Form DEFA14A LIFECORE BIOMEDICAL,

 

THIS CONTINGENT VALUE RIGHTS AGREEMENT, dated as of [●], 2026 (this “Agreement”), is entered into by and among Lifecore Inc., a Delaware corporation (“Parent”), Lifecore Biomedical, Inc., a Delaware corporation (together with any successor thereto, the “Company”), and [●], a [●], as Rights Agent.

 

RECITALS

 

 

 

 

ARTICLE I

 

DEFINITIONS; CERTAIN RULES OF CONSTRUCTION

 

Section 1.1         Definitions. Capitalized terms used but not otherwise defined herein will have the meanings ascribed to them in the Merger Agreement. As used in this Agreement, the following terms will have the following meanings:

 

“2028 Performance Milestone” means achievement during the Calendar Year ending December 31, 2028 of:

 

(a)         Revenues of at least $120,000,000 from customers of the Company Group other than Alcon; and

 

(b)         either (i) Revenues of at least $54,000,000 from Alcon or (ii) aggregate Revenues of at least $174,000,000 from all customers of the Company Group.

 

“2028 Performance Milestone Catch-Up Payment” means, with respect to the 2028 Performance Milestone, (a) if the 2029 Performance Milestone Payment is $45,000,000 (without giving effect to any adjustment pursuant to Section 2.4(i)), an amount equal to (i) $30,000,000 minus (ii) the 2028 Performance Milestone Payment or (b) in all other circumstances, $0.

 

“2028 Performance Milestone Payment” means, with respect to the 2028 Performance Milestone, an amount equal to $30,000,000; provided, that if during the Calendar Year ending December 31, 2028 (a)  Revenues are at least $100,000,000 and less than $120,000,000 from customers of the Company Group other than Alcon and (b) either clause (b)(i) or (b)(ii) of the 2028 Performance Milestone is satisfied, then the “2028 Performance Milestone Payment” shall be an amount equal to (i) $30,000,000 multiplied by (ii) the 2028 Scaling Factor.

 

“2028 Scaling Factor” means the quotient obtained by dividing (a) the amount equal to the Revenues from customers of the Company Group other than Alcon achieved during the Calendar Year ending December 31, 2028 minus $100,000,000 by (b) $20,000,000.

 

“2029 Performance Milestone” means achievement during the Calendar Year ending December 31, 2029 of:

 

(a)         Revenues of at least $175,000,000 from customers of the Company Group other than Alcon; and

 

(b)        either (i) Revenues of at least $53,000,000 from Alcon or (ii) aggregate Revenues of at least $228,000,000 from all customers of the Company Group.

 

“2029 Performance Milestone Payment” means, with respect to the 2029 Performance Milestone, an amount equal to $45,000,000; provided, that if during the Calendar Year ending December 31, 2029 (a) Revenues are at least $145,000,000 and less than $175,000,000 from customers of the Company Group other than Alcon and (b) either clause (b)(i) or (b)(ii) of the 2029 Performance Milestone is satisfied, then the “2029 Performance Milestone Payment” shall be an amount equal to (i) $45,000,000 multiplied by (ii) the 2029 Scaling Factor.

 

“2029 Scaling Factor” means the quotient obtained by dividing (a) the amount equal to the Revenues from customers of the Company Group other than Alcon achieved during the Calendar Year ending December 31, 2029 minus $145,000,000 by (b) $30,000,000.

 

“2030 Performance Milestone” means Consolidated EBITDA of at least $120,000,000 for Calendar Year ending December 31, 2030.

 

“2030 Performance Milestone Payment” means $85,000,000.

 

“Acting Holders” means, at the time of determination, Holders of at least thirty-five percent (35.0%) of the outstanding CVRs, as set forth in the CVR Register at the time of determination.

 

“Affiliate” means as to any Person, any other Person that, directly or indirectly, controls, or is controlled by, or is under common control with, such Person. For this purpose, “control” (including, with its correlative meanings, “controlled by” and “under common control with”) shall mean the possession, directly or indirectly, of the power to direct or cause the direction of management or policies of a Person whether through the ownership of securities or partnership or other ownership interests by Contract or otherwise; provided that, in no event shall Parent, Merger Sub or any of their respective Subsidiaries (including, from and after the Effective Time, the Company and its Subsidiaries) be considered an Affiliate of Webster Equity Partners or any portfolio company or investment fund affiliated with any of the foregoing nor shall any portfolio company or investment fund affiliated with any of the foregoing be considered to be an Affiliate of Parent, Merger Sub or any of their respective Subsidiaries (including, from and after the Effective Time, the Company and its Subsidiaries). For the avoidance of doubt, Parent’s Affiliates shall include, from and after the Effective Time, the Company and its Subsidiaries.

 

“Alcon” means Alcon Research, LLC and its Affiliates.

 

“Assignee” has the meaning set forth in Section 6.3.

 

“Calendar Year” means each successive period of twelve (12) months commencing on January 1 and ending on December 31.

 

“Catch-Up Amount” means the difference between the Base Consideration and the Conversion Consideration, which is $[___].

 

“Change of Control” means, with respect to a party hereto, (a) the sale, lease, exclusive license, Transfer, conveyance or other disposition, in one transaction or a series of related transactions, of all or substantially all of the assets of such party and its Subsidiaries, taken as a whole; or (b) a transaction or series of related transactions (including by way of merger, consolidation, recapitalization, reorganization or sale of securities), the result of which is that the holders of such party’s outstanding voting securities immediately prior to such transaction(s) are no longer, in the aggregate, the beneficial owners (as such term is defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly through one or more intermediaries, of more than fifty percent (50%) of the total combined voting power of all outstanding voting securities of such party, the surviving entity, the acquiring entity or a parent or holding company of the acquiring entity, as applicable, immediately following such transaction(s); provided, however, that a Change of Control shall not result from (i) any underwritten public offering of securities of such party or (ii) any financing transaction or series of related financing transactions undertaken for bona fide financing purposes.

 

“Company Equity Awards” means Company Options, RSUs and PSUs.

 

“Company Group” means Parent, the Company and their respective Subsidiaries.

“CVR Register” has the meaning set forth in Section 2.3(b).

 

“CVR” means the rights of Holders to receive contingent cash payments pursuant to the Merger Agreement and this Agreement.

 

“Common Stock CVR” means a CVR received by an initial Holder in respect of Company Common Stock pursuant to Section 1.6 of the Merger Agreement.

 

“Consolidated EBITDA” means consolidated Company Group EBITDA for any Calendar Year calculated in accordance with Exhibit A.

 

“Dispute Notice” has the meaning set forth in Section 4.6(b).

“EBITDA Statement” means, for an applicable Calendar Year, a written statement of Parent, along with an Officer’s Certificate certifying the same, setting forth in reasonable detail the calculation of Consolidated EBITDA in the applicable Calendar Year, together with reasonable supporting documentation for such calculation.

 

“Escrow Share Value” means, as to the shares of Company Common Stock held in escrow on the Closing Date relating to the Specified Adjustment Matters, the aggregate amount of cash, without interest, paid as Base Consideration on such shares plus the amount of cash that is paid in respect of the CVRs attributable to such shares of Company Common Stock, in each case as of any Milestone Determination Date.

 

“Equity Award CVR” means a CVR received by an initial Holder in respect of Company Equity Awards pursuant to Section 1.9 of the Merger Agreement.

“Funds” has the meaning set forth in Section 2.6.

“GAAP” means generally accepted accounting principles as in effect from time to time in the United States, consistently applied.

“Holder” means a person in whose name a CVR is registered in the CVR Register at the applicable time.

“Independent Accountant” means an independent certified public accounting firm of nationally recognized standing (a) designated jointly by the Acting Holders and Parent or (b) if the Acting Holders and Parent fail to make such designation within ten (10) calendar days after the end of the Resolution Period, designated jointly by one independent certified public accounting firm selected by Parent and one independent certified public accounting firm selected by the Acting Holders.

 

“Litigation Adjustment” means, as of any Milestone Determination Date, the amount, which may be positive, negative or zero, equal to (i) the Litigation Recoveries as of such Milestone Determination Date, minus (ii) the Litigation Costs as of such Milestone Determination Date, plus (iii) the Escrow Share Value as of such Milestone Determination Date, and (x) if such amount is positive, the Litigation Adjustment relating to the applicable Milestone Determination Date shall be such positive amount up to a maximum of $10,000,000, and (y) if such amount is negative, the Litigation Adjustment relating to the applicable Milestone Determination Date shall be a negative amount up to a maximum of $(10,000,000).

“Litigation Costs” means, without duplication, the aggregate amount of all third-party legal fees and professional fees, judgments, settlements, damages, fines, penalties and other monetary payments actually paid in cash by any member of the Company Group in connection with the Specified Adjustment Matters on or prior to the applicable Milestone Determination Date, whether paid before, on or after the Specified Resolution Date (but in no event including amounts paid prior to the Closing Date).

 

“Litigation Recoveries” means, without duplication, the aggregate amount of all insurance proceeds, indemnification payments, reimbursements, compensation, settlement payments, judgments, damages, penalties, interest, attorneys’ fee awards and other amounts actually received in cash by any member of the Company Group in connection with the Specified Adjustment Matters on or prior to the applicable Milestone Determination Date, whether received before, on or after the Specified Resolution Date (but in no event including amounts received prior to the Closing Date).

“Milestone” means each of the 2028 Performance Milestone, the 2029 Performance Milestone and the 2030 Performance Milestone, as applicable.

“Milestone Deposit” has the meaning set forth in Section 2.4(a).

“Milestone Determination Date” means the date that is not later than one-hundred and fifty (150) calendar days after the end of the applicable Calendar Year.

“Milestone Notice” has the meaning set forth in Section 2.4(a).

“Milestone Payment” means (a) with respect to the 2028 Performance Milestone, the 2028 Performance Milestone Payment, if any, and the 2028 Performance Milestone Catch-Up Payment, if any, (b) with respect to the 2029 Performance Milestone, the 2029 Performance Milestone Payment, if any, and (c) with respect to the 2030 Performance Milestone, the 2030 Performance Milestone Payment, if any.

“Milestone Payment Amount” means, with respect to each Milestone Payment (after giving effect to any adjustment pursuant to Section 2.4(i)) and the Holders, an amount equal to, and in the following order of priority:

(a)          First, to each Holder of a Common Stock CVR or an Equity Award CVR, the quotient obtained by dividing (i) the applicable Milestone Payment by (ii) the total number of outstanding CVRs held by such Holders as of the close of business on the last day of the Calendar Year of the applicable Milestone, until each such Holder has received the Catch-Up Amount; and

 

(b)         Second, to each Holder the quotient obtained by dividing (i) the applicable Milestone Payment (or remainder thereof after clause (a)) by (ii) the total number of outstanding CVRs held by all Holders as of the close of business on the last day of the Calendar Year of the applicable Milestone.

 

“Milestone Payment Date” has the meaning set forth in Section 2.4(b).

 

“Officer’s Certificate” means a certificate signed by the chief executive officer, president, chief financial officer, any vice president, the controller, the treasurer or the secretary, in each case of Parent, in his or her capacity as such an officer, and delivered to the Rights Agent.

 

“Permitted Transfer” means: a Transfer of a CVR (a) upon death of a Holder by will or intestacy; (b) by instrument to an inter vivos or testamentary trust in which the CVR is to be passed to beneficiaries of the Holder upon the death of the Holder; (c) pursuant to a court order (including in connection with bankruptcy or liquidation); (d) by operation of law (including by consolidation or merger of the Holder) or without consideration in connection with the dissolution, liquidation or termination of any Holder that is a corporation, limited liability company, partnership or other entity (provided, that such dissolution, liquidation or termination does not subject the CVRs to a requirement of registration under the Securities Act or the Exchange Act); (e) in the case of a CVR held in book-entry or other similar nominee form, from a nominee to a beneficial owner and, if applicable, through an intermediary, or from such nominee to another nominee for the same beneficial owner; (f) if the Holder is a corporation, partnership or limited liability company, a distribution by the transferring corporation, partnership or limited liability company to its stockholders, partners or members, as applicable (provided, that such distribution does not subject the CVRs to a requirement of registration under the Securities Act or the Exchange Act); or (g) as provided in Section 2.7.

 

“Preferred Stock CVR” means a CVR received by an initial Holder in respect of Company Series A Preferred Stock pursuant to Section 1.6 of the Merger Agreement.

 

“Previously Applied Litigation Adjustment” means, as of any Milestone Determination Date, the aggregate net amount by which prior Milestone Payments have been increased or reduced pursuant to Section 2.4(i), with increases expressed as positive amounts and reductions expressed as negative amounts.

 

“Resolution Period” has the meaning set forth in Section 4.6(b).

 

“Revenues” means the consolidated Company Group net revenue recognized with respect to the applicable period determined in accordance with GAAP, and solely to the extent consistent with GAAP, the accounting principles, policies, procedures, categorizations, definitions, methods, practices and techniques (including in respect of the exercise of management judgment) adopted in the consolidated financial statements of the Company included in the quarterly report on Form 10-Q or annual report on Form 10-K filed by the Company with the SEC immediately prior to the Closing Date.

“Revenues Statement” means, for an applicable Calendar Year, a written statement of Parent, along with an Officer’s Certificate certifying the same, setting forth in reasonable detail the calculation of Revenues in the applicable Calendar Year, together with reasonable supporting documentation for such calculation.

 

“Review Request Period” has the meaning set forth in Section 4.6(b).

 

“Rights Agent” means the Rights Agent named in the first paragraph of this Agreement, until a successor Rights Agent will have become such pursuant to the applicable provisions of this Agreement, and thereafter “Rights Agent” will mean such successor Rights Agent.

 

“Transfer” means any transfer, pledge, hypothecation, encumbrance, assignment or other disposition (whether by sale, merger, consolidation, liquidation, dissolution, dividend, distribution or otherwise), the offer to make such a transfer or other disposition, and each contract, arrangement or understanding, whether or not in writing, to effect any of the foregoing.

 

“Specified Adjustment Matters” means any Legal Proceeding involving the Company, any of its Affiliates, or any of their officers, directors, or indemnitees on the one hand, and Ardeshir Haerizadeh or any of his Affiliates on the other hand, including but not limited to the complaints captioned Ardeshir Haerizadeh v. Landec Corporation, No. 20SMCV01202 (Cal. Super. Ct., L.A. Cty.), Ardeshir Haerizadeh v. Lifecore Biomedical, No. B347181 (Cal. Ct. App., 2d Dist.), Ardeshir Haerizadeh v. Lifecore Biomedical, No. 25SMCV00649 (Cal. Super. Ct., L.A. Cty.); Ardeshir Haerizadeh v. Lifecore Biomedical, No. B353425 (Cal. App. Ct., 2d Dist.), and any appeal of the same.

 

“Specified Resolution Date” means the date by which all Specified Adjustment Matters have been resolved by one or more final, non-appealable judgments, orders or decrees of a court of competent jurisdiction or written settlement agreements executed by all parties necessary to fully resolve the applicable Specified Adjustment Matters, or any combination of the foregoing.

 

“Unapplied Litigation Adjustment” means, as of any Milestone Determination Date, the Litigation Adjustment minus the Previously Applied Litigation Adjustment, if any.

Section 1.2          Rules of Construction.

 

(a)         The headings herein are for convenience of reference only, do not constitute part of this Agreement and shall not be deemed to limit or otherwise affect any of the provisions hereof. Where a reference in this Agreement is made to a Section, such reference shall be to a Section of this Agreement unless otherwise indicated.

 

(b)         If a term is defined as one part of speech (such as a noun), it shall have a corresponding meaning when used as another part of speech (such as a verb). Unless the context of this Agreement clearly requires otherwise, words importing the masculine gender shall include the feminine and neutral genders and vice versa, and the definitions of terms contained in this Agreement are applicable to the singular as well as the plural forms of such terms. The words “includes” or “including” shall mean “including without limitation”; the words “hereof,” “hereby,” “herein,” “hereunder” and similar terms in this Agreement shall refer to this Agreement as a whole and not any particular section or article in which such words appear; the word “extent” in the phrase “to the extent” shall mean the degree to which a subject or other thing extends and such phrase shall not mean simply “if;” the word “or” shall be disjunctive but not exclusive and have the same meaning as “and/or;” any reference to a law shall include any rules and regulations promulgated thereunder, and any reference to any law in this Agreement shall mean such law as from time to time amended, modified or supplemented. Currency amounts referenced herein are in U.S. Dollars. When calculating the period of time before which, within which or following which any act is to be done or step taken pursuant to this Agreement, the date that is the reference date in calculating such period is to be excluded. Unless otherwise specified in this Agreement, all references in this Agreement to any contract, other agreement, document or instrument (excluding this Agreement) mean such contract, other agreement, document or instrument as amended, supplemented or otherwise modified from time to time in accordance with the terms thereof and, unless otherwise specified therein, include all schedules, annexes, addendums, exhibits and any other documents attached thereto or incorporated therein by reference.

 

(c)         The parties hereto have participated jointly in negotiating and drafting this Agreement. In the event that an ambiguity or a question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement.

 

ARTICLE II

 

CONTINGENT VALUE RIGHTS

 

Section 2.1         CVR. The CVRs represent the rights of Holders to receive contingent cash payments pursuant to the Merger Agreement and this Agreement. The initial Holders shall be determined pursuant to the terms of the Merger Agreement and this Agreement, and a list of the initial Holders shall be furnished to the Rights Agent by or on behalf of Parent in accordance with Section 4.1.

 

Section 2.2          Nontransferable. The CVRs may not be sold, assigned, transferred, pledged, encumbered or in any other manner disposed of or Transferred, in whole or in part, other than through a Permitted Transfer. The foregoing restrictions shall apply notwithstanding that certain of the CVRs will be held through DTC. Any attempted sale, assignment, transfer, pledge, encumbrance, disposition or Transfer of CVRs, in whole or in part, in violation of this Section 2.2 shall be void ab initio and of no effect. The CVRs will not be listed on any quotation system or traded on any securities exchange.

 

Section 2.3          No Certificate; Registration; Registration of Transfer; Change of Address.

 

(a)         The CVRs will not be evidenced by a certificate or other instrument.

 

(b)        The Rights Agent will keep a register (the “CVR Register”) for the purpose of registering CVRs and Transfers of CVRs as herein provided. The CVR Register will (i) with respect to holders of Shares that hold such Shares in book-entry form through DTC immediately prior to the Effective Time, reflect one position for Cede & Co (as nominee of DTC) representing all the Shares that were converted into the right to receive the Merger Consideration in accordance with the terms of the Merger Agreement, (ii) with respect to (A) holders of Shares that hold such Shares in certificated form immediately prior to the Effective Time that were converted into the right to receive the Merger Consideration in accordance with the terms of the Merger Agreement, upon delivery to the Rights Agent (or Paying Agent, as applicable) by each such holder of the applicable stock certificates, together with a validly executed letter of transmittal and such other customary documents as may be reasonably requested by the Rights Agent (or Paying Agent, as applicable), in accordance with the Merger Agreement, (B) holders of Shares who hold such Shares in book-entry form through the Company’s transfer agent immediately prior to the Effective Time, and (C) holders of Company Equity Awards who are entitled to receive CVRs pursuant to the terms of the Merger Agreement, in each case of clauses (A), (B) and (C), reflect the applicable number of CVRs to which each such holder is entitled pursuant to the Merger Agreement (other than, in the case of the foregoing clauses (i), (ii)(A) and (ii)(B), Excluded Shares). The Rights Agent will have no responsibility whatsoever directly to the street name holders with respect to Transfers of CVRs unless and until such CVRs are Transferred into the name of such street name holders in accordance with Section 2.2. With respect to any payments to be made under Section 2.4 with respect to CVRs held through DTC, the Rights Agent will accomplish the payment in respect of such CVRs by sending one lump payment to DTC. The Rights Agent will have no responsibilities whatsoever with regard to the distribution of payments by DTC to the Holders of such CVRs.

 

(c)        Subject to the restrictions on transferability set forth in Section 2.2, every request made to Transfer a CVR must be in writing and accompanied by a written instrument of Transfer in form reasonably satisfactory to the Rights Agent pursuant to its guidelines, duly executed by the Holder thereof, the Holder’s attorney duly authorized in writing, the Holder’s personal representative duly authorized in writing, or the Holder’s survivor (with written documentation evidencing such person’s status as the Holder’s survivor), and setting forth in reasonable detail the circumstances relating to the Transfer. Upon receipt of such written notice, the Rights Agent will, subject to its reasonable determination that the Transfer instrument is in proper form and the Transfer otherwise complies with the other terms and conditions of this Agreement (including the provisions of Section 2.2), register the Transfer of the CVRs in the CVR Register and notify such Holder of the same. No service charge shall be made for any registration of Transfer of a CVR, but the Rights Agent may require payment by a Holder to the applicable Governmental Body of a sum sufficient to cover any transfer, stamp or other similar Tax or governmental charge that is imposed in connection with any such registration of Transfer. The Rights Agent shall have no duty or obligation to take any action under any section of this Agreement that requires the payment by a Holder of a CVR of applicable Taxes or charges unless and until the Rights Agent is reasonably satisfied that all such Taxes or charges have been paid or that such Taxes or charges are not applicable. All duly Transferred CVRs registered in the CVR Register will be the valid obligations of Parent and will entitle the transferee to the same benefits and rights under this Agreement as those held immediately prior to the Transfer by the transferor. No Transfer of a CVR will be valid until registered in the CVR Register.

 

(d)         A Holder may make a written request to the Rights Agent to change such Holder’s address of record in the CVR Register. The written request must be duly executed by the Holder. Upon receipt of such written notice, the Rights Agent will promptly record the change of address in the CVR Register.

 

Section 2.4          Payment Procedures; Intended Tax Treatment.

 

(a)          As promptly as practicable following a Milestone Determination Date, and in any event on or prior to the date that is fifteen (15) calendar days following a Milestone Determination Date, unless this Agreement has been terminated in accordance with its terms, Parent shall (i) deliver to the Rights Agent a written notice (each, a “Milestone Notice”) indicating whether the corresponding Milestone was achieved and if achieved, the corresponding Milestone Payment required under this Agreement and the Milestone Payment Amount payable to each Holder, along with an Officer’s Certificate certifying the same, which Milestone Notice shall include (A) the Revenues Statement or EBITDA Statement for the applicable Calendar Year and (B) if the Specified Resolution Date has occurred on or prior to such Milestone Determination Date, the Specified Resolution Date and the calculations (set forth in reasonable detail) of the Litigation Adjustment, the Previously Applied Litigation Adjustment and the Unapplied Litigation Adjustment, if any, and (ii) if a Milestone is achieved, duly deposit or cause to be deposited with the Rights Agent (each, a “Milestone Deposit”), within five (5) business days of the delivery of the Milestone Notice, cash by wire transfer of immediately available funds to an account specified by the Rights Agent (or to the Company or its or Parent’s applicable Affiliate in the case of payments with respect to Equity Award CVRs that will be paid through the Company’s or its or Parent’s applicable Affiliate’s payroll system), equal to the aggregate amount necessary to pay the applicable Milestone Payment Amount to all Holders in accordance with the terms of this Agreement (subject to any amounts deducted or withheld pursuant to Section 2.4(d) and Section 2.4(i)). Such amounts shall be considered paid if on such date the Rights Agent (or the Company or its or Parent’s applicable Affiliate in the case of payments with respect to Equity Award CVRs that will be paid through the Company’s or its or Parent’s applicable Affiliate’s payroll system) has received in accordance with this Agreement money sufficient to pay all Milestone Payment Amounts in respect of such Milestone then due in accordance with the terms hereof.

 

(b)         The Rights Agent will promptly, and in any event within five (5) business days of receipt of a Milestone Deposit, send each Holder at its registered address a copy of the Milestone Notice (such date on which the Rights Agent sends such copy, a “Milestone Payment Date”). At the time the Rights Agent sends a copy of the Milestone Notice to the Holders, if the applicable Milestone has been met and the Milestone Payment Amount due, the Rights Agent will also pay the applicable Milestone Payment Amount to each of the Holders (subject to any amounts deducted or withheld pursuant to Section 2.4(d) and any adjustments made pursuant to Section 2.4(i)) (i) by check mailed to the address of each Holder as reflected in the CVR Register as of the close of business on the last business day immediately prior to such Milestone Payment Date or (ii) with respect to any Holder who has provided the Rights Agent wiring instructions in writing, by wire transfer of immediately available funds to the account specified on such instructions. Notwithstanding anything to the contrary set forth herein, the Rights Agent shall have no responsibility whatsoever with respect to any Milestone Payment Amount to Holders in respect of Equity Award CVRs that will be paid through the Company’s or its or Parent’s applicable Affiliate’s payroll system.

 

(c)         Parent shall cause the applicable Milestone Payment Amount payable with respect to Equity Award CVRs (determined in accordance with Section 1.9 of the Merger Agreement) held by current or former employees of the Company or its Affiliates to be paid to the applicable Holder through the Surviving Corporation’s or its or Parent’s applicable Affiliate’s payroll system or any successor payroll system no later than the second regular payroll date of such applicable payroll system following the applicable Milestone Payment Date.

 

(d)        Notwithstanding anything to the contrary in the Merger Agreement or this Agreement, Parent, the Surviving Corporation, the Rights Agent and any other applicable withholding agent (and their applicable Affiliates) shall be entitled to deduct or withhold, or cause to be deducted or withheld, from any Milestone Payment Amount otherwise payable pursuant to this Agreement such amounts as are required to be deducted or withheld therefrom under the Code, the Treasury Regulations thereunder, or any other applicable Tax law, as may be determined by Parent, the Surviving Corporation, the Rights Agent or any other applicable withholding agent (or their applicable Affiliates), as applicable. Parent, the Surviving Corporation, the Rights Agent and any other applicable withholding agent (or their applicable Affiliates) shall reasonably cooperate in good faith with any Person (other than a Holder of Equity Award CVRs who is a current or former employee of the Company or its Affiliates) in respect of which such deduction or withholding is to be made to reduce or eliminate any such withholding prior to withholding any amounts payable to such Person. Prior to making any such withholdings or causing any such withholdings to be made with respect to any Holder (other than Holders of Equity Award CVRs who are current or former employees of the Company or its Affiliates), the Rights Agent shall provide, if applicable, a reasonable opportunity for such Holder to provide documentation or take other steps to reduce or eliminate such withholding. Parent, the Surviving Corporation and the Rights Agent may assume all such documents in its possession or provided by any such Holder are valid under applicable Tax law until subsequently notified by such Holder. With respect to Holders of Equity Award CVRs who are current or former employees of the Company or its Affiliates, any such withholding may be made, or caused to be made, by Parent through the Surviving Corporation’s (or any of Parent’s applicable Affiliate’s) payroll systems. To the extent such amounts are so deducted or withheld, such amounts shall be treated for all purposes under this Agreement as having been paid to the Person to whom such amounts would otherwise have been paid, and as soon as practicable after any payment of such taxes by Parent, the Surviving Corporation or the Rights Agent (or their applicable Affiliates), as applicable, Parent shall deliver (or shall cause the Surviving Corporation, the Rights Agent or their or Parent’s applicable Affiliates to deliver) to the Person (other than a Holder of Equity Award CVRs who is a current or former employee of the Company or its Affiliates) to whom such amounts would otherwise have been paid the original or a certified copy of a receipt issued by the applicable taxing authority evidencing such payment, a copy of the return reporting such payment, or other reasonably acceptable evidence of such payment.

 

(e)        The parties hereto intend that (A) each payment provided under this Agreement with respect to an Equity Award CVR is a separate “payment” for purposes of Section 1.409A-2(b)(2)(i) of the U.S. Treasury Regulations; (B) each payment provided under this Agreement with respect to an Equity Award CVR meets all applicable requirements for a delayed payment pursuant to a change in control event, as described under Section 1.409A-3(i)(5)(iv)(A) of the U.S. Treasury Regulations; and (C)  each Equity Award CVR is exempt from or in compliance with Section 409A of the Code, and this Agreement shall be interpreted and administered in accordance therewith. The parties hereto intend to treat each Milestone as a valid performance condition and each respective Milestone Payment Amount as subject to a substantial risk of forfeiture as defined under Section 409A of the Code. None of the parties hereto or any of their Affiliates nor any of their respective employees, directors or representatives shall have any liability to a Holder or transferee or other Person in respect of Section 409A of the Code.

 

(f)        Any portion of any Milestone Payment Amount that remains undistributed to the Holders one (1) year after an applicable Milestone Payment Date will be delivered by the Rights Agent to Parent, upon demand, and any Holder will thereafter look only to Parent for payment of the applicable Milestone Payment Amount, without interest.

 

(g)       None of Parent, the Company, the Rights Agent or any of their Affiliates will be liable to any Person in respect of any Milestone Payment Amounts delivered to a public official pursuant to any applicable abandoned property, escheat or similar legal requirement. If, despite reasonable best efforts by the Rights Agent to deliver a Milestone Payment Amount to the applicable Holder pursuant to the Rights Agent’s customary unclaimed funds procedures, such Milestone Payment Amount has not been paid immediately prior to such date on which such Milestone Payment Amount would otherwise escheat to or become the property of any Governmental Body, such Milestone Payment Amount will, to the extent permitted by applicable legal requirements, become the property of Parent, free and clear of all claims or interest of any Person previously entitled thereto. In addition to and not in limitation of any other indemnity obligation herein, Parent agrees to indemnify and hold harmless the Rights Agent with respect to any liability, penalty, cost or expense the Rights Agent may incur or be subject to in connection with transferring such property to Parent, unless such loss has been determined by a court of competent jurisdiction to be a result of the Rights Agent’s willful or intentional misconduct (including willful breach), bad faith, fraud or gross negligence.

 

(h)         The Rights Agent shall be responsible for information reporting required under applicable legal requirements with respect to the CVRs (other than Equity Award CVRs held by current or former employees of the Company or its Affiliates), including reporting the Holder’s receipt of such CVRs and any Milestone Payment Amounts hereunder on Internal Revenue Service Form 1099-B or other applicable form. Parent shall use reasonable best efforts to cooperate with the Rights Agent to provide any information reasonably necessary for the Rights Agent to carry out its obligations in this Section 2.4(h).

 

(i)         Notwithstanding anything to the contrary in this Agreement, if the Specified Resolution Date has occurred on or prior to a Milestone Determination Date, the Milestone Payment, if any, payable with respect to the applicable Milestone shall be adjusted by the Unapplied Litigation Adjustment; provided that the applicable Milestone Payment shall not be reduced below zero, and any portion of such negative Unapplied Litigation Adjustment that cannot be applied because of the foregoing limitation shall be applied to any subsequent Milestone Payment that becomes payable under this Agreement. If no Milestone Payment is payable with respect to the applicable Milestone, the Unapplied Litigation Adjustment shall be applied to the next Milestone Payment, if any, that becomes payable under this Agreement. For purposes of calculating the Previously Applied Litigation Adjustment, the amount applied with respect to a Milestone Payment shall equal the amount by which such Milestone Payment was actually increased or reduced pursuant to this Section 2.4(i). The Litigation Adjustment shall be recalculated as of each applicable Milestone Determination Date, and any increase or decrease resulting from Litigation Costs paid or Litigation Recoveries received or changes in the Escrow Share Value after an earlier Milestone Determination Date shall be reflected in the Unapplied Litigation Adjustment for the next Milestone Payment. The parties hereby acknowledge and agree that in no event shall any Litigation Cost or Litigation Recovery be taken into account more than once or any legal or professional fee included in Litigation Costs be deducted from Litigation Recoveries.

 

(j)          Notwithstanding anything to the contrary in this Agreement, if the Specified Resolution Date has not occurred on or prior to the earlier of December 31, 2030 or the termination of this Agreement, there shall be no Litigation Adjustment.

 

Section 2.5          No Voting, Dividends or Interest; No Equity or Ownership Interest in Parent or the Company.

 

(a)          The CVRs will not have any voting or dividend rights, and interest will not accrue on any amounts payable on the CVRs to any Holder.

 

(b)         Without limiting any rights of the Rights Agent or any of the Holders under this Agreement or with respect to the CVRs (including the right to payments thereunder pursuant to the terms of this Agreement), the CVRs will not represent any equity or ownership interest in Parent or in any constituent company to the Merger or any of their respective Affiliates (including the Company). The sole right of each Holder to receive property hereunder is the right to receive the Milestone Payment Amounts, if any, when and if due and payable in accordance with the terms hereof. A CVR shall not constitute a security of any Person.

 

(c)         Neither Parent nor the Company nor any of their respective directors or officers will be deemed to have any fiduciary or similar duties to any Holder by virtue of this Agreement or the CVRs.

 

Section 2.6          Holding of Funds. All funds received by the Rights Agent under this Agreement that are to be distributed or applied by the Rights Agent in the performance of its services hereunder (the “Funds”) shall be held by the Rights Agent as agent for Parent and deposited in one or more segregated bank accounts to be maintained by the Rights Agent in its name as agent for Parent. The Funds shall not be used for any purpose other than to pay the Milestone Payment Amounts under this Agreement. The parties hereto hereby acknowledge and agree that, for U.S. federal (and applicable state and local) income tax purposes, Parent shall be treated as the owner of the Funds prior to the time they are distributed pursuant to this Agreement. The Rights Agent shall report with respect to income earned on the Funds to the IRS or other taxing authority as income of Parent.

 

Section 2.7       Ability to Abandon CVR. A Holder may at any time, at such Holder’s option, abandon all of such Holder’s remaining rights represented by CVRs by Transferring such CVR to Parent or a person nominated in writing by Parent (with written notice thereof from Parent to the Rights Agent) without consideration in compensation therefor, and such rights will be cancelled, with the Rights Agent being promptly notified in writing by Parent of such Transfer and cancellation. Nothing in this Agreement is intended to prohibit Parent or any of its Affiliates from offering to acquire or acquiring CVRs, in private transactions or otherwise, for consideration, and consummating any such acquisition and related Transfer, in each case in its sole discretion. Any CVRs acquired by Parent or any of its Affiliates shall be automatically deemed extinguished and no longer outstanding for purposes of this Agreement. The Rights Agent shall update the CVR Register to reflect any abandonment or acquisition of CVRs described in this Section 2.7.

 

ARTICLE III

 

THE RIGHTS AGENT

 

Section 3.1        Certain Duties and Responsibilities. The Rights Agent will not have any liability for any actions taken or not taken in connection with this Agreement, except to the extent of its willful or intentional misconduct (including willful breach), bad faith, fraud or gross negligence.

 

Section 3.2        Certain Rights of the Rights Agent. The Rights Agent undertakes to perform such duties and only such duties as are specifically set forth in this Agreement, and no implied covenants or obligations will be read into this Agreement against the Rights Agent. The Rights Agent may in its discretion or upon the written request of the Acting Holders proceed to and shall be entitled and empowered to protect and enforce the rights of the Holders hereunder by such appropriate judicial proceedings as the Rights Agent shall deem most effectual to protect and enforce any such rights for the benefit of and on behalf of all Holders to the extent directed to by the Acting Holders in writing. The Rights Agent shall be under no obligation to institute any action, suit or proceeding unless the Acting Holders (on behalf of the Holders) shall furnish the Rights Agent with reasonable security and indemnity for any costs and expenses that may be incurred. In addition:

 

(a)        in the absence of willful or intentional misconduct (including willful breach), bad faith, fraud or gross negligence, the Rights Agent may rely and will be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order or other paper or document believed by it in good faith to be genuine and to have been signed or presented by the proper party or parties;

 

(b)        whenever the Rights Agent will deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Rights Agent may, in the absence of willful or intentional misconduct (including willful breach), bad faith, fraud or gross negligence on its part, rely upon an Officer’s Certificate;

 

(c)       the Rights Agent may engage and consult with counsel of its selection and the written advice of such counsel or any opinion of counsel will, in the absence of willful or intentional misconduct (including willful breach), bad faith, fraud or gross negligence, be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon;

 

(d)        the permissive rights of the Rights Agent to do things enumerated in this Agreement will not be construed as a duty;

 

(e)        the Rights Agent will not be required to give any note or surety in respect of the execution of such powers or otherwise in respect of the premises;

 

(f)        Parent agrees to indemnify Rights Agent for, and hold Rights Agent harmless against, any loss, liability, claim, demands, suits or expense arising out of or in connection with Rights Agent’s duties under this Agreement, including the costs and expenses of defending Rights Agent against any claims, charges, demands, suits or loss, unless such loss has been determined by a court of competent jurisdiction to be a result of Rights Agent’s willful or intentional misconduct (including willful breach), bad faith, fraud or gross negligence;

 

(g)         Parent agrees to (i) pay the fees and expenses of the Rights Agent in connection with this Agreement as set forth in Schedule A attached to this Agreement and (ii) reimburse the Rights Agent for all reasonable and necessary documented out-of-pocket expenses paid or incurred by it in connection with the administration by the Rights Agent of its duties hereunder; provided, that, notwithstanding the foregoing or anything to the contrary set forth herein, Parent shall have no obligation to indemnify or pay the fees or expenses of the Rights Agent or reimburse the Rights Agent for the fees of counsel, in each case, in connection with any claim, lawsuit or action initiated by the Rights Agent on behalf of itself or the Holders.

 

(h)         no provision of this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of its rights if there shall be reasonable grounds for believing that repayment of such funds or adequate indemnification against such risk or liability is not reasonably assured to it; and

 

(i)         no Holder shall be obligated to indemnify the Rights Agent for, or hold the Rights Agent harmless against, any loss, liability, claim, demand, suit or expense arising out of or in connection with the Rights Agent’s duties under this Agreement or to pay or reimburse the Rights Agent for any fees, costs or expenses incurred by the Rights Agent in connection with this Agreement or the administration of its duties hereunder, and the Rights Agent shall not be entitled to deduct any amount from any Milestone Payment Amount in any circumstance except as provided in Section 2.4(d) and Section 2.4(i).

 

Section 3.3          Resignation and Removal; Appointment of Successor.

 

(a)         The Rights Agent may resign at any time by giving written notice thereof to Parent specifying a date when such resignation will take effect, which notice will be sent at least sixty (60) calendar days prior to the date so specified but in no event will such resignation become effective until a successor Rights Agent has been appointed. Parent has the right to remove Rights Agent at any time by a written notice specifying a date when such removal will take effect but no such removal will become effective until a successor Rights Agent has been appointed. Notice of such removal will be given by Parent to the Rights Agent, which notice will be sent at least thirty (30) calendar days prior to the date so specified.

 

(b)         If the Rights Agent provides notice of its intent to resign, is removed or becomes incapable of acting, Parent, by a written notice as soon as is reasonably possible will appoint a qualified successor Rights Agent that is a stock transfer agent of national reputation or, with the written approval of the Acting Holders, the corporate trust department of a commercial bank. The successor Rights Agent so appointed will, forthwith upon its acceptance of such appointment in accordance with Section 3.4, become the successor Rights Agent.

 

(c)        Parent will give notice of each resignation and each removal of a Rights Agent and each appointment of a successor Rights Agent by mailing written notice of such event by first-class mail to the Holders as their names and addresses appear in the CVR Register. Each notice will include the name and address of the successor Rights Agent. If Parent fails to send such notice within ten (10) calendar days after acceptance of appointment by a successor Rights Agent, the successor Rights Agent will cause the notice to be mailed at the expense of Parent.

 

(d)         The Rights Agent will reasonably cooperate with Parent and any successor Rights Agent in connection with the transition of the duties and responsibilities of the Rights Agent to the successor Rights Agent, including the transfer of all relevant data, including the CVR Register, to the successor Rights Agent.

 

Section 3.4          Acceptance of Appointment by Successor. Every successor Rights Agent appointed hereunder will execute, acknowledge and deliver to Parent and to the retiring Rights Agent an instrument accepting such appointment and a counterpart of this Agreement, and thereupon such successor Rights Agent, without any further act, deed or conveyance, will become vested with all the rights, powers, trusts and duties of the retiring Rights Agent. On request of Parent or the successor Rights Agent, the retiring Rights Agent will execute and deliver an instrument transferring to the successor Rights Agent all the rights, powers and trusts of the retiring Rights Agent.

 

ARTICLE IV

 

COVENANTS

 

Section 4.1        List of Holders. Parent will furnish or cause to be furnished to the Rights Agent in such form as Parent receives from the Company’s transfer agent (or other agent performing similar services for the Company), the names and addresses of the Holders within fifteen (15) business days of the Effective Time. The Rights Agent will reflect all such names and addresses on the CVR Register and confirm the CVR Register and list of initial Holders to Parent promptly thereafter and, in any event, within thirty (30) calendar days of the receipt of such names and addresses from Parent or the Surviving Corporation’s transfer agent, as the case may be. Upon request of a Holder, the Rights Agent will make available to such Holder a list of the other Holders, the number of CVRs held by each Holder and the contact information maintained by the Rights Agent with respect to each Holder; provided that such Holder’s purpose for requesting such list must be reasonably related to such Holder’s interest as a Holder of a CVR and the request describes in reasonable particularity the purpose of such request. A Holder who receives such a list may not use or furnish to another for use such information or any portion thereof for any purpose other than the proper purpose specified in such Holder’s request.

 

Section 4.2        Payment of Milestone Payment Amount. If a Milestone has been achieved in accordance with this Agreement, Parent will promptly (on or prior to the date that is five (5) business days following the delivery of a Milestone Notice with respect to the applicable Milestone) deposit with (i) the Rights Agent the applicable Milestone Payment Amount for such Milestone for each Holder (other than in respect of Equity Award CVRs described in clause (ii)) in accordance with Section 2.4 and (ii) the Company or its or Parent’s applicable Affiliate, for payment to the Holders of Equity Award CVRs who are then current or former employees of the Company or its Affiliates, in accordance with Section 2.4, the aggregate amount necessary to pay the Milestone Payment Amount to each such Holder of an Equity Award CVR, in each case, prior to the Milestone Payment Date. Each Milestone Payment Amount shall only be paid one time, if at all, subject to the achievement of the applicable Milestone according to this Agreement and the calculation of the relevant Milestone Payment Amount according to this Agreement, and the maximum aggregate potential amount payable to all Holders under this Agreement (prior to giving effect to any adjustment pursuant to Section 2.4(i)) shall be $160,000,000 (representing $[___] per CVR), without interest thereon and subject to reduction for any applicable withholding Taxes in respect thereof as further described in Section 2.4(d).

 

Section 4.3          Operation of Business.

 

(a)        From the date hereof through December 31, 2030, neither Parent nor any other member of the Company Group (or their respective successors and assigns) shall take any action with the primary purpose of avoiding the obligation to pay, or of reducing, any Milestone Payment Amount, including:

 

 

 

 

 

 

in each case of the foregoing with the primary purpose of avoiding the obligation to pay, or of reducing, any Milestone Payment Amount; provided, that, for the avoidance of doubt, the continuation of shipping, invoicing, collection, accounting, sales and customer incentives in a manner consistent with past practices of the Company Group shall not be deemed to be a breach of this Section 4.3(a).

 

(b)       Notwithstanding anything herein to the contrary, but subject to Parent’s obligations as set forth herein, (i) Parent and its Affiliates (including, after the Closing Date, the Surviving Corporation) shall have the power and right to control all aspects of their businesses and operations (and all of their assets and products) and subject to Parent’s compliance with the terms of this Agreement, Parent and its Affiliates may exercise or refrain from exercising such power and right as it may deem appropriate and in the best overall interests of Parent and its Affiliates and its and their equityholders, rather than the interests of the Holders, (ii) none of Parent or any of its Affiliates (including, after the Closing Date, the Surviving Corporation) (or any directors, officer, employee, or other representative of the foregoing) owes any fiduciary duty or similar duty to any Holder in respect of the CVRs and (iii) this Section 4.3 does not impose any obligation on Parent to actually achieve any Milestone.

 

Section 4.4          Books and Records. Parent shall, and shall cause its Subsidiaries to, keep true, complete and accurate records in sufficient detail to enable the Holders and the Independent Accountant to determine the amounts payable hereunder in accordance with Section 4.6, as applicable.

 

Section 4.5          Non-Use of Name.  The Rights Agent shall not use the name, trademark, trade name or logo of Parent, its Affiliates (including, the Company), or their respective employees in any publicity or news release relating to this Agreement or its subject matter, without the prior express written permission of the Parent, other than (in the case of the name of the Parent, its Affiliates, or their respective employees) with respect to a dispute pursuant to this Agreement between any of the Holders, the Rights Agent, the Parent or its Affiliates.

 

Section 4.6          Dispute Resolution.

 

(a)          If a Milestone has not been achieved, then concurrently with the Milestone Notice relating to such Milestone, Parent shall deliver to the Rights Agent a written notice (an “Expiry Notice”) stating that such Milestone was not achieved and that the applicable Milestone Payment is not payable hereunder to the Holders of such CVR as of such applicable date. The Rights Agent shall promptly, and in any event within five (5) business days of receipt of any Expiry Notice, send each Holder at its registered address a copy of such Expiry Notice. For convenience, Parent may provide the Rights Agent with a single written notice constituting the Milestone Notice and the Expiry Notice.

 

(b)         During the Review Request Period and Resolution Period (each as defined below), Parent and the Company shall reasonably cooperate with and permit, and shall cause their Subsidiaries and Affiliates to reasonably cooperate and permit, access to the financial personnel of and any external auditor for the Company Group and any books and records reasonably requested by the Acting Holders (including those described in Section 4.4) as may be reasonably necessary to verify the accuracy and completeness of the calculations relating to the applicable Revenues Statement or EBITDA Statement, the calculations relating to the Litigation Adjustment, the Previously Applied Litigation Adjustment and the Unapplied Litigation Adjustment, as applicable, and the information contained in the Expiry Notice or the Milestone Notice, with such Acting Holders acting through their designated representatives (including any accountant or other consultant or advisor retained by the Acting Holders); provided, that (x) such Acting Holders enter into customary confidentiality agreements reasonably satisfactory to Parent with respect to the confidential information of Parent or its Subsidiaries to be furnished pursuant to this Section 4.6 and (y) such confidential information or access shall not be required to be provided to the extent that such confidential information or access would reasonably be expected to result in the waiver of any attorney-client privilege or violate any applicable law; provided, that Parent and the Company shall use reasonable best efforts to implement appropriate and mutually agreeable measures to permit the disclosure of such information in a manner to remove the basis for the non-disclosure to the greatest extent reasonably possible, including by arrangement of appropriate clean room procedures, redaction of text from documents or entry into a customary joint defense agreement with respect to any information to be so provided. The Acting Holders shall have the right to deliver to Parent and the Rights Agent, within sixty (60) calendar days of the delivery of any Expiry Notice to the Holders or following the delivery of any Milestone Notice if the applicable Milestone Notice does not state that the maximum possible Milestone Payment Amount, as adjusted pursuant to Section 2.4(i), will be paid in full (each period, a “Review Request Period”), a notice disputing any items set forth in the applicable Revenues Statement or EBITDA Statement or the calculation of the Litigation Adjustment, the Previously Applied Litigation Adjustment and the Unapplied Litigation Adjustment, as applicable, delivered pursuant to this Section 4.6(b) once per Expiry Notice or Milestone Notice (such notice, a “Dispute Notice”), which Dispute Notice shall specify in reasonable detail each item that the Acting Holders disputes, the amount in dispute for each such item (if calculable) and the reasons supporting the Acting Holders’ positions. The Acting Holders and Parent shall, in good faith, try to resolve any such items under dispute as set forth in the Dispute Notice. If the Acting Holders and Parent fail to resolve such item(s) under dispute within thirty (30) calendar days after the Acting Holders deliver the Dispute Notice to Parent and the Rights Agent (the “Resolution Period”), Parent and the Company shall permit, and shall cause their respective Affiliates to permit, the Independent Accountant to have access during normal business hours to such individuals and such information, books, records, workpapers and other documents as may be reasonably necessary to verify the accuracy and completeness of the calculations relating to the applicable Revenues Statement or EBITDA Statement and the calculations of the Litigation Adjustment, the Previously Applied Litigation Adjustment and the Unapplied Litigation Adjustment, as applicable, and shall furnish, and shall cause their respective Affiliates to furnish, to the Independent Accountant such access, records, work papers and other documents and information as the Independent Accountant may reasonably request and as may be reasonably necessary to audit the applicable Revenues Statement and EBITDA Statement, the calculations of the Litigation Adjustment, the Previously Applied Litigation Adjustment and the Unapplied Litigation Adjustment, as applicable, and the determination of whether the applicable Milestone was achieved (subject to customary confidentiality agreements and access letters, in form and substance reasonably acceptable to Parent and excluding information or access that would reasonably be expected to result in the waiver of any attorney-client privilege or violate any applicable law; provided, that Parent and the Company shall use reasonable best efforts to implement appropriate and mutually agreeable measures to permit the disclosure of such information in a manner to remove the basis for the non-disclosure to the greatest extent reasonably possible, including by arrangement of appropriate clean room procedures, redaction of text from documents or entry into a customary joint defense agreement with respect to any information to be so provided). The Independent Accountant shall be instructed to come to a final determination with respect to those items set forth in a Dispute Notice within thirty (30) calendar days following the later of (x) the engagement of such Independent Accountant or (y) the date information related to such unresolved items is presented to the Independent Accountant by Parent and the Acting Holders; provided, however, that if either Parent or the Acting Holders fails to present requested information or furnish access to the Independent Accountant within the time determined by the Independent Accountant, then the Independent Accountant shall render its decision based solely on the information actually presented and access actually furnished to it by Parent and the Acting Holders. The Independent Accountant shall act only as an expert and not as an arbitrator, shall be charged to come to a final determination in accordance with the terms of this Agreement regarding the calculation of Revenues, Consolidated EBITDA, the Litigation Adjustment, the Previously Applied Litigation Adjustment and the Unapplied Litigation Adjustment, as applicable, with respect to only those disputed items set forth in the Dispute Notice that the parties hereto disagree on and submit to it for resolution and that are mathematical, computational or accounting in nature. All other items in the applicable Revenues Statement or EBITDA Statement or the calculations of the Litigation Adjustment, the Previously Applied Litigation Adjustment and the Unapplied Litigation Adjustment, as applicable, that the parties hereto do not submit, at the expiration of the Review Request Period, to the Independent Accountant for resolution shall be deemed to be agreed by the parties hereto and the Independent Accountant shall not be charged with calculating or validating those agreed upon items. The Independent Accountant shall disclose to Parent and the Acting Holders any matters directly related to their findings to the extent necessary to verify the accuracy or completeness of the applicable Revenues Statement or EBITDA Statement or the calculations of the Litigation Adjustment, the Previously Applied Litigation Adjustment and the Unapplied Litigation Adjustment, as applicable. The Independent Accountant shall provide Parent with a copy of all disclosures made to the Acting Holders concurrently with each such disclosures to the Acting Holders and shall provide the Acting Holders with a copy of all disclosures made to Parent concurrently with each such disclosures to Parent. The fees charged by the Independent Accountant shall be allocated to and borne by (i) Parent, based on the percentage that the portion of the disputed items determined by the Independent Accountant to be in favor of the Acting Holders bears to the amount actually contested by the Acting Holders, on the one hand, and (ii) the Acting Holders, based on the percentage that the portion of the disputed items determined by the Independent Accountant to be in favor of Parent bears to the amount actually contested by the Acting Holders, on the other.

 

(c)       If the Independent Accountant concludes that a Milestone was achieved in accordance with the terms hereof and the applicable Milestone Payment Amounts, as adjusted pursuant to Section 2.4(i), were not paid to the Rights Agent, Parent shall pay or cause to be paid to the Rights Agent such applicable Milestone Payment Amounts within ten (10) business days of the date the Independent Accountant delivers its final written report to the Acting Holders and Parent. The decision of the Independent Accountant shall be final, conclusive and binding on Parent and the Holders, shall be non-appealable and shall not be subject to further review, absent manifest error.

 

(d)        If, upon the expiration of a Review Request Period, the Acting Holders have not provided a Dispute Notice to Parent and the Rights Agent in accordance with this Section 4.6, the calculations set forth in the applicable Revenues Statement or EBITDA Statement and the determination in the applicable Expiry Notice or the applicable Milestone Notice shall be final, binding and conclusive upon the Holders.

 

(e)        Each person seeking to receive information from Parent in connection with an audit pursuant to this Section 4.6 shall enter into, and shall cause its accounting firm to enter into, a reasonable and mutually satisfactory confidentiality agreement with Parent or any controlled Affiliate (including the Surviving Corporation) obligating such party to retain all such information disclosed to such party in confidence pursuant to such confidentiality agreement.

 

Section 4.7          Change of Control.  Parent may, in its sole discretion and without the consent of any other party hereto, consummate or cause to be consummated any Change of Control; provided, that, Parent will cause the Person acquiring or succeeding to Parent or the Company in connection with such Change of Control (to the extent applicable pursuant to the structure of such Change of Control) to assume Parent’s and the Company’s obligations and covenants under this Agreement, as applicable, effective as of the effective time of such Change of Control and in an instrument supplemental hereto executed and delivered by such Person to the Rights Agent. Upon or prior to the consummation of any such Change of Control, Parent will deliver to the Rights Agent an Officer’s Certificate, stating that such Change of Control complies with this Section 4.7 (and the Rights Agent will promptly, and in any event within ten (10) calendar days of receipt of such notice, send each Holder at its registered address a copy of such notice).

 

Section 4.8        Intended Tax Treatment. Except to the extent any portion of any Milestone Payment Amount is required to be treated as imputed interest under applicable law (including Section 483 of the Code), the parties hereto agree to treat (a) the CVRs (other than any Equity Award CVRs) for all U.S. federal and applicable state and local Tax purposes as additional consideration for or in respect of the Shares pursuant to the Merger Agreement, (b) any Milestone Payment Amounts received in respect of such CVRs as amounts realized on the disposition of the applicable CVRs and (c) the Equity Award CVRs for all U.S. federal and applicable state and local Tax purposes as additional compensation for or in respect of such Company Equity Awards, as applicable, pursuant to the Merger Agreement, and none of the parties hereto will take any position to the contrary on any Tax Return, any other filing with a Governmental Entity related to Taxes or for other Tax purposes except as otherwise required by applicable law. The Parent or the Rights Agent, as applicable, shall report imputed interest on the CVRs pursuant to Section 483 of the Code, except as required by applicable law.

 

ARTICLE V

 

AMENDMENTS

 

Section 5.1          Amendments without Consent of Holders.

 

(a)       Without the consent of any Holders or the Rights Agent, Parent, at any time and from time to time, may enter into one or more amendments hereto, solely to evidence the succession of another person to Parent and the assumption by any such successor of the covenants of Parent herein as provided in and in accordance with Section 6.3.

 

(b)       Without the consent of any Holders, Parent and the Rights Agent, at any time and from time to time, may enter into one or more amendments hereto, for any of the following purposes:

 

 

 

 

 

 

 

(c)        Promptly after the execution by Parent and the Rights Agent of any amendment pursuant to the provisions of this Section 5.1, Parent will, with respect to CVRs held through DTC, transmit (or cause the Rights Agent to transmit) a notice thereof through the facilities of DTC in accordance with DTC’s procedures or, with respect to all other CVRs, will mail (or cause the Rights Agent to mail) a notice thereof by first class mail to the Holders at their addresses as they appear on the CVR Register, setting forth such amendment.

 

Section 5.2          Amendments with Consent of Holders.

 

(a)         Subject to Section 5.1 (which amendments pursuant to Section 5.1 may be made without the consent of the Holders), with the consent of the Acting Holders, whether evidenced in writing or taken at a meeting of the Holders, Parent and the Rights Agent may enter into one or more amendments hereto for the purpose of adding, eliminating or changing any provisions of this Agreement, even if such addition, elimination or change is adverse to the interest of the Holders; provided, however, that no such amendment shall, without the consent of the Holders of two-thirds (66 2/3%) of the outstanding CVRs:

 

 

 

 

 

(b)        Promptly after the execution by Parent and the Rights Agent of any amendment pursuant to the provisions of this Section 5.2, Parent will, with respect to CVRs held through DTC, transmit (or cause the Rights Agent to transmit) a notice thereof through the facilities of DTC in accordance with DTC’s procedures or, with respect to all other CVRs, will mail (or cause the Rights Agent to mail) a notice thereof by first class mail to the Holders at their addresses as they appear on the CVR Register, setting forth such amendment.

 

Section 5.3        Execution of Amendments. In executing any amendment permitted by this Article V, the Rights Agent will be entitled to receive, and will be fully protected in relying upon, an opinion of counsel selected by Parent stating that the execution of such amendment is authorized or permitted by this Agreement. The Rights Agent may, but is not obligated to, enter into any such amendment that affects the Rights Agent’s own rights, privileges, covenants or duties under this Agreement or otherwise.

 

Section 5.4       Effect of Amendments. Upon the execution of any amendment under this Article V, this Agreement will be modified in accordance therewith, such amendment will form a part of this Agreement for all purposes and every Holder will be bound thereby.

 

ARTICLE VI

 

OTHER PROVISIONS OF GENERAL APPLICATION

 

Section 6.1          Notice to Rights Agent and Parent. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly delivered and received hereunder: (a) one (1) business day after being sent for next business day delivery, fees prepaid, via a reputable international overnight courier service, (b) upon delivery in the case of delivery by hand, or (c) if sent by email transmission prior to 5:00 p.m. Eastern Time, upon transmission (provided, that no “bounce back” or similar message of non-delivery is received with respect thereto) or (d) if sent by email transmission after 5:00 p.m. Eastern Time, the business day following the date of transmission (provided, that no “bounce back” or similar message of non-delivery is received with respect thereto); provided, that, in each case, the notice or other communication is sent to the physical address or email address set forth beneath the name of such party hereto below (or to such other physical address or email address as such party hereto shall have specified in a written notice given to the other parties hereto):

 

If to the Rights Agent, to it at:

[●]

Attention:  [●]

Email:        [●]

If to Parent or to the Company, to it at:

Lifecore Inc.

950 Winter Street, 4th Floor, North Entrance

Waltham, MA 02451

with a copy to (which shall not constitute notice):

Goodwin Procter LLP

620 Eighth Avenue

New York, NY 10018

Attention:  Joshua M. Zachariah

Peter Hanoian

Richard E. Schwartz

[email protected];

 

Section 6.2        Notice to Holders. Where this Agreement provides for notice to Holders, such notice will be sufficiently given (unless otherwise herein expressly provided) (i) with respect to CVRs held through DTC if in writing and transmitted through the facilities of DTC in accordance with DTC’s procedures or (ii) mailed, first-class postage prepaid, to each Holder affected by such event, at the Holder’s address as it appears in the CVR Register, not later than the latest date, and not earlier than the earliest date, if any, prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder will affect the sufficiency of such notice with respect to other Holders.

 

Section 6.3          Parent Successors and Assigns. Parent may assign, in its sole discretion and without the consent of any other party hereto, any or all of its rights, interests and obligations hereunder to (a) one or more wholly owned subsidiaries of Parent but only for so long as any such entity remains a direct or indirect wholly owned subsidiary of Parent or (b) an acquiror in connection with a Change of Control in accordance with Section 4.7 (each such assignee in the preceding clauses (a) and (b), an “Assignee”); provided, that in the case of clause (a) Parent remains jointly and severally liable. Any such Assignee may thereafter assign any or all of its rights, interests and obligations hereunder in the same manner as Parent pursuant to this Section 6.3. This Agreement will be binding upon, inure to the benefit of and be enforceable by Parent’s successors. Any attempted assignment of this Agreement in violation of this Section 6.3 shall be void and of no effect. The Rights Agent may not assign this Agreement without Parent’s and the Acting Holders’ written consent.

 

Section 6.4        Benefits of Agreement. Nothing in this Agreement, express or implied, will give to any Person (other than the Rights Agent, Parent, Parent’s permitted successors and assignees and the Holders) any benefit or any legal or equitable right, remedy or claim under this Agreement or under any covenant or provision herein contained, all such covenants and provisions being for the sole benefit of the Rights Agent, Parent, Parent’s successors and assignees and the Holders. The rights of Holders are limited to those expressly provided in this Agreement which shall be exercised only by the Acting Holders. Notwithstanding anything to the contrary contained herein, any Holder may at any time agree to renounce, in whole or in part, whether or not for consideration, such Holder’s rights under this Agreement by written notice to the Rights Agent and Parent, which notice, if given, shall be irrevocable, and Parent may, in its sole discretion, at any time offer consideration to the Holders in exchange for their agreement to irrevocably renounce their rights, in whole or in part, hereunder.

 

Section 6.5       Limitations on Suits by Holders. No individual Holder or group of Holders shall have any right under this Agreement to commence proceedings under or with respect to this Agreement, and such rights may only be exercised by the Acting Holders in accordance with, and subject to the limitations set forth in, this Agreement. Any action brought by the Acting Holders shall be subject to Section 6.6 and Section 6.9, the terms of which shall apply to such Acting Holders, as applicable, and such action mutatis mutandis. The Acting Holders shall have the right, on behalf of all Holders, by virtue of or under any provision of this Agreement, to institute any action at law or in equity or in bankruptcy or otherwise upon or under or with respect to this Agreement. In any such action, the Acting Holders shall be deemed to represent all Holders. Amounts collected by the Acting Holders in any action in which the Acting Holders are deemed to represent all Holders shall be paid first to reimburse the legal fees and other reasonable costs and expenses incurred by the Acting Holders in connection with such action and the balance shall be distributed to all Holders. The Acting Holders, in acting pursuant to this Section 6.5 on behalf of all Holders, shall have no liability to any other Holders for any such actions.

 

Section 6.6        Governing Law. This Agreement, the CVRs and all actions and proceedings arising out of, or relating to the subject matter hereof, shall be governed by, and construed in accordance with, the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof.

 

Section 6.7        Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. If any provision of this Agreement, or the application of such provision to any Person or any circumstance, is invalid or unenforceable, (a) a suitable and equitable provision shall be substituted therefor to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid or unenforceable provision and (b) the remainder of this Agreement and the application of such provision to other Persons or circumstances shall not be affected by such invalidity or unenforceability, nor shall such invalidity or unenforceability affect the validity or enforceability of such provision, or the application of such provision, in any other jurisdiction.

 

Section 6.8       Counterparts and Signature. This Agreement may be executed in two or more counterparts (including by facsimile or by an electronic scan delivered by electronic mail), each of which shall be deemed an original but all of which together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each of the parties hereto and delivered to the other party, it being understood that the parties need not sign the same counterpart.

 

Section 6.9           Jurisdiction; Waiver of Jury Trial.

 

(a)         Subject to Section 6.9(b), in any action or proceeding arising out of or relating to this Agreement, the subject matter hereof or any of the CVRs: each of the parties hereto irrevocably (i) submits to the exclusive jurisdiction and venue of the Chancery Court of the State of Delaware and any state appellate court therefrom, in each case, sitting in New Castle County in the State of Delaware, (or, if the Chancery Court of the State of Delaware declines to accept jurisdiction over a particular matter, any state or federal court within the State of Delaware, in each case, sitting in New Castle County of the State of Delaware) (such courts, the “Chosen Courts”) (it being agreed that the consents to jurisdiction and venue set forth in this Section 6.9(a) shall not constitute general consents to service of process in the State of Delaware and shall have no effect for any purpose except as provided in this paragraph and shall not be deemed to confer rights on any Person other than the parties hereto); (ii) waives the defense of an inconvenient forum or lack of jurisdiction to the maintenance of any Legal Proceeding in the Chosen Courts, (iii) agrees to not attempt to deny or defeat such jurisdiction by motion or otherwise request for leave from any Chosen Court and (iv) agrees not to bring or permit any of their Affiliates to bring or support anyone else in bringing any such Legal Proceeding in any court other than the Chosen Courts (except for an action to enforce a judgment of a Chosen Court). Each of the parties hereto irrevocably consents to service of process by first class certified mail, return receipt requested, postage prepaid, to the address at which such Party is to receive notice in accordance with Section 6.1. The parties hereto agree that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by applicable Legal Requirements; provided, however that nothing in the foregoing shall restrict any rights of a party hereto to seek any post-judgment relief regarding, or any appeal from, such final trial court judgment.

 

(b)        EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING AMONG THE PARTIES HERETO ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE SUBJECT MATTER HEREOF.

 

Section 6.10        Termination. This Agreement will be terminated and of no force or effect, the parties hereto will have no liability hereunder, and no payments will be required to be made, upon the earliest to occur of (a) the complete payment in full of all Milestone Payment Amounts required to be paid under the terms of this Agreement, (b) the delivery to the Rights Agent of a written notice of termination duly executed by Parent and the Holders of two-thirds (66 2/3%) of the then outstanding CVRs, and (c) if (and only if) Parent has complied with its obligations under Section 4.6 in all material respects, the expiration of the Review Request Period (if a Dispute Notice is not received during such Review Request Period) for the EBITDA Statement prepared for the 2030 Performance Milestone if there is no Milestone Payment Amount required to be paid under the terms of this Agreement as of such time; provided, that, in the case of the foregoing clause (c) if there is any pending Dispute Notice or ongoing action (whether in contract or in tort or otherwise) arising out of or relating to this Agreement properly brought hereunder by the Acting Holders prior to the termination hereof, this Agreement will not terminate until there is (i) in the case of a Dispute Notice, a final decision of the Independent Accountant pursuant to Section 4.6 or a settlement between Parent and the Acting Holders and payment by Parent to the Rights Agent of any applicable Milestone Payment Amounts determined by the Independent Accountant or such settlement, as applicable, to be payable to the Holders or (ii) in the case of such an ongoing action, a final non-appealable order on such action from a court of competent jurisdiction or a settlement between Parent and the Acting Holders.

 

Section 6.11        Entire Agreement. This Agreement and the Merger Agreement (including the schedules, annexes and exhibits thereto) contain the entire understanding of the parties hereto and thereto with reference to the transactions and matters contemplated hereby and thereby and supersede all prior agreements, written or oral, among the parties with respect hereto and thereto. If and to the extent that any provision of this Agreement is inconsistent or conflicts with the Merger Agreement, this Agreement will govern and be controlling with respect to CVR matters only and the Merger Agreement shall govern and be controlling with respect to all matters unrelated to CVRs.

 

Section 6.12       Obligations of Parent. Parent shall cause the Company to duly perform, satisfy and discharge each of the covenants, obligations and liabilities applicable to the Company under this Agreement. Parent and the Company shall be jointly and severally liable for the performance and satisfaction of each of their respective covenants, obligations and liabilities hereunder. As material inducement to the Company to enter into the Merger Agreement and to consummate the transactions contemplated thereby, the Company hereby irrevocably and unconditionally guarantees the due and punctual performance of all obligations of Parent hereunder, including Parent’s obligations under Section 2.4 and Section 4.2, in each case when, as and if due (collectively, the “Company Guaranteed Obligations”). To the fullest extent permitted by applicable Law, the Company hereby expressly waives any and all rights and defenses arising by reason of any applicable laws other than any defenses available to Parent. Without limiting the generality of the foregoing, the Company expressly waives: (i) notice of the acceptance by the Holders of this guarantee; (ii) notice of the non-performance of all or any of the Company Guaranteed Obligations; (iii) presentment, demand, notice of dishonor, protest, notice of protest and all other notices whatsoever, in respect of any or all of the Company Guaranteed Obligations (except notices required to be given hereunder); and (iv) any defense arising by reason of any claim or defense based upon an election of remedies, including the failure or delay in exercising remedies against Parent by the Holders which in any manner affects any of its rights to proceed against the Company, other than any claims or defenses available to Parent. The Company agrees that this guaranty is one of payment, not merely of collection and not merely that of a surety, and that the Acting Holders shall not be required to pursue any right or remedy it may have against Parent under this Agreement or otherwise or to first commence any proceeding or obtain any judgment against Parent in order to enforce this Section 6.12. For the avoidance of doubt, this Section 6.12 shall survive for so long as the obligations of Parent hereunder are outstanding. Notwithstanding anything to the contrary in this Section 6.12, this Section 6.12 shall be enforceable only by the Acting Holders. Nothing set forth in this Section 6.12 shall expand the obligations of Parent hereunder or the rights of the Acting Holders hereunder.

 

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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed on its behalf by its duly authorized officers as of the day and year first above written.

 

 

Rights Agent Fees

Exhibit A

 

Consolidated EBITDA

 

This Exhibit describes the basis of preparation for “Consolidated EBITDA”. Capitalized terms used but not defined in this Exhibit shall have the meanings ascribed to them in this Agreement.

Consolidated EBITDA shall be prepared on a consolidated basis for the Company Group in accordance with the following policies and procedures in the following order of priority:

Consolidated EBITDA shall be an amount equal to consolidated net income (loss) of the Company Group, as determined in accordance with GAAP, with respect to the applicable Calendar Year, excluding each of the following items of revenue, gain, income, loss, charge or expense. The provisions of this Exhibit shall be interpreted so as to avoid double counting (whether positive or negative):

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