Offset Right. (a) In accordance with and subject to the limitations set forth in this Article VII, from and after the First Effective Time, Parent, the First-Step Surviving Corporation, the Surviving Entity and each of their respective Affiliates, officers, directors, partners, managers, equityholders, agents and employees (collectively, the “Parent Indemnified Parties”) shall be entitled to recover, by offset against any Milestone Shares not yet issued or any Tax Refunds or Earnout Consideration not yet paid, on a several and not joint basis with respect to each Seller in accordance with each Seller’s Percentage Interest (as adjusted, with respect to any Offset Right exercised against any Milestone Shares, to account for the specific allocation set forth in Section 2.21(d)) (the “Offset Right”), the aggregate amount of any Damages resulting from or arising out of the following (whether or not involving a Third-Party Claim): (i) any breach by the Company of any representation or warranty set forth in Article III or in the certificate delivered by the Company pursuant to Section 6.2(p)1.1(p) (other than to the extent related to any representation or warranty that is a Fundamental Representation); (ii) any breach by the Company of any Fundamental Representation or in the certificate delivered by the Company pursuant to Section 6.2(p) to the extent related to any Fundamental Representation; (iii) any breach of any covenant or agreement of the Company contained in this Agreement; (iv) any Company Debt to the extent unpaid as of the Closing and not included in the Post-Closing Adjustment; (v) any Company Transaction Expenses to the extent unpaid as of the Closing and not included in Company Transaction Expenses; (vi) any Pre-Closing Taxes to the extent not taken into account in the calculation of Company Debt or Company Transaction Expenses; (vii) any claims, whether direct, derivative, class or individual, by (A) any then current or former holder or alleged then-current or former holder of any Equity Interests of the Company (including any predecessors), based upon, (I) the Mergers or this Agreement, including the allocation of the Merger Consideration, or (II) such Person’s status or alleged status as a holder of Equity Interests of the Company (including any predecessors) at any time at or prior to the Closing, whether for breach of fiduciary duty or otherwise, (B) any Person to the effect that such Person is entitled to any Equity Interests of the Company or any payment in connection with the Mergers by virtue of such Equity Interests of the Company, including appraisal rights under any applicable Law (excluding cash payments to holders of Dissenting Shares not in excess of the consideration to which they would have been entitled for their shares of Company Capital Stock had they received a portion of the Merger Consideration payable pursuant to Section 2.6 rather than exercising appraisal rights) or (C) any Person with respect to any Company Equity Plan or any other plan, policy or Contract providing for compensation to such Person in respect of a Company Security; (viii) any claim by any Seller against any Parent Indemnified Party relating to the allocation or disbursement of the Merger Consideration (other than as required to be paid by Parent or the Surviving Entity, as applicable, pursuant to the terms of this Agreement); (ix) any claim for Fraud solely in respect of the representations and warranties set forth in Article III of this Agreement. (b) Notwithstanding the foregoing: (i) the Parent Indemnified Parties shall not be entitled to offset any Damages pursuant to Section 7.1(a)(i) unless and until the aggregate amount of all such Damages that the Parent Indemnified Parties, but for this clause (i) of this Section 7.1(b), are entitled to offset under Section 7.1(a)(i) exceeds $1,500,000 (the “Deductible”) (in which case the Parent Indemnified Parties shall be entitled to all Damages in excess of the Deductible); (ii) the aggregate amount of Damages the Parent Indemnified Parties shall be entitled to offset under Section 7.1(a)(i) shall not exceed twelve and a half percent (12.5%) of the value of the Merger Consideration actually received by Sellers under this Agreement; provided, that the aggregate amount of Damages the Parent Indemnified Parties shall be entitled to offset under Section 7.1(a)(i) in respect of a breach of Section 3.12 (Intellectual Property) shall be twenty percent (20%) of the value of the Merger Consideration actually received by the Sellers under this Agreement; (iii) notwithstanding anything else in this Agreement, (A) the aggregate amount of Damages the Parent Indemnified Parties shall be entitled to offset under Section 7.1(a)(ii) through Section 7.1(a)(ix), inclusive, shall not exceed the value of the Merger Consideration actually received by the Sellers under this Agreement, and (B) in no event shall any Seller’s Liability for Damages exceed the aggregate Merger Consideration actually received by such Seller; provided, that, notwithstanding the foregoing, in the case of Fraud solely with respect to a breach of the representations and warranties contained in Article III of this Agreement, there shall be no limitation on the amount of Damages the Parent Indemnified Party may recover from the Seller who committed for such Fraud (and in no event shall any Seller have any Liability for Damages resulting from or arising out of Fraud committed by another Seller). (iv) For the sake of clarity, the Deductible shall not apply to any claim for Damages arising out of, resulting from or in connection with the matters set forth in Section 7.1(a)(ii) through Section 7.1(a)(ix), inclusive. Notwithstanding anything to the contrary contained herein, (i) no Sellers shall have any right of indemnification, contribution or right of advancement from Parent, the Merger Subs, the Company or any other Parent Indemnified Party with respect to any Damages claimed by any Parent Indemnified Party and (ii) the Sellers shall not have any right of subrogation against the Company, Parent or the Merger Subs with respect to the Offset Right of any Parent Indemnified Party. The representations, warranties and covenants of the Company, and the Parent Indemnified Parties’ right to indemnification with respect thereto, shall not be affected, deemed waived or otherwise limited by reason of any investigation made by or on behalf of any Parent Indemnified Party or by reason of the fact that any Parent Indemnified Party knew or should have known that any such representation or warranty is, was or might be inaccurate or by reason of any Parent Indemnified Party’s waiver of any condition set forth in Article VI, as the case may be. Parent shall have the right, irrespective of any knowledge or investigation of Parent, the Merger Subs or their respective agents or representatives to rely fully on the representations, warranties and covenants contained herein. For purposes of determining the measurement of the amount of Damages resulting from any such breach or inaccuracy of a representation or warranty or failure to perform any covenant, agreement or obligation (but not for purposes of determining the existence of such breach or inaccuracy or the failure to so perform), all qualifications (in any form) as to “material,” “materiality,” “material respects,” “Material Adverse Effect” or “knowledge” qualifications, contained in such representations, warranties, covenants, agreements and obligations shall be disregarded and have no force or effect. (v) For purposes of this Agreement, Damages shall be calculated after giving effect to any amounts actually recovered from third parties, including amounts recovered under insurance policies (for the avoidance of doubt, excluding any self-insurance program or similar arrangement) with respect to such Damages, and the net of any costs to recover such amounts. Any Damages for indemnification under this Agreement shall be determined without duplication of recovery due to the facts giving rise to such Damages forming a basis for a claim for recovery under multiple provisions of this Article VII. Any Damages for indemnification under this Agreement shall be determined without duplication of recovery due to the facts giving rise to such Damages constituting a breach of more than one representation, warranty, covenant or agreement. (vi) In the case of the exercise of the Offset Right against the payment of any Milestone Shares hereunder, the amount of Damages which may be offset against such payment of Milestone Shares shall be determined as (A) a number of shares of Parent Common Stock equal to the applicable amount of Damages divided by the Average Parent Stock Price; provided, that the “determination date” for purposes of determining the Average Parent Stock Price shall be the date used for purposes of determining the number of Milestone Shares payment for the applicable payment for which Parent is seeking to offset under this Article VII. (vii) In the event that the amount of Damages that the Parent Indemnified Parties are entitled to offset pursuant to their Offset Right exceed, as of the time of distribution of any applicable Milestone Shares or payment of Earnout Consideration, (A) the aggregate amount of such Milestone Shares or payment of Earnout Consideration, or (B) exceed the limitation set forth in Section 7.1(b)(ii) prior to the issuance of all Milestone Shares or prior to the payment of all Earnout Consideration, the Parent Indemnified Parties shall be entitled to offset such excess amount of Damages against the next succeeding distribution of Milestone Shares or payment of Earnout Consideration (and in the case of the limitation set forth in Section 7.1(b)(ii) pursuant to the foregoing clause (B), recalculated to take into account the aggregate amount of Merger Consideration paid after giving effect to the distribution of such succeeding Milestone Shares or payment of Earnout Consideration).
Appears in 1 contract
Offset Right. (a) In accordance with and subject Subject to the limitations set forth in this Article VIIARTICLE VIII, from and after the First Effective Time, Parent, the First-Step Surviving Corporation, the Surviving Entity and each of their respective Affiliates, officers, directors, partners, managers, equityholders, agents and employees (collectively, the “Parent Indemnified Parties”) Persons shall be entitled to recover, by offset against any unissued or unearned Milestone Shares not yet issued or any Tax Refunds or Earnout Consideration not yet paid, on a several and not joint basis with respect to each Seller in accordance with each Seller’s Percentage Interest (as adjusted, with respect to any Offset Right exercised against any Milestone Shares, to account for the specific allocation set forth in Section 2.21(d)) (the “Offset Right”), (x) the aggregate amount of any Damages Losses resulting from or arising out of the following (whether or not involving a Third-Third Party Claim):) and, (y) solely with respect to clause (vii) below (i.e., regarding the ▇▇▇▇▇▇ Litigation), 50% of the Losses:
(i) any breach by the Company of any representation or warranty set forth in Article III or in the certificate delivered by the Company pursuant to Section 6.2(p)1.1(p) (other than to the extent related to any representation or warranty that is a Fundamental Representation)claim for Intentional Fraud;
(ii) any breach by the Company of any Fundamental Representation or inaccuracy in the certificate delivered by the Company pursuant to Section 6.2(p) Allocation Schedule (other than with respect to the extent related to any Fundamental Representationcalculation of the items set forth in Section 2.19(a), which matters are covered in the Post-Closing Adjustment);
(iii) any breach appraisal rights exercised by a Holder to the extent not covered by amounts returned to Parent with respect to such Holder’s Dissenting Shares pursuant to Section 2.14, and any other Action brought by a Holder or any other Person claiming rights by, through or associated with such Holder that seeks to challenge any of the Transactions (including the Mergers) based on adequacy of the consideration received by such Holder (or all Holders) or claims that any covenant director or agreement officer of the Company contained breached any fiduciary duty owed to the Company or any of the Holders in connection with the negotiation, approval, execution or performance of this AgreementAgreement or any of the Transactions (including the Mergers);
(iv) any breach of or failure to perform any covenant or agreement of (A) the Company Debt provided for in this Agreement with respect to covenants required to be performed prior to the extent unpaid as of the Closing and not included in the Post-Closing Adjustmentor (B) Holders’ Representative;
(v) any Company Transaction Expenses to the extent unpaid as of the Eligible Post-Closing and not included in Company Transaction ExpensesAdjustment;
(vi) any Pre-Closing Taxes Taxes, but only to the extent such Taxes were not taken into account included in the calculation computation of Company Debt the Closing Net Working Capital or Company Transaction Expenses;, in each case, as finally determined pursuant to Section 2.19; and
(vii) any claims, whether direct, derivative, class or individual, by (A) any then current or former holder or alleged then-current or former holder of any Equity Interests of the Company (including any predecessors), based upon, (I) the Mergers or this Agreement, including the allocation of the Merger Consideration, or (II) such Person’s status or alleged status as a holder of Equity Interests of the Company (including any predecessors) at any time at or prior to the Closing, whether for breach of fiduciary duty or otherwise, (B) any Person to the effect that such Person is entitled to any Equity Interests of the Company or any payment in connection with the Mergers by virtue of such Equity Interests of the Company, including appraisal rights under any applicable Law (excluding cash payments to holders of Dissenting Shares not in excess of the consideration to which they would have been entitled for their shares of Company Capital Stock had they received a portion of the Merger Consideration payable pursuant to Section 2.6 rather than exercising appraisal rights) or (C) any Person with respect to any Company Equity Plan or any other plan, policy or Contract providing for compensation to such Person in respect of a Company Security;
(viii) any claim by any Seller against any Parent Indemnified Party relating to the allocation or disbursement of the Merger Consideration (other than as required to be paid by Parent or the Surviving Entity, as applicable, pursuant to the terms of this Agreement);
(ix) any claim for Fraud solely in respect of the representations and warranties set forth in Article III of this Agreement▇▇▇▇▇▇ Litigation.
(b) Notwithstanding the foregoing:
(i) the Parent Indemnified Parties shall not be entitled to offset any Damages pursuant to Section 7.1(a)(i) unless and until the aggregate amount of all such Damages that the Parent Indemnified Parties, but for this clause (i) of this Section 7.1(b), are entitled to offset under Section 7.1(a)(i) exceeds $1,500,000 (the “Deductible”) (in which case the Parent Indemnified Parties shall be entitled to all Damages in excess of the Deductible);
(ii) the aggregate amount of Damages the Parent Indemnified Parties shall be entitled to offset under Section 7.1(a)(i) shall not exceed twelve and a half percent (12.5%) of the value of the Merger Consideration actually received by Sellers under this Agreement; provided, that the aggregate amount of Damages the Parent Indemnified Parties shall be entitled to offset under Section 7.1(a)(i) in respect of a breach of Section 3.12 (Intellectual Property) shall be twenty percent (20%) of the value of the Merger Consideration actually received by the Sellers under this Agreement;
(iii) notwithstanding anything else in this Agreement, (A) the aggregate amount of Damages the Parent Indemnified Parties shall be entitled to offset under Section 7.1(a)(ii) through Section 7.1(a)(ix), inclusive, shall not exceed the value of the Merger Consideration actually received by the Sellers under this Agreement, and (B) in no event shall any Seller’s Liability for Damages exceed the aggregate Merger Consideration actually received by such Seller; provided, that, notwithstanding the foregoing, in the case of Fraud solely with respect to a breach of the representations and warranties contained in Article III of this Agreement, there shall be no limitation on the amount of Damages the Parent Indemnified Party may recover from the Seller who committed for such Fraud (and in no event shall any Seller have any Liability for Damages resulting from or arising out of Fraud committed by another Seller).
(iv) For the sake of clarity, the Deductible shall not apply to any claim for Damages arising out of, resulting from or in connection with the matters set forth in Section 7.1(a)(ii) through Section 7.1(a)(ix), inclusive. Notwithstanding anything to the contrary contained herein, (i) no Sellers shall have any right of indemnification, contribution or right of advancement from Parent, the Merger Subs, the Company or any other Parent Indemnified Party with respect to any Damages claimed by any Parent Indemnified Party and (ii) the Sellers shall not have any right of subrogation against the Company, Parent or the Merger Subs with respect to the Offset Right of any Parent Indemnified Party. The representations, warranties and covenants of the Company, and the Parent Indemnified Parties’ right to indemnification with respect thereto, shall not be affected, deemed waived or otherwise limited by reason of any investigation made by or on behalf of any Parent Indemnified Party or by reason of the fact that any Parent Indemnified Party knew or should have known that any such representation or warranty is, was or might be inaccurate or by reason of any Parent Indemnified Party’s waiver of any condition set forth in Article VI, as the case may be. Parent shall have the right, irrespective of any knowledge or investigation of Parent, the Merger Subs or their respective agents or representatives to rely fully on the representations, warranties and covenants contained herein. For purposes of determining the measurement of the amount of Damages resulting from any such breach or inaccuracy of a representation or warranty or failure to perform any covenant, agreement or obligation (but not for purposes of determining the existence of such breach or inaccuracy or the failure to so perform), all qualifications (in any form) as to “material,” “materiality,” “material respects,” “Material Adverse Effect” or “knowledge” qualifications, contained in such representations, warranties, covenants, agreements and obligations shall be disregarded and have no force or effect.
(v) For purposes of this Agreement, Damages shall be calculated after giving effect to any amounts actually recovered from third parties, including amounts recovered under insurance policies (for the avoidance of doubt, excluding any self-insurance program or similar arrangement) with respect to such Damages, and the net of any costs to recover such amounts. Any Damages for indemnification under this Agreement shall be determined without duplication of recovery due to the facts giving rise to such Damages forming a basis for a claim for recovery under multiple provisions of this Article VII. Any Damages for indemnification under this Agreement shall be determined without duplication of recovery due to the facts giving rise to such Damages constituting a breach of more than one representation, warranty, covenant or agreement.
(vi) In the case of the exercise of the Offset Right against the payment of any Milestone Shares hereunder, the amount of Damages which may be offset against such payment of Milestone Shares shall be determined as (A) a number of shares of Parent Common Stock equal to the applicable amount of Damages divided by the Average Parent Stock Price; provided, that the “determination date” for purposes of determining the Average Parent Stock Price shall be the date used for purposes of determining the number of Milestone Shares payment for the applicable payment for which Parent is seeking to offset under this Article VII.
(vii) In the event that the amount of Damages that the Parent Indemnified Parties are entitled to offset pursuant to their Offset Right exceed, as of the time of distribution of any applicable Milestone Shares or payment of Earnout Consideration, (A) the aggregate amount of such Milestone Shares or payment of Earnout Consideration, or (B) exceed the limitation set forth in Section 7.1(b)(ii) prior to the issuance of all Milestone Shares or prior to the payment of all Earnout Consideration, the Parent Indemnified Parties shall be entitled to offset such excess amount of Damages against the next succeeding distribution of Milestone Shares or payment of Earnout Consideration (and in the case of the limitation set forth in Section 7.1(b)(ii) pursuant to the foregoing clause (B), recalculated to take into account the aggregate amount of Merger Consideration paid after giving effect to the distribution of such succeeding Milestone Shares or payment of Earnout Consideration).
Appears in 1 contract
Sources: Merger Agreement (Invitae Corp)
Offset Right. (a) In accordance with and subject Subject to the limitations set forth in this Article VII, from and after the First Effective Time, Parent, the First-Step Surviving Corporation, the Surviving Entity and each of their respective Affiliates, officers, directors, partners, managers, equityholders, agents and employees (collectively, the “Parent Indemnified Parties”) shall be entitled to recover, by offset against any Milestone Shares Payment not yet issued or any Tax Refunds or Earnout Consideration not yet paid, on a several and not joint basis with respect to each Seller in accordance with each Seller’s Percentage Interest (as adjusted, with respect to any Offset Right exercised against any Milestone Shares, to account for the specific allocation set forth in Section 2.21(d)) paid (the “Offset Right”), ) the aggregate amount of any Damages resulting from or arising out of the following (whether or not involving a Third-Party Claim):following:
(i) any breach by the Company of Company, or any representation allegation by any third party that, if true, would be a misrepresentation of, inaccuracy in or warranty set forth in Article III or in the certificate delivered by the Company pursuant to Section 6.2(p)1.1(p) (other than to the extent related to any representation or warranty that is a Fundamental Representation);
(ii) any breach by the Company breach, of any Fundamental Representation or in the certificate delivered by the Company pursuant to Section 6.2(p) (solely to the extent related to any breach of any Fundamental RepresentationRepresentation with respect to the obligations in Section 6.2(a));
(ii) any claim for Fraud;
(iii) any breach by the Company, or any allegation by any third party that, if true, would be a breach, of any obligation, covenant or agreement of set forth in this Agreement (including any pre-Closing Covenant) or in the certificate delivered by the Company contained pursuant to Section 6.2(p) (solely with respect to the obligations in this AgreementSection 6.2(b));
(iv) any Company Debt to the extent unpaid as of the Closing and not included in the Post-Net Closing AdjustmentCash Adjustment Amount;
(v) any Company Transaction Expenses to the extent unpaid as of the Closing and not included in Company Transaction Expensesthe Net Closing Cash Adjustment Amount;
(vi) any Pre-Closing Taxes to the extent not taken into account in the calculation of Company Debt or Company Transaction Expenses;
(vii) any claims, whether direct, derivative, class or individual, by (A) any then current or former holder or alleged then-current or former holder of any Equity Interests of the Company (including any predecessors), based uponarising out of, resulting from or in connection with (I) the Mergers or this Agreement, including the allocation of the Merger Consideration, or (II) such Person’s status or alleged status as a holder of Equity Interests of the Company (including any predecessors) at any time at or prior to the Closing, whether for breach of fiduciary duty or otherwise, (B) any Person to the effect that such Person is entitled to any Equity Interests of the Company or any payment in connection with the Mergers by virtue of such Equity Interests of the Company, including appraisal rights under any applicable Law (excluding cash payments to holders of Dissenting Shares not in excess of the consideration to which they would have been entitled for their shares of Company Capital Stock had they received a portion of the Merger Consideration payable pursuant to Section 2.6 rather than exercising appraisal rights) or (C) any Person with respect to any Company Equity Plan or any other plan, policy or Contract providing for compensation to such Person in respect of a Company Security;; and
(viii) any claim by any Seller against any Parent Indemnified Party relating to the allocation or disbursement of the Merger Consideration Consideration, including the actions of the Representative in connection therewith (other than as required to be paid by Parent or the Surviving Entity, as applicable, pursuant to the terms of this Agreement);
. provided, that the Parent Indemnified Parties shall only be entitled to recover up to fifty percent (ix50%) any claim for Fraud solely in respect of the representations and warranties set forth in Article III aggregate amount of this Agreementany Damages resulting or arising out of Section 7.1(a)(iii) through Section 7.1(a)(viii).
(b) Notwithstanding the foregoing:
(i) the Parent Indemnified Parties shall not be entitled to offset any Damages pursuant to Section 7.1(a)(i) unless and until the aggregate amount of all such Damages that the Parent Indemnified Parties, but for this clause (i) of this Section 7.1(b), are entitled to offset under Section 7.1(a)(i) exceeds $1,500,000 (the “Deductible”) (in which case the Parent Indemnified Parties shall be entitled to all Damages in excess of the Deductible);
(ii) the aggregate amount of Damages the Parent Indemnified Parties shall be entitled to offset under Section 7.1(a)(i7.1(a) shall not exceed twelve and a half percent (12.5%) of the value of the Merger Aggregate Milestone Consideration actually received by Sellers under this Agreement; provided, that the aggregate amount of Damages the Parent Indemnified Parties shall be entitled becomes otherwise payable to offset under Section 7.1(a)(i) in respect of a breach of Section 3.12 (Intellectual Property) shall be twenty percent (20%) of the value of the Merger Consideration actually received by the Sellers under this Agreement;
hereunder (iii) notwithstanding anything else in this Agreement, (A) the aggregate amount of Damages the Parent Indemnified Parties shall be entitled to offset under Section 7.1(a)(ii) through Section 7.1(a)(ix“Cap”), inclusive, shall not exceed the value of the Merger Consideration actually received by the Sellers under this Agreement, and (B) in no event shall any Seller’s Liability for Damages exceed the aggregate Merger Consideration actually received by such Seller; provided, that, notwithstanding the foregoing, in the case of Fraud solely committed by the Company with respect to a breach of the representations and warranties contained in Article III of this Agreementany representation, there shall be no limitation on warranty, covenant, agreement or obligation made hereunder, the amount of Damages the Parent Indemnified Party may recover from the Seller who Sellers shall not be limited to the Cap, regardless of whether any Sellers had knowledge or participated in such Fraud. Notwithstanding anything to the contrary herein, (i) any Seller’s liability for Damages pursuant to Section 7.1(a) shall be on a several and not joint basis based on (x) in the case of Damages offset from the Aggregate Milestone Consideration, such Seller’s pro rata share of the Aggregate Milestone Consideration that becomes payable to the Sellers and (y) in the case of Damages for Fraud committed for by the Company, such Fraud Seller’s pro rata share of the Merger Consideration actually received by the Sellers, (and ii) in no event shall any Seller have any Liability liability for Damages resulting from or arising out of Fraud committed by another Seller).
, and (iviii) in no event shall any Seller’s liability for Damages pursuant Section 7.1(a) exceed the aggregate Merger Consideration received by such Seller. For the sake of clarity, in no event will the Deductible shall not apply Parent Indemnified Parties be entitled to offset any claim for Damages arising out ofor clawback Damages against Milestone Payments already paid, resulting from or in connection with the matters set forth in Section 7.1(a)(ii) through Section 7.1(a)(ix), inclusiveabsence of Fraud. Notwithstanding anything to the contrary contained herein, (i) no Sellers shall have any right of indemnification, contribution or right of advancement from Parent, the Merger Subs, the Company or any other Parent Indemnified Party with respect to any Damages claimed by any Parent Indemnified Party and (ii) the Sellers shall not have any right of subrogation against the Company, Parent or the Merger Subs with respect to the Offset Right of any Parent Indemnified Party. Notwithstanding anything to the contrary, the amount of any Damages that may be recovered by any Parent Indemnified Party shall be calculated net of the amount of any Tax benefits actually realized by such Parent Indemnified Party in respect of such Damages or any of the events or circumstances giving rise to or otherwise related to such Damages. The representations, warranties and covenants of the Company, and the Parent Indemnified Parties’ right to indemnification with respect thereto, shall not be affected, deemed waived or otherwise limited by reason of any investigation made by or on behalf of any Parent Indemnified Party or by reason of the fact that any Parent Indemnified Party knew or should have known that any such representation or warranty is, was or might be inaccurate or by reason of any Parent Indemnified Party’s waiver of any condition set forth in Article VI, as the case may be. Parent shall have the right, irrespective of any knowledge or investigation of Parent, the Merger Subs or their respective agents or representatives to rely fully on the representations, warranties and covenants contained herein. For purposes of determining the measurement of the amount of Damages resulting from any such breach or inaccuracy of a representation or warranty or failure to perform any covenant, agreement or obligation (but not for purposes of determining the existence of such breach or inaccuracy or the failure to so perform), all qualifications (in any form) as to “material,” “materiality,” “material respects,” “Material Adverse Effect” or “knowledge” qualifications, contained in such representations, warranties, covenants, agreements and obligations shall be disregarded and have no force or effect.
(v) For purposes of this Agreement, Damages shall be calculated after giving effect to any amounts actually recovered from third parties, including amounts recovered under insurance policies (for the avoidance of doubt, excluding any self-insurance program or similar arrangement) with respect to such Damages, and the net of any costs to recover such amounts. Any Damages for indemnification under this Agreement shall be determined without duplication of recovery due to the facts giving rise to such Damages forming a basis for a claim for recovery under multiple provisions of this Article VII. Any Damages for indemnification under this Agreement shall be determined without duplication of recovery due to the facts giving rise to such Damages constituting a breach of more than one representation, warranty, covenant or agreement.
(vi) In the case of the exercise of the Offset Right against the payment of any Milestone Shares hereunder, the amount of Damages which may be offset against such payment of Milestone Shares shall be determined as (A) a number of shares of Parent Common Stock equal to the applicable amount of Damages divided by the Average Parent Stock Price; provided, that the “determination date” for purposes of determining the Average Parent Stock Price shall be the date used for purposes of determining the number of Milestone Shares payment for the applicable payment for which Parent is seeking to offset under this Article VII.
(vii) In the event that the amount of Damages that the Parent Indemnified Parties are entitled to offset pursuant to their Offset Right exceed, as of the time of distribution of any applicable Milestone Shares or payment of Earnout Consideration, (A) the aggregate amount of such Milestone Shares or payment of Earnout Consideration, or (B) exceed the limitation set forth in Section 7.1(b)(ii) prior to the issuance of all Milestone Shares or prior to the payment of all Earnout Consideration, the Parent Indemnified Parties shall be entitled to offset such excess amount of Damages against the next succeeding distribution of Milestone Shares or payment of Earnout Consideration (and in the case of the limitation set forth in Section 7.1(b)(ii) pursuant to the foregoing clause (B), recalculated to take into account the aggregate amount of Merger Consideration paid after giving effect to the distribution of such succeeding Milestone Shares or payment of Earnout Consideration).
Appears in 1 contract
Offset Right. Subject to the terms and limitations of this Section 10.12, any payment to which the Purchaser (or any Purchaser Indemnitee) is entitled to under this Agreement from the Seller or any of its Affiliates may, at the Purchaser’s election, be satisfied (in whole or in part) by setting off all or any portion of such payment amount against amounts that are then due and payable by the Purchaser (or any Purchaser Indemnitee) to the Seller at such time (including any amounts that Purchaser owes to the Seller in respect of the Shortfall Amount or any other amounts payable pursuant to Section 2.5); provided, however, (a) the Purchaser shall have no right of set-off against (i) any fees, charges or other amounts payable by the Purchaser, any Group Company or any of their respective Affiliates to the Seller or any of its Affiliates pursuant to the Transition Services Agreement, the Employee Leasing Agreement or any other Transaction Document that provides for post-Closing services or other ordinary-course commercial arrangements, or (ii) any amounts payable to the Seller or any of its Affiliates by any third party (including, from and after the Closing, any Group Company), and (b) the Purchaser shall not exercise any right of set-off in a manner that delays or excuses the timely payment in full of any amounts that are not subject to a good-faith dispute. In accordance with no event shall the Purchaser or any Purchaser Indemnitee be entitled to recover the same Losses more than once, whether by way of set-off, direct payment, insurance recovery or otherwise, and any exercise of set-off rights by the Purchaser shall be subject to the limitations set forth in this Article VIIAgreement, from and after the First Effective Time, Parent, the First-Step Surviving Corporation, the Surviving Entity and each of their respective Affiliates, officers, directors, partners, managers, equityholders, agents and employees (collectively, the so as to avoid duplication or “Parent Indemnified Parties”) shall be entitled to recover, by offset against any Milestone Shares not yet issued or any Tax Refunds or Earnout Consideration not yet paid, on a several and not joint basis with respect to each Seller in accordance with each Seller’s Percentage Interest (as adjusted, with respect to any Offset Right exercised against any Milestone Shares, to account for the specific allocation set forth in Section 2.21(d)) (the “Offset Right”), the aggregate amount of any Damages resulting from or arising out double counting” of the following (whether or not involving a Third-Party Claim):
(i) any breach by the Company of any representation or warranty set forth in Article III or in the certificate delivered by the Company pursuant to Section 6.2(p)1.1(p) (other than to the extent related to any representation or warranty that is a Fundamental Representation);
(ii) any breach by the Company of any Fundamental Representation or in the certificate delivered by the Company pursuant to Section 6.2(p) to the extent related to any Fundamental Representation;
(iii) any breach of any covenant or agreement of the Company contained in this Agreement;
(iv) any Company Debt to the extent unpaid as of the Closing and not included in the Post-Closing Adjustment;
(v) any Company Transaction Expenses to the extent unpaid as of the Closing and not included in Company Transaction Expenses;
(vi) any Pre-Closing Taxes to the extent not taken into account in the calculation of Company Debt or Company Transaction Expenses;
(vii) any claims, whether direct, derivative, class or individual, by (A) any then current or former holder or alleged then-current or former holder of any Equity Interests of the Company (including any predecessors), based upon, (I) the Mergers or this Agreement, including the allocation of the Merger Consideration, or (II) such Person’s status or alleged status as a holder of Equity Interests of the Company (including any predecessors) at any time at or prior to the Closing, whether for breach of fiduciary duty or otherwise, (B) any Person to the effect that such Person is entitled to any Equity Interests of the Company or any payment in connection with the Mergers by virtue of such Equity Interests of the Company, including appraisal rights under any applicable Law (excluding cash payments to holders of Dissenting Shares not in excess of the consideration to which they would have been entitled for their shares of Company Capital Stock had they received a portion of the Merger Consideration payable pursuant to Section 2.6 rather than exercising appraisal rights) or (C) any Person with respect to any Company Equity Plan or any other plan, policy or Contract providing for compensation to such Person in respect of a Company Security;
(viii) any claim by any Seller against any Parent Indemnified Party relating to the allocation or disbursement of the Merger Consideration (other than as required to be paid by Parent or the Surviving Entity, as applicable, pursuant to the terms of this Agreement);
(ix) any claim for Fraud solely in respect of the representations and warranties set forth in Article III of this Agreementsame Loss.
(b) Notwithstanding the foregoing:
(i) the Parent Indemnified Parties shall not be entitled to offset any Damages pursuant to Section 7.1(a)(i) unless and until the aggregate amount of all such Damages that the Parent Indemnified Parties, but for this clause (i) of this Section 7.1(b), are entitled to offset under Section 7.1(a)(i) exceeds $1,500,000 (the “Deductible”) (in which case the Parent Indemnified Parties shall be entitled to all Damages in excess of the Deductible);
(ii) the aggregate amount of Damages the Parent Indemnified Parties shall be entitled to offset under Section 7.1(a)(i) shall not exceed twelve and a half percent (12.5%) of the value of the Merger Consideration actually received by Sellers under this Agreement; provided, that the aggregate amount of Damages the Parent Indemnified Parties shall be entitled to offset under Section 7.1(a)(i) in respect of a breach of Section 3.12 (Intellectual Property) shall be twenty percent (20%) of the value of the Merger Consideration actually received by the Sellers under this Agreement;
(iii) notwithstanding anything else in this Agreement, (A) the aggregate amount of Damages the Parent Indemnified Parties shall be entitled to offset under Section 7.1(a)(ii) through Section 7.1(a)(ix), inclusive, shall not exceed the value of the Merger Consideration actually received by the Sellers under this Agreement, and (B) in no event shall any Seller’s Liability for Damages exceed the aggregate Merger Consideration actually received by such Seller; provided, that, notwithstanding the foregoing, in the case of Fraud solely with respect to a breach of the representations and warranties contained in Article III of this Agreement, there shall be no limitation on the amount of Damages the Parent Indemnified Party may recover from the Seller who committed for such Fraud (and in no event shall any Seller have any Liability for Damages resulting from or arising out of Fraud committed by another Seller).
(iv) For the sake of clarity, the Deductible shall not apply to any claim for Damages arising out of, resulting from or in connection with the matters set forth in Section 7.1(a)(ii) through Section 7.1(a)(ix), inclusive. Notwithstanding anything to the contrary contained herein, (i) no Sellers shall have any right of indemnification, contribution or right of advancement from Parent, the Merger Subs, the Company or any other Parent Indemnified Party with respect to any Damages claimed by any Parent Indemnified Party and (ii) the Sellers shall not have any right of subrogation against the Company, Parent or the Merger Subs with respect to the Offset Right of any Parent Indemnified Party. The representations, warranties and covenants of the Company, and the Parent Indemnified Parties’ right to indemnification with respect thereto, shall not be affected, deemed waived or otherwise limited by reason of any investigation made by or on behalf of any Parent Indemnified Party or by reason of the fact that any Parent Indemnified Party knew or should have known that any such representation or warranty is, was or might be inaccurate or by reason of any Parent Indemnified Party’s waiver of any condition set forth in Article VI, as the case may be. Parent shall have the right, irrespective of any knowledge or investigation of Parent, the Merger Subs or their respective agents or representatives to rely fully on the representations, warranties and covenants contained herein. For purposes of determining the measurement of the amount of Damages resulting from any such breach or inaccuracy of a representation or warranty or failure to perform any covenant, agreement or obligation (but not for purposes of determining the existence of such breach or inaccuracy or the failure to so perform), all qualifications (in any form) as to “material,” “materiality,” “material respects,” “Material Adverse Effect” or “knowledge” qualifications, contained in such representations, warranties, covenants, agreements and obligations shall be disregarded and have no force or effect.
(v) For purposes of this Agreement, Damages shall be calculated after giving effect to any amounts actually recovered from third parties, including amounts recovered under insurance policies (for the avoidance of doubt, excluding any self-insurance program or similar arrangement) with respect to such Damages, and the net of any costs to recover such amounts. Any Damages for indemnification under this Agreement shall be determined without duplication of recovery due to the facts giving rise to such Damages forming a basis for a claim for recovery under multiple provisions of this Article VII. Any Damages for indemnification under this Agreement shall be determined without duplication of recovery due to the facts giving rise to such Damages constituting a breach of more than one representation, warranty, covenant or agreement.
(vi) In the case of the exercise of the Offset Right against the payment of any Milestone Shares hereunder, the amount of Damages which may be offset against such payment of Milestone Shares shall be determined as (A) a number of shares of Parent Common Stock equal to the applicable amount of Damages divided by the Average Parent Stock Price; provided, that the “determination date” for purposes of determining the Average Parent Stock Price shall be the date used for purposes of determining the number of Milestone Shares payment for the applicable payment for which Parent is seeking to offset under this Article VII.
(vii) In the event that the amount of Damages that the Parent Indemnified Parties are entitled to offset pursuant to their Offset Right exceed, as of the time of distribution of any applicable Milestone Shares or payment of Earnout Consideration, (A) the aggregate amount of such Milestone Shares or payment of Earnout Consideration, or (B) exceed the limitation set forth in Section 7.1(b)(ii) prior to the issuance of all Milestone Shares or prior to the payment of all Earnout Consideration, the Parent Indemnified Parties shall be entitled to offset such excess amount of Damages against the next succeeding distribution of Milestone Shares or payment of Earnout Consideration (and in the case of the limitation set forth in Section 7.1(b)(ii) pursuant to the foregoing clause (B), recalculated to take into account the aggregate amount of Merger Consideration paid after giving effect to the distribution of such succeeding Milestone Shares or payment of Earnout Consideration).
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Sources: Securities Purchase Agreement (OneWater Marine Inc.)