Operation of the Business (a) Except as (A) required by applicable Law, Order or a Governmental Entity, (B) set forth in Section 4.01(a) of the Parent Disclosure Letter, (C) consented to by Buyer in writing (which consent shall not be unreasonably withheld, delayed or conditioned), (D) as required to implement the Internal Reorganization in accordance with the Steps Plan or (E) as expressly required by this Agreement or any other Transaction Document, between the date of this Agreement and the earlier of the Closing and the termination of this Agreement in accordance with Article VII, Parent shall (solely with respect to the Business), and shall cause each Business Company and, solely with respect to the Business, each other Subsidiary to, subject to the restrictions and exceptions set forth in this Section 4.01 or elsewhere in this Agreement or any other Transaction Document, (x) conduct the Business in the ordinary course of business in all material respects and (y) use commercially reasonable efforts to
(1) preserve intact its business organizations (except as required to implement the Internal Reorganization in accordance with the Steps Plan), (2) retain the Business’s current officers and (3) preserve the Business’s relationship with its Key Customers, Key Suppliers, employees and others having business dealings with the Business; provided that no action with respect to matters specifically addressed by Section 4.01(b) shall be deemed to be a breach of this Section 4.01(a) unless such action would constitute a breach of Section 4.01(b).
(b) Without limiting the foregoing, except in respect of matters (A) required by applicable Law, Order or a Governmental Entity, (B) set forth in Section 4.01(b) of the Parent Disclosure Letter, (C) consented to by Buyer in writing (which consent shall not be unreasonably withheld, delayed or conditioned), (D) required to implement the Internal Reorganization in accordance with the Steps Plan or (E) as required by this Agreement or any other Transaction Document, between the date of this Agreement and the earlier of the Closing and the termination of this Agreement in accordance with Article VII, Parent shall not (solely to the extent related to the Business), and shall cause each Business Company and, solely with respect to the Business, each other Subsidiary not to:
(i) in the case of any Business Company, (A) issue, deliver, sell, pledge or transfer any of its capital stock or other equity securities, (B) adjust, split, combine or reclassify any shares of its capital stock or other equity interests or issue or authorize or propose the issuance of any other securities in respect of, in lieu of or in substitution for, its capital stock or other equity interests, (C) grant any options, warrants, calls, rights, “phantom” stock rights, stock appreciate rights or stock-based performance units or other securities convertible into or exchangeable or exercisable for, or rights to purchase, subscribe for or otherwise acquire any shares of its capital stock or equity interests or securities of a Business Company, or (D) repurchase, redeem or otherwise acquire or offer to repurchase, redeem or otherwise acquire, directly or indirectly, any shares of its capital stock or other equity interests;
(ii) in the case of any Business Company, declare, set aside, make or pay any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to any of its capital stock or other equity interests, other than any dividends or other distributions from any wholly owned Business Subsidiary to a Transferred Company or any other wholly owned Business Subsidiary that are made prior to the Closing Date;
(iii) amend or modify the organizational or similar documents of any Business Company;
(iv) (A) acquire or agree to acquire in any manner (including by merger, consolidation, acquisition of stock, equity interests or assets or any other business combination) any corporation, partnership, other business organization or division or any material properties, equity interests or assets from any third party, (B) enter into any joint venture or other similar partnership with any third party or (C) make any loans or capital contributions to, or investments in, any Person, other than to or in any wholly-owned Business Company, except for extensions of trade credit in the ordinary course of business consistent with past practice;
(v) sell, transfer, assign, lease, mortgage, license, abandon or otherwise dispose of any of the material properties or assets of the Business (including any capital stock or other equity interests of any Business Subsidiary);
(vi) abandon, fail to maintain, sell, transfer, assign, license, cancel, allow to lapse or expire or otherwise dispose of any Registered Intellectual Property or other material Owned Intellectual Property, other than non-exclusive licenses granted to customers of the Business Companies in the ordinary course of business;
(vii) fail to maintain or protect the confidentiality of any material trade secrets and other material confidential information included in the Owned Intellectual Property, except for disclosures pursuant to confidentiality obligations entered into in the ordinary course of business;
(viii) pledge, mortgage, encumber or otherwise subject to a Lien (other than a Permitted Lien) any of the material properties or assets of the Business (including any capital stock or other equity interests in any Business Company);
(ix) other than borrowings in the ordinary course of business under lines of credit or similar arrangements in existence as of the date of this Agreement, incur, assume, guarantee or otherwise become liable for (whether directly, contingently or otherwise) any indebtedness for borrowed money with an aggregate principal amount in excess of $500,000, other than (A) indebtedness that shall be repaid, settled, canceled or terminated prior to the Closing, (B) intercompany indebtedness between the wholly-owned Business Companies in accordance with (including as to amounts) past practice, and (C) indebtedness to replace existing indebtedness (on substantially similar or better terms and not in amount greater than the existing indebtedness that it is replacing) that is maturing, expiring or otherwise terminating;
(x) enter into any swap or hedging transaction or other derivative agreement other than in the ordinary course of business consistent with past practice (but, in any event, not for speculative purposes);
(xi) except (A) as required pursuant to the terms of any Benefit Plan or Collective Bargaining Agreement as in effect as of the date of this Agreement or adopted, established, entered into or amended after the date of this Agreement not in violation of this Agreement, (B) as contemplated in Section 5.04 of this Agreement, (C) as may be initiated by Parent or one or more of Parent’s Affiliates in good faith with respect to their employees generally in the applicable jurisdiction or geographic location in the ordinary course of business consistent with past practice and in a manner that does not target or otherwise disproportionately affect the Business Employees or (D) arrangements that will not result in any liability under this Agreement or otherwise to Buyer or its Affiliates (including any Business Company), (1) grant to any Business Employee who is entitled to annual salary or fees in excess of $125,000 any material increase in compensation or any material increase in severance, change of control, retention, transaction bonus or termination pay, (2) accelerate the time of payment or vesting of, the lapsing of restrictions or waiving of performance conditions with respect to, or fund or otherwise secure the payment of, any compensation or benefits to any Business Employee under any Benefit Plan, (3) enter into, terminate or materially amend any Benefit Plan (other than an Assumed Benefit Plan), or enter into, terminate or amend any Assumed Benefit Plan or enter into, terminate, amend or negotiate any Collective Bargaining Agreement (provided, however, that the foregoing clauses (1), (2) and (3) shall not restrict any Business Company from providing, or making available to, employees who are newly hired or promoted based on job performance or workplace requirements (in each case in the ordinary course of business), compensation and benefit arrangements (including incentive grants) and Benefit Plans that are substantially consistent with the compensation and benefit arrangements (including incentive grants) and Benefit Plans previously provided to newly hired or promoted employees in similar positions), (4) take any action to fund or in any other way secure the payment of compensation or benefits to any Business Employee under any Benefit Plan, (5) take any action that affects whether or not any employee spends at least 50% of his or her work time in the operation of the Business, including by transferring, hiring or terminating any employees, other than hiring or terminating an employee who is entitled to annual salary or fees of $125,000 or less in the ordinary course of business, terminations due to death, disability or for cause, as determined by Parent and its Affiliates (including the Business Companies) in good faith or hiring or transferring any employees to replace a departed Business Employee in the ordinary course of business consistent with past practice, (6) defer any payroll or other Taxes payable by any Business Company or any employee of any Business Company pursuant to the CARES Act or otherwise or (7) announce or implement any mass layoff or other material reduction in force in respect of any Business Employees, or any furlough, work schedule reduction or similar program affecting (x) ten (10) or more Business Employees or (y) substantially all Business Employees in any jurisdiction;
(xii) except for any actions related to any Parent Consolidated Tax Return or Parent Consolidated Group that would not have any material and adverse effect on Buyer or its Affiliates (including for periods after the Closing, the Business Companies), (A) make or change any material Tax election with respect to the Business or the Business Companies (including for this purpose making any entity classification election not specifically provided for in this Agreement), (B) settle or compromise any material Tax Proceeding or Tax claim, if such Tax Proceeding or Tax claim could reasonably be expected to have material Tax consequences (including with respect to effects on future Tax liabilities) to Buyer (or its Affiliates) that are not fully indemnified under the terms of this Agreement, (C) file any Tax Return with respect to the Business or the Business Companies in a manner that is materially inconsistent with past practices, (D) adopt or change any Tax accounting period or other material method of Tax accounting, (E) enter into any Tax allocation, sharing or similar agreement (other than Ordinary Course Contracts), (F) surrender any right to claim a material Tax refund, credit or other benefit or (G) make any voluntary Tax disclosure or Tax amnesty or similar filing with respect to matters that could reasonably be expected to implicate liabilities for which Buyer or its Affiliates would be liable;
(xiii) change any methods or principles of financial accounting used by the Business, except as required by GAAP (or any interpretation thereof) or the Financial Accounting Standards Board or any similar organization;
(xiv) release, compromise or settle any Action (A) involving payments (exclusive of attorney’s fees) by the Business Companies in excess of $1,000,000 individually or in excess of $2,500,000 in the aggregate, (B) granting injunctive or other equitable remedy against the Business Companies or the Business or (C) which imposes any material restrictions on the operations of the Business;
(xv) adopt or enter into any plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of any Business Company;
(xvi) prior to the date that is nine (9) months after the date of this Agreement, enter into any material line of business outside of the Business or abandon or discontinue any existing material line of business;
(xvii) terminate or cancel any of the insurance policies of or covering the Business or any Business Company, including allowing the policies to expire without renewing such policies or obtaining comparable replacement coverage, or prejudicing rights to insurance payments or coverage;
(xviii) (x) other than in the ordinary course of business, enter into any Contract that, if entered into prior to the date hereof, would be required to be set forth on Section 2.17(a) of the Parent Disclosure Letter (other than clauses (iv), (vii) or (xix) thereof), and (y) enter into any Contract that, if entered into prior to the date hereof, would be required to be set forth on clause (iv), (vii) or (xix) of Section 2.17(a) of the Parent Disclosure Letter;
(xix) other than in the ordinary course of business, amend, modify, renew, terminate or extend, or waive any claim or right under, or terminate any Material Contract;
(xx) subject to Section 5.25, make or commit to make, any capital expenditure in excess of $1,000,000 individually, or $5,000,000 in the aggregate;
(i) accelerate the collection or receipt of accounts receivable, discount any accounts receivable, or engage in any other activity that has or would reasonably be expected to have the effect of accelerating to pre-Closing periods accounts receivable that would otherwise be expected to be collected in post-Closing periods, or delay the payment of accounts payable or defer expenses or (ii) conduct its cash management practices other than in the ordinary course of business (including with respect to collection of accounts receivable, payment of accounts payable and accrued expenses, pricing and credit practices and operation of cash management practices generally); or
(xxii) authorize, commit or agree to take any of the actions described in this Section 4.01(b).
(c) Notwithstanding anything to the contrary set forth in this Agreement, nothing contained in this Agreement or any other Transaction Document shall prevent Parent or its Subsidiaries (including the Business Companies) from taking any action or failing to take any action (1) in response to COVID-19 or COVID-19 Measures, in each case, to the extent reasonably necessary to mitigate a proximate risk to health and human safety and to the extent reasonably consistent with any such actions (or omissions) as Parent and its Subsidiaries have taken in response thereto prior to the date hereof and (2) in response to COVID-19 Measures, in each case, to the extent reasonably necessary to comply with such COVID-19 Measures, taking into account (x) the scope and duration of such act or failure to act and (y) the actions being taken by companies that are similarly situated and that operate in similar industries in response to COVID-19 Measures, and, in each case, (i) no such actions or failure to take such actions shall be deemed to violate or constitute a breach of this Agreement, (ii) all such actions or failure to take such actions shall be deemed to constitute an action taken in the ordinary course of business, and (iii) no such actions or failure to take such actions shall serve as a basis for Buyer to terminate this Agreement or assert that any of the conditions to the Closing contained herein have not been satisfied; provided that, to the extent reasonably practicable, Parent shall consult with Buyer prior to taking any such material actions, or failing to take any such material actions.
(d) Nothing contained in this Agreement or any other Transaction Document shall give Buyer, directly or indirectly, the right to control or direct the operations of Parent or its Subsidiaries (including any Business Company) prior to the Closing. Prior to the Closing, Parent and its Subsidiaries (including the Business Companies) shall exercise, consistent with the terms and conditions of this Agreement and the other Transaction Documents, complete unilateral control and supervision over their business operations (including the Business).
