Merger)
that shall be filed with and accepted for record by the State Department of
Assessments and Taxation of Maryland (the SDAT) on the Closing
Date. The term Effective Time shall be
the date and time when the Merger becomes effective as set forth in the
Articles of Merger.
1.4 Effects
of the Merger. At and after the
Effective Time, the Merger shall have the effects set forth in the MGCL.
1.5 Conversion
of Capital Stock. At the Effective
Time, by virtue of the Merger and without any action on the part of the
Company, Parent or Merger Sub or the holder of any of the following securities:
(a) Each share of
common stock, par value $0.001 per share, of Merger Sub (the Merger Sub
Common Stock) issued and outstanding immediately prior to the Effective
Time shall be converted into one validly issued, fully paid and nonassessable
share of common stock, par value $0.0001 per share, of the Surviving Company.
(b) All shares of
common stock, par value $0.0001 per share, of the Company issued and
outstanding immediately prior to the Effective Time (the Company Common
Stock) that are owned by Parent or any of its Consolidated Subsidiaries (including
Merger Sub) shall be cancelled and shall cease to exist and no shares of the
Parent Common Stock or any other consideration shall be delivered in exchange
therefor.
(c) Subject to Section 1.5(e),
each share of the Company Common Stock, except for shares of the Company Common
Stock owned by Parent or any of its Consolidated Subsidiaries (including Merger
Sub), shall be converted, in accordance with the procedures set forth in Article II,
into the right to receive a number of shares of the Parent Common Stock as
determined by the Exchange Ratio (the Merger Consideration).
(d) All of the
shares of the Company Common Stock converted into the right to receive the
Merger Consideration pursuant to this Article I shall no longer be
outstanding and shall automatically be cancelled and shall cease to exist as of
the Effective Time, and each certificate previously representing any such
shares of the Company Common Stock (each, a Certificate) shall
thereafter represent only the right to receive the Merger Consideration, cash
in lieu of fractional shares into which the shares of the Company Common Stock
represented by such Certificate have been converted pursuant to Section 2.3(f) and
any dividends or other distributions payable pursuant to Section 2.3(c).
(e) Between the
date of this Agreement and the Effective Time, if the outstanding shares of the
Parent Common Stock shall have themselves been increased, decreased, changed
into or exchanged for a different number or kind of shares or securities as a result
of any reclassification, recapitalization, stock split, reverse stock split,
split-up, combination or exchange of shares, or if a stock dividend (other than
as a result of shares delivered pursuant to Parents dividend reinvestment
plan) or dividend payable in any
2
other securities shall be
declared with a record date within such period, or if any other similar event
shall have occurred, the Merger Consideration, the Exchange Ratio and the
Reference Price shall be appropriately adjusted to provide to the holders of
the Company Common Stock and the Company Stock Options the same economic effect
as contemplated by this Agreement prior to such event.
1.6 Stock
Options.
(a) Prior to the
Closing Date, the Companys Board of Directors shall adopt such resolutions and
take such other actions as are necessary and sufficient to cause all
outstanding unvested and unexercisable options to purchase shares of the
Company Common Stock issued pursuant to the Company Stock Option Plan (each
outstanding option to purchase shares of the Company Common Stock issued
pursuant to the Company Stock Option Plan, whether or not vested and
exercisable, a Company Stock Option) to be fully vested and
exercisable. In addition, at least three
Business Days prior to the Effective Time, the Company shall provide the
Company Stock Option holders the opportunity to provide the Company with a
notice to exercise some or all of the outstanding Company Stock Options held by
them, such exercise to be effective as of the Effective Time; provided that the
resolutions and actions of the Companys Board of Directors to cause all
unvested and unexercisable Company Stock Options to be fully vested and
exercisable as of the Effective Time, and the exercise of such Company Stock
Options by the holders thereof, shall be contingent on the Effective Time
occurring. The Company Common Stock
acquired upon such exercise shall be converted at the Effective Time into the
right to receive the Merger Consideration and Parent shall take, or cause to be
taken, all actions reasonably necessary to issue, as soon as reasonably
practicable (but in no event later than five Business Days) after the Effective
Time, shares of the Parent Common Stock in respect thereof to the holders of
the Company Stock Options exercised, in accordance with their terms, pursuant
to this Section 1.6(a).
(b) At the
Effective Time, each Company Stock Option, whether previously vested or
unvested, that has not been exercised (whether pursuant to
Section 1.6(a) or otherwise) and that has an exercise price per
share:
(i) equal to or
greater than the product of (a) the Parent Average Closing Price and
(b) the Exchange Ratio, shall be cancelled without any payment therefor
and
(ii) less than the
product of (a) the Parent Average Closing Price and (b) the Exchange
Ratio, shall be cancelled and shall only entitle the holder thereof to receive,
at the election of the holder, either
(A) a lump sum cash
amount, as soon as reasonably practicable (but in no event later than ten
Business Days) after the Effective Time, equal to the product of (u) x
(w), where (u) is the excess of the Parent Average Closing Price
multiplied by the Exchange Ratio over the exercise price per share under such
Company Stock Option and (w) is the total number of shares of the Company
Common Stock subject to the Company Stock Option for which this election is
made, less applicable withholdings, or
3
(B) a number of shares
of the Parent Common Stock equal to (i) the product of (x) the total
number of shares of the Company Common Stock subject to the Company Stock
Option for which this election is made times (y) the excess of
(1) the Parent Average Closing Price multiplied by the Exchange Ratio over
(2) the exercise price per share under such Company Stock Option, less
applicable withholdings, divided by (ii) the Parent Average Closing Price;
provided, that each holder of Company Stock Options who would otherwise
have been entitled to receive a fraction of a share of the Parent Common Stock
(with all calculations rounded to three decimal places) shall receive, in lieu
thereof, cash (without interest) in an amount equal to the product of
(i) such fractional part of a share of the Parent Common Stock multiplied
by (ii) the Parent Average Closing Price.
At least three Business Days prior to the Effective
Time, the Company shall provide the Company Stock Option holders the
opportunity to make the election provided by this Section 1.6(b) with
respect to some or all of the outstanding Company Stock Options held by them,
such election to be effective as of the Effective Time; provided that
the resolutions and actions of the Companys Board of Directors authorizing the
election provided by this Section 1.6(b) and a holders
election pursuant to this Section 1.6(b) shall be contingent
on the Effective Time occurring; provided, further, that if any
Company Stock Option holder fails to make an election pursuant to this Section 1.6(b),
such holder shall be deemed to have made an election to receive shares of the
Parent Common Stock pursuant to this Section 1.6(b)(ii)(B). Parent shall take, or cause to be taken, all
actions reasonably necessary to issue to the holders of the Company Stock
Options who have made an election to receive shares of the Parent Common Stock
pursuant to this Section 1.6(b)(ii)(B), shares of the Parent Common
Stock to the extent of such holders election as soon as reasonably practicable
(but in no event later than five Business Days) after the Effective Time.
(c) For purposes of
this Section 1.6, Parent Average Closing Price means the
average closing price per share of the Parent Common Stock on NASDAQ (as
reported by Bloomberg L.P. or, if not reported thereby, by another
authoritative source mutually agreed by the parties) for the five consecutive
trading days immediately preceding the Closing Date.
(d) Prior to the
Closing Date, the Companys Board of Directors shall adopt such resolutions and
take such other actions as are necessary and sufficient to effectuate the
provisions of this Section 1.6(d) and to cause the Company
Stock Option Plan to be terminated as of the Effective Time.
1.7 Charter
and Bylaws of the Surviving Company.
The charter of Merger Sub, as in effect immediately prior to the
Effective Time, shall be the Charter of the Surviving Company as of the
Effective Time. The bylaws of Merger
Sub, as in effect immediately prior to the Effective Time, shall be the bylaws
of the Surviving Company until thereafter amended in accordance with applicable
Law and the terms of such bylaws.
1.8 Directors
and Officers. Subject to applicable
Law, the directors of Merger Sub immediately prior to the Effective Time shall
be the initial directors of the Surviving Company
4
and shall hold office until their respective successors are duly
elected and qualify, or their earlier death, resignation or removal. The officers of Parent immediately prior to
the Effective Time shall be the initial officers of the Surviving Company and
shall hold office until their respective successors are duly elected and
qualify, or their earlier death, resignation or removal. At the Effective Time, Parents Board of
Directors shall be increased by at least one member and Parent shall submit the
name of one member of the Companys Board of Directors for consideration to
Parents Nominating and Governance Committee to fill the vacancy.
1.9 Effect
on the Parent Common Stock. Each
share of the Parent Common Stock outstanding immediately prior to the Effective
Time shall remain outstanding.
ARTICLE II
DELIVERY OF MERGER CONSIDERATION
2.1 Exchange
Agent. Prior to the Effective Time,
Parent shall appoint Parents
transfer agent to act as exchange agent (the Exchange Agent) hereunder,
pursuant to an agreement (the Exchange Agent Agreement), the form of which
shall be subject to the Companys prior approval (such prior approval not to be
unreasonably withheld, conditioned or delayed).
2.2 Deposit
of Merger Consideration. At or prior
to the Effective Time, Parent shall deposit with the Exchange Agent, in trust
for the benefit of holders of shares of the Company Common Stock,
(a) certificates representing the Parent Common Stock issuable pursuant to
Section 1.5(c) (or otherwise shall make shares of the Parent
Common Stock available for such issuance) minus the aggregate number of shares
of the Parent Common Stock that is represented by the fractional shares for
which the Exchange Agent shall pay an amount in cash to the holders thereof and
(b) cash sufficient to pay the cash for fractional shares in accordance
with Section 2.3(f) and any dividends or other distributions
pursuant to Section 2.3(c).
Parent shall make available to the Exchange Agent, from time to time as
needed, additional cash sufficient to pay cash in lieu of fractional shares
pursuant to Section 2.3(f) and any dividends and other
distributions pursuant to Section 2.3(c). Any cash and certificates of the Parent
Common Stock deposited with the Exchange Agent (or shares of the Parent Common
Stock otherwise made available to the Exchange Agent pursuant to this Section 2.2)
shall hereinafter be referred to as the Exchange Fund.
2.3 Delivery of Merger
Consideration.
(a) As soon as
reasonably practicable after the Effective Time, but in any event within five
Business Days, the Exchange Agent shall mail to each holder of record of
Certificate(s) that immediately prior to the Effective Time represented
outstanding shares of the Company Common Stock that were converted into the
right to receive the Merger Consideration pursuant to Section 1.5(c) and
any cash in lieu of fractional shares of the Parent Common Stock to be issued
or paid in consideration therefor and any dividends and other distributions
pursuant to Section 2.3(c), (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to
Certificate(s) shall pass, only upon delivery of Certificate(s) (or
affidavits of loss in lieu of
5
such Certificates)) to
the Exchange Agent and shall be substantially in such form and have such other
provisions as shall be prescribed by Parent and the Exchange Agent Agreement
(the Letter of Transmittal) and (ii) instructions for use in
surrendering Certificate(s) in exchange for the Merger Consideration, any
cash in lieu of fractional shares of the Parent Common Stock to be issued or
paid in consideration therefor and any dividends or other distributions to
which such holder is entitled pursuant to Section 2.3(c).
(b) Subject to Section 2.3(f),
upon surrender to the Exchange Agent of its Certificate or Certificates,
accompanied by a properly completed Letter of Transmittal, a holder of the Company
Common Stock shall be entitled to receive promptly after the Effective Time the
Merger Consideration and any cash in lieu of fractional shares of the Parent
Common Stock to be issued or paid in consideration therefor in respect of the
shares of the Company Common Stock represented by its Certificate or
Certificates and any dividends or other distributions to which such holder is
entitled to pursuant to Section 2.3(c). The Exchange Fund shall not be used for any
other purpose other than the purposes provided for in the immediately preceding
sentence. Until so surrendered, each
such Certificate shall represent after the Effective Time, for all purposes,
only the right to receive, without interest, the Merger Consideration and,
subject to Section 2.3(f), any cash in lieu of fractional shares of
the Parent Common Stock to be issued or paid in consideration therefor upon
surrender of such Certificate in accordance with this Article II,
and any dividends or other distributions to which such holder is entitled
pursuant to this Article II.
(c) No dividends or
other distributions with respect to the Parent Common Stock shall be paid to
the holder of any unsurrendered Certificate with respect to the shares of the
Parent Common Stock represented thereby, in each case unless and until the
surrender of such Certificate in accordance with this Article II. Subject to the effect of applicable abandoned
property, escheat or similar Laws, following surrender of any such Certificate
in accordance with this Article II, the record holder thereof shall
be entitled to receive, without interest, (i) the amount of dividends or
other distributions with a record date after the Effective Time theretofore
payable with respect to the whole shares of the Parent Common Stock represented
by such Certificate and not paid and/or (ii) at the appropriate payment
date, the amount of dividends or other distributions payable with respect to
shares of the Parent Common Stock represented by such Certificate with a record
date after the Effective Time (but before such surrender date) and with a
payment date subsequent to the issuance of the Parent Common Stock issuable
with respect to such Certificate.
(d) Notwithstanding
anything herein to the contrary, in the event of a transfer of ownership of a
Certificate representing the Company Common Stock that is not registered in the
stock transfer records of the Company, the shares of the Parent Common Stock
and cash in lieu of fractional shares of the Parent Common Stock comprising the
Merger Consideration, and any dividends or other distributions payable pursuant
to Section 2.3(c), shall be issued or paid in exchange therefor to
a Person other than the Person in whose name the Certificate so surrendered is
registered if the Certificate formerly representing such Company Common Stock
shall be properly endorsed or otherwise be in proper form for transfer. To the extent Parent reasonably determines
that
6
any transfer or other
similar Taxes required by reason of the payment or issuance to a Person other
than the registered holder of the Certificate are required to be paid, the
Person requesting such payment or issuance shall establish to the reasonable
satisfaction of Parent that the Tax has been paid by such Person or is not
applicable.
(e) After the
Effective Time, there shall be no transfers on the stock transfer books of the
Company of the shares of the Company Common Stock that were issued and
outstanding immediately prior to the Effective Time other than to settle
transfers of the Company Common Stock that occurred prior to the Effective
Time. Subject to Section 2.3(d),
if, after the Effective Time, Certificates representing such shares are
presented for transfer to the Exchange Agent, they shall be cancelled and
exchanged for the Merger Consideration and, subject to Section 2.3(f),
any cash in lieu of fractional shares of the Parent Common Stock to be issued
or paid in consideration therefor in accordance with the procedures set forth
in this Article II, and any dividends or other distributions to
which such holder is entitled pursuant to this Article II.
(f) No certificates
or scrip representing fractional shares of the Parent Common Stock shall be
issued upon the conversion of the Company Common Stock pursuant to Section 1.5(c),
and such fractional share interests shall not entitle the owner thereof to vote
or to any rights of a holder of the Parent Common Stock. Each holder of shares of the Company Common
Stock exchanged pursuant to the Merger who would otherwise have been entitled
to receive a fraction of a share of the Parent Common Stock (after taking into
account all Certificates delivered by such holder) shall receive, in lieu
thereof, cash (without interest) in an amount equal to the product of
(i) such fractional part of a share of the Parent Common Stock multiplied
by (ii) the Reference Price. For
purposes of this Section 2.3(f), all fractional shares to which a
single record holder would be entitled shall be aggregated and calculations
shall be rounded to three decimal places.
(g) Any portion of
the Exchange Fund that remains unclaimed by the stockholders of the Company as
of the first anniversary of the Effective Time may be paid to Parent, upon
Parents written demand to the Exchange Agent.
In such event, any former stockholders of the Company who have not
theretofore complied with this Article II shall thereafter look
only to Parent with respect to the Merger Consideration, any cash in lieu of
any fractional shares and any unpaid dividends and other distributions on the
Parent Common Stock deliverable in respect of each share of the Company Common
Stock such stockholder holds as determined pursuant to this Agreement, in each
case, without any interest thereon.
Notwithstanding the foregoing, none of Parent, the Company, the
Surviving Company, Merger Sub, the Exchange Agent or any other Person shall be
liable to any former holder of shares of the Company Common Stock for any
amount delivered in good faith to a public official pursuant to applicable
abandoned property, escheat or similar Laws.
(h) In the event
any Certificate shall have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the Person claiming such Certificate to be lost,
stolen or destroyed and, if reasonably required by Parent or the Exchange
Agent, the posting by such Person of a bond in such amount as Parent may
determine is reasonably necessary as indemnity against any claim that may be
made against it with respect to such
7
Certificate, the Exchange
Agent shall issue in exchange for such lost, stolen or destroyed Certificate,
the Merger Consideration, any cash in lieu of any fractional shares and any
unpaid dividends and other distributions on the Parent Common Stock, in each
case, deliverable in respect thereof pursuant to this Agreement.
(i) Parent or the
Exchange Agent shall be entitled to deduct and withhold from amounts payable
pursuant to this Agreement, including the Merger Consideration, to any holder
of the Company Common Stock such amounts as it determines in good faith are
required to be deducted and withheld with respect to the making of such payment
under the Code, or under any provision of state, local or foreign Tax Law. To the extent that amounts are so withheld
and paid over to the appropriate Governmental Entity, such withheld amounts
shall be treated for all purposes of this Agreement as having been paid to the
recipient.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
No representation or
warranty of the Company contained in this Article III (other than
the representations and warranties contained in Sections 3.1(a) (first
and last sentence), 3.3(a) and 3.3(b)(i), which shall be
true and correct in all material respects, Section 3.2, which shall
be true and correct except to a de minimis
extent (relative to Section 3.2 taken as a whole) or except in any
way that reasonably is not adverse to Parent, and Sections 3.1(b), 3.7,
3.8(a), 3.13(b) (the last sentence), 3.16(a) and
3.23, which shall be true and correct in all respects) shall be deemed
untrue, and the Company shall not be deemed to have breached a representation
or warranty, as a consequence of the existence of any fact, event or
circumstance unless such fact, circumstance or event, individually or taken
together with all other facts, events or circumstances inconsistent with any
representation contained in this Article III (read for this purpose
without regard to any individual reference to materiality, Material Adverse
Effect or words of similar import set forth in this Article III)
has had or is reasonably likely to have a Material Adverse Effect with respect
to the Company.
Subject to the foregoing,
except with respect to matters that have been Previously Disclosed, the Company
hereby represents and warrants to Parent as follows as of the date hereof and
as of the Effective Time:
3.1 Corporate
Organization.
(a) The Company is
a corporation duly incorporated and validly existing under the laws of the
State of Maryland and in good standing with the SDAT. The Company has the requisite corporate power
and authority to own or lease all of its properties and assets and to carry on
its business as it is now being conducted in all material respects, and is duly
licensed or qualified to do business in all material respects as a foreign
corporation in each jurisdiction in which the nature of the business conducted
by it or the character or location of the properties and assets owned or leased
by it makes such licensing or qualification necessary. The Company has duly elected to be regulated
as a
8
BDC pursuant to the
Investment Company Act and such election has not been revoked or withdrawn and
is in full force and effect.
(b) True, complete
and correct copies of the Company Articles and the Company Bylaws, as in effect
as of the date of this Agreement, have previously been publicly filed by the
Company and are available to Parent.
(c) Each
Consolidated Subsidiary of the Company (i) is duly incorporated or duly
formed, as applicable to each such Consolidated Subsidiary, and validly
existing and in good standing under the Laws of its jurisdiction of
organization, (ii) has the requisite corporate (or similar) power and
authority to own or lease all of its properties and assets and to carry on its
business as it is now being conducted in all material respects and
(iii) is duly licensed or qualified to do business in all material
respects as a foreign corporation or other business entity in each jurisdiction
in which the nature of the business conducted by it or the character or
location of the properties and assets owned or leased by it makes such
licensing or qualification necessary.
3.2 Capitalization.
(a) The authorized
capital stock of the Company consists of 400,000,000 shares of stock of which, as of October 23, 2009 (the Company
Capitalization Date), no more than 179,361,775 shares were issued and
outstanding, all of which were the Company Common Stock. No shares of authorized capital stock of the
Company have been classified as anything but the Company Common Stock. As of the Company Capitalization Date, there
were outstanding Company Stock Options to purchase an aggregate of 24,540,171
shares of the Company Common Stock. As
of the Company Capitalization Date, there were 28,552,687 shares of the Company
Common Stock reserved for issuance under the Company Stock Option Plan. All of the issued and outstanding shares of
the Company Common Stock have been duly authorized and validly issued and are
fully paid, nonassessable and free of preemptive rights, with no personal
liability with respect to the Company attaching to the ownership thereof. As of the date of this Agreement, no bonds,
debentures, notes or other indebtedness having the right to vote on any matters
on which stockholders of the Company may vote (Voting Debt) are issued
or outstanding. As of the Company
Capitalization Date, except pursuant to this Agreement as set forth in this Section 3.2
(including as contemplated in Section 3.2(b)), the Company does not
have and is not bound by any outstanding subscriptions, options, warrants,
calls, rights, commitments or agreements of any character (Rights)
calling for the purchase or issuance of, or the payment of any amount based on,
any shares of the Company Common Stock, Voting Debt or any other equity
securities of the Company or any securities representing the right to purchase
or otherwise receive any shares of the Company Common Stock, Voting Debt or
other equity securities of the Company.
There are no obligations of the Company or any of its Consolidated
Subsidiaries (i) to repurchase, redeem or otherwise acquire any shares of
capital stock of the Company, Voting Debt or any equity security of the Company
or its Consolidated Subsidiaries or any securities representing the right to
purchase or otherwise receive any shares of capital stock, Voting Debt or any
other equity security of the Company or its Consolidated Subsidiaries or (ii) pursuant
to which the Company or any of its Consolidated Subsidiaries
9
is or could be required
to register shares of the Companys capital stock or other securities under the
Securities Act. All of the Company
Common Stock sold has been sold pursuant to an effective registration statement
filed under the Securities Act or an appropriate exemption therefrom and in
accordance with the Investment Company Act.
(b) Other than
awards under the Company Stock Option Plan that are outstanding as of the
Company Capitalization Date, no other equity-based awards issued by the Company
or any of its Consolidated Subsidiaries are outstanding as of the Company
Capitalization Date. The Company has
Previously Disclosed a true, complete and correct list of the aggregate number
of shares of the Company Common Stock issuable upon the exercise of each
Company Stock Option granted under the Company Stock Option Plan that were
outstanding as of the Company Capitalization Date and the exercise price for
each such Company Stock Option. Since
the Company Capitalization Date through the date hereof, the Company has not
(i) issued or repurchased any shares of the Company Common Stock, Voting
Debt or other equity securities of the Company, other than the issuance of
shares of the Company Common Stock in connection with the exercise of the
Company Stock Options or settlement in accordance with the terms of the Company
Stock Option Plan that were outstanding on the Company Capitalization Date or
(ii) issued or awarded any options, stock appreciation rights, restricted
shares, restricted stock units, deferred equity units, awards based on the
value of the Companys capital stock or any other equity-based awards. From January 1, 2009 through the date of
this Agreement, except as expressly provided for in this Agreement, neither the
Company nor any of its Consolidated Subsidiaries has (A) accelerated the
vesting of or lapsing of restrictions with respect to any material stock-based
compensation awards or long term incentive compensation awards, (B) with
respect to executive officers of the Company or any of its Consolidated
Subsidiaries, entered into or amended any material employment, severance,
change of control or similar agreement (including any agreement providing for
the reimbursement of excise Taxes under Section 4999 of the Code) or
(C) adopted or amended any material Company Benefit Plan (as defined
below), except to the extent required by applicable Law.
(c) All of the
issued and outstanding shares of capital stock or other equity ownership
interests of each Consolidated Subsidiary of the Company are owned by the
Company, directly or indirectly, free and clear of any Liens, and all of such
shares or equity ownership interests are duly authorized and validly issued and
are fully paid, nonassessable and free of preemptive rights. No Consolidated Subsidiary of the Company has
or is bound by any outstanding Rights calling for the purchase or issuance of,
or the payment of any amount based on, any shares of capital stock or any other
equity security of such Consolidated Subsidiary or any securities representing
the right to purchase or otherwise receive any shares of capital stock or any
other equity security of such Consolidated Subsidiary.
3.3 Authority;
No Violation.
(a) The Company has
full corporate power and authority to execute and deliver this Agreement and to
consummate the Transactions (other than the Second Merger). The execution and delivery of this Agreement
and the consummation of the
10
Transactions (other than
the Second Merger) have been duly and validly approved by the Board of
Directors of the Company. The Board of
Directors of the Company has determined that this Agreement and the terms of
the Merger and the related Transactions (other than the Second Merger) are
advisable and in the best interests of the Company and its stockholders, has
approved the Company Matters and has directed that the Company Matters be submitted
to the Companys stockholders for approval at a duly held meeting of such
stockholders and has adopted a resolution to the foregoing effect. Except for receipt of the affirmative vote of
the holders of at least two-thirds of the shares of the Company Common Stock
entitled to vote to approve the Company Matters pursuant to this Agreement, the
Merger and the other Transactions (other than the Second Merger) have been
authorized by all necessary corporate action.
This Agreement has been duly and validly executed and delivered by the
Company and (assuming due authorization, execution and delivery by Parent and
Merger Sub) constitutes the valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms (except as may be
limited by bankruptcy, insolvency, fraudulent transfer, moratorium,
reorganization or similar Laws of general applicability relating to or
affecting the rights of creditors generally and subject to general principles
of equity (the Bankruptcy and Equity Exception)).
(b) Neither the
execution and delivery of this Agreement by the Company nor the consummation by
the Company of the Transactions (other than the Second Merger), nor compliance
by the Company with any of the terms or provisions of this Agreement, will
(i) violate any provision of the Company Articles or the Company Bylaws,
or (ii) assuming that the consents, approvals and filings referred to in Section 3.3(a) and
Section 3.4 are duly obtained and/or made, (A) violate any Law
or Order applicable to the Company, any of its Consolidated Subsidiaries or any
of their respective properties or assets or (B) violate, conflict with,
result in a breach of any provision of or the loss of any benefit under,
constitute a default (or an event that, with or without the giving of notice or
lapse of time, or both, would constitute a default) under, result in the
termination of or a right of termination or cancellation under, accelerate the
performance required by, require the consent, approval or authorization of, or
notice to or filing with any third-party with respect to, or result in the
creation of any Lien upon any of the respective properties or assets of the
Company or any of its Consolidated Subsidiaries under, any of the terms,
conditions or provisions of any Permit, Contract or other obligation to which
the Company or any of its Consolidated Subsidiaries is a party or by which any
of them or any of their respective properties or assets is bound except, with
respect to clause (ii), any such violation, conflict, breach, default,
termination, cancellation, acceleration or creation that would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect with respect to the Company.
(c) Neither the
consummation by the Company of the Transactions nor compliance by the Company
with any of the terms or provisions of this Agreement will, assuming that the
consents, rating agency confirmations, approvals, authorizations, notices and
filings Previously Disclosed are duly obtained or made, violate, conflict with,
result in a breach of any provision of or the loss of any benefit under,
11
constitute a default (or
an event that, with or without the giving of notice or lapse of time, or both,
would constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by,
require the consent, confirmation, approval or authorization of, or notice to
or filing with any third-party with respect to, any of the terms, conditions or
provisions of any Company Managed Fund Contract.
3.4 Governmental
Consents. Except for (i) the
Regulatory Approvals that have been Previously Disclosed by the Company in
Section 3.4 of the Company Disclosure Schedule (collectively, the Company
Requisite Regulatory Approvals), (ii) the filing with the SEC of a joint
proxy statement in definitive form relating to the meeting of the Companys
stockholders and the meeting of Parents stockholders to be held in connection
with this Agreement and the Transactions (the Joint Proxy
Statement/Prospectus) and of a registration statement on Form N-14 or
such other appropriate SEC form (the Registration Statement) in which the
Joint Proxy Statement/Prospectus will be included as a prospectus (the
Prospectus), and declaration of effectiveness of the Registration Statement,
(iii) the filing of the Articles of Merger with and the acceptance for
record of the Articles of Merger by the SDAT, (iv) any notices or filings
under the HSR Act and (v) such filings and approvals as are required to be
made or obtained under the securities or Blue Sky Laws of various states in
connection with the issuance of the shares of the Parent Common Stock pursuant
to this Agreement and approval of listing of such Parent Common Stock on NASDAQ
and the Company Public Notes on NASDAQ, NYSE or other applicable exchanges, no
material consents or approvals of or filings or registrations with any
Governmental Entity are necessary in connection with the consummation by the
Company of the Merger and the other Transactions. No consents or approvals of or filings or
registrations with any Governmental Entity are necessary in connection with the
execution and delivery by the Company of this Agreement other than (i) the
reporting of this Agreement on a Current Report on Form 8-K or
(ii) as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect with respect to the Company.
3.5 Reports;
Regulatory Matters.
(a) The Company and
each of its Consolidated Subsidiaries, in all material respects, have timely
filed all reports, schedules, registrations, statements, certifications and
other documents, together with any amendments required to be made with respect
thereto, that they were required to file since January 1, 2008 with the
SEC, the NYSE and any other Governmental Entity, and all other reports and
statements required to be filed by them since January 1, 2008 pursuant to
the Laws of any Governmental Entity, and have paid all fees and assessments due
and payable in connection therewith. To
the knowledge of the Company, since January 1, 2008, no Governmental
Entity has initiated or has pending any Proceeding or investigation into the
business, disclosures or operations of the Company or any of its Consolidated
Subsidiaries. To the knowledge of the
Company, since January 1, 2008, no Governmental Entity has resolved any
Proceeding or investigation into the business, disclosures or operations of the
Company or any of its Consolidated Subsidiaries. To the knowledge of the Company, there is no
unresolved or threatened comment, exception or stop order by any Governmental
Entity with respect to any filing by the Company or any of its Consolidated Subsidiaries,
relating to any examinations or inspections of the Company or any of its
Consolidated Subsidiaries. To the
knowledge of the Company, since January 1, 2008, there have been no formal
inquiries by, or disagreements or disputes with, any Governmental Entity with
respect to
12
the business, operations,
policies or procedures of the Company or any of its Consolidated Subsidiaries.
(b)
An accurate and complete copy of each (i) prospectus, final registration
statement, report, schedule and definitive proxy statement filed with or
furnished to the SEC by the Company or any of its Consolidated Subsidiaries
pursuant to the Investment Company Act, the Securities Act or the Exchange Act
since January 1, 2008 (the Company SEC Reports) and (ii) communication
mailed by the Company to its stockholders since January 1, 2008 is
publicly available. No such Company SEC
Report or communication, at the time filed, furnished or communicated (and, in
the case of registration statements and proxy statements, on the dates of
effectiveness and the dates of the relevant meetings, respectively), 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 made
therein, in light of the circumstances in which they were made, not
misleading. As of their respective
dates, all Company SEC Reports complied as to form in all material respects
with the published rules and regulations of the SEC with respect thereto.
(c)
Neither the Company nor any of its Consolidated Subsidiaries is subject to any
cease-and-desist or other order or enforcement action issued by, or is a party
to any Contract, consent agreement or memorandum of understanding with, or is a
party to any commitment letter or similar undertaking to, or is subject to any
Order by, or has been ordered to pay any civil money penalty by, or since January 1,
2008 has adopted any policies, procedures or board resolutions at the request
of, any Governmental Entity that currently restricts in any material respect
the conduct of its business (or to the Companys knowledge that, upon
consummation of the Mergers, would restrict in any material respect the conduct
of the business of Parent or any of its Consolidated Subsidiaries), or that in
any material manner relates to its capital adequacy, its ability to pay
dividends, its credit, risk management or compliance policies, its internal
controls, its management or its business, other than those of general
application that apply to similarly situated BDCs or their Consolidated
Subsidiaries, nor has the Company or any of its Consolidated Subsidiaries been
advised in writing or, to the knowledge of the Company, verbally, since January 1,
2008 by any Governmental Entity that it is considering issuing, initiating, ordering,
or requesting any of the foregoing.
3.6 Company Financial Statements.
(a)
The financial statements, including the related consolidated schedules of
investments, of the Company and its Consolidated Subsidiaries included (or
incorporated by reference) in the Company SEC Reports (including the related
notes, where applicable) and the Company Interim Financials (i) have been
prepared from, and are in accordance with, in all material respects, the books
and records of the Company and its Consolidated Subsidiaries, (ii) fairly
present in all material respects the consolidated results of operations, cash
flows, changes in stockholders equity and consolidated financial position of
the Company and its Consolidated Subsidiaries for the respective fiscal periods
or as of the respective dates therein set forth (subject in the case of
unaudited statements and the Company Interim Financials to recurring year-end
audit adjustments normal in nature and
13
amount), (iii) have
complied as to form, as of their respective dates of filing with the SEC or, in
the case of the Company Interim Financials, as of the date hereof, in all
material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto and (iv) have
been prepared in all material respects in accordance with GAAP consistently
applied during the periods involved, except, in each case, as indicated in such
statements or in the notes thereto. As
of the date hereof, the books and records of the Company and its Consolidated
Subsidiaries have been maintained in all material respects in accordance with
GAAP and any other applicable legal and accounting requirements and reflect
only actual transactions. KPMG LLP has
not resigned, threatened resignation or been dismissed as independent public
accountants of the Company as a result of or in connection with any
disagreements with the Company on a matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure.
(b)
(i) Neither the Company nor any of its Consolidated Subsidiaries has any
material liability or obligation of any nature whatsoever (whether absolute,
accrued, contingent, determined, determinable or otherwise and whether due or
to become due), except for (A) in the case of the Company and its
Consolidated Subsidiaries, liabilities that are reflected or reserved against
on the consolidated balance sheet of the Company included in the Company Interim
Financials, (B) liabilities incurred in the ordinary course of business
consistent with past practice since September 30, 2009 and (C) liabilities
incurred since September 30, 2009 pursuant to Contracts entered into after
September 30, 2009 not in violation of this Agreement (as if this
Agreement was in effect on September 30, 2009).
(ii)
Other than as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect with respect to the Company, neither
the Company nor any of its Consolidated Subsidiaries is a party to, and has no
commitment to become a party to, any joint venture, partnership agreement or
any similar Contract (including any Contract relating to any transaction,
arrangement or relationship between or among the Company or any of its
Consolidated Subsidiaries, on the one hand, and any Affiliate, including any
structured finance, special purpose or limited purpose entity, on the other
hand) where the purpose or intended effect of such arrangement is to avoid
disclosure of any material transaction involving the Company in the Companys
consolidated financial statements.
(iii)
None of the Consolidated Subsidiaries of the Company is required to file any
forms, reports, schedules, statements or other documents with the SEC.
(c)
Since January 1, 2008, (i) neither the Company nor any of its
Consolidated Subsidiaries nor, to the knowledge of the Company, any director,
officer, Employee, auditor, accountant or representative of the Company or any
of its Consolidated Subsidiaries has received or otherwise had or obtained
knowledge of any material complaint, allegation, assertion or claim, whether
written or oral, regarding the accounting or auditing practices, procedures,
methodologies or methods of the Company or any of its Consolidated Subsidiaries
or their respective internal accounting controls, including any complaint,
allegation, assertion or claim that the Company or any of its
14
Consolidated Subsidiaries
has engaged in questionable or illegal accounting or auditing practices or
maintains inadequate internal controls over financial reporting (as defined in
Rules 13a-15(f) and 15d-15(f) of the Exchange Act), and
(ii) no attorney representing the Company or any of its Consolidated
Subsidiaries, whether or not employed by the Company or any of its Consolidated
Subsidiaries, has reported evidence of a material violation of securities laws,
breach of fiduciary duty or similar violation by the Company or any of its
officers, directors, Employees or agents to the Board of Directors of the
Company or any committee thereof or to any director or officer of the Company.
(d)
Neither the Company nor any of its Consolidated Subsidiaries is a party to any
securitization transaction with respect to the assets of the Company or its
Consolidated Subsidiaries or off-balance sheet arrangement with respect to the
Company (as defined in Item 303(a)(4) of Regulation S-K promulgated under
the Exchange Act). To the Companys
knowledge, since January 1, 2008, KPMG LLP, which has expressed its
opinion with respect to the financial statements of the Company and its
Consolidated Subsidiaries included in the Company SEC Reports (including the
related notes), has been (i) independent with respect to the Company and
its Consolidated Subsidiaries within the meaning of Regulation S-X, and (ii) in
compliance with subsections (g) through (l) of Section 10A of
the Exchange Act and the related rules of the SEC and the Public Company
Accounting Oversight Board.
(e)
The principal executive officer and principal financial officer of the Company
have made all certifications required by, and would be able to make such
certifications as of the date hereof and as of the Closing Date as if required
to be made as of such dates, pursuant to Sections 302 and 906 of the
Sarbanes-Oxley Act and any related rules and regulations promulgated by
the SEC, and the statements contained in any such certifications are complete
and correct, and the Company is otherwise in compliance with all applicable
effective provisions of the Sarbanes-Oxley Act and the applicable listing
standards and corporate governance rules of the NYSE.
(f) The Company has in all material respects:
(i)
designed and maintained a system of disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) promulgated under the
Exchange Act) to ensure that all information (both financial and non-financial)
required to be disclosed by the Company in the reports that it files or submits
to the SEC under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the rules and forms of the
SEC and that such information is accumulated and communicated to the Companys
management as appropriate to allow timely decisions regarding required
disclosure and to allow the Companys principal executive officer and principal
financial officer to make the certifications required under the Exchange Act
with respect to such reports;
(ii)
designed and maintained a system of internal controls over financial reporting
sufficient to provide reasonable assurance concerning the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with GAAP, including reasonable assurance that (A) transactions
are executed in
15
accordance with managements
general or specific authorizations, (B) transactions are recorded as
necessary to permit preparation of financial statements in conformity with GAAP
and to maintain accountability for assets, (C) access to assets is
permitted only in accordance with managements general or specific
authorization and (D) the recorded accountability for assets is compared
with the existing assets at reasonable intervals and appropriate action is
taken with respect to any differences; the Companys management, with the
participation of the Companys principal executive and financial officers, has
completed an assessment of the effectiveness of the Companys internal controls
over financial reporting for the fiscal year ended December 31, 2008 in
compliance with the requirements of Section 404 of the Sarbanes-Oxley Act,
and such assessment concluded that such internal controls were effective using
the framework specified in the Companys Annual Report on Form 10-K for
the fiscal year ended December 31, 2008;
(iii)
(A) disclosed, based on its most recent evaluation, to its auditors and
the Audit Committee of the Board of Directors of the Company (1) any
significant deficiencies or material weaknesses (as defined in the relevant
Statement of Auditing Standards) in the design or operation of the Companys
internal controls over financial reporting that could adversely affect its
ability to record, process, summarize and report financial data and (2) any
fraud, whether or not material, that involves management or other Employees who
have a significant role in its internal controls over financial reporting and (B) identified
for the Companys auditors any material weaknesses in internal controls; and
(iv)
provided to Parent true and correct copies of any of the foregoing disclosures
to its auditors or the Audit Committee of the Board of Directors of the Company
that have been made in writing from January 1, 2008 through the date
hereof, and will promptly provide to Parent true and correct copies of any such
disclosures that are made after the date hereof.
3.7 Brokers Fees. Neither the Company nor any of its
Consolidated Subsidiaries nor any of their respective officers, directors,
Employees or agents has utilized any broker, finder or financial advisor or
incurred any liability for any brokers fees, commissions or finders fees in
connection with the Merger or the other Transactions, other than to Bank of
America/Merrill Lynch, Pierce, Fenner & Smith Incorporated and Sandler
ONeill & Partners, L.P. pursuant to letter agreements, true, complete
and correct copies of which have been previously delivered to Parent.
3.8 Absence of Changes or Events. Since September 30, 2009, (a) there
has not been any Effect that, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect with respect to the
Company, and (b) there has not been any action that, if it had been taken
after the date hereof, would have required the consent of Parent under Section 5.1
or 5.2.
3.9 Compliance with Applicable Law.
(a)
The Company and each of its Consolidated Subsidiaries is in compliance, and has
been operated since January 1, 2008, in all material respects, with all
applicable
16
Laws, including, if and to
the extent applicable, the Investment Company Act, the Investment Advisers Act,
the Securities Act, the Exchange Act, Environmental Laws and the Code other
than, in the case of Environmental Laws only, as would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect with
respect to the Company. Each of the
Company and its Consolidated Subsidiaries is in compliance, and has been
operated since January 1, 2008 in compliance, with all listing standards
and corporate governance standards of the NYSE or other listing exchange or
self regulating organization applicable to the Company or its Consolidated
Subsidiaries, other than as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect with respect to the
Company. The Company has complied with
the SEC Order.
(b)
(i) The Company and each Company Managed Fund has complied since January 1,
2008 (or, if later, its launch date or the date the Company or one of its
Consolidated Subsidiaries began managing the Company Managed Fund), and is in
compliance, in all material respects with its investment policies and
restrictions and portfolio valuation methods, if any, as such policies and
restrictions may be set forth in its registration statement, offering
circulars, indentures or plan documents (as they may be amended from time to
time) and applicable Laws, if any, other than any non-compliance that would
not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect with respect to the Company.
(c)
The Company has written policies and procedures adopted pursuant to Rule 38a-1
under the Investment Company Act that are reasonably designed to prevent
material violations of the Federal Securities Laws, as such term is defined
in Rule 38a-1(e)(1) under the Investment Company Act. Since January 1, 2008, there have been
no Material Compliance Matters for the Company, as such term is defined in Rule 38a-1(e)(2) under
the Investment Company Act, other than those that have been reported to the
Companys Board of Directors and satisfactorily remedied or are in the process
of being remedied or those that would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect with respect to the
Company.
(d)
The Company and each of its Consolidated Subsidiaries will hold immediately
prior to the Closing, all Permits required in order to permit the Company and
each of its Consolidated Subsidiaries to own or lease their properties and
assets and to conduct their businesses under and pursuant to all applicable
Law, in each case, other than any failure to hold any Permit that would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect with respect to the Company.
All such Permits are valid and in full force and effect, except for
those the failure of which to be valid or to be in full force and effect would
not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect with respect to the Company. No violations with respect to such Permits
have occurred that would, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect with respect to the Company, and no
Proceeding is pending and served or threatened in writing or, to the knowledge
of the Company, pending and not served or otherwise threatened to suspend,
cancel, modify, revoke or materially limit any such Permits, which Proceeding
would, individually or in the aggregate, reasonably be expected to be material
to the operations of
17
the Company and its Consolidated
Subsidiaries, taken as a whole. Each
Employee of the Company and each of its Consolidated Subsidiaries who is
required to be registered or licensed as a registered representative,
investment adviser representative, sales person or an equivalent person with
any Governmental Entity is duly registered as such and such registration is in
full force and effect, except for such failures to be so registered or for such
registration to remain in full force and effect that, individually or in the
aggregate, would not reasonably be expected to be material to the operations of
the Company and its Consolidated Subsidiaries, taken as a whole.
(e)
Each Company Managed Fund that is required to register as an investment company
under the Investment Company Act is so registered or is properly relying on an
exemption from registration under the Investment Company Act.
(f)
No affiliated person (as defined under the Investment Company Act) of the
Company has been subject to disqualification to serve in any capacity
contemplated by the Investment Company Act for any investment company
(including a BDC) under Sections 9(a) and 9(b) of the Investment
Company Act, unless, in each case, such Person has received exemptive relief
from the SEC with respect to any such disqualification. The Company has made available to Parent,
prior to the date of this Agreement, a copy of any material exemptive order or
other relief issued by the SEC in respect of any such disqualification. There is no material Proceeding pending and
served or, to the knowledge of the Company, threatened that would result in any
such disqualification.
(g)
Any Consolidated Subsidiary of the Company acting as an investment adviser as
defined in the Investment Advisers Act to a Company Managed Fund is duly
registered with the SEC under the Investment Advisers Act or is not subject to
registration under the Investment Advisers Act.
No Consolidated Subsidiary of the Company is registered or required to
be registered under the Exchange Act as a broker-dealer with the SEC.
(h)
Since January 1, 2008, the Company has not received any written
notification, or to the Companys knowledge oral notification, from a
Governmental Entity asserting that it is not in compliance in all material
respects with any material Laws or Permits.
3.10 State Takeover Laws. The Board of Directors of the Company has
approved this Agreement, the Merger and the other Transactions as required to
render inapplicable to this Agreement, the Merger and such other Transactions
the restrictions on business combinations set forth in any moratorium, control
share, fair price, takeover or interested stockholder Law, including
Subtitles 6 and 7 of Title 3 of the MGCL (any such laws, Takeover Statutes).
3.11 Opinion. The Board of Directors of the Company has
received the opinion of each of Bank of America/Merrill Lynch, Pierce, Fenner &
Smith Incorporated and Sandler ONeill & Partners, L.P., to the effect
that, as of the date hereof, and based upon and subject to the factors and
assumptions set forth therein, the Exchange Ratio is fair from a financial
point of view to the holders of the Company Common Stock.
18
3.12 Company Information. The information relating to the Company and
its Consolidated Subsidiaries that is provided by the Company or its
Representatives for inclusion in the Registration Statement, or in any
application, notification or other document filed with any Governmental Entity
in connection with the Transactions, will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein, in light of the circumstances in which they are made, not
misleading. The portions of the
Registration Statement relating to the Company and its Consolidated
Subsidiaries and other portions within the reasonable control of the Company
and its Consolidated Subsidiaries will comply in all material respects with the
provisions of the Exchange Act. The
Registration Statement will comply in all material respects with the provisions
of the Securities Act.
3.13 Taxes and Tax Returns.
(a)
Each of the Company and its Consolidated Subsidiaries has duly and timely filed
(including all applicable extensions) all material Tax Returns required to be
filed by it on or prior to the date of this Agreement (all such Tax Returns
being accurate and complete in all material respects), has paid all material
Taxes shown thereon as arising and has duly paid or made provision for the payment
of all material Taxes that have been incurred or are due or claimed to be due
from it by federal, state, foreign or local taxing authorities other than Taxes
that are not yet delinquent or are being contested in good faith, have not been
finally determined and have been adequately reserved against under GAAP. For taxable years ending on or after December 31,
2003, no Tax Return of the Company or its Consolidated Subsidiaries has been
examined by the IRS or other relevant taxing authority except where such
examination has not, and would not reasonably be expected to, give rise to
liabilities in excess of $25,000 or as set forth on Section 3.13(a) of
the Company Disclosure Schedule and any liability with respect thereto has been
satisfied or any liability with respect to deficiencies asserted as a result of
such examination is covered by reserves that are adequate under GAAP. There are no material disputes pending, or
written claims asserted, for Taxes or assessments upon the Company or any of
its Consolidated Subsidiaries for which the Company does not have reserves that
are adequate under GAAP. Neither the
Company nor any of its Consolidated Subsidiaries is a party to or is bound by
any Tax sharing, allocation or indemnification agreement or arrangement (other
than such an agreement or arrangement exclusively between or among the Company
and its Consolidated Subsidiaries).
Within the past five years (or otherwise as part of a plan (or series
of related transactions) within the meaning of Section 355(e) of the
Code of which the Merger is also a part), neither the Company nor any of its
Consolidated Subsidiaries has been a distributing corporation or a controlled
corporation in a distribution intended to qualify under Section 355(a) of
the Code. Neither the Company nor any of
its Consolidated Subsidiaries is required to include in income any adjustment
pursuant to Section 481(a) of the Code, no such adjustment has been
proposed by the IRS and no pending request for permission to change any
accounting method has been submitted by the Company or any of its Consolidated
Subsidiaries. Neither the Company nor
any of its Consolidated Subsidiaries has participated in a listed transaction
within the meaning of Treasury Regulation Section 1.6011-4(b)(2). If the Company or any of its Consolidated
Subsidiaries has participated in a reportable transaction within the meaning
of Treasury Regulation Section 1.6011-4(b),
19
such entity has properly
disclosed such transaction in accordance with the applicable Tax regulations.
(b)
The Company made a valid election under Part I of Subchapter M of Subtitle
A, Chapter 1, of the Code to be taxed as a regulated investment company (a RIC). The Company has qualified as a RIC at all
times since December 31, 2002 and expects to continue to so qualify
through the Effective Time. No challenge
to the Companys status as a RIC is pending or has been threatened orally or in
writing. The Company is not required to
pay a Tax Dividend for (i) the taxable year ending December 31, 2009 or (ii) to the
knowledge of the Company, for the period beginning January 1, 2010 and
ending on the date the Transactions are consummated, with such payments
determined without regard to Section 108(i) of the Code.
(c)
Company REIT made a valid election under Part II of Subchapter M of
Subtitle A, Chapter 1, of the Code to be taxed as a real estate investment
trust (a REIT). Company REIT
has qualified as a REIT at all times since its formation. No challenge to Company REITs status as a
REIT is pending or has been threatened in writing.
(d)
The Company and its Consolidated Subsidiaries have complied in all material
respects with all applicable Laws relating to the payment and withholding of
Taxes (including withholding of Taxes pursuant to Sections 1441, 1442 and 3402
of the Code or any comparable provision of any state, local or foreign Laws)
and have, within the time and in the manner prescribed by applicable Law,
withheld from and paid over all amounts required to be so withheld and paid
over under applicable Laws.
(e)
The Company is not aware of any fact or circumstance that could reasonably be
expected to prevent the Mergers together from qualifying as a reorganization
within the meaning of Section 368(a) of the Code.
(f)
The Company has no earnings and profits for U.S. federal income Tax purposes
described in Section 852(a)(2)(B) of the Code.
(g)
Each Consolidated Subsidiary of the Company that is a partnership, joint venture,
or limited liability company has been since its formation treated for U.S.
federal income Tax purposes as a partnership or disregarded entity, as the case
may be, and not as a corporation or an association taxable as a corporation.
(h)
Section 3.13(h) of the Company Disclosure Schedule lists each asset
the disposition of which would be subject to rules similar to Section 1374
of the Code as prescribed in Internal Revenue Service Notice 88-19, 1988-1 C.B.
486, or Treasury Regulation Section 1.337(d)-5, Treasury Regulation Section 1.337(d)-6
or Treasury Regulation Section 1.337(d)-7 and the amount of net
unrealized built-in gain (within the meaning of Section 1374(d) of
the Code) on each such asset.
(i)
No claim has been made in writing by a taxing authority in a jurisdiction where
the Company or any of its Consolidated Subsidiaries does not file Tax Returns
that
20
the Company or any such
Consolidated Subsidiary is or may be subject to taxation by that jurisdiction.
(j)
Neither the Company nor any other Person on behalf of the Company or any of its
Consolidated Subsidiaries has requested any extension of time within which to
file any material Tax Return, which material Tax Return has not yet been filed.
(k)
Neither the Company nor any of its Consolidated Subsidiaries has requested a
private letter ruling from the IRS or comparable rulings from other taxing
authorities.
(l)
Neither the Company nor any of its Consolidated Subsidiaries has any liability
for the Taxes of another Person other than the Company and its Consolidated
Subsidiaries under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign Law), as a transferee, successor or
payable pursuant to a contractual obligation.
(m)
There are no Liens for Taxes (other than Taxes not yet due and payable) upon
any of the assets of the Company or any of its Consolidated Subsidiaries.
3.14 Litigation.
(a)
Neither the Company nor any of its Consolidated Subsidiaries is a party to any,
and there are no pending or, to the Companys knowledge, threatened, legal,
administrative, arbitral or other Proceedings of any nature against the Company
or any of its Consolidated Subsidiaries or to which any of their assets are subject
that is seeking unspecified damages, damages in excess of $100,000, or any
injunctive or other equitable relief other than, in the case of Proceedings
initiated between the date hereof and the Closing Date only, such Proceedings
as would not, individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect with respect to the Company.
(b)
There is no material Order or regulatory restriction (other than regulatory
restrictions of general application that apply to similarly situated companies
or their Consolidated Subsidiaries) imposed upon the Company, any of its
Consolidated Subsidiaries or the assets of the Company or any of its
Consolidated Subsidiaries (or that, upon consummation of the Merger, would
apply to Parent or any of its Consolidated Subsidiaries).
(c)
Since January 1, 2008, there have not been, nor are there currently
pending, any internal investigations or inquiries being conducted by the
Company, the Companys Board of Directors (or any committee thereof) or any
third party at the request of any of the foregoing concerning any financial,
accounting, Tax, conflict of interest, self-dealing, fraudulent or deceptive
conduct or other misfeasance or malfeasance issues.
3.15 Employee Matters.
(a)
The Company has Previously Disclosed a true, complete and correct list of each employee
benefit plan as defined in Section 3(3) of ERISA, whether or not
21
subject to ERISA, and each
material employment, consulting, bonus, incentive or deferred compensation,
vacation, stock option or other equity-based, severance, termination,
retention, change of control, profit-sharing, fringe benefit, health, medical
or other similar plan, program, agreement or commitment, whether written or
unwritten entered into, maintained or contributed to by the Company or any of
its Consolidated Subsidiaries or to which the Company or any of its
Consolidated Subsidiaries is obligated to contribute or which otherwise
provides benefits to any current, former or future employee, officer or
director of the Company or any beneficiary or dependent thereof (the Company
Benefit Plans).
(b)
With respect to each of the Company Benefit Plans maintained by the Company or
any of its Consolidated Subsidiaries, the Company has provided to Parent or has
previously publicly filed, true, complete and correct copies of the following
(as applicable): (i) the written document evidencing such Company Benefit
Plan; (ii) the summary plan description; (iii) the three most recent
annual reports, financial statements and/or actuarial reports; (iv) the
most recent determination letter from the IRS; (v) the three most recent Form 5500s
that have been filed with the IRS, including all schedules thereto; (vi) any
related trust agreements, insurance contracts or documents of any other funding
arrangements; (vii) any notices to or from the IRS or any office or
representative of the Department of Labor relating to any pending compliance
issues in respect of any such Company Benefit Plan; and (viii) all
material amendments, material modifications or material supplements to any such
Company Benefit Plan.
(c)
With respect to each of the Company Benefit Plans, (i) all contributions,
premiums and other payments required to be made with respect to any Company
Benefit Plan have been made on or before their due dates under applicable Law
and the terms of such Company Benefit Plan, (ii) the Company and each of
its Consolidated Subsidiaries have operated and administered each such Company Benefit
Plan in material compliance with all applicable Laws and the terms of each such
plan, and (iii) the terms of each such Company Benefit Plan maintained by
the Company or its Consolidated Subsidiaries are in material compliance with
all applicable Laws. Each Company
Benefit Plan maintained by the Company or its Consolidated Subsidiaries that is
intended to be qualified under Section 401 has received a favorable
determination or opinion letter from the IRS to such effect and, to the
knowledge of the Company, no fact, circumstance or event has occurred or exists
since the date of such determination letter that would reasonably be expected
to adversely affect the qualified status of any such Company Benefit Plan. There are no pending or, to the knowledge of
the Company, threatened or anticipated material Proceedings by, on behalf of or
against any of the Company Benefit Plans, any fiduciaries of such Company
Benefit Plans (with respect to whom the Company has an indemnification
obligation with respect to their duties to any such Company Benefit Plans), or
against the assets of such Company Benefit Plans or any trust maintained in
connection with such Company Benefit Plans (other than routine claims for
benefits).
(d)
Each trade or business, whether or not incorporated, that together with the
Company or any of its Consolidated Subsidiaries would be deemed to be a single
employer within the meaning of Section 4001(b) of ERISA (an ERISA
Affiliate), has, to the knowledge of the Company, since January 1,
2008, fulfilled its obligations under the
22
minimum funding standards of
ERISA and the Code with respect to each ERISA Plan which it sponsors or
maintains or to which it has an obligation to contribute and is in material
compliance with ERISA and the Code with respect to each such ERISA Plan. To the knowledge of the Company, since January 1,
2008, no ERISA Affiliate has (i) sought a waiver of the minimum funding
standard under Section 412 of the Code in respect of any ERISA plan, (ii) failed
to make any contribution or payment to any ERISA Plan or Multiemployer Plan, or
made any amendment to any ERISA Plan, which has resulted or could result in the
imposition of a material Lien or the posting of a bond or other security under
ERISA or the Code, or (iii) incurred any material liability under Title IV
of ERISA, other than a liability to the PBGC for premiums under Section 4007
of ERISA. To the knowledge of the
Company, since January 1, 2008, no complete or partial withdrawal from any
Multiemployer Plan has been made by any ERISA Affiliate that would reasonably
be expected to result in any material liability to such ERISA Affiliate,
whether such liability is contingent or otherwise and if any ERISA Affiliate
were to withdraw from any such Multiemployer Plan, such withdrawal would not
result in any material liability to any ERISA Affiliate. For purposes of this Section 3.15(e), ERISA
Plan means any employee pension benefit plan (as defined in Section 3(2) of
ERISA) that is subject to Title IV of ERISA or Section 302 of ERISA or Section 412
of 4971 of the Code, other than a multiemployer plan within the meaning of Section 3(37)
and 4001(a)(3) of ERISA (a Multiemployer Plan). Notwithstanding the foregoing, the
representations contained in this Section 3.15(d) shall be deemed to
be breached only if and to the extent that the underlying event or occurrence
would reasonably be expected to result in any material liability to the Company
or any Consolidated Subsidiary.
(e)
Neither the Company nor any of its Consolidated Subsidiaries maintain or
contribute to, or within the last six years have maintained or contributed to, (i) any
employee benefit plan within the meaning of Section 3(3) of ERISA
that is subject to Section 412 of the Code or Section 302 or Title IV
of ERISA or (ii) a multiemployer plan within the meaning of Section 3(37)
and 4001(a)(3) of ERISA or a multiple employer plan within the meaning
of Sections 4063/4064 of ERISA or Section 413(c) of the Code.
(f)
Except as Previously Disclosed, no Company Benefit Plan is under audit or is the
subject of a material Proceeding by the IRS, the Department of Labor, the SEC
or any other Governmental Entity, nor is any such audit or material Proceeding
pending or, to the Companys knowledge, threatened.
(g)
Except as Previously Disclosed, or as provided for by the terms of this
Agreement, neither the execution or delivery of this Agreement nor the
consummation of the Transactions will, either alone or in conjunction with any
other event, (i) result in any payment or benefit becoming due or payable,
or required to be provided, to any director, employee or individual treated as
an independent contractor of the Company or any of its Consolidated
Subsidiaries, (ii) materially increase the amount or value of any benefit
or compensation otherwise payable or required to be provided to any such
director, employee or individual treated as an independent contractor, (iii) result
in the acceleration of the time of payment, vesting or funding of any such
benefit or compensation, (iv) result in any amount failing to be
deductible by reason of Section 280G of the Code or (v) result in any
23
limitation (x) on the
right of the Company or any of its Consolidated Subsidiaries prior to the
Effective Time, or (y) the right of Parent or any of its Consolidated
Subsidiaries on and after the Effective Time to amend, merge or terminate any
Company Benefit Plan maintained by the Company or its Consolidated Subsidiaries
or related trust.
(h)
Except as Previously Disclosed, neither the Company nor its Consolidated
Subsidiaries has any liability with respect to an obligation to provide
post-employment group health benefits (whether or not insured) with respect to
any Person beyond such Persons retirement or other termination of service,
other than coverage mandated by Section 4980B of the Code or applicable
Law.
(i)
All the Company equity awards have been granted in material compliance with the
terms of the applicable Company Benefit Plans and applicable Law.
(j)
Neither the Company nor any of its Consolidated Subsidiaries is a party to or
otherwise bound by any collective bargaining agreement or other Contract with a
labor union and there are no organizational campaigns, petitions or other
activities or Proceedings of any labor union, workers council or labor
organization seeking recognition of a collective bargaining unit with respect
to, or otherwise attempting to represent, any of the employees of the Company
or any of its Consolidated Subsidiaries or compel the Company or any of its
Consolidated Subsidiaries to bargain with any such labor union, works council
or labor organization. There are no
labor related controversies, strikes, slowdowns, walkouts or other work stoppages pending
or, to the knowledge of the Company, threatened and neither the Company nor any
of its Consolidated Subsidiaries has experienced any such labor related
controversy, strike, slowdown, walkout or other work stoppage within the
past three years. Neither the Company
nor any of its Consolidated Subsidiaries is a party to, or otherwise bound by,
any consent decree with, or citation by, any Governmental Entity relating to
employees or employment practices. The
Company and each of its Consolidated Subsidiaries are in compliance with all
applicable Laws relating to labor, employment, termination of employment or
similar matters, including but not limited to Laws relating to discrimination,
disability, labor relations, hours of work, payment of wages and overtime
wages, pay equity, immigration, workers compensation, working conditions,
employee scheduling, occupational safety and health, family and medical leave,
and employee terminations, and have not engaged in any unfair labor practices
or similar prohibited practices. Except
as would not result in any material liability to the Company or any of its
Consolidated Subsidiaries, there are no Proceedings of any nature pending or,
to the knowledge of the Company, threatened against the Company or any of its
Consolidated Subsidiaries brought by or on behalf of any applicant for
employment, any current or former employee, any Person alleging to be a current
or former employee, any class of the foregoing, or any Governmental Entity,
relating to any such Law, or alleging breach of any express or implied contract
of employment, wrongful termination of employment, or alleging any other
discriminatory, wrongful or tortious conduct in connection with the employment
relationship. The Company has provided
to Parent a copy of all written policies and procedures related to the Companys
and its Consolidated Subsidiaries employees.
24
(k)
Within the last six months, neither the Company nor any of its Consolidated
Subsidiaries has incurred any liability or obligation that remains unsatisfied
under the Worker Adjustment and Retraining Notification Act (WARN) or
any similar Laws regarding the termination or layoff of employees, nor has the
Company taken any undisclosed action that may contribute to establishing any
liability or obligation under such employee termination advance notification
laws.
3.16 Certain Contracts.
(a) The Company has Previously Disclosed a
complete and accurate list of, and true and complete copies have been delivered
or made available (including via EDGAR) to Parent of, all Contracts (in each
case, other than any Company Benefit Plans) (the Company Material Contracts)
to which, as of the date hereof, it or any of its Consolidated Subsidiaries is
a party, or by which it or any of its Consolidated Subsidiaries may be bound,
or, to the knowledge of the Company, to which it or any of its Consolidated
Subsidiaries or their respective assets or properties may be subject:
(1)
any loan or credit agreements, notes, bonds, mortgages, indentures and other
agreements and instruments pursuant to which any indebtedness of the Company or
any of its Consolidated Subsidiaries in an aggregate principal amount in excess
of $500,000 is outstanding or may be incurred;
(2)
any Contract, with (A) any Consolidated Subsidiaries of the Company, (B) any
current or former Employee or controlling stockholder of it or except with
respect to investments set forth in the Company SEC Reports or Company Interim
Financials, any Affiliate of such Person, or (C) any associate or member
of the immediate family (as such terms are respectively defined in Rule 12b-2
and Rule 16a-1 of the Exchange Act) of a Person identified in clause (A) or
(B) of this paragraph, in each case in excess of $250,000 (individually or
together with all related Contracts);
(3)
any Contract that creates future payment obligations, including settlement
agreements, in excess of $250,000 and that by its terms does not terminate, or
is not terminable upon notice, without penalty within 90 days or less, or any
Contract that creates or would create a Lien on any asset of the Company or its
Consolidated Subsidiaries (other than Liens consisting of restrictions on
transfer agreed to in respect of investments entered into in the ordinary
course of business or as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect with respect to the
Company);
25
(4)
except with respect to investments set forth in the Company SEC Reports or
Company Interim Financials, any partnership, limited liability company, joint
venture or other similar Contract that is not entered into in the ordinary
course of business and is material to the Company and its Consolidated
Subsidiaries, taken as a whole;
(5)
any non-competition or non-solicitation Contract or any other Contract that
limits, purports to limit, or would reasonably be expected to limit in each
case in any material respect the manner in which, or the localities in which, any
material business of the Company and its Consolidated Subsidiaries (taken as a
whole) is or could be conducted or the types of business that the Company and
its Consolidated Subsidiaries conducts or may conduct;
(6)
any Contract relating to the acquisition or disposition of any business or
operations (whether by merger, sale of stock, sale of assets or otherwise)
involving value in excess of $250,000 (individually or together with all
related Contracts) as to which there are any ongoing obligations or that was
entered into on or after January 1, 2008 other than Contracts entered into
in the ordinary course of business with respect to investments set forth in the
Company SEC Reports or the Company Interim Financials;
(7)
any Contract that obligates the Company or any of its Consolidated Subsidiaries
to conduct any business that is material to the Company and its Consolidated
Subsidiaries, taken as a whole, on an exclusive basis with any third party, or
upon consummation of the Merger, will obligate Parent, the Surviving Company or
any of their Consolidated Subsidiaries to conduct business with any third-party
on an exclusive basis;
(8)
any Contract with a Governmental Entity;
(9)
any Company Managed Fund Contract;
(10)
any Contract relating to any collateral management, investment advisory or
other management or advisory fees in excess of $250,000 per year payable by or
to the Company or any of its Consolidated Subsidiaries; or
(11) any other Contract that is a material
contract within the meaning of Item 601(b)(10) of the
26
SECs Regulation S-K or that
is material to the Company or its financial condition or results of operations.
(b)
Each Company Material Contract is (i) valid and binding on the Company or
its applicable Consolidated Subsidiary and, to the Companys knowledge, each
other party thereto, (ii) enforceable in accordance with its terms
(subject to the Bankruptcy and Equity Exception), and (iii) is in full
force and effect other than as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect with respect to the
Company. Neither the Company nor any of
its Consolidated Subsidiaries nor, to the Companys knowledge, any other party
thereto, is in breach of any provisions of or in default (or, with the giving
of notice or lapse of time or both, would be in default) under, and has not
taken any action resulting in the termination of, acceleration of performance
required by, or resulting in a right of termination or acceleration under, any
Company Material Contract other than as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect with
respect to the Company. No Company
Material Contract has been amended, modified or supplemented other than as
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect with respect to the Company. No event has occurred with respect to the
Company or any of its Consolidated Subsidiaries that, with or without the
giving of notice, the lapse of time or both, would constitute a material
breach, violation or default under, give rise to a right of termination,
modification, cancellation, foreclosure, prepayment or acceleration under or
result in the imposition of a Lien pursuant to, any of the Company Material
Contracts other than as would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect with respect to the Company.
3.17 Insurance Coverage.
(a)
Section 3.17(a) of the Company Disclosure Schedule contains a list of
all material insurance policies that are owned by the Company or its
Consolidated Subsidiaries and that name the Company or a Consolidated
Subsidiary as an insured, including, without limitation, fidelity or surety
bonds and self-insurance arrangements and those which pertain to the assets,
Employees, agents or operations of the Company or its Consolidated Subsidiaries
(each, a Company Insurance Policy).
(b)
The Company and its Consolidated Subsidiaries are insured against (i) such
losses and risks and in such amounts as are customary in the businesses in
which they are engaged, and (ii) any and all reasonably foreseeable
liability for any and all of the litigation described in the Company Quarterly
Report and Section 3.14(a) of the Company Disclosure Schedule. In addition, Section 3.17(b) of the
Company Disclosure Schedule sets forth in respect of the Company Insurance
Policies (i) a description of claims made and reported involving amounts
in excess of $100,000 and (ii) the aggregate amount paid out under each
such policy during the period from January 1, 2008 through the date
hereof.
(c)
Except as would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect with respect to the Company, neither the Company
nor any of its Consolidated Subsidiaries has received any notice or other
27
communication regarding any
actual or threatened in writing: (a) cancellation
or invalidation of any Company Insurance Policy (if not rescinded); (b) refusal
or denial of any material coverage, reservation of rights or rejection of any
material claim under any Company Insurance Policy; or (c) material
adjustment in the amount of the premiums payable with respect to any Company
Insurance Policy.
(d)
There have been no disputes regarding denial or nonpayment of claims under any
Company Insurance Policy since January 1, 2008 other than with respect to claims
that, individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect. The Company and its Consolidated Subsidiaries
maintain insurance coverage with reputable insurers reasonably believed by the
Company to be financially sound.
3.18 Investment Assets.
Each of the Company and its Consolidated
Subsidiaries has good title to all securities, indebtedness and other financial
instruments owned by it, free and clear of any material Liens, except to the
extent such securities, indebtedness or other financial instruments, as
applicable, are pledged in the ordinary course of business consistent with past
practice to secure obligations of the Company or its Consolidated Subsidiaries
under the Company Outstanding Debt and except for Liens consisting of
restrictions on transfer agreed to in respect of investments entered into in
the ordinary course of business.
3.19 [Reserved].
3.20 Intellectual Property. The Company and its Consolidated Subsidiaries
own, or are validly licensed or otherwise have the right to use, all patents,
patent applications, patent rights, trademarks, trademark applications,
trademark rights, trade names, trade name rights, service marks, service mark
applications, service mark rights, copyrights, computer programs (including
source code and object code), trade secrets, know-how and other proprietary
intellectual property rights (collectively, Intellectual Property Rights)
that are material to the conduct of the business of the Company and its Consolidated
Subsidiaries taken as a whole (hereinafter, Company Intellectual Property
Rights). No claims are pending for
which the Company has received written notice or, to the knowledge of the
Company, threatened (i) that the Company or any of its Consolidated
Subsidiaries is infringing or otherwise adversely affecting the rights of any
Person with regard to any Intellectual Property Right, or (ii) that any
Company Intellectual Property Right is invalid or unenforceable. To the knowledge of the Company, no Person is
infringing, misappropriating or using without authorization the rights of the
Company or any of its Consolidated Subsidiaries with respect to any
Intellectual Property Right.
3.21 Environmental Matters. There are no material Proceedings of any
kind, pending or, to the knowledge of the Company, threatened, against the
Company or any of its Consolidated Subsidiaries, arising under any
Environmental Law. There are no Orders
by or with any Governmental Entity, imposing any material liability or
obligation on the Company or any of its Consolidated Subsidiaries under or in
respect of any Environmental Law. There
are and have been no substances, materials, chemicals, wastes, pollutants, or
contaminants classified as hazardous or toxic, or that are otherwise defined in
or regulated under any Environmental Law,
28
or other conditions at any property owned, operated, or
otherwise used by, or the subject of a security interest on behalf of it or any
of its Consolidated Subsidiaries, that reasonably could be expected,
individually or in the aggregate, to give rise to a Material Adverse Effect
with respect to the Company. The Company
has provided to Parent all material environmental reports, assessments, audits,
studies, investigations, data, environmental permits and other material written
environmental information in the custody, possession or control of the Company
or any of its Consolidated Subsidiaries, concerning the Company or any of its
Consolidated Subsidiaries.
3.22 Real Property.
(a)
Except as would not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect with respect to the Company, the Company or a
Consolidated Subsidiary of the Company owns fee simple title to, or has a valid
leasehold interest in, each of the real properties reflected on the most recent
balance sheet of the Company included in the Company SEC Reports and the
Company Interim Financials and as Previously Disclosed (each, a Company Property
and collectively, the Company Properties), which are all of the real
estate properties owned or leased by them, free and clear of Liens, except (i) inchoate
Liens imposed for construction work in progress (now or at any time prior to
Closing) or otherwise incurred in the ordinary course of business, (ii) mechanics,
workmens and repairmens Liens (other than inchoate Liens for work in
progress), and (iii) real estate Taxes, charges of any nature for public
utility services and special assessments, none of which is delinquent. Neither the Company nor any Consolidated
Subsidiary of Company has received written notice that it is currently in
default under any Property Agreement, Lease or REA other than such defaults
that would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect with respect to the Company. In addition, neither the Company or any
Consolidated Subsidiary of the Company has any knowledge of facts or circumstances
that, with the giving of notice or the passage of time or both, would
constitute a default or event of default under any such Property Agreement,
Lease or REA, either by the Company or a Consolidated Subsidiary of the Company
that is a party thereto, or by any other parties to such Property Agreement,
Lease or REA other than such defaults that would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect with
respect to the Company.
(b)
Section 3.22(b) of the Company Disclosure Schedule sets forth a
complete and accurate list of all real property owned (the Owned Real
Property) or leased (the Leased Real Property) by the Company or
any of its Consolidated Subsidiaries (the Owned Real Property together with the
Leased Real Property, the Real Property), including in each case the
address and a description of the use of such Real Property. Except as set forth on Section 3.22(b) of
the Company Disclosure Schedule, neither the Company nor any of its
Consolidated Subsidiaries is a party to any Lease for real property. Except as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect with
respect to the Company, all of the Leases to which the Company or any of its
Consolidated Subsidiaries is party are in full force and effect and enforceable
by the Company or the Consolidated Subsidiary which is a party thereto in
accordance with their terms except to the extent that such enforceability may
be
29
limited by the Bankruptcy
and Equity Exception. Neither the
Company nor any of its Consolidated Subsidiaries (nor, to the knowledge of the
Company, any other party thereto) is in breach of or default under (and to the knowledge
of the Company no event has occurred which with notice or the passage of time
or both would constitute a breach or default under) any of the Leases,
excluding, however, any breaches or defaults that would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect with
respect to the Company. The Company has
provided Parent with true, complete and correct copies of all Leases.
(c)
Neither the Company nor any of its Consolidated Subsidiaries has received
written notice of any pending or contemplated condemnation, expropriation or
other Proceeding in eminent domain affecting the Real Property or any portion
thereof or interest therein, except for such Proceedings as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect with respect to the Company.
Neither the Company nor any of its Consolidated Subsidiaries has
received any written notice that the current use and occupancy of the Real
Property violates in any material respect any easement, covenant, condition,
restriction or similar provision in any instrument of record or other
unrecorded agreement affecting the Real Property, as applicable, other than
such violations as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect with respect to the Company.
3.23 Appraisal Rights. In accordance with Section 3-202(c)(1) of
the MGCL, no appraisal rights shall be available to holders of the Company
Common Stock in connection with the Merger.
3.24 Representations Regarding Ciena. The Company has considered and accounted for
Cienas voluntary filing for bankruptcy protection, the letters of credit,
current regulatory issues, ongoing investigations and litigation, including all
allegations and claims of any type, in performing the valuation of Ciena at September 30,
2009.
3.25 Representations Regarding Callidus. To the knowledge of the Company:
(a)
Callidus is a limited liability company duly formed and validly existing under
the laws of the State of Delaware and in good standing with the Delaware
Secretary of State. Callidus has the
requisite limited liability company power and authority to own or lease all of
its properties and assets and to carry on its business as it is now being
conducted in all material respects, and is duly licensed or qualified to do
business in all material respects as a foreign limited liability company in
each jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such licensing or qualification necessary.
True and correct copies of the Callidus certificate of formation and
limited liability company agreement, as in effect as of the date of this Agreement,
have previously been made available to Parent.
(b)
Except as would not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect with respect to the Company, the operations
of Callidus are conducted in compliance in all material respects with all
applicable Laws.
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Without in any way limiting
the foregoing, Callidus is not required to be registered as an investment
adviser under the Investment Advisers Act.
Since January 1, 2008, neither the Company nor, to the Companys
knowledge, Callidus has received any written notice from any Governmental
Entity asserting that Callidus is not in compliance in all material respects
with applicable Law.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
No
representation or warranty of Parent contained in this Article IV (other
than the representations and warranties contained in Sections 4.1(a) (first
and last sentence), 4.3(a) and 4.3(b)(i), which shall be true and correct
in all material respects, Section 4.2, which shall be true and correct
except to a de minimis extent
(relative to Section 4.2 taken as a whole) or except in any way that
reasonably is not adverse to the Company, and Sections 4.1(b), 4.7, 4.8(a), and
4.15(a), which shall be true and correct in all respects) shall be deemed
untrue, and Parent shall not be deemed to have breached a representation or
warranty, as a consequence of the existence of any fact, event or circumstance
unless such fact, circumstance or event, individually or taken together with
all other facts, events or circumstances inconsistent with any representation
contained in this Article IV (read for this purpose without regard to any
individual reference to materiality, Material Adverse Effect or words of
similar import set forth in this Article IV) has had or is reasonably
likely to have a Material Adverse Effect with respect to Parent.
Subject
to the foregoing, except with respect to matters that have been Previously
Disclosed, Parent hereby represents and warrants to the Company as follows as
of the date hereof and as of the Effective Time:
4.1 Corporate Organization.
(a)
Each of Parent and Merger Sub is a corporation duly incorporated and validly
existing under the laws of the State of Maryland and in good standing with the
SDAT. Each of Parent and Merger Sub has
the requisite corporate power and authority to own or lease all of its
properties and assets and to carry on its business as it is now being conducted
in all material respects, and is duly licensed or qualified to do business in
all material respects as a foreign corporation in each jurisdiction in which
the nature of the business conducted by it or the character or location of the
properties and assets owned or leased by it makes such licensing or
qualification necessary. Parent has duly
elected to be regulated as a BDC pursuant to the Investment Company Act and
such election has not been revoked or withdrawn and is in full force and
effect.
(b)
True, complete and correct copies of the Parent Articles and Parent Bylaws, as
in effect as of the date of this Agreement, have previously been publicly filed
(or provided) by Parent and are available to the Company.
(c)
Each Consolidated Subsidiary of Parent (i) is duly incorporated or duly
formed, as applicable to each such Consolidated Subsidiary, and validly
existing and in good standing under the Laws of its jurisdiction of
organization, (ii) has the requisite
31
corporate (or similar) power
and authority to own or lease all of its properties and assets and to carry on
its business as it is now being conducted in all material respects and (iii) is
duly licensed or qualified to do business in all material respects as a foreign
corporation or other business entity in each jurisdiction in which the nature
of the business conducted by it or the character or location of the properties
and assets owned or leased by it makes such licensing or qualification
necessary.
4.2 Capitalization.
(a)
The authorized capital stock of Parent consists of 200,000,000 shares of the
Parent Common Stock of which, as of October 25, 2009 (the Parent
Capitalization Date), no more than 109,592,728 shares were issued and
outstanding, all of which were the Parent Common Stock. No shares of authorized capital stock of
Parent have been classified as anything but the Parent Common Stock. All of the issued and outstanding shares of
the Parent Common Stock have been duly authorized and validly issued and are
fully paid, nonassessable and free of preemptive rights, with no personal
liability with respect to Parent attaching to the ownership thereof. As of the date of this Agreement, no Voting
Debt is issued or outstanding. As of the
Parent Capitalization Date, except pursuant to this Agreement as set forth in
this Section 4.2 (including as contemplated in Section 4.2(b))
and Parents dividend reinvestment plan, Parent does not have and is not bound
by any Rights calling for the purchase or issuance of, or the payment of any
amount based on, any shares of the Parent Common Stock, Voting Debt or any
other equity securities of Parent or any securities representing the right to
purchase or otherwise receive any shares of the Parent Common Stock, Voting
Debt or other equity securities of Parent.
There are no obligations of Parent or any of its Consolidated
Subsidiaries (i) to repurchase, redeem or otherwise acquire any shares of
capital stock of Parent, Voting Debt or any equity security of Parent or its
Consolidated Subsidiaries or any securities representing the right to purchase
or otherwise receive any shares of capital stock, Voting Debt or any other
equity security of Parent or its Consolidated Subsidiaries or (ii) pursuant
to which Parent or any of its Consolidated Subsidiaries is or could be required
to register shares of Parent capital stock or other securities under the
Securities Act. All of the Parent Common
Stock sold has been sold pursuant to an effective registration statement filed
under the Securities Act or an appropriate exemption therefrom and in
accordance with the Investment Company Act.
(b)
Parent has no issued and outstanding equity-based awards or, as of the date
hereof, any plans providing for such awards.
Since the Parent Capitalization Date through the date hereof, Parent has
not (i) issued or repurchased any shares of the Parent Common Stock,
Voting Debt or other equity securities of Parent or (ii) issued or awarded
any options, stock appreciation rights, restricted shares, restricted stock
units, deferred equity units, awards based on the value of Parents capital
stock or any other equity-based awards.
From January 1, 2009 through the date of this Agreement, neither
Parent nor any of its Consolidated Subsidiaries has (A) accelerated the
vesting of or lapsing of restrictions with respect to any material stock-based
compensation awards or long term incentive compensation awards, (B) with
respect to executive officers of Parent or any of its Consolidated
Subsidiaries, entered into or amended any material employment, severance,
change of control or similar agreement (including any agreement providing for
the
32
reimbursement of excise
Taxes under Section 4999 of the Code) or (C) adopted or amended any
material Parent Benefit Plan (as defined below), except to the extent required
by applicable Law.
(c)
All of the issued and outstanding shares of capital stock or other equity
ownership interests of each Consolidated Subsidiary of Parent are owned by
Parent, directly or indirectly, free and clear of any Liens, and all of such
shares or equity ownership interests are duly authorized and validly issued and
are fully paid, nonassessable and free of preemptive rights. No Consolidated Subsidiary of Parent has or
is bound by any outstanding Rights calling for the purchase or issuance of, or
the payment of any amount based on, any shares of capital stock or any other
equity security of such Consolidated Subsidiary or any securities representing
the right to purchase or otherwise receive any shares of capital stock or any
other equity security of such Consolidated Subsidiary.
4.3 Authority; No Violation.
(a)
Each of Parent and Merger Sub has full corporate power and authority to execute
and deliver this Agreement and to consummate the Transactions (other than the
Second Merger). The execution and
delivery of this Agreement and the consummation of the Transactions (other than
the Second Merger) have been duly and validly approved by the Boards of
Directors of each of Parent and Merger Sub.
The Board of Directors of Parent has determined that this Agreement and
the terms of the Merger and the related Transactions (other than the Second
Merger) are advisable and in the best interests of Parent and its stockholders,
has approved the Parent Matters and has directed that the Parent Matters be
submitted to Parents stockholders for approval at a duly held meeting of such
stockholders and has adopted a resolution to the foregoing effect. Except for receipt of the affirmative vote of
a majority of the shares of the Parent Common Stock entitled to vote to approve
the Parent Matters pursuant to this Agreement, the Merger and the other
Transactions (other than the Second Merger) have been authorized by all
necessary corporate action. This
Agreement has been duly and validly executed and delivered by Parent and Merger
Sub and (assuming due authorization, execution and delivery by the Company)
constitutes the valid and binding obligation of each of Parent and Merger Sub,
enforceable against each of Parent and Merger Sub in accordance with its terms
(except as may be limited by the Bankruptcy and Equity Exception).
(b)
Neither the execution and delivery of this Agreement by Parent or Merger Sub,
nor the consummation by Parent or Merger Sub of the Transactions (other than
the Second Merger), nor compliance by Parent or Merger Sub with any of the
terms or provisions of this Agreement, will (i) violate any provision of
the Parent Articles, Parent Bylaws or the bylaws or charter of Merger Sub or (ii) assuming
that the consents, approvals and filings referred to in Section 4.3(a) and
Section 4.4 are duly obtained and/or made, (A) violate any Law or
Order applicable to Parent, any of its Consolidated Subsidiaries or any of
their respective properties or assets or (B) violate, conflict with,
result in a breach of any provision of or the loss of any benefit under,
constitute a default (or an event that, with or without the giving of notice or
lapse of time, or both, would constitute a default) under, result in the
termination of or a right of termination or
33
cancellation under,
accelerate the performance required by, require the consent, approval or
authorization of, or notice to or filing with any third-party with respect to,
or result in the creation of any Lien upon any of the respective properties or
assets of Parent or any of its Consolidated Subsidiaries under, any of the
terms, conditions or provisions of any Permit, Contract or other obligation to
which Parent or any of its Consolidated Subsidiaries is a party or by which any
of them or any of their respective properties or assets is bound except, with
respect to clause (ii), any such violation, conflict, breach, default,
termination, cancellation, acceleration or creation that would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect with respect to Parent.
(c)
Neither the consummation by Parent of the Transactions nor compliance by Parent
with any of the terms or provisions of this Agreement will, assuming that the
consents, rating agency confirmations, approvals, authorizations, notices and
filings Previously Disclosed are duly obtained or made, violate, conflict with,
result in a breach of any provision of or the loss of any benefit under,
constitute a default (or an event that, with or without the giving of notice or
lapse of time, or both, would constitute a default) under, result in the
termination of or a right of termination or cancellation under, accelerate the
performance required by, require the consent, confirmation, approval or
authorization of, or notice to or filing with any third-party with respect to,
any of the terms, conditions or provisions of any Parent Managed Fund Contract.
4.4 Governmental Consents. Except for (i) the Regulatory Approvals
that have been Previously Disclosed by Parent in Section 4.4 of the Parent
Disclosure Schedule (collectively, the Parent Requisite Regulatory
Approvals), (ii) the filing with the SEC of the Registration
Statement, and declaration of effectiveness of the Registration Statement, (iii) the
filing of the Articles of Merger with and the acceptance for record of the
Articles of Merger by the SDAT, (iv) any notices or filings under the HSR
Act and (v) such filings and approvals as are required to be made or
obtained under the securities or Blue Sky Laws of various states in
connection with the issuance of the shares of the Parent Common Stock pursuant
to this Agreement and approval of listing of such Parent Common Stock on NASDAQ
and the Company Public Notes on NASDAQ, NYSE or other applicable exchanges, no
material consents or approvals of or filings or registrations with any
Governmental Entity are necessary in connection with the consummation by Parent
or Merger Sub of the Merger and the other Transactions. No consents or approvals of or filings or
registrations with any Governmental Entity are necessary in connection with the
execution and delivery by Parent of this Agreement other than (i) the
reporting of this Agreement on a Current Report on Form 8-K or (ii) as
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect with respect to Parent.
4.5 Reports; Regulatory Matters
(a)
Parent and each of its Consolidated Subsidiaries, in all material respects,
have timely filed all reports, schedules, registrations, statements,
certifications and other documents, together with any amendments required to be
made with respect thereto, that they were required to file since January 1,
2008 with the SEC, NASDAQ and any other Governmental Entity, and all other
reports and statements required to be filed by them
34
since January 1, 2008
pursuant to the Laws of any Governmental Entity, and have paid all fees and
assessments due and payable in connection therewith. To the knowledge of Parent, since January 1,
2008, no Governmental Entity has initiated or has pending any Proceeding or
investigation into the business, disclosures or operations of Parent or any of
its Consolidated Subsidiaries. To the
knowledge of Parent, since January 1, 2008, no Governmental Entity has
resolved any Proceeding or investigation into the business, disclosures or
operations of Parent or any of its Consolidated Subsidiaries. To the knowledge of Parent, there is no
unresolved or threatened comment, exception or stop order by any Governmental
Entity with respect to any filing by Parent or any of its Consolidated
Subsidiaries relating to any examinations or inspections of Parent or any of
its Consolidated Subsidiaries. To the
knowledge of the Parent, since January 1,
2008, there have been no formal inquiries by, or disagreements or disputes
with, any Governmental Entity with respect to the business, operations,
policies or procedures of Parent or any of its Consolidated Subsidiaries.
(b)
An accurate and complete copy of each (i) prospectus, final registration
statement, report, schedule and definitive proxy statement filed with or
furnished to the SEC by Parent or any of its Consolidated Subsidiaries pursuant
to the Investment Company Act, the Securities Act or the Exchange Act since January 1,
2008 (the Parent SEC Reports) and (ii) communication mailed by
Parent to its stockholders since January 1, 2008 is publicly
available. No such Parent SEC Report or
communication, at the time filed, furnished or communicated (and, in the case
of registration statements and proxy statements, on the dates of effectiveness
and the dates of the relevant meetings, respectively), 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 made therein, in
light of the circumstances in which they were made, not misleading. As of their respective dates, all Parent SEC
Reports complied as to form in all material respects with the published rules and
regulations of the SEC with respect thereto.
(c)
Neither Parent nor any of its Consolidated Subsidiaries is subject to any
cease-and-desist or other order or enforcement action issued by, or is a party
to any Contract, consent agreement or memorandum of understanding with, or is a
party to any commitment letter or similar undertaking to, or is subject to any
Order by, or has been ordered to pay any civil money penalty by, or since January 1,
2008 has adopted any policies, procedures or board resolutions at the request
of, any Governmental Entity that currently restricts in any material respect
the conduct of its business (or to Parents knowledge that, upon consummation
of the Mergers, would restrict in any material respect the conduct of the
business of Parent or any of its Consolidated Subsidiaries), or that in any
material manner relates to its capital adequacy, its ability to pay dividends,
its credit, risk management or compliance policies, its internal controls, its
management or its business, other than those of general application that apply
to similarly situated BDCs or their Consolidated Subsidiaries, nor has Parent
or any of its Consolidated Subsidiaries been advised in writing or, to the
knowledge of Parent, verbally, since January 1, 2008 by any Governmental
Entity that it is considering issuing, initiating, ordering, or requesting any
of the foregoing.
35
4.6 Parent Financial Statements
(a)
The financial statements, including the related consolidated schedules of
investments, of Parent and its Consolidated Subsidiaries included (or
incorporated by reference) in the Parent SEC Reports (including the related
notes, where applicable) and the Parent Interim Financials (i) have been
prepared from, and are in accordance with, in all material respects, the books
and records of Parent and its Consolidated Subsidiaries, (ii) fairly
present in all material respects the consolidated results of operations, cash
flows, changes in stockholders equity and consolidated financial position of
Parent and its Consolidated Subsidiaries for the respective fiscal periods or
as of the respective dates therein set forth (subject in the case of unaudited
statements and the Parent Interim Financials to recurring year-end audit
adjustments normal in nature and amount), (iii) have complied as to form,
as of their respective dates of filing with the SEC or, in the case of the
Parent Interim Financials, as of the date hereof, in all material respects with
applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto and (iv) have been prepared in
all material respects in accordance with GAAP consistently applied during the
periods involved, except, in each case, as indicated in such statements or in
the notes thereto. As of the date
hereof, the books and records of Parent and its Consolidated Subsidiaries have
been maintained in all material respects in accordance with GAAP and any other
applicable legal and accounting requirements and reflect only actual
transactions. KPMG LLP has not resigned,
threatened resignation or been dismissed as independent public accountants of
Parent as a result of or in connection with any disagreements with Parent on a
matter of accounting principles or practices, financial statement disclosure or
auditing scope or procedure.
(b)
(i) Neither Parent nor any of its Consolidated Subsidiaries has any
material liability or obligation of any nature whatsoever (whether absolute,
accrued, contingent, determined, determinable or otherwise and whether due or
to become due), except for (A) in the case of Parent and its Consolidated
Subsidiaries, liabilities that are reflected or reserved against on the
consolidated balance sheet of Parent included in the Parent Interim Financials,
(B) liabilities incurred in the ordinary course of business consistent
with past practice since September 30, 2009 and (C) liabilities
incurred since September 30, 2009 pursuant to Contracts entered into after
September 30, 2009 in violation of this Agreement (as if this Agreement
was in effect on September 30, 2009).
(ii)
Other than as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect with respect to Parent, neither
Parent nor any of its Consolidated Subsidiaries is a party to, and has no
commitment to become a party to, any joint venture, partnership agreement or
any similar Contract (including any Contract relating to any transaction,
arrangement or relationship between or among Parent or any of its Consolidated
Subsidiaries, on the one hand, and any Affiliate, including any structured
finance, special purpose or limited purpose entity, on the other hand) where
the purpose or intended effect of such arrangement is to avoid disclosure of
any material transaction involving Parent in Parents consolidated financial
statements.
(iii)
None of the Consolidated Subsidiaries of Parent is required to file any forms,
reports, schedules, statements or other documents with the SEC.
36
(c)
Since January 1, 2008, (i) neither Parent nor any of its Consolidated
Subsidiaries nor, to the knowledge of Parent, any director, officer, Employee,
auditor, accountant or representative of Parent or any of its Consolidated
Subsidiaries has received or otherwise had or obtained knowledge of any
material complaint, allegation, assertion or claim, whether written or oral,
regarding the accounting or auditing practices, procedures, methodologies or
methods of Parent or any of its Consolidated Subsidiaries or their respective
internal accounting controls, including any complaint, allegation, assertion or
claim that Parent or any of its Consolidated Subsidiaries has engaged in
questionable or illegal accounting or auditing practices or maintains
inadequate internal controls over financial reporting (as defined in Rules 13a-15(f) and
15d-15(f) of the Exchange Act), and (ii) no attorney representing
Parent or any of its Consolidated Subsidiaries, whether or not employed by
Parent or any of its Consolidated Subsidiaries, has reported evidence of a
material violation of securities laws, breach of fiduciary duty or similar
violation by Parent or any of its officers, directors, Employees or agents to
the Board of Directors of Parent or any committee thereof or to any director or
officer of Parent.
(d)
Neither Parent nor any of its Consolidated Subsidiaries is a party to any
securitization transaction with respect to the assets of Parent or its
Consolidated Subsidiaries or off-balance sheet arrangement with respect to
Parent (as defined in Item 303(a)(4) of Regulation S-K promulgated under
the Exchange Act). To Parents knowledge, since January 1, 2008, KPMG LLP,
which has expressed its opinion with respect to the financial statements of
Parent and its Consolidated Subsidiaries included in Parents SEC Reports
(including the related notes), has been (i) independent with respect to
Parent and its Consolidated Subsidiaries within the meaning of Regulation S-X,
and (ii) in compliance with subsections (g) through (l) of Section 10A
of the Exchange Act and the related rules of the SEC and the Public
Company Accounting Oversight Board.
(e)
The principal executive officer and principal financial officer of Parent have
made all certifications required by, and would be able to make such
certifications as of the date hereof and as of the Closing Date as if required
to be made as of such dates, pursuant to Sections 302 and 906 of the
Sarbanes-Oxley Act and any related rules and regulations promulgated by
the SEC, and the statements contained in any such certifications are complete
and correct, and Parent is otherwise in compliance with all applicable
effective provisions of the Sarbanes-Oxley Act and the applicable listing standards
and corporate governance rules of NASDAQ.
(f) Parent has in all material respects:
(i)
designed and maintained a system of disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) promulgated under the
Exchange Act) to ensure that all information (both financial and non-financial)
required to be disclosed by Parent in the reports that it files or submits to
the SEC under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the rules and forms of the SEC and
that such information is accumulated and communicated to Parents management as
appropriate to allow timely decisions regarding required disclosure and to
allow Parents principal executive officer and
37
principal financial officer
to make the certifications required under the Exchange Act with respect to such
reports;
(ii)
designed and maintained a system of internal controls over financial reporting
sufficient to provide reasonable assurance concerning the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with GAAP, including reasonable assurance that (A) transactions
are executed in accordance with managements general or specific
authorizations, (B) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
accountability for assets, (C) access to assets is permitted only in
accordance with managements general or specific authorization and (D) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences; Parents management, with the participation of Parents principal
executive and financial officers, has completed an assessment of the
effectiveness of Parents internal controls over financial reporting for the
fiscal year ended December 31, 2008 in compliance with the requirements of
Section 404 of the Sarbanes-Oxley Act, and such assessment concluded that
such internal controls were effective using the framework specified in Parents
Annual Report on Form 10-K for the fiscal year ended December 31,
2008;
(iii)
(A) disclosed, based on its most recent evaluation, to its auditors and
the Audit Committee of the Board of Directors of Parent (1) any
significant deficiencies or material weaknesses (as defined in the relevant
Statement of Auditing Standards) in the design or operation of Parents internal
controls over financial reporting that could adversely affect its ability to
record, process, summarize and report financial data and (2) any fraud,
whether or not material, that involves management or other Employees who have a
significant role in its internal controls over financial reporting and (B) identified
for Parents auditors any material weaknesses in internal controls; and
(iv)
provided to the Company true and correct copies of any of the foregoing
disclosures to its auditors or the Audit Committee of the Board of Directors of
Parent that have been made in writing from January 1, 2008 through the
date hereof, and will promptly provide to the Company true and correct copies
of any such disclosures that are made after the date hereof.
4.7 Brokers Fees. Neither Parent nor any of its Consolidated
Subsidiaries nor any of their respective officers, directors, Employees or
agents has utilized any broker, finder or financial advisor or incurred any
liability for any brokers fees, commissions or finders fees in connection
with the Merger or the other Transactions, other than to J.P. Morgan Securities
Inc. pursuant to a letter agreement, a true, complete and correct copy of which
has been previously delivered to the Company.
4.8 Absence of Changes or Events. Since September 30, 2009, (a) there
has not been any Effect that, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect with respect to Parent
and (b) there has not been any action that, if it had been taken after the
date hereof, would have required the consent of the Company under Section 5.1
and 5.4.
38
4.9 Compliance with Applicable Law.
(a)
Parent and each of its Consolidated Subsidiaries is in compliance, and has been
operated since January 1, 2008, in all material respects, with all
applicable Laws, including, if and to the extent applicable, the Investment
Company Act, the Investment Advisers Act, the Securities Act, the Exchange Act,
Environmental Laws and the Code other than, in the case of Environmental Laws
only, as would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect with respect to Parent. Each of Parent and its Consolidated
Subsidiaries is in compliance, and has been operated since January 1, 2008
in compliance with all listing standards and corporate governance standards of
NASDAQ or other listing exchange or self regulating organization applicable to
the Parent or its Consolidated Subsidiaries other than as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect with respect to Parent.
(b)
(i) Parent and each Parent Managed Fund has complied since January 1,
2008 (or, if later, its launch date or the date the Company or one of its
Consolidated Subsidiaries began managing the Company Managed Fund), and is in
compliance, in all material respects with its investment policies and
restrictions and portfolio valuation methods, if any, as such policies and
restrictions may be set forth in its registration statement, offering
circulars, indentures or plan documents (as they may be amended from time to
time) and applicable Laws, if any, other than any non-compliance that would
not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect with respect to Parent.
(c)
Parent has written policies and procedures adopted pursuant to Rule 38a-1
under the Investment Company Act that are reasonably designed to prevent material
violations of the Federal Securities Laws, as such term is defined in Rule 38a-1(e)(1) under
the Investment Company Act. Since January 1,
2008, there have been no Material Compliance Matters for Parent, as such term
is defined in Rule 38a-1(e)(2) under the Investment Company Act,
other than those that have been reported to Parents Board of Directors and
satisfactorily remedied or are in the process of being remedied or those that
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect with respect to Parent.
(d)
Parent and each of its Consolidated Subsidiaries will hold immediately prior to
the Closing, all Permits required in order to permit Parent and each of its
Consolidated Subsidiaries to own or lease their properties and assets and to
conduct their businesses under and pursuant to all applicable Law, in each
case, other than any failure to hold any Permit that would not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect with
respect to Parent. All such Permits are
valid and in full force and effect, except for those the failure of which to be
valid or to be in full force and effect would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect with respect to
Parent. No violations with respect to
such Permits have occurred that would, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect with respect to
Parent, and no Proceeding is pending and served or threatened in writing or, to
the knowledge of Parent, pending and not served or
39
otherwise threatened to
suspend, cancel, modify, revoke or materially limit any such Permits, which
Proceeding would, individually or in the aggregate, reasonably be expected to
be material to the operations of Parent and its Consolidated Subsidiaries,
taken as a whole. Each Employee of
Parent and each of its Consolidated Subsidiaries who is required to be
registered or licensed as a registered representative, investment adviser
representative, sales person or an equivalent person with any Governmental
Entity is duly registered as such and such registration is in full force and
effect, except for such failures to be so registered or for such registration
to remain in full force and effect that, individually or in the aggregate,
would not reasonably be expected to be material to the operations of Parent and
its Consolidated Subsidiaries, taken as a whole.
(e)
Each Parent Managed Fund that is required to register as an investment company
under the Investment Company Act is so registered or is properly relying on an
exemption from registration under the Investment Company Act.
(f)
No affiliated person (as defined under the Investment Company Act ) of Parent
has been subject to disqualification to serve in any capacity contemplated by
the Investment Company Act for any investment company (including a BDC) under
Sections 9(a) and 9(b) of the Investment Company Act, unless, in each
case, such Person has received exemptive relief from the SEC with respect to
any such disqualification. Parent has
made available to the Company, prior to the date of this Agreement, a copy of
any material exemptive order or other relief issued by the SEC in respect of
any such disqualification. There is no
material Proceeding pending and served or, to the knowledge of Parent,
threatened that would result in any such disqualification.
(g)
Any Consolidated Subsidiary of Parent acting as an investment adviser as
defined in the Investment Advisers Act to a Parent Managed Fund is duly
registered with the SEC under the Investment Advisers Act or is not subject to
registration under the Investment Advisers Act.
No Consolidated Subsidiary of Parent is registered or required to be
registered under the Exchange Act as a broker-dealer with the SEC.
(h)
Since January 1, 2008, Parent has not received any written notification,
or to Parents knowledge oral notification, from a Governmental Entity
asserting that it is not in compliance in all material respects with any
material Laws or Permits.
4.10 Opinion. The Board of Directors of Parent has received
the opinion of J.P. Morgan Securities Inc., to the effect that, as of the date
hereof, and based upon and subject to the factors and assumptions set forth
therein, the Exchange Ratio is fair from a financial point of view to Parent.
4.11 Parent Information. The information relating to Parent and its
Consolidated Subsidiaries that is provided by Parent or its Representatives for
inclusion in the Registration Statement, or in any application, notification or
other document filed with any Governmental Entity in connection with the
Transactions, will not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements therein, in light of
the circumstances in which they are made, not misleading. The portions of the Registration Statement
relating to Parent and its Consolidated Subsidiaries and other portions within
the
40
reasonable control of Parent and its Consolidated
Subsidiaries will comply in all material respects with the provisions of the
Exchange Act. The Registration Statement
will comply in all material respects with the provisions of the Securities Act.
4.12 Taxes and Tax Returns.
(a)
Each of Parent and its Consolidated Subsidiaries has duly and timely filed
(including all applicable extensions) all material Tax Returns required to be
filed by it on or prior to the date of this Agreement (all such Tax Returns
being accurate and complete in all material respects), has paid all material
Taxes shown thereon as arising and has duly paid or made provision for the
payment of all material Taxes that have been incurred or are due or claimed to
be due from it by federal, state, foreign or local taxing authorities other
than Taxes that are not yet delinquent or are being contested in good faith,
have not been finally determined and have been adequately reserved against
under GAAP. For taxable years ending on
or after December 31, 2003, no Tax Return of Parent or its Consolidated
Subsidiaries has been examined by the IRS or other relevant taxing authority
except where such examination has not, and would not reasonably be expected to,
give rise to liabilities in excess of $25,000 or as set forth on Section 4.12(a) of
the Parent Disclosure Schedule and any liability with respect thereto has been
satisfied or any liability with respect to deficiencies asserted as a result of
such examination is covered by reserves that are adequate under GAAP. There are no material disputes pending, or
written claims asserted, for Taxes or assessments upon Parent or any of its
Consolidated Subsidiaries for which Parent does not have reserves that are
adequate under GAAP. Neither Parent nor
any of its Consolidated Subsidiaries is a party to or is bound by any Tax
sharing, allocation or indemnification agreement or arrangement (other than
such an agreement or arrangement exclusively between or among Parent and its
Consolidated Subsidiaries). Within the
past five years (or otherwise as part of a plan (or series of related
transactions) within the meaning of Section 355(e) of the Code of
which the Merger is also a part), neither Parent nor any of its Consolidated
Subsidiaries has been a distributing corporation or a controlled corporation
in a distribution intended to qualify under Section 355(a) of the
Code. Neither Parent nor any of its
Consolidated Subsidiaries is required to include in income any adjustment
pursuant to Section 481(a) of the Code, no such adjustment has been
proposed by the IRS and no pending request for permission to change any
accounting method has been submitted by Parent or any of its Consolidated
Subsidiaries. Neither Parent nor any of
its Consolidated Subsidiaries has participated in a listed transaction within
the meaning of Treasury Regulation Section 1.6011-4(b)(2). If Parent or any of its Consolidated
Subsidiaries has participated in a reportable transaction within the meaning
of Treasury Regulation Section 1.6011-4(b), such entity has properly
disclosed such transaction in accordance with the applicable Tax regulations.
(b)
Parent made a valid election under Part I of Subchapter M of Subtitle A,
Chapter 1, of the Code to be taxed as a RIC.
Parent has qualified as a RIC at all times since its formation and
expects to continue to so qualify through the Effective Time. No challenge to the Parents status as a RIC
is pending or has been threatened orally or in writing.
41
(c)
Merger Sub is a newly formed entity created for the purpose of undertaking the
Merger. Prior to the Effective Time,
Merger Sub will not have engaged in any other business activities and will have
incurred no liabilities or obligations other than as contemplated by this
Agreement.
(d)
Parent and its Consolidated Subsidiaries have complied in all material respects
with all applicable Laws relating to the payment and withholding of Taxes
(including withholding of Taxes pursuant to Sections 1441, 1442 and 3402 of the
Code or any comparable provision of any state, local or foreign Laws) and have,
within the time and in the manner prescribed by applicable Law, withheld from
and paid over all amounts required to be so withheld and paid over under
applicable Laws.
(e)
Parent is not aware of any fact or circumstance that could reasonably be
expected to prevent the Mergers together from qualifying as a reorganization
within the meaning of Section 368(a) of the Code.
(f)
Parent has no earnings and profits for U.S. federal income Tax purposes
described in Section 852(a)(2)(B) of the Code.
(g)
Each Consolidated Subsidiary of Parent that is a partnership, joint venture, or
limited liability company has been since its formation treated for U.S. federal
income Tax purposes as a partnership or disregarded entity, as the case may be,
and not as a corporation or an association taxable as a corporation.
(h)
Section 4.12(h) of the Parent Disclosure Schedule lists each asset
the disposition of which would be subject to rules similar to Section 1374
of the Code as prescribed in Internal Revenue Service Notice 88-19, 1988-1 C.B.
486, or Treasury Regulation Section 1.337(d)-5, Treasury Regulation Section 1.337(d)-6
or Treasury Regulation Section 1.337(d)-7 and the amount of net
unrealized built-in gain (within the meaning of Section 1374(d) of
the Code) on each such asset.
(i)
No claim has been made in writing by a taxing authority in a jurisdiction where
Parent or any of its Consolidated Subsidiaries does not file Tax Returns that
Parent or any such Consolidated Subsidiary is or may be subject to taxation by
that jurisdiction.
(j)
Neither Parent nor any other Person on behalf of Parent or any of its
Consolidated Subsidiaries has requested any extension of time within which to
file any material Tax Return, which material Tax Return has not yet been filed.
(k)
Neither Parent nor any of its Consolidated Subsidiaries has requested a private
letter ruling from the IRS or comparable rulings from other taxing authorities.
(l)
Neither Parent nor any of its Consolidated Subsidiaries has any liability for
the Taxes of another Person other than Parent and its Consolidated Subsidiaries
under Treasury Regulation Section 1.1502-6 (or any similar provision of
state, local or foreign Law), as a transferee, successor or payable pursuant to
a contractual obligation.
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(m)
There are no Liens for Taxes (other than Taxes not yet due and payable) upon
any of the assets of Parent or any of its Consolidated Subsidiaries.
4.13 Litigation.
(a)
Neither Parent nor any of its Consolidated Subsidiaries is a party to any, and there
are no pending or, to the Parents knowledge, threatened, legal,
administrative, arbitral or other Proceedings of any nature against Parent or
any of its Consolidated Subsidiaries or to which any of their assets are
subject that is seeking unspecified damages, damages in excess of $100,000, or
any injunctive or other equitable relief other than, in the case of Proceedings
initiated between the date hereof and the Closing Date only, such Proceedings
as would not, individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect with respect to Parent.
(b)
There is no material Order or regulatory restriction (other than regulatory
restrictions of general application that apply to similarly situated companies
or their Consolidated Subsidiaries) imposed upon Parent, any of its
Consolidated Subsidiaries or the assets of Parent or any of its Consolidated
Subsidiaries (or that, upon consummation of the Merger, would apply to Parent
or any of its Consolidated Subsidiaries).
(c)
Since January 1, 2008, there have not been, nor are there currently
pending, any internal investigations or inquiries being conducted by Parent,
Parents Board of Directors (or any committee thereof) or any third party at
the request of any of the foregoing concerning any financial, accounting, Tax,
conflict of interest, self-dealing, fraudulent or deceptive conduct or other
misfeasance or malfeasance issues.
4.14 Employee Matters. Neither Parent nor any of its Consolidated
Subsidiaries has any employees or any employee benefit plans as defined in Section 3(3) of
ERISA, or any employment, bonus, incentive or deferred compensation, vacation,
stock option or other equity based, severance, termination, retention, change
of control, profit sharing, fringe benefit, health, medical or other similar
plan, program, agreement or commitment, whether written or unwritten (Parent
Benefit Plans).
4.15 Certain Contracts.
(a)
Parent has Previously Disclosed a complete and accurate list of, and true and
complete copies have been delivered or made available (including via EDGAR) to
the Company of, all Contracts (in each case, other than any Parent Benefit
Plans) (the Parent Material Contracts) to which, as of the date
hereof, it or any of its Consolidated Subsidiaries is a party, or by which it
or any of its Consolidated Subsidiaries may be bound, or, to the knowledge of
Parent, to which it or any of its Consolidated Subsidiaries or their respective
assets or properties may be subject:
(1)
any loan or credit agreements, notes, bonds, mortgages, indentures and other
agreements and instruments pursuant to which any indebtedness of Parent or any
of its Consolidated Subsidiaries in an aggregate
43
principal
amount in excess of $500,000 is outstanding or may be incurred;
(2)
any Contract other than this Agreement, with (A) any Consolidated
Subsidiaries of Parent, (B) any current or former Employee or controlling
stockholder of it or except with respect to investments set forth in the Parent
SEC Reports or Parent Interim Financials any Affiliate of such Person, or (C) any
associate or member of the immediate family (as such terms are respectively
defined in Rule 12b-2 and Rule 16a-1 of the Exchange Act) of a Person
identified in clause (A) or (B) of this paragraph, in each case in
excess of $250,000 (individually or together with all related Contracts);
(3)
any Contract that creates future payment obligations, including settlement
agreements, in excess of $250,000 and that by its terms does not terminate, or
is not terminable upon notice, without penalty within 90 days or less, or any
Contract that creates or would create a Lien on any asset of Parent or its
Consolidated Subsidiaries (other than Liens consisting of restrictions on
transfer agreed to in respect of investments entered into in the ordinary
course of business or as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect with respect to
Parent);
(4)
except with respect to investments set forth in the Parent SEC Reports or
Parent Interim Financials, any partnership, limited liability company, joint
venture or other similar Contract that is not entered into in the ordinary
course of business and is material to Parent and its Consolidated Subsidiaries,
taken as a whole;
(5)
any non-competition or non-solicitation Contract or any other Contract that
limits, purports to limit, or would reasonably be expected to limit in each
case in any material respect the manner in which, or the localities in which,
any material business of Parent and its Consolidated Subsidiaries (taken as a
whole) is or could be conducted or the types of business that Parent and its
Consolidated Subsidiaries conducts or may conduct;
(6)
any Contract relating to the acquisition or disposition of any business or
operations (whether by merger, sale of stock, sale of assets or otherwise)
involving value in excess of $250,000 (individually or together with all
44
related Contracts) as to
which there are any ongoing obligations or that was entered into on or after January 1,
2008 other than Contracts entered into in the ordinary course of business with
respect to investments set forth in the Parent SEC Reports or Parent Interim
Financials;
(7)
any Contract that obligates Parent or any of its Consolidated Subsidiaries to
conduct any business that is material to Parent and its Consolidated
Subsidiaries, taken as a whole, on an exclusive basis with any third party or,
upon consummation of the Merger, will obligate Parent, the Surviving Company or
any of their Consolidated Subsidiaries to conduct business with any third-party
on an exclusive basis;
(8)
any Contract with a Governmental Entity;
(9)
any Parent Managed Fund Contract;
(10)
any Contract relating to any collateral management, investment advisory or
other management or advisory fees in excess of $250,000 per year payable by or
to Parent or any of its Consolidated Subsidiaries; or
(11) any other Contract that is a material
contract within the meaning of Item 601(b)(10) of the SECs Regulation
S-K or that is material to Parent or its financial condition or results of
operations.
(b)
Each Parent Material Contract is (i) valid and binding on Parent or its
applicable Consolidated Subsidiary and, to Parents knowledge, each other party
thereto, (ii) enforceable in accordance with its terms (subject to the
Bankruptcy and Equity Exception), and (iii) is in full force and effect
other than as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect with respect to Parent. Neither Parent nor any of its Consolidated
Subsidiaries nor, to Parents knowledge, any other party thereto, is in breach
of any provisions of or in default (or, with the giving of notice or lapse of
time or both, would be in default) under, and has not taken any action
resulting in the termination of, acceleration of performance required by, or
resulting in a right of termination or acceleration under, any Parent Material
Contract other than as would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect with respect to Parent. No Parent Material Contract has been amended,
modified or supplemented other than as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect with
respect to Parent. No event has occurred
with respect to Parent or any of its Consolidated Subsidiaries that, with or
without the giving of notice, the lapse of time or both, would constitute a
material breach, violation or default under, give rise to a right of
termination,
45
modification, cancellation,
foreclosure, prepayment or acceleration under or result in the imposition of a
Lien pursuant to, any of the Parent Material Contracts other than as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect with respect to Parent.
4.16 Insurance Coverage.
(a)
Section 4.16(a) of the Parent Disclosure Schedule contains a list of
all material insurance policies that are owned by Parent or its Consolidated
Subsidiaries and that name Parent or a Consolidated Subsidiary as an insured,
including, without limitation, fidelity or surety bonds and self-insurance
arrangements and those which pertain to the assets, Employees, agents or
operations of the Parent or its Consolidated Subsidiaries (each, a Parent
Insurance Policy).
(b)
Parent and its Consolidated Subsidiaries are insured against (i) such
losses and risks and in such amounts as are customary in the businesses in
which they are engaged and (ii) any and all reasonably foreseeable
liability for any and all of the litigation described in the Parent Quarterly
Report and Section 4.13(a) of the Parent Disclosure Schedule. In addition, Section 4.16(b) of the
Parent Disclosure Schedule sets forth in respect of the Parent Insurance
Policies (i) a description of claims made and reported involving amounts
in excess of $100,000 and (ii) the aggregate amount paid out under each
such policy during the period from January 1, 2008 through the date
hereof.
(c)
Except as would not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect with respect to Parent, neither Parent nor
any of its Consolidated Subsidiaries has received any notice or other
communication regarding any actual or threatened in writing: (a) cancellation or invalidation of any
Parent Insurance Policy (if not rescinded); (b) refusal or denial of any
material coverage, reservation of rights or rejection of any material claim
under any Parent Insurance Policy; or (c) material adjustment in the
amount of the premiums payable with respect to any Parent Insurance Policy.
(d)
There have been no disputes regarding denial or nonpayment of claims under any
Parent Insurance Policy since January 1, 2008 other than with respect to
claims that, individually or in the aggregate, would not reasonably be expected
to have a Material Adverse Effect. Parent and its Consolidated Subsidiaries
maintain insurance coverage with reputable insurers reasonably believed by
Parent to be financially sound.
4.17 Investment
Assets. Each of Parent and its
Consolidated Subsidiaries has good title to all securities, indebtedness and
other financial instruments owned by it, free and clear of any material Liens,
except to the extent such securities, indebtedness or other financial
instruments, as applicable, are pledged in the ordinary course of business
consistent with past practice to secure obligations of Parent or its
Consolidated Subsidiaries under outstanding indebtedness and except for Liens
consisting of restrictions on transfer agreed to in respect of investments
entered into in the ordinary course of business.
46
4.18 [Reserved].
4.19 Intellectual Property. Parent and its Consolidated Subsidiaries own,
or are validly licensed or otherwise have the right to use, all Intellectual
Property Rights that are material to the conduct of the business of Parent and
its Consolidated Subsidiaries taken as a whole (hereinafter, Parent
Intellectual Property Rights). No
claims are pending for which Parent has received written notice or, to the
knowledge of Parent, threatened (i) that Parent or any of its Consolidated
Subsidiaries is infringing or otherwise adversely affecting the rights of any
Person with regard to any Intellectual Property Right, or (ii) that any
Parent Intellectual Property Right is invalid or unenforceable. To the knowledge of Parent, no Person is
infringing, misappropriating or using without authorization the rights of the
Company or any of its Consolidated Subsidiaries with respect to any
Intellectual Property Right.
4.20 Environmental Matters. There are no material Proceedings of any
kind, pending or, to the knowledge of Parent, threatened, against Parent or any
of its Consolidated Subsidiaries, arising under any Environmental Law. There are no Orders by or with any
Governmental Entity, imposing any material liability or obligation on Parent or
any of its Consolidated Subsidiaries under or in respect of any Environmental
Law. There are and have been no
substances, materials, chemicals, wastes, pollutants, or contaminants
classified as hazardous or toxic, or that are otherwise defined in or regulated
under any Environmental Law, or other conditions at any property owned,
operated, or otherwise used by, or the subject of a security interest on behalf
of it or any of its Consolidated Subsidiaries, that reasonably could be
expected, individually or in the aggregate, to give rise to a Material Adverse
Effect with respect to Parent. Parent
has provided to the Company all material environmental reports, assessments,
audits, studies, investigations, data, environmental permits and other material
written environmental information in the custody, possession or control of
Parent or any of its Consolidated Subsidiaries, concerning Parent or any of its
Consolidated Subsidiaries.
4.21 Real Property. Neither Parent nor any of its Consolidated
Subsidiaries own any real property.
4.22 Investment Adviser and Administrator
To
the knowledge of Parent:
(a)
Ares Capital Management LLC (the Investment Adviser) is a limited
liability company duly formed, validly existing and in good standing under the
laws of the State of Delaware, Ares Operations LLC (the Administrator)
is a limited liability company duly formed, validly existing and in good
standing under the laws of the State of Delaware. True, complete and correct copies of the
certificates of formation and limited liability company agreements of the
Investment Adviser and the Administrator, each as in effect as of the date of
this Agreement, have previously been made available to the Company. Each of the Investment Adviser and the
Administrator has the requisite limited liability company power and authority
to own or lease all of its properties and assets and to carry on its business
as it is now being conducted in all material respects, and is duly licensed or
qualified to do business in each jurisdiction in which the nature of the
business conducted by it or the character or location of the properties and
assets owned or leased by
47
it makes such licensing or
qualification necessary, except where the failure to be so licensed or
qualified would not, individually or in the aggregate, have a Material Adverse
Effect on Parent.
(b)
Since the respective dates as of which information is given in the Parent SEC
Reports, except as otherwise stated therein, there has been no material adverse
change in the operations, affairs or regulatory status of the Investment
Adviser or the Administrator that would reasonably be expected to result in a
Material Adverse Effect on Parent.
(c)
The Investment Adviser is duly registered with the SEC as an investment adviser
under the Investment Advisers Act of 1940 and is not prohibited by such act or
the Investment Company Act from acting as the investment adviser of Parent
under the Investment Advisory Agreement as contemplated by the Parent SEC
Reports. There does not exist any
proceeding or, to Parents knowledge, any facts or circumstances the existence
of which would be reasonably likely to adversely affect the registration of the
Investment Adviser with the SEC or the ability of the Investment Adviser to
perform its obligations under the Investment Advisory Agreement.
(d)
There is no action, suit or proceeding or, inquiry or investigation before or
brought by any court or governmental agency or body, domestic or foreign, now
pending, or, to the knowledge of Parent, threatened, against or affecting
either the Investment Adviser or the Administrator, which is required to be
disclosed in the Parent SEC Reports or which would reasonably be expected to
result in a Material Adverse Effect on Parent.
(e)
The Investment Advisory Agreement has been duly authorized, executed and
delivered by Parent and the Investment Adviser, is in full force and effect,
and no party thereto is in default or breach of any of its obligations
thereunder. The Administration Agreement
has been duly authorized, executed and delivered by Parent and the
Administrator, is in full force and effect, and no party thereto is in default
or breach of any of its obligations thereunder.
Each of the Investment Advisory Agreement and the Administration
Agreement constitute valid and legally binding agreements of the Investment
Adviser and the Administrator, respectively, subject to the Bankruptcy and
Equity Exception.
(f)
Neither the Investment Adviser nor the Administrator is in violation of its
certificate of formation or limited liability company agreement, except for
such violations or defaults that would not reasonably be expected to result in
a Material Adverse Effect on Parent.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 Conduct of Businesses Prior to the
Effective Time. Subject to
applicable Law, except as Previously Disclosed, as contemplated or permitted by
this Agreement or with the prior written consent of the other parties, which
prior written consent shall not be unreasonably
48
delayed, conditioned or withheld, during the
period from the date of this Agreement to the Effective Time, each party shall,
and shall cause each of its respective Consolidated Subsidiaries to, (a) conduct
its business in the ordinary course of business consistent with past practice
and (b) use reasonable best efforts to (i) maintain and preserve
intact its business organization, listing exchange status and advantageous
business relationships, and (ii) maintain in effect all material Permits
that are required by such party and its Consolidated Subsidiaries to carry on
their respective businesses.
5.2 Company Forbearances. Subject to applicable Law, during the period
from the date of this Agreement to the Effective Time, except as Previously
Disclosed or as expressly contemplated
or permitted by this Agreement, the Company shall not, and shall not
permit any of its Consolidated Subsidiaries to, directly or indirectly, without
the prior written consent of Parent (which prior written consent shall not be
unreasonably delayed, conditioned or withheld):
(a)
Other than pursuant to the Company Stock Options outstanding on the date of
this Agreement or as set forth on Section 5.2(a) of the Company
Disclosure Schedule, issue, deliver, sell, grant or otherwise permit to become
outstanding, or dispose of or encumber or pledge, or authorize the creation of,
or amend the terms of (i) any shares of its capital stock, (ii) any
Company Voting Debt or other voting securities, (iii) any securities
convertible into or exercisable or exchangeable for, or any other Rights to
acquire, any such shares or other securities or (iv) any phantom stock, phantom
stock rights, stock appreciation rights or stock-based performance units.
(b)
(i) Make, declare, pay or set aside or establish a record date for payment
of any dividend on or in respect of, or declare or make any distribution on,
any shares of its capital stock or the capital stock of any of its Consolidated
Subsidiaries, whether in cash, stock or property or any combination thereof,
except for required dividends on the capital stock of the Company REIT to the
extent necessary to avoid the imposition of income or excise Taxes on the
Company REIT, as reasonably determined by the Company or dividends payable by
any directly or indirectly wholly owned Consolidated Subsidiary of the Company
to the Company or another directly or indirectly wholly owned Consolidated
Subsidiary of the Company, (ii) adjust, split, combine, reclassify or take
similar action with respect to any of its capital stock or issue or authorize
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock, or (iii) purchase, redeem or
otherwise acquire, any shares of its capital stock or the capital stock of any
of its Consolidated Subsidiaries or any other securities thereof or any rights,
warrants or options to acquire any such shares or other securities as in effect
on the date of this Agreement.
(c)
Sell, transfer, lease, mortgage, encumber or otherwise dispose of or
discontinue any of its assets, deposits, business or properties, except for
sales, transfers, leases, mortgages, encumbrances or other dispositions or
discontinuances (i) as set forth in Section 5.2(c) of the
Company Disclosure Schedule, (ii) other such transactions in the ordinary
course of business consistent with past practice and in an aggregate amount not
to exceed $500,000 or (iii) encumbrances required to secure the Company
Outstanding Debt pursuant to the terms of such debt as in effect as of the date
of this Agreement.
49
(d)
Acquire or agree to acquire (other than by way of foreclosures or acquisitions
of control in a fiduciary or similar capacity or in satisfaction of debts
previously contracted in good faith, in each case, in the ordinary course of
business consistent with past practice) all or any portion of the assets,
business, deposits or properties of any other Person, whether by merger,
consolidation, purchase or otherwise or make any other investments, except in a
transaction conducted in the ordinary course of business consistent with past
practice and in an amount that individually or together with other such
transactions does not exceed $500,000.
(e)
Amend the Company Articles, the Company Bylaws or other governing documents or
similar governing documents of any of its Consolidated Subsidiaries.
(f)
Implement or adopt any change in its Tax or financial accounting principles,
practices or methods, other than as required by applicable Law, GAAP or
applicable regulatory requirements.
(g)
Except as required under applicable Law or the terms of any Company Benefit
Plan existing as of the date hereof or as is set forth in Section 5.2(g) of
the Company Disclosure Schedule or provided for by this Agreement, (i) increase
in any manner the compensation or benefits (including, without limitation, any
increase in severance, change of control or termination pay) of any of the
current, former or newly hired Employees of the Company or its Consolidated
Subsidiaries, (ii) pay any amounts to Employees of the Company or its
Consolidated Subsidiaries or increase any amounts or rights of any such
Employees not required by any current plan, program or agreement unless in
connection with ordinary course payroll and expense reimbursement policies and
procedures as in effect as of the date hereof, (iii) become a party to,
establish, amend, commence participation in, terminate or commit itself to the
adoption of any stock option plan or other stock-based compensation plan,
compensation, severance, pension, retirement, profit-sharing, welfare benefit,
or other employee benefit plan or agreement or employment agreement with or for
the benefit of any Employee (or newly hired Employees) of the Company or its
Consolidated Subsidiaries, (iv) other than as provided for in this Agreement,
accelerate the vesting of or lapsing of restrictions with respect to any
stock-based compensation or other long-term incentive compensation under any
Company Benefit Plans, (v) cause the funding of any rabbi trust or similar
arrangement or take any action to fund or in any other way secure the payment
of compensation or benefits under any Company Benefit Plan, or (vi) enter
into any employment, consulting, indemnification, severance or termination
Contract with any Employee (other than immaterial at will employment
arrangements).
(h)
Take any action or knowingly fail to take any action that would, or would
reasonably be expected to prevent the Mergers together from qualifying as a
reorganization within the meaning of Section 368(a) of the Code.
(i)
(i) Incur any indebtedness for borrowed money, or guarantee any such
indebtedness of another Person, issue or sell any debt securities or warrants
or other rights to acquire any of its debt securities or the debt securities of
any Consolidated Subsidiary, guarantee any debt of its Consolidated
Subsidiaries, enter into any keep well or other
50
agreement to maintain any
financial statement condition of another Person or enter into any arrangement
having the economic effect of any of the foregoing, except for draw downs with
respect to existing credit facilities in the ordinary course of business
consistent with past practice, or (ii) except pursuant to Previously
Disclosed commitments existing as of the date of this Agreement that are set
forth on Section 5.2(i) of the Company Disclosure Schedule, make any
loans, advances or capital contributions to, or investments in, any other
Person, other than to or in the Company or any direct or indirect wholly owned and
Consolidated Subsidiary of the Company that is set forth on Section 5.2(i) of
the Company Disclosure Schedule.
(j)
Make or agree to make any new capital expenditure or expenditures in the
aggregate in excess of $100,000.
(k)
File or amend any Tax Return other than in the ordinary course of business;
make, change or revoke any Tax election; or settle or compromise any material
Tax liability or refund.
(l)
Take any action, or knowingly fail to take any action, that is reasonably
likely to cause Company REIT to fail to qualify as a REIT.
(m)
Enter into any new line of business.
(n)
Terminate, enter into, amend, modify or renew any Contract referenced in Section 3.16(a)(1),
(2)(B), 2(C), (3), (5) (other than, in respect of non-solicitation
Contracts, in the ordinary course of business consistent with past practice),
(7), (8), (9), (10), and (11) in a manner materially adverse to the Company or
its Consolidated Subsidiaries, as applicable.
(o)
Settle any Proceeding against it, except for a Proceeding that (i) is
settled in the ordinary course of business consistent with past practice in an
amount or for consideration not in excess of $100,000 in the aggregate, (ii) would
not impose any material restriction on the conduct of business of it or any of its
Consolidated Subsidiaries or, after the Effective Time, Parent, the Surviving
Company or any of their Consolidated Subsidiaries, (iii) would not create
precedent for Proceedings that are reasonably likely to be material to it or
any of its Consolidated Subsidiaries or, after the Effective Time, Parent, the
Surviving Company or any of their Consolidated Subsidiaries and (iv) would
not admit fault, liability or guilt.
(p)
(i) Pay, discharge or satisfy any indebtedness for borrowed money, other
than the payment, discharge or satisfaction, required pursuant to the terms of
Company Outstanding Debt as in effect as of the date of this Agreement, (ii) cancel
any material indebtedness (individually or in the aggregate) or waive or amend
any claims or rights of substantial value (other than in accordance with
ordinary course restructurings of portfolio companies in an aggregate amount
not to exceed $1,000,000) or (iii) waive material benefits of, or agree to
modify in any material manner, any confidentiality (other than in the ordinary
course of business consistent with past practice), standstill or similar
agreement to which it or any of its Consolidated Subsidiaries is a party.
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(q)
Merge or consolidate the Company or any of its Consolidated Subsidiaries with
any Person or adopt a plan of complete or partial liquidation, dissolution,
restructuring, recapitalization or other reorganization of the Company or any
of its Consolidated Subsidiaries.
(r)
Agree to take, make any commitment to take, or adopt any resolutions of its
Board of Directors in support of, any of the actions prohibited by this Section 5.2.
5.3 [Reserved].
5.4 Parent Forbearances. Subject to applicable Law, during the period
from the date of this Agreement to the Effective Time, except as Previously
Disclosed or as expressly contemplated or permitted by this Agreement, Parent
shall not, and shall not permit any of its Consolidated Subsidiaries to,
directly or indirectly, without the prior written consent of the Company (which
prior written consent shall not be unreasonably delayed, conditioned or
withheld):
(a)
Issue, deliver, sell, grant, dispose of, encumber or pledge any shares of its
capital stock, other than (i) shares in an aggregate amount not to exceed
$150 million aggregate value on or before March 31, 2010 and at a price no
less than 80% of net asset value, (ii) after March 31, 2010, shares
in an aggregate amount not to exceed $400 million aggregate value (including
any value represented by shares issued prior to March 31, 2010) and at a
price no less than 90% of net asset value, (iii) shares at a price per
share greater than the net asset value per share of the Parent Common Stock or (iv) other
shares of its capital stock not otherwise shares of the Parent Common Stock.
(b)
Make, declare, pay or set aside or establish a record date for payment any
dividend on or in respect of, or declare or make any distribution on, any
shares of its capital stock or the capital stock of any of its Consolidated
Subsidiaries, whether in cash, stock or property or any combination thereof, in
each case, other than in the ordinary course of business consistent with past
practice.
(c)
Amend the Parent Articles, Parent Bylaws or other governing documents or
similar governing documents of any of its Consolidated Subsidiaries (other than
to increase the number of shares of authorized Parent Common Stock), in each
case, in any manner that would reasonably be expected to be adverse to holders
of the Company Common Stock.
(d)
Take any action, or knowingly fail to take any action that would, or would
reasonably be expected to prevent the Mergers together from qualifying as a
reorganization within the meaning of Section 368(a) of the Code.
(e)
Agree to take, make any commitment to take, or adopt any resolutions of its
Board of Directors in support of, any of the actions prohibited by this Section 5.4.
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ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Further Assurances.
(a)
Subject to the Company Right, the parties shall cooperate with each other and
use their reasonable best efforts to take, or cause to be taken, in good faith,
all actions, and to do, or cause to be done, all things necessary, including to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings, to
obtain as promptly as practicable all Permits of all Governmental Entities and
all permits, consents, approvals, confirmations and authorizations of all third
parties, in each case, that are necessary or advisable to consummate the
Transactions (including the Merger) including, without limitation, the consents
set forth on Section 3.3(b) of the Company Disclosure Schedule or Section 4.3(b) of
Parent Disclosure Schedule, and to comply with the terms and conditions of all
such permits, consents, approvals and authorizations of all such third parties
and Governmental Entities. Without
limiting the foregoing, the Company shall use its reasonable best efforts to
obtain the Company Requisite Regulatory Approvals and the FIRPTA Certificate
and Parent shall use its reasonable best efforts to obtain the Parent Requisite
Regulatory Approvals. The Company shall
use its reasonable best efforts to modify the Company Exemptive Order so that
it would apply to Parent as the Companys successor.
In furtherance (but not in
limitation) of the foregoing, Parent shall promptly (but in no event later than 21 days of the date hereof) file any
required applications, notices or other filings under the HSR Act. Subject to applicable Law, the Company and
Parent shall have the right to review in advance, and, to the extent practicable,
each shall consult the other on all the information relating to the Company or
Parent, as the case may be, and any of their respective Consolidated
Subsidiaries, that appear in any filing made with, or written materials
submitted to, any third-party or any Governmental Entity in connection with the
Transactions. In exercising the
foregoing right, each of the parties shall act reasonably and as promptly as
practicable. The parties shall consult
with each other with respect to the obtaining of all Permits, consents,
approvals and authorizations of all third parties and Permits of all
Governmental Entities necessary or advisable to consummate the Transactions and
each party will keep the other apprised of the status of matters relating to
completion of the Transactions. Parent,
on the one hand, and the Company, on the other hand, shall each, in connection
with the efforts referenced in this Section 6.1(a) to obtain all
requisite Permits for the Transactions under the HSR Act, use its reasonable
best efforts to (i) cooperate in all respects with each other in
connection with any filing or submission and in connection with any
investigation or other inquiry, including any Proceeding initiated by a private
party; (ii) keep the other party informed of any communication received by
such party from, or given by such party to, the Federal Trade Commission (the FTC),
the Antitrust Division of the Department of Justice (the DOJ), or any other
Governmental Entity and of any communication received or given in connection
with any Proceeding by a private party, in each case regarding any of the
Transactions; and (iii) subject to applicable Law, permit the other party
to review, in advance, any written communication given by it to or received
from, and consult with
53
each other
in advance of any meeting or conference with, the FTC, the DOJ, or any other
Governmental Entity or, in connection with any Proceeding by a private party,
any other Person, and to the extent permitted by the FTC, the DOJ, or other
applicable Governmental Entity or other Person, give the other party the
opportunity to attend and participate in such meetings and conferences subject
to applicable Law.
Notwithstanding the foregoing or any
other covenant contained herein, in connection with the receipt of any
necessary Permits, including under the HSR Act or under any applicable foreign
antitrust laws, nothing shall require either Parent or the Company to (i) divest
or hold separate any material part of its businesses or operations or (ii) agree
not to compete in any geographic area or line of business or agree to take, or
not to take, any other action or comply with any other term or condition, in
each case in such a manner as would reasonably be expected to result in a
Material Adverse Effect.
(b)
Subject to subsection (c) below, from the date of this Agreement
until the Closing, Parent and the Company shall, and shall cause their
Representatives to, reasonably cooperate in connection with obtaining the
Financing Consents, any restructuring of any Company Outstanding Debt or Parent
Indebtedness or any outstanding debt of the Company and its Consolidated
Subsidiaries or Parent and its Consolidated Subsidiaries, or, in the
circumstance where the Financing Consents cannot be obtained, obtaining any
replacement, amended, modified or alternative financing, including the
following (it being understood and agreed that in no event shall any party be
required to take any action in respect of the following to the extent that
doing so would be commercially unreasonable):
(i)
assisting with the preparation of appropriate and customary materials for
rating agency presentations, offering documents, bank information memoranda
(including the delivery of customary representation letters) and similar documents
reasonably required in connection with the Financing Consents, any
restructuring or any alternative financing;
(ii)
assisting with the preparation of any pledge and security documents, any loan
agreement, currency or interest hedging agreement, other definitive financing
documents on terms reasonably satisfactory to Parent, or other certificates,
legal opinions or documents as may be reasonably requested by Parent;
(iii)
facilitating the pledging of collateral;
(iv)
subject to receipt by the Company or Parent, as applicable, of customary
confidentiality undertakings, furnishing to financing sources identified by
Parent or the Company, as the case may be, as promptly as practicable, such
financial and other pertinent information regarding the applicable party as may
be reasonably requested by the other party, including all financial statements
and other financial data of the type and form customarily required by bank
lenders, of the type required by Regulation S-X and Regulation S-K under the Securities
Act for registered offerings of debt securities and of the type and form
customarily included in offering documents used in private
54
placements under Rule 144A
of the Securities Act, to consummate any offerings of debt securities;
(v)
providing monthly financial statements to the extent the relevant party
customarily prepares such financial statements within the time such statements
are customarily prepared;
(vi)
obtaining such accountants comfort letters, legal opinions, surveys and title
insurance as reasonably requested by the parties or their financing sources in
connection with any financing;
(vii)
causing its independent accountants to cooperate with and assist in preparing
customary and appropriate information packages and offering materials as may be
reasonably requested for use in connection with a financing;
(viii)
making available appropriate officers and employees, on reasonable advance
notice, to meet with prospective lenders and investors in meetings,
presentations, road shows and due diligence sessions, or to execute documents
in accordance with this Section 6.1(b),
(ix)
introducing Parent to appropriate representatives of the Companys lending
sources in order to discuss the Financing Consents; and
(x)
taking all corporate or entity actions, subject to the occurrence of the
Closing, reasonably requested by Parent to permit the consummation of the
Financing Consents, any restructuring of any Company Outstanding Debt or any
other outstanding debt of Company and its Consolidated Subsidiaries or any
alternative financing and to permit the proceeds thereof to be made available
to Parent at the Closing.
(c)
Notwithstanding anything to the contrary herein, (i) nothing in this
Agreement shall require either Parent and its Consolidated Subsidiaries or the
Company and its Consolidated Subsidiaries to make payments or provide other
consideration for the repayment, restructuring or amendment of terms of
indebtedness in connection with the Mergers in order to obtain the Financing
Consents, other than customary consent fees required in connection with the
change of control, and (ii) Section 6.1(b) and this Section 6.1(c) shall
exclusively govern the obligations of each party to take (or omit to take) any
action in respect of the Financing Consents, any restructuring of any Company
Outstanding Debt or any outstanding debt of the Company and its Consolidated
Subsidiaries, or, in the circumstance where the Financing Consents cannot be obtained,
any action to obtain any replacement, amended, modified or alternative
financing.
(d)
If the Financing Consents are obtained, Parent agrees to execute and deliver,
or cause to be executed and delivered, by or on behalf of the Surviving
Company, at or prior to the Effective Time, one or more supplemental
indentures, guarantees, certificates, opinions and other instruments required
for the due assumption of the Company Outstanding Debt.
55
6.2 Regulatory Matters.
(a)
Parent and the Company shall as promptly as practicable, but in no case later
than 30 days after the date of this Agreement, prepare and file with the SEC
the Registration Statement. Each of
Parent and the Company shall use its reasonable best efforts to have the
Registration Statement declared effective under the Securities Act as promptly
as practicable after such filing, and the Company and Parent shall promptly
mail or deliver the Joint Proxy Statement/Prospectus to their respective
stockholders upon such effectiveness.
Parent shall also use its reasonable best efforts to obtain all
necessary state securities Law or Blue Sky permits and approvals required to
carry out the Transactions, and the Company shall use reasonable best efforts
to furnish all information concerning the Company and the holders of the
Company Common Stock as may be reasonably requested in connection with any such
action.
(b)
Each of Parent and the Company shall, upon request, furnish to the other all
information concerning itself, its Consolidated Subsidiaries, directors,
officers and stockholders and such other matters as may be reasonably necessary
or advisable in connection with the Registration Statement or any other
statement, filing, notice or application made by or on behalf of Parent, the
Company or any of their respective Consolidated Subsidiaries to any
Governmental Entity in connection with the Merger and the other
Transactions. The information supplied
or to be supplied by either Parent or the Company, as the case may be, for
inclusion in the Registration Statement shall not at the time the Registration
Statement is filed with the SEC or declared effective by the SEC contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading. Without limiting the generality of the
foregoing, prior to the Effective Time each party shall notify the other party
as promptly as practicable (i) upon becoming aware of any event or
circumstance that should be described in an amendment to the Registration
Statement or in a supplement to the Joint Proxy Statement/Prospectus and (ii) after
the receipt by it of any written or oral comments of the SEC with respect to,
or of any written or oral request by the SEC for amendments or supplements to,
the Joint Proxy Statement/Prospectus or the Registration Statement, and shall
promptly supply the other party with copies of all correspondence between it or
any of its Representatives and the SEC with respect to any of the foregoing
filings.
(c)
Subject to applicable Law, each of Parent and the Company shall promptly advise
the other upon receiving any communication from any Governmental Entity, the
consent or approval of which is required for consummation of the Transactions,
that causes such party to believe that there is a reasonable likelihood that
any Regulatory Approval will not be obtained or that the receipt of any such
approval may be materially delayed or conditioned. To the extent permitted by applicable Law,
each party shall consult with the other party prior to responding to any
communication from any Governmental Entity in connection with the Transactions.
6.3 Stockholder Approval.
(a)
As of the date of this Agreement, the Board of Directors of the Company has
adopted resolutions approving the Company Matters, including the Merger, on the
56
terms and conditions set
forth in this Agreement, and directing that the Company Matters, including the
Merger, be submitted to the Companys stockholders for their
consideration. Subject to the Company
Right, the Board of Directors of the Company shall submit to its stockholders
the Company Matters on the terms and conditions set forth in this Agreement and
any other matters required to be approved or adopted by its stockholders in
order to carry out the Transactions. In
furtherance of that obligation, subject to the Company Right, the Company shall
take, in accordance with applicable Law and the Company Articles and the
Company Bylaws, all action necessary to send a notice as promptly as
practicable (but in no event later than ten Business Days) following the date
on which the SEC declares the Registration Statement effective of which the
Joint Proxy Statement/Prospectus forms a part, to convene a meeting of its
stockholders (the Company Stockholders Meeting), as promptly as
practicable thereafter, to consider and vote upon approval of the Company
Matters including the Merger, on the terms and conditions set forth in this
Agreement as well as any other such matters.
The record date for the Company Stockholders Meeting shall be determined
in prior consultation with and subject to the prior written approval of Parent
(which prior written approval shall not be unreasonably delayed, conditioned or
withheld). Subject to Section 6.7,
the Board of Directors of the Company shall use reasonable best efforts to
obtain from the Companys stockholders the vote required to approve the Company
Matters, on the terms and conditions set forth in this Agreement, including by
recommending to the Companys stockholders the approval of the Company Matters
and including such recommendation in the Joint Proxy Statement/Prospectus and
by, at the request of Parent, postponing or adjourning the Company Stockholders
Meeting to obtain a quorum or solicit additional proxies; provided that
the Company shall not postpone or adjourn the Company Stockholders Meeting for
any other reason without the prior written consent of Parent (which prior
written consent shall not be unreasonably delayed, conditioned or
withheld). Without limiting the generality
of the foregoing, the Companys obligations pursuant to this Section 6.3(a) shall
not be affected by (i) the commencement, public proposal, public
disclosure or communication to the Company or its stockholders of any Takeover
Proposal or (ii) a Company Adverse Recommendation Change (other than a
Company Right).
(b)
As of the date of this Agreement, the Board of Directors of Parent has adopted
resolutions approving the Parent Matters on the terms and conditions set forth
in this Agreement, and directing that the Parent Matters be submitted to Parents
stockholders for their consideration.
The Board of Directors of Parent shall submit to its stockholders the
Parent Matters on the terms and conditions set forth in this Agreement and any
other matters required to be approved or adopted by its stockholders in order
to carry out the Transactions. In
furtherance of that obligation, Parent shall take, in accordance with
applicable Law and the Parent Articles and the Parent Bylaws, all action
necessary to send a notice as promptly as practicable (but in no event later
than ten Business Days) following the date on which the SEC declares the
Registration Statement effective of which the Joint Proxy Statement/Prospectus
forms a part, to convene a meeting of its stockholders (the Parent
Stockholders Meeting), as promptly as practicable thereafter, to consider
and vote upon approval of the Parent Matters including the Merger, on the terms
and conditions set forth in this Agreement as well as any other such
matters. The record date for the Parent
Stockholders Meeting shall be determined in
57
prior consultation with and
subject to the prior written approval of the Company (which prior written
approval shall not be unreasonably delayed, conditioned or withheld). Subject to Sections 6.8(a) and 6.8(b),
the Board of Directors of Parent shall use reasonable best efforts to obtain
from Parents stockholders the vote required to approve the Parent Matters,
including by recommending to Parents stockholders the approval of the Parent
Matters and including such recommendation in the Joint Proxy
Statement/Prospectus and by, at the request of the Company, postponing or
adjourning the Parent Stockholders Meeting to obtain a quorum or solicit
additional proxies; provided that Parent shall not postpone or adjourn
the Parent Stockholders Meeting for any other reason without the prior written
consent of the Company (which prior written consent shall not be unreasonably
delayed, conditioned or withheld).
Without limiting the generality of the foregoing, Parents obligations
pursuant to this Section 6.3(b) shall not be affected by a
Parent Adverse Recommendation Change.
6.4 NASDAQ Listing. Parent shall use reasonable best efforts to
cause the shares of the Parent Common Stock to be issued in the Merger in
exchange for the Company Common Stock to be approved for listing on the NASDAQ,
subject to official notice of issuance, as promptly as practicable, and in any
event prior to the Effective Time.
6.5 Employee Matters.
(a)
The Company shall cause the employment or services of all Employees of the
Company and its Consolidated Subsidiaries (other than those identified by
Parent prior to the Closing as not requiring termination) to be terminated
immediately prior to the Effective Time; provided, however, that such
termination of employment or services shall be contingent upon the Effective
Time actually occurring.
(b)
On or prior to the Closing Date, Parent or its Affiliates may, but shall be
under no obligation to, make an offer of employment, effective as of the
Effective Time or thereafter, or hire any of the Employees of the Company who
are actively employed with the Company immediately prior to the Effective Time;
provided, however, that any such offer of employment to an
Employee shall be contingent upon the Effective Time actually occurring. Employees of the Company who continue as
Employees of Parent or who affirmatively accept an offer of employment from a
controlled Affiliate of Parent and commence working for Parent or its
controlled Affiliates on the Closing Date are hereinafter referred to as the Business
Employees. Parent or its controlled
Affiliates shall determine, in its or their sole and absolute discretion, the
terms and conditions of employment to be offered to any Business Employee and
are under no obligation to employ any Business Employee for any particular
period of time. Nothing herein shall be
construed to prevent Parent or its controlled Affiliates from terminating the
employment of any Business Employee at any time after the Effective Time for
any reason (or no reason). Parent agrees
that any employee benefit plans in which the Business Employees are eligible to
participate shall take into account for purposes of eligibility, vesting and
benefit accrual thereunder, except for benefit accrual under defined benefit
pension plans, or to the extent it would result in a duplication of benefits,
service by Business Employees with the Company and its Affiliates as if such
service were with Parent or its controlled Affiliates, to the same extent such
service was credited under a comparable Company
58
Benefit Plan. Parent shall, or shall cause its controlled
Affiliates to: (i) waive any
preexisting condition limitations otherwise applicable to Business Employees
and their eligible dependents under any benefit plan of Parent or its
controlled Affiliates that provides health or medical benefits in which such
Business Employees may be eligible to participate following the Closing (a Parent
Welfare Plan), other than any limitations that were in effect with respect
to such employees as of the Closing under the analogous Company Benefit Plan, (ii) honor
any deductible, co-payment and out-of-pocket maximums incurred by any Business
Employee and his or her eligible dependents under the health plans in which
they participated immediately prior to the Closing during the portion of the
calendar year prior to the Closing in satisfying any deductibles, co-payments or
out-of-pocket maximums under Parent Welfare Plans that provide health or
medical benefits in which they are eligible to participate after the Closing in
the same plan year in which such deductibles, co-payments or out-of-pocket
maximums were incurred and (iii) waive any waiting period limitation or
evidence of insurability requirement that would otherwise be applicable to any
Business Employee and his or her eligible dependents on or after the Closing,
in each case to the extent such Business Employee or eligible dependent had
satisfied any similar limitation or requirement under an analogous Company
Benefit Plan prior to the Closing.
(c)
Not later than 10 Business Days prior to and contingent upon the Effective
Time, the Company shall terminate all of the Company Benefit Plans maintained
by the Company or any of its Consolidated Subsidiaries subject to the
requirements of Sections 401(a) and 409A of the Code; provided, however,
that the Company shall not be required to terminate (1) any obligation it
has to make payments under any employment or retention agreements or payments
otherwise provided for in this Agreement or (2) any Company Benefit Plan
identified by Parent at least 10 Business Days prior to the Closing. Payments in respect of terminated Company
Benefit Plans shall be made upon the Closing to the extent permitted by
Sections 401(a) and 409A of the Code.
To the extent payment upon Closing is not permitted by Sections 401(a) and
409A of the Code, the Company shall vest payments and benefits under such
terminated Company Benefit Plans and payments and benefits under employment or
retention agreements for employees who will not continue in the employ of
Parent and its Affiliates. To the extent
permitted by Section 409A of the Code, the Company shall establish and
fund a rabbi trust or similar funding arrangement for any such payments not
made at Closing, which will be distributed at the earliest time permitted in
accordance with the terms of such underlying Company Benefit Plans and the
requirements of Section 409A of the Code.
The rabbi trust shall provide that upon satisfaction of all amounts the
remainder will revert to the Company.
Notwithstanding the foregoing, Parent or its controlled Affiliates shall
continue, or cause to be continued for the duration of the applicable COBRA
continuation period, the health and medical benefits for the Employees of the
Company and its Consolidated Subsidiaries under the arrangements that exist
immediately prior to the Effective Time (the Company Health Plans); provided,
that if it is not possible for Parent or its controlled Affiliates to continue
the Company Health Plans as a result of the termination of such Company Health
Plan as of the Closing Date, the Parent or its controlled Affiliate shall
either (i) use commercially reasonable efforts to obtain replacement
arrangements that replicate the Company Health Plans or (ii) cause such
benefits to be provided pursuant to the health and medical benefit arrangements
of a controlled Affiliate that most closely approximate the
59
benefits provided pursuant
to the Company Health Plans. At or prior
to the Effective Time, the Company shall take all necessary action to cause the
account balances and/or accrued benefits of the Company Employees under the
Company 401(k) Plan, to be fully vested and non-forfeitable as of the
Closing Date provided that such actions shall be contingent on the Effective
Time occurring. Each Business Employee
with an outstanding plan loan under the Company 401(k) Plan shall be
permitted to roll over his or her eligible rollover distribution from the
Company 401(k) Plan to a qualified defined contribution plan maintained by
Parent or its controlled Affiliate for the Business Employees, including any
outstanding plan loan or promissory note under the Company 401(k) Plan to
the extent allowable under such plan.
Except as set forth above, at or prior to the Effective Time (or, if not
permitted under applicable Law, as soon as practicable after the Effective Time
in accordance with their terms) the Company shall pay out to each Employee of
the Company or its Consolidated Subsidiaries all benefits accrued by such
Employee of the Company or its Consolidated Subsidiaries under the Company
Benefit Plans. The Company shall provide
Parent reasonable opportunity to review and comment upon all documentation,
including any resolutions to be adopted by the Company, and to effectuate the
termination of the Company Benefit Plans and vesting of the Companys matching
contributions under the Company 401(k) Plan.
(d)
In the event that (i) any Employee of the Company or its Consolidated
Subsidiary who does not have a retention agreement does not continue in the
employ of Parent or its controlled Affiliate on or after the Closing or (ii) the
employment of any Business Employee who does not have a retention agreement is
terminated by Parent or its controlled Affiliate without cause within twelve
months following the Closing, then the Company (in the case of the foregoing Section 6.5(d)(i))
or the Parent (in the case of the foregoing Section 6.5(d)(ii)), agrees
to, or will cause its controlled Affiliate to, provide such Employee with
severance benefits no less than the severance benefits set forth on Section 5.2(g) of
the Company Disclosure Schedule.
(e)
The Company shall be permitted to pay retention/annual bonuses and
miscellaneous transaction-related compensation, consistent with the terms set
forth on Section 5.2(g) of the Company Disclosure Schedule, to
Employees of the Company and its Consolidated Subsidiaries.
(f)
Notwithstanding anything in this Section 6.5 to the contrary, nothing
contained herein, whether express or implied, shall be treated as an amendment
or other modification of any employee benefit plan maintained by Parent or any
of its Affiliates, or shall limit the right of Parent or its respective
Affiliates to amend, terminate or otherwise modify any employee benefit plan
maintained by Parent or any of its Affiliates following the Effective Time. If (i) a party other than the parties
hereto makes a claim or takes other action to enforce any provision in this
Agreement as an amendment to any employee benefit plan maintained by Parent or
any of its Affiliates, and (ii) such provision is deemed to be an
amendment to such employee benefit plan maintained by Parent or any of its
Affiliates even though not explicitly designated as such in this Agreement,
then, solely with respect to the employee benefit plan maintained by Parent or
any of its Affiliates at issue, such provision shall lapse retroactively and
shall have no amendatory effect with respect thereto.
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(g)
No provision of this Section 6.5 shall create any third party beneficiary
or other rights in any Business Employee (including any beneficiary or
dependent thereof) in respect of employment with Parent or any of its
Affiliates and no provision of this Section 6.5 shall create any rights in
any Business Employee (including any beneficiary or dependent thereof) in
respect of any compensation or benefits that may be provided, directly or
indirectly, under any employee benefit plan or arrangement that has been or may
be established by Parent or any of its Affiliates. No provision of this Agreement shall
constitute a limitation on rights to amend, modify or terminate at any time any
employee benefit plans or arrangements of Parent of any of its Affiliates.
(h)
The Company shall be responsible for fulfilling all requirements under WARN,
including but not limited to issuing all notices required under WARN or similar
state laws (a WARN Notice) and/or to make any payments required to be
made to any Employee of the Company or its Consolidated Subsidiaries under WARN
or similar state laws; provided, that Parent shall have an opportunity to
review and approve such WARN Notice no later than seven Business Days before
such WARN Notice will be issued to an Employee of the Company or its
Consolidated Subsidiaries, such approval by Parent to not be unreasonably
withheld.
6.6 Indemnification; Directors and Officers
Insurance.
(a)
Following the Effective Time, Parent shall, to the fullest extent permitted
under applicable Law, indemnify, defend and hold harmless and advance expenses
to the present and former directors and officers of the Company or any of its
Consolidated Subsidiaries, and any such Person presently or formerly serving at
the request of the Company or any of its Consolidated Subsidiaries as a
director, officer, employee, trustee or fiduciary of any other Person or under
or with respect to any employee benefit plan (in each case, when acting in such
capacity) (each, an Indemnified Party and collectively, the Indemnified
Parties) against all costs or expenses (including reasonable attorneys
fees), judgments, fines, losses, claims, damages, penalties, amounts paid in
settlement or other liabilities (collectively, Indemnified Liabilities)
incurred in connection with any Proceeding arising out of actions or omissions
occurring at or prior to the Effective Time (including the Transactions),
whether asserted or claimed prior to, at or after the Effective Time. In the event of any such Indemnified
Liabilities, (i) Parent shall advance to such Indemnified Party upon
request reimbursement of documented expenses reasonably incurred to the fullest
extent permitted under applicable Law provided that the Person to whom expenses
are advanced provides an undertaking to repay such advances if it is ultimately
determined that such Person is not entitled to indemnification and complies
with other applicable provisions imposed under the Investment Company Act and
interpretations thereof by the SEC or its staff and (ii) Parent and the
applicable Indemnified Parties shall cooperate in the defense of such matter. If any Indemnified Party is required to bring
any action to enforce rights or to collect moneys due under this Section 6.6(a) and
is successful in obtaining a decision that it is entitled to enforcement of any
right or collection of any money in such action, Parent shall reimburse such
Indemnified Party for all of its expenses reasonably incurred in connection
with bringing and pursuing such action, including reasonable attorneys fees
and costs.
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(b)
For a period of six years following the Effective Time, Parent shall obtain a
directors and officers liability insurance policy that serves to reimburse
the present and former officers and directors of the Company or any of its
Consolidated Subsidiaries (determined as of the Effective Time) with respect to
Proceedings against such directors or officers arising from facts or events
occurring on or prior to the Effective Time, which insurance shall contain
identical or better coverage and amounts, and contain terms and conditions no
less advantageous, as that coverage currently provided by the Companys current
policies (the Company D&O Policies); provided, that in no
event shall Parent be required to expend more than 200% of the current amount
expended by the Company for the Company D&O Policies for a twelve-month
period (the Current Premium) to maintain or procure directors and
officers insurance coverage for a comparable six-year period, which annual
premium is set forth on Section 6.6(b) of the Company Disclosure
Schedule; provided, further, that if Parent is unable to maintain
or obtain the insurance called for by this Section 6.6(b), Parent shall
use its reasonable best efforts to obtain as much comparable insurance as is
available for 200% of the Current Premium; provided, further,
that officers and directors of the Company or any of its Consolidated
Subsidiaries may be required to make application and provide customary
representations and warranties to the responsible insurance carrier for the
purpose of obtaining such insurance.
Notwithstanding anything in this Section 6.6(b) to the
contrary, (i) Parent may fulfill its (and the Surviving Companys)
obligations under this Section 6.6(b) by purchasing, and (ii) the
Company may purchase for up to 200% of the Current Premium a directors and
officers insurance policy or a tail policy under the Company D&O
Policies, in either case that (A) has an effective term of six years from
the Effective Time, (B) covers those Persons who are currently covered by
the Company D&O Policies and for actions and omissions occurring on or
prior to the Effective Time and (C) contains terms with respect to
coverage and amounts that are identical or better than those contained in the
Company D&O Policies provided, that, if the Company purchases such
insurance policy or tail policy, Parents obligation under this Section 6.6(b) shall
be deemed to have been satisfied in full.
(c)
Any Indemnified Party wishing to claim indemnification under Section 6.6(a),
upon learning of any Proceeding described above, shall promptly notify Parent; provided,
that failure so to notify shall not affect the obligations of Parent under Section 6.6(a) unless
and to the extent that Parent is actually and materially prejudiced as a consequence.
(d)
If Parent or any of its successors or assigns consolidates with or merges into
any other entity and is not the continuing or surviving entity of such
consolidation or merger or transfers all or substantially all of its assets to
any other entity, then and in each case, Parent shall cause proper provision to
be made so that the successors and assigns of Parent shall assume the
obligations set forth in this Section 6.6.
(e)
At the Effective Time, Parent shall automatically, fully, unconditionally and
irrevocably assume and agree to perform and discharge, jointly and severally
with the Surviving Company, all of the obligations of the Company under each
indemnification agreement between the Company and any of its directors and
officers listed on Section 6.6(e) of the Company Disclosure Schedule
(substantially in the form filed under Exhibit
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10.37 to the Companys Form 10-K
for the year ended December 31, 2003) and any other similar agreements.
(f)
The provisions of this Section 6.6 are (i) intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party and his or her
heirs and representatives and (ii) in addition to, and not in substitution
for, any other rights to indemnification or contribution that any such person
may have by Contract or otherwise.
6.7 No Solicitation.
(a)
The Company shall, and shall cause its Affiliates, Consolidated Subsidiaries,
and its and each of their respective officers, directors, trustees, managers,
employees, consultants, financial advisors, attorneys, accountants and other
advisors, representatives and agents (collectively, Representatives)
to, immediately cease and cause to be terminated immediately any discussions or
negotiations with any parties that may be ongoing with respect to, or that are
intended to or could reasonably be expected to lead to, a Takeover
Proposal. The Company shall promptly
demand that each Person (other than Parent or its Affiliates or
Representatives) that has heretofore executed a confidentiality agreement with
respect to the Companys consideration of a possible Takeover Proposal
immediately return or destroy (which destruction shall be certified in writing
by such Person to the Company) all confidential information heretofore
furnished to such Person. Prior to the
Effective Time, subject to Section 6.7(c), the Company shall not, and
shall cause its Affiliates, Consolidated Subsidiaries and its and their
respective Representatives not to, (i) directly or indirectly solicit,
initiate, induce, knowingly encourage or take any other action with the intent
to solicit, initiate, induce or encourage (including by way of furnishing or
disclosing information) any inquiries or the making or submission or implementation
of any proposal or offer (including any proposal or offer to its stockholders)
with respect to any Takeover Proposal, (ii) enter into any agreement,
arrangement, discussions or understanding with respect to any Takeover Proposal
(including any letter of intent, agreement in principle, memorandum of
understanding or confidentiality agreement) or enter into any Contract or
understanding (including any letter of intent, agreement in principle,
memorandum of understanding or confidentiality agreement) requiring it to
abandon, terminate or fail to consummate, or that is intended to or that would
reasonably be expected to result in the abandonment of, termination of or
failure to consummate, the Merger or any other Transaction, (iii) initiate
or participate in any way in any negotiations or discussions regarding, or
furnish or disclose to any Person (other than Parent or its Affiliates or
Representatives) any information with respect to, or take any other action to
facilitate or in furtherance of any inquiries or the making of any proposal
that constitutes, or would reasonably be expected to lead to, any Takeover
Proposal, or (iv) grant any approval pursuant to any Takeover Statute to
any Person (other than Parent or its Affiliates) or transaction (other than the
Transactions) or waiver or release under any standstill or any similar
agreement with respect to equity securities of the Company.
(b)
The Company shall advise Parent in writing of any request for information or
any Takeover Proposal and the terms and conditions of such request, Takeover
Proposal or inquiry (including the identity of the Person (or group of Persons)
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making such request,
Takeover Proposal or inquiry) and the Company shall promptly provide to Parent
copies of any written materials received by the Company in connection with any
of the foregoing, and the identity of the Person (or group of Persons) making
any such request, Takeover Proposal or inquiry or with whom any discussions or
negotiations are taking place. The
Company agrees that it shall keep Parent informed on a reasonably current basis
of the status and the material terms and conditions (including amendments or
proposed amendments) of any such request, Takeover Proposal or inquiry and keep
Parent informed on a reasonably current basis of any information requested of
or provided by the Company and as to the status of all discussions or
negotiations with respect to any such request, Takeover Proposal or inquiry.
(c)
If on or after the date of this Agreement and at any time prior to the Company
Stockholders Meeting, (i) the Company receives a bona fide unsolicited
Takeover Proposal (under circumstances in which the Company has complied in all
material respects with the provisions of Sections 6.7(a) and (b)); (ii) the
Board of Directors of the Company shall have determined in good faith, after
consultation with reputable outside legal counsel and financial advisors
experienced in such matters, that (x) failure to consider such Takeover
Proposal would be a breach of the duties of the directors of the Company under
applicable Law and (y) such Takeover Proposal constitutes or is reasonably
likely to result in a Superior Proposal; and (iii) the Company gives
Parent at least two (2) Business Days prior written notice of the identity
of the Person making such Takeover Proposal, the terms and conditions of such
Takeover Proposal and the Companys intention to furnish information to, or
participate in discussions or negotiations with, the Person making such
Takeover Proposal then, subject to compliance with this Section 6.7(c),
the Company may:
(i)
engage in negotiations or discussions with such Person who has made the
unsolicited bona fide Takeover Proposal and provide information in response to
a request therefor by a Person who has made such Takeover Proposal if the
Company (A) receives from such Person an executed confidentiality
agreement with terms (including standstill) no less favorable to the Company
than those contained in the Confidentiality Agreement (except for such changes
specifically necessary for the Company to comply with its obligations under
this Agreement) and (B) provides Parent a copy of all such information
that has not previously been delivered to Parent simultaneously with delivery
to such Person, and
(ii)
after fulfilling its obligations under Section 6.7(d) below, adopt,
approve or recommend, or publicly propose to adopt, approve or recommend,
including entering into an agreement with respect thereto, a Takeover Proposal
(a Takeover Approval).
If on or after the date of
this Agreement and at any time prior to the Company Stockholders Meeting, the
Board of Directors of the Company shall have determined in good faith, after
consultation with reputable outside legal counsel and financial advisors
experienced in such matters, that recommendation of the Company Matters to the
Companys stockholders would be a breach of the duties of the directors of the
Company under applicable Law, the Company may (A) withdraw or qualify (or
modify or amend in
64
a manner adverse to Parent),
or publicly propose to withdraw or qualify (or modify or amend in a manner
adverse to Parent), the approval, adoption, recommendation or declaration of
advisability by the Board of Directors of the Company of the Company Matters,
including the recommendation of the Board of Directors of the Company (the Company
Recommendation) and (B) take any action or make any statement, filing
or release, in connection with the Company Stockholders Meeting or otherwise,
inconsistent with the Company Recommendation (any action described in clause (A) and
(B) referred to collectively with any Takeover Approval as a Company
Adverse Recommendation Change).
(d)
Upon any determination that a Takeover Proposal constitutes a Superior
Proposal, the Company shall provide to Parent a written notice (a Notice of
a Superior Proposal) (i) advising Parent that the Board of Directors
of the Company has received a Superior Proposal, (ii) specifying in
reasonable detail the material terms and conditions of such Superior Proposal,
including the amount per share that the stockholders of the Company will
receive and including a copy of all written materials provided to or by the Company
in connection with such Superior Proposal and (iii) identifying the Person
making such Superior Proposal. The
Company shall cooperate and negotiate in good faith with Parent during the five
calendar day period following the Notice of a Superior Proposal (it being
understood that any amendment to the financial terms or any other material term
of such Superior Proposal shall require a new notice and a new five calendar
day period) to make such adjustments in the terms and conditions of this
Agreement as would enable the Company to proceed with a Company Recommendation
without a Company Adverse Recommendation Change. If Parent does not make an offer that the
Board of Directors of the Company determines in its reasonable good faith
judgment (after consultation with reputable outside legal counsel and financial
advisors experienced in such matters ) to be as favorable to the holders of the
Company Common Stock (other than Parent and its Affiliates), as such Superior
Proposal, and the Company has complied in all material respects with Section 6.7(c) above,
the Company may terminate this Agreement pursuant to Section 8.1(c)(iii).
(e)
Other than as permitted by Section 6.7(c), neither the Company nor
the Board of Directors of the Company shall make any Company Adverse
Recommendation Change. Notwithstanding
anything herein to the contrary, no Company Adverse Recommendation Change shall
change the approval of the Company Matters or any other approval of the Board
of Directors of the Company, including in any respect that would have the
effect of causing any Takeover Statute or other similar statute to be
applicable to the Transactions.
(f)
The Company shall provide Parent with prompt written notice of any meeting of
the Companys Board of Directors at which the Companys Board of Directors is
reasonably expected to consider any Takeover Proposal (such written notice
shall in any event be reasonably in advance of such meeting).
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6.8 Parent Recommendations.
(a)
If on or after the date of this Agreement and at any time prior to Parent
Stockholders Meeting, the Board of Directors of Parent shall have determined in
good faith, after consultation with reputable outside legal counsel and
financial advisors experienced in such matters, that recommendation of the
Parent Matters to Parents stockholders would be a breach of the duties of the
directors of Parent under applicable Law, Parent may (A) withdraw or
qualify (or modify or amend in a manner adverse to the Company), or publicly
propose to withdraw or qualify (or modify or amend in a manner adverse to the
Company), the approval, adoption, recommendation or declaration of advisability
by the Board of Directors of Parent of the Parent Matters, including the recommendation
of the Board of Directors of Parent (the Parent Recommendation), and (B) take
any action or make any statement, filing or release, in connection with the
Parent Stockholders Meeting or otherwise, inconsistent with the Parent
Recommendation (any action described in clause (A) and (B) being
referred to as a Parent Adverse Recommendation Change).
(b)
Other than as permitted by Section 6.8(a), neither Parent nor the Board of
Directors of Parent shall make any Parent Adverse Recommendation Change. Notwithstanding anything herein to the
contrary, no Parent Adverse Recommendation Change shall change the approval of
the Parent Matters or any other approval of the Board of Directors of Parent.
6.9 Access to Information.
(a)
Upon reasonable notice, subject to applicable Law, each of the Company and
Parent shall, and shall cause each of its Consolidated Subsidiaries to, afford
to the officers, employees, accountants, counsel, advisors, agents and other
Representatives of the other party, reasonable access, during normal business
hours during the period prior to the Effective Time, to all its properties,
books, Contracts, commitments and records, and, during such period, such party
shall, and shall cause its Consolidated Subsidiaries to, make available
(including via EDGAR) to the other party (i) a copy of each report,
schedule, registration statement and other document filed or received by it
during such period pursuant to the requirements of applicable Laws (other than
reports or documents that such party is not permitted to disclose under
applicable Law) and (ii) all other information concerning its business,
properties and personnel as the other party may reasonably request. From the date of this Agreement through the
Closing, subject to applicable Law, each of Parent and the Company shall
promptly provide each other with monthly and quarterly information regarding
its portfolio company investments for informational purposes. Prior to the Closing, the Company shall
provide Parent with all information reasonably requested by Parent regarding
the Companys portfolio companies, including information of third parties, and
cooperate fully with Parent in connection with its diligence of the Companys
portfolio companies.
(b)
All information and materials provided pursuant to this Agreement shall be
subject to the provisions of the Confidentiality Agreement.
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(c)
No investigation by a party hereto or its representatives shall affect the
representations and warranties of the other party set forth in this Agreement.
6.10 Takeover Statutes and Provisions. Neither Parent nor the Company will take any
action that would cause the Transactions to be subject to requirements imposed
by any Takeover Statute. Each of Parent
and the Company shall take all necessary steps within its control to exempt (or
ensure the continued exemption of) those Transactions from, or if necessary
challenge the validity or applicability of, any applicable Takeover Statute, as
now or hereafter in effect.
6.11 Tax Matters.
(a)
Tax Representation Letters. Prior
to the Effective Time (or at such other times as requested by counsel), each of
Parent and the Company shall execute and deliver to Proskauer Rose LLP and
Sullivan & Cromwell LLP tax representation letters (which will be used
in connection with the tax opinions contemplated by Sections 7.2(d) and
7.3(d)) in form and substance as set forth in Exhibits B and C.
(b)
Tax Information. The Company
shall use its reasonable best efforts to deliver to Parent a statement,
accurate in all material respects, no later than the Closing Date, of (i) the
assets of the Company appearing in the Consolidated Statement of Investments
included in the Companys SEC filings, showing the basis of such assets for
federal income Tax purposes by lot and the holding periods of such assets for
such purposes, based on the books and records of the Company as of the close of
the quarter immediately preceding the Closing Date (the Prior Quarter)
(provided that, if the Closing Date is less than 30 days after the close of the
Prior Quarter, the information shall be provided on the basis of the books and
records of the Company as of the close of the quarter immediately preceding the
Prior Quarter; (ii) the capital loss carryforwards of the Company for
federal income Tax purposes and the taxable year(s) of the Company (or its
predecessors) in which such capital losses were recognized; (iii) any
limitations on the use of such losses imposed under Section 382 of the
Code (determined without regard to the Transactions); (iv) any unrealized
gain or loss in such assets for federal income Tax purposes, based on the books
and records of the Company as of the close of the Prior Quarter (provided that,
if the Closing Date is less than 30 days after the close of the Prior Quarter,
the information shall be provided on the basis of the books and records of the
Company as of the close of the quarter immediately preceding the Prior
Quarter), and (v) such other Tax information reasonably and timely
requested by Parent.
(c)
RIC Status. During the period
from the date of this Agreement to the Effective Time, except as Previously
Disclosed or as expressly contemplated or permitted by this Agreement, (i) the
Company shall not, and shall not permit any of its Consolidated Subsidiaries
to, directly or indirectly, without the prior written consent of Parent take
any action, or knowingly fail to take any action, which action or failure to
act is reasonably likely to cause the Company to fail to qualify as a RIC, and (ii) Parent
shall not, and shall not permit any of its Consolidated Subsidiaries to,
directly or indirectly, without the prior written consent of the Company, take
any action, or knowingly fail to take any action,
67
which action or failure to
act is reasonably likely to cause Parent to fail to qualify as a RIC.
(d)
Tax Opinions. The Company shall
use its best efforts to cause Sullivan & Cromwell LLP to, and Parent
shall use its best efforts to cause Proskauer Rose LLP to, issue a Registration
Statement Tax Opinion in form and substance as set forth in Exhibit G. The Company shall use its best efforts to
obtain the tax opinion described in Section 7.3(d) and Parent shall
use its best efforts to obtain the tax opinion described in Section 7.2(d).
6.12 Merger of Surviving Company. Immediately after the occurrence of the
Effective Time and in accordance with the MGCL, Surviving Company shall merge
with and into Parent, with Parent as the surviving entity.
6.13 Stakeholder Litigation. The parties to this Agreement shall cooperate
and consult with one another in connection with any Proceeding by the Companys
stockholders and other stakeholders or Parents stockholders and other
stakeholders against any of them or any of their respective directors, officers
or Affiliates with respect to this Agreement or the Transactions. In furtherance of and without in any way
limiting the foregoing, each of the parties shall use its respective reasonable
best efforts to prevail in such Proceeding so as to permit the consummation of
the Transactions in the manner contemplated by this Agreement. Notwithstanding the foregoing, the Company
agrees that it will not compromise or settle any Proceeding commenced against
it or its directors, officers and/or employees
relating to this Agreement or the Transactions (including the Merger)
without Parents prior written consent, except for any Proceeding that is
settled in the ordinary course of business consistent with past practice in an
amount or for consideration not in excess of $500,000 and that would not (i) impose
any material restriction on the business of the Company or any of its
Consolidated Subsidiaries, or after the Effective Time, Parent, the Surviving
Company or any of their Consolidated Subsidiaries, (ii) create precedent
for claims that are reasonably likely to be material to the Company or any of
its Consolidated Subsidiaries or, after the Effective Time, Parent, the
Surviving Company or any of their Consolidated Subsidiaries or (iii) admit
fault, liability or guilt.
6.14 Resignations. To the extent requested by Parent in writing
at least two Business Days prior to the Closing Date, on the Closing Date, the
Company shall cause to be delivered to Parent duly signed resignations,
effective at or immediately after the Closing, of the directors and officers of
the Company and its Consolidated Subsidiaries designated by Parent and shall
take such other action as is necessary to accomplish the foregoing.
6.15 Section 16 Matters. Prior to the Effective Time, the Board of
Directors of each of Parent and the Company shall take all such steps as may be
required to cause any dispositions of the Company Common Stock (including
derivative securities with respect to the Company Common Stock) or acquisitions
of the Parent Common Stock (including derivative securities with respect to the
Parent Common Stock) resulting from the Transactions by each individual who is
subject to the reporting requirements of Section 16(a) of the
Exchange Act with respect to the Company or will become subject to such
reporting requirements with respect to Parent, in each case, to be exempt
pursuant to Rule 16b-3.
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6.16 Managed Funds Approvals. The Company and Parent shall each use its
respective reasonable best efforts to obtain or make all consents (including by
voting or consenting with respect of its own interests), rating agency
confirmations, approvals, authorizations, notices and filings required to
consummate the Transactions without violating, conflicting with, resulting in a
breach of any provision of or the loss of any benefit under, constituting a
default (or an event that, with or without the giving of notice or lapse of
time, or both, would constitute a default) under, resulting in the termination
of or a right of termination or cancellation under, accelerating the
performance required by any party, in connection with any Company Managed Fund
Contract. Neither the Company nor Parent
shall otherwise knowingly dissuade or impede, any vote or other action
necessary to obtain such consents in anticipation of the Closing.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Each Partys Obligation To
Effect the Merger. The respective
obligations of the parties to effect the Merger shall be subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a)
Stockholder Approvals. (i) The
Company Matters shall have been approved by the requisite affirmative vote of
the stockholders of the Company entitled to vote thereon, and (ii) the
Parent Matters shall have been approved by the requisite affirmative vote of
the stockholders of Parent entitled to vote thereon.
(b)
NASDAQ Listings. The shares of
the Parent Common Stock to be issued under this Agreement in connection with
the Merger shall have been authorized for listing on the NASDAQ, subject to
official notice of issuance.
(c)
Registration Statement. The
Registration Statement shall have become effective under the Securities Act and
no stop order suspending the effectiveness of the Registration Statement shall
have been issued and no Proceedings for that purpose shall have been initiated
by the SEC.
(d)
No Injunctions or Restraints; Illegality. No Order issued by any court or agency of
competent jurisdiction or other Law preventing or making illegal the
consummation of the Merger or any of the other Transactions shall be in effect.
(e)
Regulatory Approvals. All
Regulatory Approvals required by applicable Law to consummate the Transactions,
including the Mergers, shall have been obtained and shall remain in full force
and effect and all statutory waiting periods required by applicable Law in respect thereof shall have expired
(including expiration of the applicable waiting period under the HSR Act).
7.2 Conditions to Obligations of Parent. The obligation of Parent to effect the Merger
is also subject to the satisfaction, or waiver by Parent, at or prior to the
Effective Time, of the following conditions:
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(a)
Representations and Warranties. (i) The representations and warranties
of the Company set forth in this Agreement shall be true and correct as of the
date of this Agreement and as of the Closing Date as though made on and as of
such date and time, without regard to any Material Adverse Effect or other
materiality qualification to such representations and warranties (except to the
extent that any such representation and warranty expressly speaks as of an
earlier date, in which case such representation and warranty shall be true and
correct as of such earlier date), provided, however, that notwithstanding
anything herein to the contrary, the condition set forth in this Section 7.2(a)(i) shall
be deemed to have been satisfied even if any representations and warranties of
the Company (other than Section 3.2, which must be true and correct
except to a de minimis extent
(relative to Section 3.2 taken as a whole) or except in any way
that reasonably is not adverse to Parent and Sections 3.3(a) and 3.3(b)(i),
which must be true and correct in all material respects) are not so true and
correct, without regard to any Material Adverse Effect or other materiality
qualification to such representations and warranties, unless the failure of
such representations and warranties of the Company to be so true and correct,
individually or in the aggregate, has had or is reasonably expected to have a
Material Adverse Effect with respect to the Company and its Consolidated
Subsidiaries, taken as a whole; and (ii) Parent shall have received a
certificate signed on behalf of the Company by the Chief Executive Officer or
the Chief Financial Officer of the Company to the effect that the conditions
set forth in this Section 7.2(a)(i) have been satisfied.
(b)
Performance of Obligations of the Company. The Company shall have performed in all
material respects all obligations required to be performed by it under this
Agreement at or prior to the Effective Time; and Parent shall have received a
certificate signed on behalf of the Company by the Chief Executive Officer or
the Chief Financial Officer of the Company to such effect.
(c)
Absence of Company Material Adverse Effect. Since the date of this Agreement there shall
not have occurred any condition, change or event (other than, subject to the
proviso at the end of this clause (c), any Effect Previously Disclosed) that,
individually or in the aggregate, has had or would reasonably be expected to have,
a Material Adverse Effect in respect of the Company; provided, however, that
for purposes of this clause (c), an Effect that has been Previously Disclosed
shall (i) be limited solely to the information with respect to the Effect
included in the Disclosure Schedule or filing, as applicable, and (ii) not
include any additional facts, developments or other information in respect to
such Effect (including, without limitation, future facts, developments or other
information in respect of such Effect) that arise following the date
hereof. Notwithstanding anything in the
foregoing to the contrary, in no event shall any Ciena Matter be considered or
otherwise taken into account for purposes of this Section 7.2(c).
(d)
Federal Tax Opinion. Parent shall
have received the opinion of its counsel, Proskauer Rose LLP, in form and
substance as set forth in Exhibit D, dated the Closing Date,
substantially to the effect that, on the basis of facts, representations and
assumptions set forth in such opinion that are consistent with the state of
facts existing at the Closing Date, the Mergers together will be treated as a
reorganization within the meaning of Section 368(a) of the Code. In rendering such opinion, counsel may
require
70
and rely upon customary
representations contained in certificates of officers of the Company and
Parent, in form and substance as set forth in Exhibits B and C. If counsel for Parent will not render such an
opinion, counsel for the Company may render such opinion to Parent.
(e)
FIRPTA Certificate. The Company
shall have delivered within 30 days prior to the Closing Date a duly executed
certificate (the FIRPTA Certificate) stating that the Company is not
and has not been within five years of the date of the certificate a United
States real property holding corporation within the meaning of Section 897
of the Code in accordance with Treasury Regulations promulgated under Sections
897 and 1445 of the Code.
(f)
Lender Approvals. All Financing
Consents shall have been obtained and shall remain in full force and effect.
(g)
No Bankruptcy Event. No
Bankruptcy Event shall have occurred with respect to the Company or any of its
Consolidated Subsidiaries (other than the Bankruptcy Event that has already
occurred with respect to Ciena).
7.3 Conditions to Obligations of the Company. The obligation of the Company to effect the
Merger is also subject to the satisfaction or waiver by the Company at or prior
to the Effective Time of the following conditions:
(a)
Representations and Warranties. (i) The
representations and warranties of Parent and Merger Sub set forth in this
Agreement shall be true and correct as of the date of this Agreement and as of
the Closing Date as though made on and as of such date and time, without regard
to any Material Adverse Effect or other materiality qualification to such
representations and warranties (except to the extent that any such
representation and warranty expressly speaks as of an earlier date, in which
case such representation and warranty shall be true and correct as of such
earlier date), provided, however, that notwithstanding anything herein to the
contrary, the condition set forth in this Section 7.3(a)(i) shall
be deemed to have been satisfied even if any representations and warranties of
the Company (other than Section 4.2, which must be true and correct
except to a de minimis extent
(relative to Section 4.2 taken as a whole) or except in any way
that reasonably is not adverse to the Company and Sections 4.3(a) and
4.3(b)(i), which must be true and correct in all material respects) are
not so true and correct, without regard to any Material Adverse Effect or other
materiality qualification to such representations and warranties, unless the
failure of such representations and warranties of Parent and Merger Sub to be
so true and correct, individually or in the aggregate, has had or is reasonably
expected to have a Material Adverse Effect with respect to Parent and its
Consolidated Subsidiaries, taken as a whole; and (ii) the Company shall
have received a certificate signed on behalf of Parent by the Chief Executive
Officer or the Chief Financial Officer of Parent and Merger Sub to the effect
that the conditions set forth in Section 7.3(a)(i) have been
satisfied.
(b)
Performance of Obligations of Parent and Merger Sub. Each of Parent and Merger Sub shall have
performed in all material respects all obligations required to be
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performed by it under this
Agreement at or prior to the Effective Time; and the Company shall have
received a certificate signed on behalf of Parent and Merger Sub by the Chief
Executive Officer or the Chief Financial Officer of Parent to such effect.
(c)
Absence of Parent Material Adverse Effect. Since the date of this Agreement there shall
not have occurred any condition, change or event (other than, subject to the
proviso at the end of this clause (c), any Effect Previously Disclosed) that,
individually or in the aggregate, has had or would reasonably be expected to
have, a Material Adverse Effect in respect of Parent; provided, however, that
for purposes of this clause (c), an Effect that has been Previously Disclosed
shall (i) be limited solely to the information with respect to the Effect
included in the Disclosure Schedule or filing, as applicable, and (ii) not
include any additional facts, developments or other information in respect to
such Effect (including, without limitation, future facts, developments or other
information in respect of such Effect) that arise following the date hereof.
(d)
Federal Tax Opinion. The Company
shall have received the opinion of its counsel, Sullivan & Cromwell
LLP, in form and substance as set forth in Exhibit D, dated the
Closing Date, substantially to the effect that, on the basis of facts,
representations and assumptions set forth in such opinion that are consistent
with the state of facts existing at the Closing Date, the Mergers together will
be treated as a reorganization within the meaning of Section 368(a) of
the Code. In rendering such opinion,
counsel may require and rely upon customary representations contained in
certificates of officers of the Company and Parent, in form and substance as
set forth in Exhibits B and C.
If counsel for the Company will not render such an opinion, counsel for
Parent may render such opinion to Company.
(e)
No Bankruptcy Event. No
Bankruptcy Event shall have occurred with respect to Parent or any of its
Consolidated Subsidiaries.
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval of the Company
Matters by the stockholders of the Company or the Parent Matters by the
stockholders of Parent:
(a)
by mutual consent of the Company and Parent in a written instrument authorized
by the respective Boards of Directors of the Company and Parent;
(b)
by either the Company or Parent, if:
(i)
any Governmental Entity that must grant a Regulatory Approval has denied
approval of the Merger and such denial has become final and nonappealable or
any Governmental Entity of competent jurisdiction shall have issued a final and
nonappealable Order, or promulgated any other Law permanently enjoining or
otherwise prohibiting or making illegal the consummation of the Transactions;
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(ii)
the Merger shall not have been consummated on or before June 30, 2010 (the
Termination Date);
(iii)
the stockholders of the Company shall have failed to approve the Company
Matters by the requisite vote of the Companys stockholders at a duly held
meeting of the Companys stockholders or at any adjournment or postponement
thereof at which the Company Matters have been voted upon;
(iv)
the stockholders of Parent shall have failed to approve the Parent Matters by
the requisite vote of Parents stockholders at a duly held meeting of Parents
stockholders or at any adjournment or postponement thereof at which the Parent
Matters have been voted upon; or
(v)
a Special Termination Event shall have occurred.
provided, however,
that the right to terminate this Agreement pursuant to this Section 8.1(b) shall
not be available to any party that has breached in any material respect its
obligations under this Agreement in any manner that shall have proximately
contributed to the occurrence of the failure of a condition to the consummation
of the Merger;
(c)
by the Company, if:
(i) there shall
have been a breach of any of the covenants or agreements or any of the
representations or warranties set forth in this Agreement on the part of Parent
or Merger Sub, which breach, either individually or in the aggregate, would
result in, if occurring or continuing on the Closing Date, the failure of the
conditions set forth in Section 7.3, and which is not cured within 15
Business Days following written notice to Parent or by its nature or timing
cannot be cured within such time period (provided that the Company is
not then in material breach of this Agreement so as to cause any of the
conditions set forth in Section 7.1, 7.2(a) or 7.2(b) not to be
satisfied);
(ii) prior to
obtaining approval of the Parent Matters by the stockholders of Parent (A) a
Parent Adverse Recommendation Change shall have occurred, (B) Parent shall
have failed to include in the Registration Statement the recommendation of
Parents Board of Directors that Parents stockholders vote in favor of the
Parent Matters or (C) Parent shall have failed to take a vote of its
stockholders on the Parent Matters prior to the Termination Date;
(iii) at any time
prior to the time the approval of stockholders with respect to the Company
Matters is obtained, (A) the Company is not in material breach of any of
the terms of this Agreement, (B) the Board of Directors of the Company
authorizes the Company, subject to complying with the terms of this Agreement
(including Section 6.7(d)), to enter into, or the Company enters
into, any letter of intent, memorandum of understanding, agreement in
principle, acquisition agreement, merger agreement or other similar Contract
with respect to a Superior Proposal and (C) the Company prior to such
termination pays to Parent
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in
immediately available funds any fees required to be paid pursuant to Section 8.2(a);
or
(iv) Parent
breaches, in any material respect, any of its obligations under Section 6.3(b) or
Section 6.8.
(d)
by Parent, if:
(i) there shall
have been a breach of any of the covenants or agreements or any of the
representations or warranties set forth in this Agreement on the part of the
Company, which breach, either individually or in the aggregate, would result
in, if occurring or continuing on the Closing Date, the failure of the
conditions set forth in Section 7.2, and which is not cured within 15
Business Days following written notice to the Company or by its nature or
timing cannot be cured within such time period (provided that Parent is
not then in material breach of this Agreement so as to cause any of the
conditions set forth in Section 7.1, 7.3(a) or 7.3(b) not to be
satisfied);
(ii) if, prior to
obtaining approval of the Company Matters by the stockholders of the Company (A) a
Company Adverse Recommendation Change and/or Takeover Approval shall have
occurred, (B) the Company shall have failed to include in the Registration
Statement the recommendation of the Companys Board of Directors that the
Companys stockholders vote in favor of the Company Matters, including the
Merger and the other Transactions, (C) a tender or exchange offer relating
to any shares of the Company Common Stock shall have been commenced and the
Company shall not have sent to its stockholders, within 10 Business Days after
the commencement of such tender or exchange offer, a statement disclosing that
the Companys Board of Directors recommends rejection of such tender or
exchange offer, (D) a Takeover Proposal is publicly announced and the
Company fails to issue, within 10 Business Days after such Takeover Proposal is
announced, a press release that reaffirms the recommendation of the Companys
Board of Directors that the Companys stockholders vote in favor of the Company
Matters, including the Merger and the other Transactions, or (E) the
Company shall have failed to take a vote of its stockholders on the Company
Matters prior to the Termination Date; or
(iii) the Company
breaches, in any material respect, any of its obligations under Section 6.3(a) or
Section 6.7.
The party desiring to terminate this Agreement
pursuant to Section 8.1 shall give written notice of such
termination to the other party in accordance with Section 10.2, specifying
the provision or provisions hereof pursuant to which such termination is
effected.
8.2 Termination Fee.
(a)
(i) If this Agreement shall be terminated by (a) Parent pursuant to Section 8.1(d)(i) (solely
to the extent that the Company has committed a willful breach), 8.1 (d)(ii)
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or 8.1(d)(iii) or
(b) by the Company pursuant to Section 8.1(c)(iii), then the
Company shall upon the date of such termination (or, in the case of a
termination by the Company pursuant to Section 8.1(c)(iii), prior
to such termination), pay Parent a non-refundable fee in an amount equal to
$30.0 million (the Termination Fee), as liquidated damages and full
compensation hereunder, by wire transfer of immediately available funds to an
account designated in writing to the Company by Parent.
(ii) If this
Agreement shall be terminated by Parent or the Company pursuant to Section 8.1(b)(iii),
then the Company shall upon the date of such termination pay Parent a
non-refundable fee in an amount equal to $15.0 million (the Special
Termination Fee), as liquidated damages and full compensation hereunder,
by wire transfer of immediately available funds to an account designated in
writing to the Company by Parent. If
this Agreement is terminated, in no event shall the maximum aggregate liability
of the Company hereunder exceed the amount of the Termination Fee or Special
Termination Fee, as applicable.
(b)
If this Agreement is terminated (1) by Parent or the Company pursuant to Section 8.1(b)(iv) or
by the Company pursuant to Section 8.1(c)(i) (solely to the
extent that Parent has committed a willful breach), (ii) or (iv) or
(2) due to a Financing Issue, then
Parent shall upon the date of such termination pay the Company a non-refundable
fee in an amount equal to $30 million (the Reverse Termination Fee) as
liquidated damages and full compensation hereunder, payable by wire transfer of
immediately available funds to an account designated in writing to Parent by
the Company. If this Agreement is
terminated, in no event shall the maximum aggregate liability of Parent and
Merger Sub collectively hereunder exceed the amount of the Reverse Termination
Fee.
(c)
The parties acknowledge that the
agreements contained in this Section 8.2 are an integral part of
the Transactions, that without these agreements each party would not have
entered into this Agreement, and that any amounts payable pursuant to
this Section 8.2 do not constitute a penalty. If Parent fails to pay as directed in writing
by the Company any amounts due to the Company pursuant to this Section 8.2
within the time periods specified in this Section 8.2 or the
Company fails to pay Parent any amounts due to Parent pursuant to this Section 8.2
within the time periods specified in this Section 8.2, Parent or
the Company, as applicable, shall pay the costs and expenses (including
reasonable legal fees and expenses) incurred by the Company or Parent, as
applicable, in connection with any action, including the filing of any lawsuit,
taken to collect payment of such amounts, together with interest on such unpaid
amounts at the prime lending rate prevailing during such period as published in
The Wall Street Journal,
calculated on a daily basis from the date such amounts were required to be paid
until the date of actual payment.
8.3 Effect of Termination. In the event of termination of this Agreement
by either the Company or Parent as provided in Section 8.1, this Agreement
shall forthwith become void and have no effect, and none of Parent, the
Company, any of their respective Affiliates or Consolidated Subsidiaries or any
of the officers or directors of any of them shall have any liability of any
nature whatsoever under this Agreement, or in connection with the Transactions,
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except that Section 6.9(b), Article VIII and Article X
(including, in each case, any applicable definitions) shall survive any
termination of this Agreement; provided, however, that nothing herein shall relieve
any party from any liabilities for damages incurred or suffered by another
party arising out of the breach by such party of any provision of this
Agreement.
8.4 Fees and Expenses. Subject to Section 8.2, except with
respect to (i) costs and expenses of printing and mailing the Registration
Statement and all filing and other fees paid to the SEC in connection with the
Merger, and (ii) all filing and other fees in connection with any filing
under the HSR Act, which shall be borne equally by Parent and the Company, all
fees and expenses incurred in connection with the Merger, this Agreement and
the Transactions shall be paid by the party incurring such fees or expenses,
whether or not the Merger is consummated.
8.5 Amendment. This Agreement may be amended by the parties,
by action taken or authorized by their respective Boards of Directors, at any
time before or after approval of Parent Matters by the stockholders of Parent
or the Company Matters by the stockholders of the Company; provided, however, that
after any approval of the Parent Matters by the stockholders of Parent or the
Company Matters by the stockholders of the Company, there may not be, without
further approval of such stockholders, any amendment of this Agreement that
requires such further approval under applicable Law. This Agreement may not be amended except by
an instrument in writing signed on behalf of each of the parties.
8.6 Extension; Waiver. At any time prior to the Effective Time, each
party, by action taken or authorized by its Board of Directors, may, to the
extent legally allowed, (a) extend the time for the performance of any of
the obligations or other acts of the other parties, (b) waive any
inaccuracies in the representations and warranties of the other parties contained
in this Agreement or (c) waive compliance by the other parties with any of
the agreements or conditions contained in this Agreement. Any agreement on the part of a party to any
such extension or waiver shall be valid only if set forth in a written instrument
signed on behalf of such party, but such extension or waiver or failure to
insist on strict compliance with an obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other non-compliance.
ARTICLE IX
CERTAIN DEFINITIONS
Administration Agreement means the
Amended and Restated Administration Agreement between Parent and Ares
Operations LLC dated as of June 1, 2007.
Affiliate of a Person means any
other Person that, directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with the first
Person. In the case of a BDC that is
externally managed, Affiliate includes its investment adviser.
Bankruptcy Code means
Title 11, United States Code, 11 U.S.C. §§ 101 et
seq., as amended from time to time.
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Bankruptcy Event shall be
deemed to have occurred with respect to a Person if either:
(a)
a case or other Proceeding shall be commenced, without the application or
consent of such Person, in any court, seeking the liquidation, reorganization,
debt arrangement, dissolution, winding up, or composition or readjustment of
debts of such Person, the appointment of a trustee, receiver, custodian,
liquidator, assignee, sequestrator (or other similar official) or the like for
such Person or all or substantially all of its assets or any similar action
with respect to such Person, in each case, under any Bankruptcy Laws, and such
case or Proceeding shall continue undismissed, or unstayed and in effect, for a
period of 90 consecutive days; or an order for relief in respect of such Person
shall be entered in an involuntary case under the federal Bankruptcy Laws or
other similar laws now or hereafter in effect; or
(b)
such Person shall commence a voluntary case or other Proceeding under any
Bankruptcy Laws now or hereafter in effect, or shall consent to the appointment
of or taking possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or other similar official) for such Person or all or
substantially all of its assets under any Bankruptcy Laws, or shall make any
general assignment for the benefit of creditors, or shall fail to, or admit in
writing its inability to, pay its debts generally as they become due, or, if a
corporation or similar entity, its board of directors or similar governing body
shall vote to implement any of the foregoing.
Bankruptcy Laws means the Bankruptcy Code and all other applicable liquidation, conservatorship,
bankruptcy, moratorium, rearrangement, receivership, insolvency,
reorganization, suspension of payments, or similar debtor relief laws from time
to time in effect affecting the rights of creditors generally.
BDC means a Business Development
Company as defined in Section 2(a)(48) of the Investment Company Act.
Business Day means any day other
than a Saturday or Sunday or a day on which banks are required or authorized to
close in the City of New York.
Callidus means, collectively, Callidus
Capital Management, LLC, a Delaware limited liability company, and its
Consolidated Subsidiaries.
Ciena means Ciena Capital LLC, a
Delaware limited liability company, and its Consolidated Subsidiaries, and any
predecessor company including Business Loan Express.
Ciena Matters means all Proceedings
that directly or indirectly arise out of, or are related to, (i) the
business of Ciena, its Consolidated Subsidiaries or Affiliates, (ii) the
bankruptcy cases of Ciena, its Consolidated Subsidiaries or Affiliates, or (iii) the
participation in, operation, or supervision (or alleged lack thereof) of Ciena,
its Consolidated Subsidiaries or Affiliates.
COBRA means the Consolidated Omnibus
Budget Reconciliation Act.
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Code means the Internal Revenue Code
of 1986, as amended.
Company 401(k) Plan means the
Allied Capital Corporation 401(k) Plan.
Company Articles means the Restated
Articles of Incorporation of the Company as in full force and effect.
Company Bylaws means the Amended and
Restated Bylaws of the Company as in full force and effect.
Company Credit Agreement means that
certain Amended and Restated Credit Agreement dated as of August 28, 2009
by and among the Company, Bank of America, N.A., as administrative agent, and
the other agents and lenders party thereto.
Company Exemptive Order means an
order issued by the SEC granting an exemption from Section 12(d)(3) of
the Investment Company Act (Application No. 812-13561).
Company Interim Financials means the
draft financial statements of the Company and its Consolidated Subsidiaries as
of and for the three and nine-month periods ending September 30, 2009, a
copy of which has been provided to Parent.
Company Financing Consent means all
consents, confirmations, approvals or authorizations, or notices required under
the Contracts governing the Company Credit Agreement and the Company Private
Notes necessary to consummate the
Transactions, including the Mergers, without violating, conflicting with,
resulting in a breach of any provision of or the loss of any benefit under,
constituting a default (or an event that, with or without the giving of notice
or lapse of time, or both, would constitute a default) under, resulting in the
termination of or a right of termination or cancellation under, accelerating
the performance required by any party to such Contracts.
Company Managed Fund Contracts
means, collectively, the indentures, collateral management agreements and all
other investment advisory, management, servicing, administration and other
agreements that perform a similar function by which the Company or any
Consolidated Subsidiary of the Company is bound with respect to the Company
Managed Funds.
Company Managed Funds means a
Managed Fund to which the Company or a Consolidated Subsidiary of the Company
acts as investment manager, collateral manager, manager, adviser, servicer,
sub-servicer, sub-adviser or similar capacity, including, without limitation, (i) Senior
Secured Loan Fund LLC (formerly known as Unitranche Fund LLC), (ii) Allied
Capital Senior Debt Fund, L.P. and Allied Capital Senior Debt Funding 2007-1, (iii) AGILE
Fund I, LLC, (iv) Knightsbridge CLO 2007-1 Limited, (v) Knightsbridge
CLO 2008-1 Limited, (vi) Emporia Preferred Funding I, Ltd., (vii) Emporia
Preferred Funding II, Ltd., and (viii) Emporia Preferred Funding III, Ltd.
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Company Matters means (i) the
proposed Merger and (ii) any other matters required to be approved or
adopted by the stockholders of the Company in order to effect the Transactions
(excluding the Second Merger).
Company Outstanding Debt means the
Company Private Notes, the Company Public Notes and the Company Credit
Agreement.
Company Private Note Agreement means
that certain Amended, Restated and Consolidated Note Agreement dated as of August 28,
2009 by and among the Company and the institutional investors party thereto.
Company Private Notes means the Series A-1
Senior Notes due June 15, 2010, the Series A-2 Senior Notes due June 15,
2010, the Series B-1 Senior Notes due June 15, 2011, the Series B-2
Senior Notes due June 15, 2011, the Series C-1 Senior Notes due March 31,
2012, the Series C-2 Senior Notes due March 31, 2012, and the Series CMW
Senior Notes due April 1, 2012, in each case outstanding under the Company
Private Note Agreement.
Company Public Notes
means:
(i) $400,000,000
6.625% Notes due July 15, 2011 issued pursuant to that Indenture, dated as
of June 16, 2006, by and between the Company and The Bank of New York (the
Indenture), as amended by that First Supplemental Indenture, dated as
of July 25, 2006;
(ii) $250,000,000 6.00% Notes due
April 1, 2012 issued pursuant to the Indenture as amended by that Second
Supplemental Indenture, dated as of December 8, 2008; and
(iii) $200,000,000 6.875% Notes
due April 15, 2047 issued pursuant to the Indenture as amended by that
Third Supplemental Indenture, dated as of March 28, 2007.
Company Quarterly Report means the
Companys Quarterly Report on Form 10-Q for the quarter ended June 30,
2009.
Company REIT means, collectively,
Allied Capital REIT, Inc., a Maryland Corporation.
Company Right means the right of the
Company to take any action that constitutes a Company Adverse Recommendation
Change pursuant to Section 6.7.
Company Stock Option Plan means the
Allied Capital Corporation Amended Stock Option Plan.
Confidentiality Agreement means the
Confidentiality and Nondisclosure Agreement, dated July 1, 2009, between
Parent and the Company.
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Consolidated Subsidiary, when used
with respect to any Person, means any bank, corporation, partnership, limited
liability company or other Person, whether incorporated or unincorporated, that
is consolidated with such Person for financial reporting purposes under GAAP.
Contract means any agreement,
contract, lease, mortgage, power of attorney, evidence of indebtedness,
indenture, letter of credit, undertaking, covenant not to compete, license,
instrument, obligation, purchase or sales order, arrangement or other
commitment, whether oral or written, and shall include each amendment,
supplement and modification to the foregoing, to which a Person or any of its Consolidated
Subsidiaries is a party or by which any of them may be bound or to which to
their knowledge any of their assets or properties may be subject.
EDGAR means the SECs Electronic
Data Gathering Analysis and Retrieval System.
Employees means, with respect to a
Person, its directors, officers, employees, consultants, or individuals treated
as independent contractors.
Environmental Laws means Laws
regulating, relating to or imposing liability or standards of conduct
concerning the generation, treatment, use, storage, handling, disposal, release
or exposure to hazardous or toxic substances, materials, chemicals, wastes,
pollutants or contaminants, pollution or the environment, as in effect on or
prior to the date of this Agreement.
ERISA means the Employee Retirement
Income Security Act of 1974, as amended.
Exchange Act means the Securities
Exchange Act of 1934, as amended, and the rules promulgated thereunder.
Exchange Ratio means, initially,
each share of the Company Common Stock shall be converted into 0.325 shares of
the Parent Common Stock (the Initial Shares) subject to adjustment
pursuant to Section 1.5(e).
Extension of Credit means any loan,
revolving credit facility, letter of credit, repurchase agreement or other
extension of credit or commitment to extend credit, together with all security
agreements and guarantees relating thereto.
Financing Consents means,
collectively, the Company Financing Consent and the Parent Financing Consent.
Financing Issue is a circumstance where
this Agreement is terminated (A) by Parent pursuant to Section 8.1(b)(ii)
as a result of the failure to satisfy the condition set forth in Section 7.2(f) or
(B) by either party pursuant to Section 8.1(b)(ii) in the event
that each of the conditions set forth Article VII (other than Section 7.2(f))
have been satisfied or waived as of such date.
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GAAP means U.S. generally accepted
accounting principles.
Governmental Entity means any
federal, state, local, or foreign government or other governmental body, any
agency, commission or authority thereof, any regulatory or administrative
authority, any quasi-governmental body, any self-regulatory agency, any court,
tribunal, or judicial or arbitral body, or any political subdivision,
department or branch of any of the foregoing.
HSR Act means the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended.
Investment Advisers Act means the
Investment Advisers Act of 1940, as amended, and the rules promulgated
thereunder.
Investment Advisory Agreement means
the Amended and Restated Investment Advisory and Management Agreement, made as
of June 1, 2006, between Parent and Ares Capital Management LLC.
Investment Company Act means the
Investment Company Act of 1940, as amended, and the rules promulgated
thereunder.
IRS means the Internal Revenue
Service.
knowledge means (i) for the
Company, the actual knowledge of its executive officers and directors set forth
in Section 9 of the Company Disclosure Schedule, after reasonable inquiry
and (ii) for Parent, the actual
knowledge of its executive officers and directors set forth in Section 9
of the Parent Disclosure Schedule, after reasonable inquiry.
Law means any federal, state, local,
municipal, or foreign constitution, treaty, law (including the common law),
statute, code, ordinance, rule, regulation, judgment, order, writ, decree or
injunction or any Permit or similar right granted by any Governmental Entity.
Lease means all lease documents,
including the lease agreements and all modifications or amendments thereto,
under which the Company or any of its Consolidated Subsidiaries is either the
landlord or a tenant.
liabilities means all obligations
and liabilities (including accounts payable), absolute or contingent, accrued
or unaccrued, known or unknown, contingent, matured or unmatured, asserted or
unasserted, liquidated or unliquidated, incurred or consequential, whether due
or to become due and regardless of when or by whom asserted.
Liens means all security interests,
community property interests, liens, claims, pledges, contracts, limitations in
voting rights, charges, conditions, easements, covenants, warrants, demands,
equitable interests, mortgages, options, purchase rights, rights of first
refusal or encumbrances or restrictions of any nature whatsoever, including any
restriction on use, voting, transfer, receipt of income or exercise of any
other attribute of ownership.
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Managed Fund means any collective or
pooled investment vehicle that meets the definition of investment company in Section 3
of the Investment Company Act or is excepted or exempt therefrom by virtue of Section 3(c)(1),
3(c)(5) or 3(c)(7) thereof or Rule 3a-7 thereunder.
Material Adverse Effect means, with
respect to Parent or the Company, as the case may be, any event, state of
facts, circumstance, development, change, effect or occurrence (each, an Effect)
that is, or would reasonably be expected to be, materially adverse to (i) the
business, operations, condition (financial or otherwise) or results of
operations of such party and its Consolidated Subsidiaries, taken as a whole,
other than (A) any Effect resulting, directly or indirectly, from (1) changes
in general economic, social or political conditions or the securities, credit
or financial markets in general, (2) general changes or developments in
the industries in which such party and its Consolidated Subsidiaries operate,
including general changes in Law across such industries or geographic areas,
except, in the case of the foregoing clauses (1) and (2), to the extent
such changes or developments referred to therein would reasonably be expected
to have a materially disproportionate adverse impact on such party and its
Consolidated Subsidiaries, taken as a whole, relative to other participants in
the industries and in the geographic markets in which such party conducts its
businesses after taking into account the size of such party relative to such
other participants, or (3) the announcement of this Agreement or the
Transactions or the identities of the parties to this Agreement or (4) any
actions or omissions of a party taken with the prior written consent of the
other party or any actions taken by the parties mutually, or (B) any
failure to meet internal projections for any period or any decline in the price
of shares of the Parent Common Stock or the Company Common Stock, as the case
may be, on NASDAQ or the NYSE, as the case may be (provided that the underlying
causes of such failure shall be considered in determining whether there is a
Material Adverse Effect) or (ii) the ability of such party to timely
consummate the Merger and the other Transactions.
MGCL means the Maryland General
Corporation Law.
NASDAQ means The NASDAQ Global
Select Market.
NYSE means the New York Stock
Exchange.
Order means any award, writ,
stipulation, determination, decision, injunction, judgment, order, decree,
ruling, subpoena or verdict entered, issued, made or rendered by, or any
Contract with, any Governmental Entity.
Organizational Documents means, with
respect to a Person other than a natural person, (i) the articles or
certificate of incorporation and the bylaws of a corporation; (ii) the
certificate of formation and operating agreement of a limited liability
company; (iii) the partnership agreement and any statement of partnership
of a general partnership; (iv) the limited partnership agreement and the
certificate of limited partnership of a limited partnership; (v) any
charter or similar document adopted or filed in connection with the creation,
formation or organization of any other Person; (vi) any stockholder or
similar
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agreement among holders of
securities of an issuer; and (vii) an amendment to any of the foregoing.
Parent Articles means the Articles
of Amendment and Restatement of Parent, as amended.
Parent Bylaws means the Second
Amended and Restated Bylaws of Parent.
Parent Common Stock means shares of
common stock, par value $0.001 per share, of Parent.
Parent Financing Consent means all
consents, confirmations, approvals or authorizations, notices or confirmation
(or similar pronouncement from a rating agency) required under the Contracts
governing the Parent Indebtedness necessary
to consummate the Transactions, including the Mergers, without
violating, conflicting with, resulting in a breach of any provision of or the
loss of any benefit under, constituting a default (or an event that, with or
without the giving of notice or lapse of time, or both, would constitute a
default) under, resulting in the termination of or a right of termination or
cancellation under, accelerating the performance required by any party to such
Contracts.
Parent Indebtedness means (i) the
senior secured revolving credit facility among Parent, the lenders party
thereto from time to time and JPMorgan Chase Bank, N.A., as administrative
agent, as amended to date; (ii) the $314.0 million principal amount of
asset-backed notes issued through Parents wholly owned subsidiary, ARCC CLO
2006 LLC, (iii) the revolving facility among, inter alia, Ares Capital CP
Funding, LLC, as the borrower, Parent, as the originator and the servicer, and
Wachovia Capital Markets, LLC, as the administrative agent, as amended to date;
and (iv) the revolving facility among, inter alia, Ares Capital CP Funding
II, LLC, as the borrower, Parent, as the servicer and the transferor, and
Wachovia Bank, National Association, as the Note Purchaser.
Parent Interim Financials means the
draft financial statements of Parent and its Consolidated Subsidiaries as of
and for the three and nine-month periods ending September 30, 2009, a copy
of which has been provided to the Company.
Parent Managed Fund Contracts means,
collectively, the indentures, collateral
management agreements and all other investment advisory, management, servicing,
administration and other agreements that perform a similar function by which
Parent or any Consolidated Subsidiary of Parent is bound with respect to the
Parent Managed Funds.
Parent Managed Funds means a Managed
Fund to which Parent or an Affiliate that is controlled by Parent acts as
investment manager, collateral manager, manager, adviser, servicer, sub-servicer,
sub-adviser or similar capacity, including, without limitation, (i) Ivy
Hill Middle Market Credit Fund, Ltd., (ii) Ivy Hill Middle Market Credit
Fund II, Ltd., (iii) FirstLight Funding I, Ltd., (iv) CoLTS 2005-1
Ltd., (v) CoLTS 2005-2 Ltd., (vi) CoLTS 2007-1 Ltd., (vii) Ares
Capital CP Funding LLC, (viii) Ares Capital CP Funding II LLC, and (ix) ARCC
Commercial Loan Trust 2006.
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Parent Matters means (i) the
proposed issuance of the Parent Common Stock in connection with the Merger, (ii) any
matters required to be approved under Section 23(b) of the Investment
Company Act and (iii) any other matters required to be approved or adopted
by the stockholders of Parent in order to effect the Transactions (excluding
the Second Merger).
Parent Quarterly Report means Parents
Quarterly Report on Form 10-Q for the quarter ended June 30, 2009.
party means any party to this
Agreement.
PBGC means the Pension Benefit
Guaranty Corporation.
Permit means any license, permit,
variance, exemption, franchise, consent, approval, authorization,
qualification, or order of any Governmental Entity.
Person means an individual, a
(general or limited) partnership, a corporation, a limited liability company,
an association, a joint stock company, a trust, a joint venture, an
unincorporated organization, a Governmental Entity or other legal entity or
organization or group (which term shall include a group as such term is
defined in Section 13(d)(3) of the Exchange Act).
Previously Disclosed means
information (i) set forth by the Company or Parent, as the case may be, in
the applicable Disclosure Schedule or (ii) previously disclosed in their respective
annual reports on Form 10-K for the 2008 fiscal year or quarterly reports
on Form 10-Q for the fiscal quarter ending on June 30, 2009 or the
Company Quarterly Report or the Parent Quarterly Report, as applicable or in
the case of the Company, in its Current Report on Form 8-K dated September 1,
2009 (but in each case excluding any risk factor disclosures contained under
the heading Risk Factors, any disclosure of risks included in any forward-looking
statements disclaimer or any other statements that are similarly non-specific
or predictive or forward-looking in nature).
Proceeding means an action, charge,
complaint, claim, demand, suit, arbitration, inquiry, notice of violation,
investigation, litigation, lawsuit, audit, bankruptcy or other proceeding
(including a partial proceeding, such as a deposition), whether civil,
criminal, administrative, investigative or informal.
Property Agreements means each
certificate, permit or license from any Governmental Entity having jurisdiction
over any of the Company Properties or any agreement, easement or any other
right that is necessary to permit the lawful use and operation of the buildings
and improvements on any of the Company Properties or that is necessary to
permit the lawful use and operation of all driveways, roads and other means of
egress and ingress to and from any of the Company Properties.
REA means all operation and
reciprocal easement agreements or other similar agreements under which the
Company or any of its Consolidated Subsidiaries is a party
Reference Price means $3.47.
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Registration Statement Tax Opinion
means the opinion (and consent of counsel to its use) supporting the tax
matters and consequences to the stockholders discussed in the Registration
Statement.
Regulatory Approvals means all
applications and notices with, and receipt of consents, authorizations,
approvals, exemptions or nonobjections from any Governmental Entity.
Sarbanes-Oxley Act means the Sarbanes-Oxley
Act of 2002, as amended.
SEC means the Securities and
Exchange Commission.
SEC Order means SEC Release No. 55931,
dated June 20, 2007, entitled In the Matter of Allied Capital
Corporation.
Securities Act means the Securities
Act of 1933, as amended, and the rules promulgated thereunder.
Special Termination Event means if
prior to the Closing the Board of Directors of Parent determines in its
reasonable good faith judgment that there is a reasonable likelihood that the
liabilities for any monetary net losses related to Ciena exceeds 66 2/3% of the
fair value of Ciena as of September 30, 2009 as such fair value is
determined by the Companys Board of Directors, then Parent shall promptly
provide the Company with written notice of the determination (including the
reasoning therefor) (the Ciena Notice). The Board of Directors of
Parent shall make a determination within 15 Business Days of receiving new and
material information relating to the Ciena Matters. During a period of five Business Days
following the delivery of the Ciena Notice to the Company, either Parent or the
Company shall have the right to terminate this Agreement by providing written
notice therefor to the other party. In
the event of any such termination, no termination fees will be payable
hereunder.
Superior Proposal means a bona fide
written Takeover Proposal that was not knowingly solicited by, or the result of
any knowing solicitation by, the Company or any of its Consolidated
Subsidiaries or by any of their respective Affiliates or Representatives in
violation of this Agreement, made by a third party to purchase 80% of the
outstanding equity securities of the Company pursuant to a tender offer,
exchange offer, merger, consolidation or business combination or all or at
least 80% of the assets of the Company on a consolidated basis (a) on
terms which the Companys Board of Directors determines in good faith (based on
the written opinion, with only customary qualifications, of the Companys
independent financial advisor) to be superior for the stockholders of the
Company (in their capacity as stockholders), taken as a group, from a financial
point of view as compared to the Merger (after giving effect to the payment of
the Reverse Termination Fee and any alternative proposed by Parent in
accordance with Section 6.7), (b) that is reasonably likely to
be consummated (taking into account, among other things, all legal, financial,
regulatory and other aspects of the proposal, including any conditions, and the
identity of the offeror) in a timely manner and (c) in respect of which any required financing has been determined
in good faith by the Companys Board of Directors
85
(including
a majority that are not interested persons as defined in the Investment
Company Act) to be reasonably likely to be obtained, as evidenced by a written
commitment of a reputable financing source.
Takeover Proposal means any inquiry,
proposal, discussions, negotiations or offer from any Person or group of
Persons (other than Parent or any of its Affiliates) relating to any direct or
indirect acquisition, in one transaction or a series of transactions, including
any merger, consolidation, tender offer, exchange offer, stock acquisition, asset
acquisition, binding share exchange, business combination, recapitalization,
liquidation, dissolution, joint venture or similar transaction, of (a) assets
or businesses that constitute or represent 20% or more of the total assets, net
revenue or net income of the Company and its Consolidated Subsidiaries, taken
as a whole, or (b) 20% or more of the outstanding shares of capital stock
of, or other equity or voting interests in, the Company or in any of the
Companys Consolidated Subsidiaries directly or indirectly holding,
individually or taken together, the assets or businesses referred to in clause (a) above,
in each case other than the Merger and the other Transactions.
Tax or Taxes means all federal,
state, local, and foreign income, excise, gross receipts, gross income, ad valorem, profits, gains, property,
capital, sales, transfer, use, payroll, employment, severance, withholding,
duties, intangibles, franchise, backup withholding, value added, alternative or
add-on minimum, estimated and other taxes, charges, levies or like assessments
together with all penalties and additions to tax and interest thereon, whether
disputed or not.
Tax Dividend means a dividend or
dividends, with a record date and ex-dividend date prior to the Effective Time,
which, together with all previous dividends, shall have the effect of
distributing to the Companys stockholders all of its previously undistributed (i) investment
company taxable income within the meaning of Section 852(b) of the
Code (determined without regard to Section 852(b)(2)(D) of the Code),
(ii) amounts constituting the excess of (A) the amount specified in Section 852(a)(1)(B)(i) of
the Code over (B) the amount specified in Section 852(a)(1)(B)(ii) of
the Code, and (iii) net capital gain (within the meaning of Section 1222(11)
of the Code), if any, in each case recognized in taxable periods or years
ending on or before the Effective Time.
Tax Return means a report, return,
statement, form or other information (including any schedules, attachments or
amendments thereto) required to be supplied to a Governmental Entity with
respect to Taxes including, where permitted or required, consolidated, combined
or unitary returns for any group of entities.
Transactions means the transactions
contemplated by this Agreement, including the Mergers.
86
ARTICLE X
GENERAL PROVISIONS
10.1 Nonsurvival of Representations, Warranties
and Agreements. None of the
representations, warranties, covenants and agreements set forth in this
Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Effective Time, except for Section 6.6 and for those other
covenants and agreements contained in this Agreement that by their terms apply
or are to be performed in whole or in part after the Effective Time.
10.2 Notices. All notices and other communications in
connection with this Agreement shall be in writing and shall be deemed given if
delivered personally, sent via facsimile (with confirmation), mailed by
registered or certified mail (return receipt requested) or delivered by an
express courier (with confirmation) to the parties at the following addresses
(or at such other address for a party as shall be specified by like notice):
If to the Company, to:
Allied Capital Corporation
1919 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
Attention: John M. Scheurer
Facsimile: (202) 721-6101
with a copy, which will not constitute notice, to:
Sutherland Asbill & Brennan LLP
1275 Pennsylvania Avenue, NW
Washington, DC 20004
Attention:
Cynthia Krus
Facsimile: (202) 637-3593
Sullivan & Cromwell LLP
125 Broad Street
New York, New York 10004
Attention: Mark J. Menting
Facsimile: (212) 558-3588
If to Parent or Merger Sub, to:
Ares Capital Corporation
2000 Avenue of the Stars
12th Floor
Los Angeles, CA 90067
Attention: Michael Weiner
Facsimile: (310) 201-4141
87
and
Ares Capital Corporation
280 Park Avenue, 22nd Floor Building East
New York, NY 10017
Attention: Joshua Bloomstein
Facsimile: (212) 750-1777
with
a copy, which will not constitute notice, to:
Proskauer Rose LLP
2049 Century Park East
Suite 3200
Los Angeles, California 90067-3206
Attention: Michael Woronoff and Monica
Shilling
Facsimile: (310) 557-2193
Each such notice or other communication shall be
effective upon receipt (or refusal of receipt).
10.3 Interpretation. When a reference is made in this Agreement to
Articles, Sections, Exhibits or Schedules, such reference shall be to an Article or
Section of or Exhibit or Schedule to this Agreement unless otherwise
indicated. The table of contents and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. Whenever the words include, includes or including
are used in this Agreement, they shall be deemed to be followed by the words without
limitation. All schedules and exhibits hereto shall be deemed part of this
Agreement and included in any reference to this Agreement. If any term, provision, covenant or
restriction contained in this Agreement is held by a court or a federal or
state regulatory agency of competent jurisdiction to be invalid, void or unenforceable,
the remainder of the terms, provisions and covenants and restrictions contained
in this Agreement shall remain in full force and effect, and shall in no way be
affected, impaired or invalidated. If
for any reason such court or regulatory agency determines that any term,
provision, covenant or restriction is invalid, void or unenforceable, it is the
express intention of the parties that such term, provision, covenant or
restriction be enforced to the maximum extent permitted. Accounting terms that are not otherwise
defined in this Agreement have the meanings given to them under GAAP. To the extent that the definition of an
accounting term defined in this Agreement is inconsistent with the meaning of
such term under GAAP, the definition set forth in this Agreement shall control.
10.4 Counterparts. This Agreement may be executed in two or more
counterparts (including by facsimile or other electronic means), all of which
shall be considered one and the same agreement and shall become effective when
counterparts have been signed by each of the parties and delivered to the other
parties (including by facsimile or other electronic means), it being understood
that each party need not sign the same counterpart.
88
10.5 Entire Agreement. This Agreement (including the documents and
the instruments referred to in this Agreement), together with the
Confidentiality Agreement, constitutes the entire agreement and supersedes all
prior agreements and understandings, both written and oral, between the parties
with respect to the subject matter of this Agreement.
10.6 Governing Law; Jurisdiction. This Agreement shall be governed and
construed in accordance with the Laws of the State of Maryland applicable to
contracts made and performed entirely within such state, without regard to any
applicable conflicts of law principles that would cause the application of the
Laws of another jurisdiction, except to the extent governed by the Investment
Company Act, in which case the latter shall control. The parties hereto agree that any Proceeding
brought by any party to enforce any provision of, or based on any matter
arising out of or in connection with, this Agreement or the Transactions shall
be brought in any federal or state court located in the State of Maryland. Each of the parties hereto submits to the
jurisdiction of any such court in any Proceeding seeking to enforce any
provision of, or based on any matter arising out of or in connection with, this
Agreement or the Transactions and hereby irrevocably waives the benefit of
jurisdiction derived from present or future domicile or otherwise in such
Proceeding. Each party hereto
irrevocably waives, to the fullest extent permitted by Law, any objection that
it may now or hereafter have to the laying of the venue of any Proceeding in
any such court or that any such Proceeding brought in any such court has been
brought in an inconvenient forum. Each
party hereto irrevocably waives any and all right to trial by jury in any legal
proceeding arising out of or relating to this Agreement and the Transactions
contemplated hereby.
10.7 Publicity. The initial press release with respect to the
Transactions shall be a joint press release reasonably acceptable to Parent and
the Company. Thereafter, so long as this
Agreement is in effect, none of Parent, the Company or any of their respective
Affiliates shall issue or cause the publication of any press release or other
announcement with respect to this Agreement, the Merger, or the other
Transactions without the prior approval of (i) in the case of the Company
or any of its Affiliates, Parent and (ii) in the case of Parent or any of
its Affiliates, the Company; provided, however, that either party may, without
the prior consent of the other party (but after prior consultation with the
other party to the extent practicable under the circumstances) issue or cause
the publication of any press release or other public announcement to the extent
required by Law or the rules and regulations of NASDAQ or NYSE, as
applicable.
10.8 Assignment; Third Party Beneficiaries. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned by any of the
parties (whether by operation of law or otherwise) without the prior written
consent of the other parties. Any
purported assignment in contravention hereof shall be null and void. Subject to the preceding sentence, this
Agreement shall be binding upon, inure to the benefit of and be enforceable by
each of the parties and their respective successors and assigns. Except as otherwise specifically provided in Section 6.6,
this Agreement (including the documents and instruments referred to in this
Agreement) is not intended to and does not confer upon any Person other than
the parties hereto any rights or remedies under this Agreement.
10.9 No Specific Performance. The parties acknowledge and agree that no
party shall be entitled to seek or obtain an injunction or injunctions to
prevent breaches of this Agreement by the other parties or to enforce
specifically the terms and provisions of this Agreement and that
89
the sole and exclusive remedy of (i) the Company, the
Companys stockholders, any of their respective Affiliates or any other Person
with respect to any such breach shall be as set forth in Section 8.2(b),
and (ii) Parent, Parents stockholders, Merger Sub, any of their
respective Affiliates or any other Person with respect to any such breach shall
be as set forth in Section 8.2(a).
10.10 Disclosure Schedule. Before entry into this Agreement, Parent and
the Company each delivered to the other party a schedule (the Parent
Disclosure Schedule and the Company Disclosure Schedule, respectively, each,
a Disclosure Schedule) that sets forth, among other things, items the
disclosure of which is necessary or appropriate either in response to an
express disclosure requirement contained in a provision hereof or as an
exception to one or more representations or warranties contained in Article III
or IV, as applicable, or to one or more covenants contained herein; provided,
however, that notwithstanding anything in this Agreement to the contrary, the
mere inclusion of an item as an exception to a representation or warranty shall
not be deemed an admission that such item represents a material exception or
material fact, event or circumstance or that such item has had or would be
reasonably likely to have a Material Adverse Effect. Each Disclosure Schedule shall be numbered to
correspond with the sections and subsections contained in this Agreement. The disclosure in any section or subsection
of each Disclosure Schedule, shall qualify only (i) the corresponding
section or subsection, as the case may be, of this Agreement, (ii) other
sections or subsections of this Agreement to the extent specifically
cross-referenced in such section or subsection thereof, and (iii) other
sections or subsections of this Agreement to the extent it is reasonably
apparent from a reading of the disclosure that such disclosure would be
applicable to such other sections or subsections.
10.11 Conforming Amendment. If Parent determines to merge the Company
into Parent directly instead of merging Merger Sub into the Company, then, upon
the prior approval of the Company (such prior approval not to be unreasonably
delayed, conditioned or withheld), the parties hereto shall enter into an
amendment (the Conforming Amendment) to this Agreement with the other parties
reflecting such structural change and amending such provisions of this
Agreement as may be necessary to effectuate the Conforming Amendment.
[Signature Page Follows]
90
IN WITNESS WHEREOF, the Company, Merger Sub
and Parent have caused this Agreement to be executed by their respective
officers thereunto duly authorized as of the date first above written.
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ALLIED CAPITAL CORPORATION
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By:
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/s/
John M. Scheurer
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Name:
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John
M. Scheurer
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Title:
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CEO
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ARES CAPITAL CORPORATION
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By:
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/s/
Michael J. Arougheti
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Name:
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Michael
J. Arougheti
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Title:
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President
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ARCC ODYSSEY CORP.
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By:
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/s/
Joshua M. Bloomstein
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Name:
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Joshua
M. Bloomstein
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Title:
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Authorized
Signatory
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[Agreement and Plan of Merger]