Calculation of Merger Consideration. (a) Not fewer than three Business Days prior to the date hereof, the Company delivered to Parent a statement (the “Estimate Statement”) setting forth the Company’s good faith estimates of the amounts of the Closing Working Capital, the Net Closing Indebtedness and the Unpaid Company Transaction Expenses, and the amount of the Merger Consideration (the “Estimated Merger Consideration”) based on the foregoing estimates. The Estimate Statement also included the Sellers’ Expense Amount and the Company’s determination of the estimated Closing Date Share Amount based on the Estimated Merger Consideration, the Indemnity Amount, the Adjustment Amount and the Sellers’ Expense Amount, together with the aggregate number of outstanding shares of Common Stock and the aggregate number of Common Stock Equivalents (and the aggregate exercise prices thereof) used in the determination thereof. The Company has provided to Parent prompt notice and the details of any exercise of Common Stock Equivalents that occurred following the calculation of any amounts included in the Estimate Statement and prior to the Effective Time. To the extent any Common Stock Equivalents have been exercised following Parent’s receipt of the Estimate Statement, the Estimated Merger Consideration shall be adjusted to give effect to the actual number of Common Stock Equivalents outstanding immediately prior to the Effective Time rather than the number of Common Stock Equivalents estimated to be outstanding immediately prior to the Effective Time in the Estimate Statement. (b) No later than the 90th day after the Closing Date, Parent will prepare and deliver, or cause to be prepared and delivered, to the Shareholder Representative a consolidated balance sheet of the Company and the Company Subsidiaries (the “Closing Balance Sheet”), together with a statement (the “Closing Statement”) setting forth Parent’s determination of (i) the actual Closing Working Capital as of the Adjustment Time, (ii) the actual Net Closing Indebtedness as of the Adjustment Time, and (iii) the actual Unpaid Company Transaction Expenses as of the Effective Time. The Closing Statement shall also include the Company’s determination of the Merger Consideration and the Closing Date Share Amount, based on the Indemnity Amount, the Adjustment Amount and the Sellers’ Expense Amount, together with the aggregate number of outstanding shares of Common Stock and the aggregate number of Common Stock Equivalents (and aggregate exercise prices thereof) used in the determination thereof. Parent will prepare, or cause to be prepared, the Closing Balance Sheet and the Closing Statement (including the determinations included therein) in accordance with Section 2.3(f). (c) During the 60-day period immediately following the Shareholder Representative’s receipt of the Closing Balance Sheet and the Closing Statement (provided that, if Parent fails to deliver the Closing Balance Sheet and the Closing Statement within the 90-day period described in Section 2.3(b), then at the written election of the Shareholder Representative the Estimate Statement will be treated as the Closing Balance Sheet and the Closing Statement for purposes of this Section 2.3), the Shareholder Representative and its representatives and advisors (i) will be permitted to review, during normal business hours and upon reasonable notice, the Surviving Corporation’s and the Company Subsidiaries’ books and records and their and their outside accountants working papers related or relevant to the preparation of the Closing Balance Sheet and the Closing Statement (including the determinations included therein), and (ii) will be given reasonable access, during normal business hours and upon reasonable prior notice, to knowledgeable employees and accounting professionals of Parent, the Surviving Corporation and the Company Subsidiaries in order to facilitate the Shareholder Representative’s review of the Closing Balance Sheet and the Closing Statement; provided, however, that the review and access described in clauses (i) and (ii) will be conducted at times and in a manner that does not unreasonably interfere with the operation of Parent’s, the Surviving Corporation’s or the Company Subsidiaries’ respective businesses. The Closing Balance Sheet and the Closing Statement (including the determinations included therein) will become final, binding and conclusive upon Parent, the Surviving Corporation, the Shareholder Representative and the Company Holders (the “Interested Persons”) (A) on the 60th day following the Shareholder Representative’s receipt thereof, unless Parent receives from the Shareholder Representative on or prior to such 60th day written notice of the Shareholder Representative’s disagreement (the “Dispute Notice”) with any account or determination set forth in the Closing Balance Sheet or the Closing Statement or (B) on such earlier date as the Shareholder Representative notifies Parent that it does not dispute the Closing Balance Sheet and Closing Statement; provided that, if Parent shall have failed to timely deliver the Closing Balance Sheet and Closing Statement under Section 2.3(b), the 60th day referred to in clause (A) above shall refer to the 60th day after the same was due to be delivered. The Dispute Notice will specify the items in the Closing Balance Sheet and the Closing Statement disputed by the Shareholder Representative (collectively, the “Disputed Items”). Any item set forth or reflected on the Closing Balance Sheet or the Closing Statement that is not objected to in the Dispute Notice will be deemed final, binding and conclusive upon the Interested Persons upon delivery of the Dispute Notice. If the Shareholder Representative timely delivers the Dispute Notice, then the Closing Balance Sheet and Closing Statement will become final, binding and conclusive upon the Interested Persons on the first to occur of (x) the date on which Parent and the Shareholder Representative resolve in writing all differences they have with respect to the Disputed Items or (y) the date on which all of the Disputed Items that are not resolved by Parent and the Shareholder Representative in writing are finally resolved in writing by the Independent Accountants in accordance with Section 2.3(d). (d) During the 30 days following delivery of a Dispute Notice, Parent and the Shareholder Representative will seek in good faith to resolve in writing any differences they have with respect to the Disputed Items. Any Disputed Item agreed in writing by Parent and the Shareholder Representative will be deemed final, binding and conclusive on the Interested Persons when such written agreement has been entered into by each of Parent and the Shareholder Representative. If Parent and the Shareholder Representative do not reach agreement on all of the Disputed Items during such 30-day period (or such longer period as they shall mutually agree), then at the end of such 30-day (or longer) period Parent and the Shareholder Representative shall submit all unresolved Disputed Items (collectively, the “Unresolved Items”) to Deloitte LLP (the “Independent Accountants”) to review and resolve such matters. The Independent Accountants will determine each Unresolved Item (the amount of which may not be more favorable to Parent than the related amount reflected in the Closing Statement nor more favorable to the Shareholder Representative and the Company Holders than any related amount set forth in the Dispute Notice) in accordance with this Section 2.3(d) and Section 2.3(f) as promptly as may be reasonably practicable, and Parent and the Shareholder Representative will instruct the Independent Accountants to complete such process within a period of no more than 60 days from the date of its engagement. The Independent Accountants shall act as an arbitrator to resolve each Unresolved Item based solely on written presentations by Parent and the Shareholder Representative and their respective agents, and not by independent review. Except as Parent and the Shareholder Representative may otherwise agree in writing, all communications between Parent and the Shareholder Representative or any of their respective representatives, on the one hand, and the Independent Accountants, on the other hand, will be in writing, with copies simultaneously delivered to the non-communicating party. The Independent Accountants’ determination of the Unresolved Items will be final, binding and conclusive on Parent, the Company Holders and the Shareholder Representative, effective as of the date the Independent Accountants’ written determination is received by Parent and the Shareholder Representative. The fees and expenses of the Independent Accountants will be borne one-half by Parent and one-half by the Shareholder Representative (for the account of the Company Holders), and each of Parent and the Shareholder Representative (for the account of the Company Holders) will bear its own legal, accounting and other fees and expenses of participating in such dispute resolution procedure. (e) Upon final determination of the Merger Consideration pursuant to Section 2.3(c) or (d), as applicable, an adjustment will be determined and paid as follows: (i) If the Estimated Merger Consideration exceeds the Merger Consideration, the Shareholder Representative and Parent shall within five Business Days after such final determination issue joint written instructions directing the Escrow Agent to (x) pay to Parent the amount of such excess (or, if less, the entire amount of the Adjustment Escrow) out of the Adjustment Escrow, by wire transfer of immediately available funds to the account specified by Parent, (y) pay to the Shareholder Representative (on behalf of the Company Holders) the remaining amount, if any, of the Adjustment Escrow (reduced by the amount provided for in Section 2.2(b)(iii) with respect to any Dissenting Shares, which amount shall instead be paid to Parent in the same method as specified in clause (x) above), by wire transfer of immediately available funds to the account specified by the Shareholder Representative, and (z) if the Estimated Merger Consideration exceeds the Merger Consideration by an amount that is greater than the amount of the Adjustment Escrow, pay the portion of such excess not paid from the Adjustment Escrow pursuant to clause (x) above to Parent from the Indemnity Escrow, by wire transfer of immediately available funds to the account specified by Parent. (ii) If the Merger Consideration exceeds the Estimated Merger Consideration, then within five Business Days after such final determination, Parent will pay to the Shareholder Representative (on behalf of the Company Holders) the amount of such excess (reduced by the amount provided for in Section 2.2(b)(iii) with respect to any Dissenting Shares) by wire transfer of immediately available funds to the account specified by the Shareholder Representative, and the Shareholder Representative and Parent shall issue joint written instructions to the Escrow Agent to pay the amount of the Adjustment Escrow to the Shareholder Representative (on behalf of the Company Holders) (reduced by the amount provided for in Section 2.2(b)(iii) with respect to any Dissenting Shares, which amount shall instead be paid to Parent in the same method as specified in clause (i)(x) above). (f) Except as otherwise specified in this Agreement, each accounting term used herein will have the meaning that is applied thereto in accordance with GAAP and, to the extent consistent with GAAP, the accounting principles, policies, procedures and methodologies consistently applied in preparing the consolidated balance sheet of the Company and the Company Subsidiaries as of the Balance Sheet Date and the accompanying statement of income (“Company GAAP”). Except as otherwise provided in this Agreement, each amount included in the Estimate Statement, the Closing Statement and the Closing Balance Sheet will be (A) calculated in accordance with Company GAAP (without regard to materiality), including with respect to the nature or classification of accounts, and determining levels of reserves or levels of accruals, and the definitions for such amount (and the components of such amount) herein agreed; and (B) consistent with the books and records of the Company and the Company Subsidiaries; provided that, except as otherwise provided in this Agreement, in determining current assets and liabilities hereunder, all accounting entries shall be taken into account regardless of their amount and all known errors and omissions shall be corrected. (g) Notwithstanding anything contained in this Agreement to the contrary, but subject to the rights of the parties to seek specific performance of this Section 2.3 under Section 8.9, this Section 2.3 sets forth the sole remedy of Parent and Merger Sub in respect of any Damages related to any asset or liability accounted for, or intended to be accounted for, in the calculation of Closing Working Capital, Net Closing Indebtedness or Unpaid Company Transaction Expenses, and Parent and Merger Sub shall not be entitled to indemnification under Article VII or any other recovery for any such Damages in respect thereof, whether or not the underlying facts constitute a breach of this Agreement; provided, however, that nothing contained in this Section 2.3(g) shall limit, restrict or negate Parent’s or Merger Sub’s right to indemnification for Damages arising out of or resulting from or in connection with a breach of the representations and warranties of the Company set forth herein or a breach of the Company’s covenants set forth herein (including any such breach of representation or warranty or breach of covenant resulting from or relating to any such underlying facts) unless such Damages are included in the calculation of Merger Consideration as finally determined pursuant to Section 2.3(c) or Section 2.3(d), as applicable.
Appears in 1 contract
Sources: Merger Agreement (Ascent Media CORP)
Calculation of Merger Consideration. (a) Not fewer less than three Business Days (3) days prior to the date hereofClosing Date, the Company delivered shall deliver to Parent the Purchaser the following by way of a statement Funds Flow Memorandum in substantially the form attached hereto as Schedule I:
(the “Estimate Statement”i) setting forth the Company’s portion of the Company’s reasonable good faith estimates estimate of the amounts amount Cash of OCW and its Subsidiaries as of the Closing Working Capital, the Net Closing Indebtedness and the Unpaid Company Transaction Expenses, and the amount of the Merger Consideration Date (the “Estimated Merger ConsiderationClosing Cash”);
(ii) based on the foregoing estimates. The Estimate Statement also included the Sellers’ Expense Amount and the Company’s determination portion of the estimated outstanding balance of any Indebtedness of OCW and its Subsidiaries as of the Closing Date Share Amount based on Date, as calculated pursuant to appropriate payoff letters from the Estimated Merger Considerationholders of such Indebtedness, the Indemnity Amount, the Adjustment Amount and the Sellers’ Expense Amount, together with the aggregate number of outstanding shares of Common Stock and the aggregate number of Common Stock Equivalents (and the aggregate exercise prices thereof) used in the determination thereof. The Company has such payoff letters to be provided to Parent prompt notice and Purchaser (the details “Closing Indebtedness”); and
(iii) the Company’s portion of any exercise of Common Stock Equivalents and all Transaction Expenses incurred by OCW and its Subsidiaries that occurred following the calculation of any amounts included in the Estimate Statement and prior to the Effective Time. To the extent any Common Stock Equivalents have been exercised following Parent’s receipt remain outstanding as of the Estimate StatementClosing Date, the Estimated Merger Consideration shall be adjusted as calculated pursuant to give effect to the actual number of Common Stock Equivalents outstanding immediately prior to the Effective Time rather than the number of Common Stock Equivalents estimated proper invoices representing such Transaction Expenses, such invoices to be outstanding immediately prior provided to Purchaser (the Effective Time in the Estimate Statement“Closing Transaction Expenses”).
(b) No later than the 90th day after On the Closing Date, Parent will prepare and deliver, or cause to be prepared and delivered, to the Shareholder Representative a consolidated balance sheet of the Company and the Company Subsidiaries (the “Closing Balance Sheet”), together with a statement (the “Closing Statement”) setting forth Parent’s determination of (i) the actual Closing Working Capital as of the Adjustment Time, (ii) the actual Net Closing Indebtedness as of the Adjustment Time, and (iii) the actual Unpaid Company Transaction Expenses as of the Effective Time. The Closing Statement shall also include the Company’s determination of the Merger Consideration and the Closing Date Share Amount, based on the Indemnity Amount, the Adjustment Amount and the Sellers’ Expense Amount, together with the aggregate number of outstanding shares of Common Stock and the aggregate number of Common Stock Equivalents (and aggregate exercise prices thereof) used in the determination thereof. Parent will prepare, or cause to be prepared, delivered by Purchaser to Stockholders (or delivered pursuant to the Closing Balance Sheet and terms of the Closing Statement (including the determinations included thereinComputershare Escrow Agreement) in accordance with Section 2.3(f1.03 shall be a number of Class A Shares equal to the quotient of (A) the sum of $103,093,670 plus the Estimated Closing Cash minus the amount of each of the Closing Indebtedness and the Closing Transaction Expenses and (B) a price per share equal to the ten (10) day volume-weighted average price of the Purchaser’s shares as traded on the New York Stock Exchange determined as of the Effective Date ($314.60) (the “Signing Date Share Price”).
(c) During Within fifteen (15) days after the 60-day period immediately following Closing Date, a representative of Stockholders shall deliver to the Shareholder RepresentativePurchaser a final amount of Cash of the Company and its Subsidiaries as of the Closing Date (the “Final Closing Cash”). Such representative shall also provide to the Purchaser such data and information as the Purchaser may reasonably request in connection with the determination of the Final Closing Cash. The Purchaser shall notify such representative of the Purchaser’s acceptance or dispute of such statement within five (5) days after the Purchaser’s receipt of such statement. In the Closing Balance Sheet and the Closing Statement (provided that, if Parent fails to deliver the Closing Balance Sheet and the Closing Statement within the 90-day period described in Section 2.3(b), then at the written election event of the Shareholder Representative the Estimate Statement will be treated as the Closing Balance Sheet and the Closing Statement for purposes of this Section 2.3), the Shareholder Representative and its representatives and advisors (i) will be permitted to review, during normal business hours and upon reasonable notice, the Surviving Corporation’s and the Company Subsidiaries’ books and records and their and their outside accountants working papers related or relevant to the preparation of the Closing Balance Sheet and the Closing Statement (including the determinations included therein), and (ii) will be given reasonable access, during normal business hours and upon reasonable prior notice, to knowledgeable employees and accounting professionals of Parent, the Surviving Corporation and the Company Subsidiaries in order to facilitate the Shareholder Representative’s review of the Closing Balance Sheet and the Closing Statement; provided, however, that the review and access described in clauses (i) and (ii) will be conducted at times and in a manner that does not unreasonably interfere with the operation of Parent’s, the Surviving Corporation’s or the Company Subsidiaries’ respective businesses. The Closing Balance Sheet and the Closing Statement (including the determinations included therein) will become final, binding and conclusive upon Parent, the Surviving Corporation, the Shareholder Representative and the Company Holders (the “Interested Persons”) (A) on the 60th day following the Shareholder Representative’s receipt thereof, unless Parent receives from the Shareholder Representative on or prior to such 60th day written notice of the Shareholder Representative’s disagreement (the “Dispute Notice”) with any account or determination set forth in the Closing Balance Sheet or the Closing Statement or (B) on such earlier date as the Shareholder Representative notifies Parent that it does not dispute the Closing Balance Sheet and Closing Statement; provided that, if Parent shall have failed to timely deliver the Closing Balance Sheet and Closing Statement under Section 2.3(b), the 60th day referred to in clause (A) above shall refer to the 60th day after the same was due to be delivered. The Dispute Notice will specify the items in the Closing Balance Sheet and the Closing Statement disputed by the Shareholder Representative (collectively, the “Disputed Items”). Any item set forth or reflected on the Closing Balance Sheet or the Closing Statement that is not objected to in the Dispute Notice will be deemed final, binding and conclusive upon the Interested Persons upon delivery of the Dispute Notice. If the Shareholder Representative timely delivers the Dispute Notice, then the Closing Balance Sheet and Closing Statement will become final, binding and conclusive upon the Interested Persons on the first to occur of (x) the date on which Parent and the Shareholder Representative resolve in writing all differences they have with respect to the Disputed Items or (y) the date on which all determination of the Disputed Items that are not resolved by Parent Final Closing Cash, the Purchaser and the Shareholder Representative in writing are finally resolved in writing representative of Stockholders shall attempt to reconcile their difference and any written agreement by them as to any disputed amounts shall be final, binding, and conclusive on the Independent Accountants in accordance with Section 2.3(d)parties.
(d) During If the 30 days following delivery of a Dispute Notice, Parent and Final Closing Cash exceeds the Shareholder Representative will seek in good faith to resolve in writing any differences they have with respect to the Disputed Items. Any Disputed Item agreed in writing by Parent and the Shareholder Representative will be deemed final, binding and conclusive on the Interested Persons when such written agreement has been entered into by each of Parent and the Shareholder Representative. If Parent and the Shareholder Representative do not reach agreement on all of the Disputed Items during such 30-day period (or such longer period as they shall mutually agree), then at the end of such 30-day (or longer) period Parent and the Shareholder Representative shall submit all unresolved Disputed Items (collectively, the “Unresolved Items”) to Deloitte LLP Estimated Closing Cash (the “Independent AccountantsExcess Closing Cash”) ), the Purchaser shall deliver to review and resolve such matters. The Independent Accountants will determine each Unresolved Item (the amount Stockholder its Pro Rata Share of which may not be more favorable to Parent than the related amount reflected in the Closing Statement nor more favorable a number of Class A Shares equal to the Shareholder Representative and the Company Holders than any related amount set forth in the Dispute Notice) in accordance with this Section 2.3(d) and Section 2.3(f) as promptly as may be reasonably practicable, and Parent and the Shareholder Representative will instruct the Independent Accountants to complete such process within a period of no more than 60 days from the date of its engagement. The Independent Accountants shall act as an arbitrator to resolve each Unresolved Item based solely on written presentations by Parent and the Shareholder Representative and their respective agents, and not by independent review. Except as Parent and the Shareholder Representative may otherwise agree in writing, all communications between Parent and the Shareholder Representative or any of their respective representatives, on the one hand, and the Independent Accountants, on the other hand, will be in writing, with copies simultaneously delivered to the non-communicating party. The Independent Accountants’ determination quotient of the Unresolved Items will be final, binding and conclusive on Parent, the Company Holders and the Shareholder Representative, effective as of the date the Independent Accountants’ written determination is received by Parent and the Shareholder Representative. The fees and expenses of the Independent Accountants will be borne one-half by Parent and one-half by the Shareholder Representative (for the account of the Company Holders), and each of Parent and the Shareholder Representative (for the account of the Company Holders) will bear its own legal, accounting and other fees and expenses of participating in such dispute resolution procedure.
(e) Upon final determination of the Merger Consideration pursuant to Section 2.3(c) or (d), as applicable, an adjustment will be determined and paid as follows:
(i) If the Estimated Merger Consideration exceeds the Merger Consideration, the Shareholder Representative and Parent shall within five Business Days after such final determination issue joint written instructions directing the Escrow Agent to (x) pay to Parent the amount of such excess (or, if less, the entire amount of the Adjustment Escrow) out of the Adjustment Escrow, by wire transfer of immediately available funds to the account specified by Parent, (y) pay to the Shareholder Representative (on behalf of the Company Holders) the remaining amount, if any, of the Adjustment Escrow (reduced by the amount provided for in Section 2.2(b)(iii) with respect to any Dissenting Shares, which amount shall instead be paid to Parent in the same method as specified in clause (x) above), by wire transfer of immediately available funds to the account specified by the Shareholder Representative, and (z) if the Estimated Merger Consideration exceeds the Merger Consideration by an amount that is greater than the amount of the Adjustment Escrow, pay the portion of such excess not paid from the Adjustment Escrow pursuant to clause (x) above to Parent from the Indemnity Escrow, by wire transfer of immediately available funds to the account specified by Parent.
(ii) If the Merger Consideration exceeds the Estimated Merger Consideration, then within five Business Days after such final determination, Parent will pay to the Shareholder Representative (on behalf of the Company Holders) the amount of such excess (reduced by the amount provided for in Section 2.2(b)(iii) with respect to any Dissenting Shares) by wire transfer of immediately available funds to the account specified by the Shareholder Representative, and the Shareholder Representative and Parent shall issue joint written instructions to the Escrow Agent to pay the amount of the Adjustment Escrow to the Shareholder Representative (on behalf of the Company Holders) (reduced by the amount provided for in Section 2.2(b)(iii) with respect to any Dissenting Shares, which amount shall instead be paid to Parent in the same method as specified in clause (i)(x) above).
(f) Except as otherwise specified in this Agreement, each accounting term used herein will have the meaning that is applied thereto in accordance with GAAP and, to the extent consistent with GAAP, the accounting principles, policies, procedures and methodologies consistently applied in preparing the consolidated balance sheet of the Company and the Company Subsidiaries as of the Balance Sheet Date and the accompanying statement of income (“Company GAAP”). Except as otherwise provided in this Agreement, each amount included in the Estimate Statement, the Closing Statement and the Closing Balance Sheet will be (A) calculated in accordance with Company GAAP (without regard to materiality), including with respect to the nature or classification of accounts, and determining levels of reserves or levels of accruals, and the definitions for such amount (and the components of such amount) herein agreed; Excess Closing Cash and (B) consistent with the books and records Signing Date Share Price. If the Estimated Closing Cash exceeds the Final Closing Cash (the “Deficit Closing Cash”), the Purchaser shall cancel a number of the Company and the Company Subsidiaries; provided that, except as otherwise provided in this Agreement, in determining current assets and liabilities hereunder, all accounting entries shall be taken into account regardless Class A Shares of their amount and all known errors and omissions shall be corrected.
(g) Notwithstanding anything contained in this Agreement each Stockholder equal to its Pro Rata Share of a number of Class A Shares equal to the contrary, but subject to quotient of (A) the rights of Deficit Closing Cash and (B) the parties to seek specific performance of this Section 2.3 under Section 8.9, this Section 2.3 sets forth the sole remedy of Parent and Merger Sub in respect of any Damages related to any asset or liability accounted for, or intended to be accounted for, in the calculation of Closing Working Capital, Net Closing Indebtedness or Unpaid Company Transaction Expenses, and Parent and Merger Sub shall not be entitled to indemnification under Article VII or any other recovery for any such Damages in respect thereof, whether or not the underlying facts constitute a breach of this Agreement; provided, however, that nothing contained in this Section 2.3(g) shall limit, restrict or negate Parent’s or Merger Sub’s right to indemnification for Damages arising out of or resulting from or in connection with a breach of the representations and warranties of the Company set forth herein or a breach of the Company’s covenants set forth herein (including any such breach of representation or warranty or breach of covenant resulting from or relating to any such underlying facts) unless such Damages are included in the calculation of Merger Consideration as finally determined pursuant to Section 2.3(c) or Section 2.3(d), as applicableSigning Date Share Price.
Appears in 1 contract
Calculation of Merger Consideration. (a) Not fewer No earlier than ten Business Days nor less than three Business Days prior to the date hereofClosing Date, the Company delivered shall deliver to Parent a statement (the “Estimate Statement”) setting forth the Company’s good faith estimates of the amounts of the Closing Working Capital, the Net Closing Indebtedness and Indebtedness, the Unpaid Company Transaction Expenses, the Closing Cash and the amount Closing Taxes, and a calculation of the Merger Consideration (the “Estimated Merger Consideration”) based on the foregoing estimates. The Estimate Statement shall also included the Sellers’ Expense Amount and include the Company’s good faith initial determination of the estimated Closing Date Applicable Share Amount for each class and series of Company Stock and each Warrant based on the Estimated Merger Consideration, the Indemnity Amount, the Adjustment Amount and the Sellers’ Expense Amount, together with the aggregate number of outstanding shares of Common Stock and the aggregate number of Common Stock Equivalents (and the aggregate exercise prices thereof) used in the determination thereof. The Company has provided to Parent prompt notice and the details of any exercise of Common Stock Equivalents that occurred following the calculation of any amounts included in the Estimate Statement and prior to the Effective Time. To the extent any Common Stock Equivalents have been exercised following Parent’s receipt of the Estimate Statement, the Estimated Merger Consideration shall be adjusted to give effect to the actual number of Common Stock Equivalents outstanding immediately prior to the Effective Time rather than the number of Common Stock Equivalents estimated to be outstanding immediately prior to the Effective Time in the Estimate Statement.
(b) No later than the 90th day after the Closing DateDate (the “Post-Closing Deadline”), Parent will prepare and deliver, or cause to be prepared and delivered, deliver to the Shareholder Stockholder Representative a consolidated balance sheet of the Company and as of the Company Subsidiaries Adjustment Time (the “Closing Balance Sheet”), together with a statement (the “Closing Statement”) setting forth Parent’s determination of (i) the actual Closing Working Capital as of the Adjustment TimeCapital, (ii) the actual Net Closing Indebtedness as of the Adjustment TimeIndebtedness, and (iii) the actual Unpaid Company Transaction Expenses as of Expenses, (iv) the Effective Time. The actual Closing Statement shall also include Cash, (v) the Company’s determination actual Closing Taxes and (vi) a calculation of the Merger Consideration and the Closing Date Share AmountConsideration, based on the Indemnity Amount, the Adjustment Amount and the Sellers’ Expense Amount, together with the aggregate number of outstanding shares of Common Stock and the aggregate number of Common Stock Equivalents (and aggregate exercise prices thereof) used in the determination thereof. Parent will prepare, or cause to be prepared, the Closing Balance Sheet and the Closing Statement (including the determinations included therein) each case prepared in accordance with Section 2.3(f). If Parent fails to deliver the Closing Statement by the Post-Closing Deadline, then the Merger Consideration shall not be further adjusted pursuant to this Section 2.3 unless the Stockholder Representative elects, by written notice delivered to Parent within five Business Days after the Post-Closing Deadline, to retain (at the expense of Parent and the Surviving Corporation) a nationally recognized independent accounting firm to prepare the Closing Balance Sheet and Closing Statement in accordance with Section 2.3(f), in which case such independent accounting firm shall be instructed to deliver the Closing Balance Sheet and Closing Statement to the Stockholder Representative and Parent within 60 days after the Post-Closing Deadline and the determinations of such accounting firm will be conclusive and binding on Parent, the Surviving Corporation, the Stockholder Representative, the Company Holders and each of their Affiliates (the “Interested Persons”). Parent shall cause the Company and the Company Subsidiaries to make their financial records available to the Stockholder Representative and its advisors (or such independent accounting firm retained by the Stockholder Representative, as the case may be) in connection with any review conducted in connection with this Section 2.3.
(c) During the 60-day period immediately following the Shareholder Representative’s receipt of day on which the Stockholder Representative receives the Closing Balance Sheet and the Closing Statement (provided that, if Parent fails to deliver the Closing Balance Sheet and the Closing Statement within the 90-day period described in Section 2.3(b), then at the written election of the Shareholder Representative the Estimate Statement will be treated as the Closing Balance Sheet and the Closing Statement for purposes of this Section 2.3)Statement, the Shareholder Stockholder Representative and its representatives and advisors (i) will be permitted to review, during normal business hours and upon reasonable notice, the Surviving Corporation’s and the Company Subsidiaries’ books and records and their and their outside accountants the working papers related or relevant to the preparation of the Closing Balance Sheet and the Closing Statement (including the determinations included therein), and (ii) will be given reasonable access, during normal business hours and upon reasonable prior notice, to knowledgeable employees and accounting professionals of Parent, the Surviving Corporation and the Company Subsidiaries in order to facilitate the Shareholder Stockholder Representative’s review of the Closing Balance Sheet and the Closing Statement; provided, however, that the review and access described in clauses (i) and (ii) will be conducted at times and in a manner that does not unreasonably interfere with the operation of Parent’s, the Surviving Corporation’s or the Company Subsidiaries’ respective businesses. The Closing Balance Sheet and the Closing Statement (including the determinations included therein) will become final, binding and conclusive upon Parent, the Surviving Corporation, Interested Persons on the Shareholder Representative and the Company Holders (the “Interested Persons”) earlier of (A) on the 60th day following the Shareholder Representative’s receipt thereof, date on which the Stockholder Representative receives them unless Parent receives from the Shareholder Stockholder Representative on or prior to such 60th day a written notice from the Stockholder Representative setting forth all of the Shareholder Representative’s disagreement (the “Dispute Notice”) its disagreements with any account or determination set forth in the Closing Balance Sheet or the Closing Statement or (the “Disputed Items”) together with an explanation for each Disputed Item in reasonable detail and its proposed adjustments with respect to each Disputed Item to the extent reasonably practicable in light of the information then available to the Stockholder Representative (the “Dispute Notice”) and (B) the date on such earlier date as which the Shareholder Stockholder Representative notifies Parent in writing that it does not dispute the Closing Balance Sheet and Closing Statement; provided thatprovided, however, that notwithstanding the foregoing if Parent shall have failed the Stockholder Representative is entitled and elects to timely deliver the Closing Balance Sheet and Closing Statement under retain an independent accounting firm pursuant to Section 2.3(b), the 60th day referred to in clause (A) above shall refer to the 60th day after the same was due to be delivered. The Dispute Notice will specify the items in then the Closing Balance Sheet and the Closing Statement disputed (including the determinations included therein) prepared by such independent accounting firm will become final, binding and conclusive upon the Shareholder Interested Persons when delivered to the Stockholder Representative (collectivelyand Parent. If a Dispute Notice is given, the “Disputed Items”). Any then any item set forth or reflected on the Closing Balance Sheet or the Closing Statement that is not objected to in the Dispute Notice a Disputed Item will be deemed final, binding and conclusive upon the Interested Persons upon from and after the delivery of the Dispute Notice. If the Shareholder Stockholder Representative timely delivers the Dispute Notice, then the Closing Balance Sheet and Closing Statement (including the determinations included therein) will become final, binding and conclusive upon the Interested Persons on the first to occur of (x) the date on which Parent and the Shareholder Stockholder Representative resolve agree in writing all differences they have with respect to the resolution of all the Disputed Items or (y) the first date on which all of the Disputed Items that are not resolved by the written agreement of Parent and the Shareholder Stockholder Representative in writing are or finally resolved in writing by the Independent Accountants in accordance with Section 2.3(d).
(d) During the 30 days following delivery of a after the date on which Parent receives the Dispute Notice, Parent and the Shareholder Stockholder Representative will seek in good faith to resolve in writing by written agreement any differences they have with respect to the Disputed Items. Any Items and any Disputed Item agreed in writing by Parent and the Shareholder Representative so resolved will be deemed final, binding and conclusive on upon the Interested Persons when such written agreement has been entered into by each of Parent and the Shareholder RepresentativePersons. If Parent and the Shareholder Stockholder Representative do not reach written agreement on the resolution of all of the Disputed Items during such 30-day period (or such longer period as they shall mutually agree), then at the end of such 30-day (or longer) period Parent and the Shareholder Stockholder Representative shall submit all unresolved Disputed Items (collectively, the “Unresolved Items”) to Deloitte & Touche LLP or such other nationally recognized firm of independent certified public accountants with a nationwide audit and accounting practice as Parent and the Stockholder Representative may agree in writing (the “Independent Accountants”) to and the Independent Accountants shall review and resolve such mattersall of the Unresolved Items. The Independent Accountants will determine each Unresolved Item (the amount of which may not be more favorable to Parent than the related amount reflected in the Closing Statement nor more favorable to the Shareholder Representative and the Company Holders than any related amount set forth in the Dispute Notice) in accordance with this Section 2.3(d) and Section 2.3(f) as promptly as may be reasonably practicable, and Parent and the Shareholder Stockholder Representative will instruct the Independent Accountants to endeavor to complete such process within a period of no more than 60 days from days; provided, however, that notwithstanding the date foregoing if any such determination of its engagementany Unresolved Item is more favorable to Parent than the related amount specified by the Parent in the Closing Statement, or more favorable to the Company Holders than any related amount specified by the Stockholder Representative in the Dispute Notice, then such Unresolved Item shall be deemed to be such related amount specified by Parent or the Stockholder Representative, as applicable, for all purposes of this Agreement. The Independent Accountants shall act as an expert and not as an arbitrator to resolve each Unresolved Item based solely on the provisions of this Agreement, GAAP and the written presentations made by Parent and the Shareholder Stockholder Representative and their respective agents, and not by independent review. Except as Parent and the Shareholder Stockholder Representative may otherwise agree in writing, all communications between Parent and the Shareholder Stockholder Representative or any of their respective representatives, on the one hand, and the Independent Accountants, on the other hand, will be in writing, with copies simultaneously delivered to the non-communicating party. The Independent Accountants’ determination of the Unresolved Items will be final, binding and conclusive on Parent, the Company Holders and the Shareholder RepresentativeInterested Parties, effective as of the date the Independent Accountants’ written determination is received by Parent and the Shareholder Stockholder Representative. The fees and expenses of the Independent Accountants will be borne one-half by Parent and one-half by the Shareholder Representative (for the account of the Company Holders)Stockholder Representative, and each of Parent and the Shareholder Stockholder Representative (for the account of the Company Holders) will bear its own legal, accounting and other fees and expenses of participating in such dispute resolution procedure.
(e) Upon final determination of the Merger Consideration Closing Working Capital, Closing Indebtedness, Unpaid Company Transaction Expenses, Closing Cash and Closing Taxes pursuant to Section 2.3(c2.3(b), (c) or (d), as applicable, an adjustment will be determined and paid as follows:
(i) If the Estimated Merger Consideration exceeds the Merger ConsiderationConsideration (based on such final determination), the Shareholder Stockholder Representative and Parent shall within five (5) Business Days after such final determination issue joint written instructions directing the Escrow Agent to (x) pay to Parent the amount of such excess together with interest thereon from the Closing Date to the payment date at the rate of 2% per annum (or, if lesscollectively, the entire amount of the Adjustment Escrow“Excess Amount”) out of the Adjustment Escrow, Escrow by wire transfer of immediately available funds to the account specified by ParentParent (the “Parent Account”), (y) and to pay to the Shareholder Stockholder Representative (on behalf of the Company Holders) the remaining amount, if any, of the Adjustment Escrow (reduced by the amount provided for in Section 2.2(b)(iii) with respect to any Dissenting Shares, which amount shall instead be paid to Parent in the same method as specified in clause (x) above), by wire transfer of immediately available funds to the account specified by the Shareholder Stockholder Representative, and (z) if . If the Estimated Merger Consideration exceeds the Merger Consideration by an amount that Excess Amount is greater than the amount of in the Adjustment Escrow, then the Stockholder Representative and Parent shall issue joint written instructions directing the Escrow Agent to pay to Parent out of the portion of such excess not paid from Indemnity Escrow the amount by which the Excess Amount exceeds the amount in the Adjustment Escrow pursuant (up to clause (x) above to Parent from the amount in the Indemnity Escrow, ) by wire transfer of immediately available funds to the Parent Account. Any amount payable to Parent pursuant to this Section 2.3(e)(i) will be paid within five (5) Business Days of such final determination by wire transfer of immediately available funds to the account specified by Parent.
(ii) If the Merger Consideration (based on such final determination) exceeds the Estimated Merger Consideration, then within five Business Days after such final determination, Parent will pay to the Shareholder Stockholder Representative (on behalf of the Company Holders) the an amount of equal to such excess (reduced by together with interest thereon from the amount provided for in Section 2.2(b)(iii) with respect to any Dissenting Shares) by wire transfer of immediately available funds Closing Date to the account specified by payment date at the Shareholder Representativerate of 2% per annum, and the Shareholder Stockholder Representative and Parent shall issue joint written instructions to the Escrow Agent to pay the amount of the Adjustment Escrow to the Shareholder Stockholder Representative (on behalf of the Company Holders). Any amount payable to the Stockholder Representative pursuant to this Section 2.3(e)(ii) will be paid within five (reduced 5) Business Days of such final determination by wire transfer of immediately available funds to the account specified by the Stockholder Representative. Any amount provided for in Section 2.2(b)(iii) with respect to any Dissenting Shares, which amount shall instead be paid to Parent in the same method as specified in pursuant to clause (i)(xe)(i) or to the Stockholder Representative pursuant to clause (e)(ii) (other than interest on the Adjustment Escrow paid to the Stockholder Representative pursuant to clause (ii) above)) will be deemed to constitute an adjustment to the Merger Consideration.
(f) Except as otherwise specified in For the purposes of this AgreementSection 2.3, each accounting term used herein will have the meaning that is applied thereto in accordance with GAAP as of the date of this Agreement and, to the extent consistent with such GAAP, the accounting principles, policies, procedures and methodologies consistently applied in preparing the consolidated balance sheet of Audited Financial Statements as of, and for the Company and the Company Subsidiaries as of year ending on, the Balance Sheet Date and the accompanying statement of income (“Company GAAP”)Date. Except as otherwise provided in this Agreement, each amount included in the Estimate StatementThe Closing Balance Sheet, the Closing Statement Working Capital, the Closing Indebtedness, the Unpaid Company Transaction Expenses, the Closing Cash and the Closing Balance Sheet Taxes will be calculated (A) calculated in accordance with Company GAAP (without regard as in effect on the date of this Agreement and, to materiality)the extent consistent with such GAAP, the accounting principles, policies, procedures and methodologies applied in preparing the Audited Financial Statements as of, and for the year ending on, the Balance Sheet Date, including without limitation with respect to the nature or classification of accounts, accounts and determining levels of reserves or levels of accruals, and the definitions for such amount (and the components of such amount) herein agreed; and (B) consistent with based on the books and records of the Company and the Company Subsidiaries; provided that, except as otherwise provided in this Agreement, in determining current assets Subsidiaries and liabilities hereunder, all accounting entries shall be taken into account regardless of their amount and all known errors and omissions shall be corrected.
(g) Notwithstanding anything contained in this Agreement to the contrary, but subject to the rights of the parties to seek specific performance of this Section 2.3 under Section 8.9, this Section 2.3 sets forth the sole remedy of Parent and Merger Sub in respect of any Damages related to any asset or liability accounted for, or intended to be accounted for, in the calculation of Closing Working Capital, Net Closing Indebtedness or Unpaid Company Transaction Expenses, and Parent and Merger Sub shall not be entitled to indemnification under Article VII or any other recovery for any such Damages in respect thereof, whether or not the underlying facts constitute a breach of this Agreementdefinitions herein agreed; provided, however, that nothing contained notwithstanding the foregoing, any errors or omissions in this Section 2.3(g) shall limitsuch books and records, restrict the Closing Statement or negate Parent’s or Merger Sub’s right to indemnification for Damages arising out of or resulting from or in connection with a breach of the representations and warranties of the Company computations set forth herein therein shall be corrected regardless of their materiality or a breach of the Company’s covenants set forth herein (including any such breach of representation or warranty or breach of covenant resulting from or relating to any such underlying facts) unless such Damages are included in the calculation of Merger Consideration as finally determined pursuant to Section 2.3(c) or Section 2.3(d), as applicableamount.
Appears in 1 contract
Sources: Merger Agreement (Harris Corp /De/)