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You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Maloney v Falcon VII Investment SARL [2025] EWHC 240 (Comm) (11 February 2025) URL: http://www.bailii.org/ew/cases/EWHC/Comm/2025/240.html Cite as: [2025] EWHC 240 (Comm) |
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KING'S BENCH DIVISION
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT
Fetter Lane, London, EC4A 1NL |
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B e f o r e :
____________________
| Mr Barry Maloney |
Claimant |
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| - and - |
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| Falcon VII Investment S.A.R.L. |
Defendant |
____________________
Lord Wolfson KC, Joyce Arnold and Jarret Huang (instructed by Milbank LLP) for the Defendant
Hearing dates: 14, 15, 16, 20, 22, 23 January 2025
____________________
Crown Copyright ©
Mr Justice Bright:
Introduction
Background
The documents governing the financial arrangements
i) The Topco articles of association dated 21 December 2018, as subsequently amended and restated on 30 April 2019 (the "Articles").
ii) The SHA. This governs the management of Topco and the other Buyer Group Companies and their decision-making within Workhuman.
iii) A services agreement between Mr Maloney, the Buyer Group Companies, Falcon VII and Falcon Financing dated 21 December 2018 (the "Services Agreement").
i) Part A sets out a series of positive covenants given by each Buyer Group Company.
ii) Part B sets out a series of negative covenants given by each Buyer Group Company.
iii) Part C sets out a series of Promoters' covenants (one of the Promoters being Mr Maloney) in relation to the Buyer Group Companies.
iv) Part D sets out a series of covenants given by the Buyer Group Companies and by the Relevant Parties (including Mr Maloney) in relation to the Target Group Companies.
v) Part E sets out a further series of covenants in relation to the Buyer Group Companies.
i) Part B covenant 6, in so far as it is a covenant by the Buyer Group Companies not, without Lender Investor Consent, to amend any of the Target Investment Documents which includes the articles of association of Workhuman (the "Workhuman Articles").
ii) Part B covenant 24, in so far as it is a covenant by the Buyer Group Companies not, without Lender Investor Consent, to instigate or "take any steps" in relation to an ICG Realisation Event unless the provisions of the SHA and Articles were complied with and the ICG Exit Conditions were adhered to.
iii) Part D covenants 1, 6 (in so far as it relates to the Workhuman Articles), 12 and 13.
The falling-out, the Shareholder Resolutions and the dispute about clause 5.4
"For the purposes of clause 6.2.4 of the SHA and otherwise, our client hereby formally requests that the Lead Promotor promptly provide us with copies of all offers, term sheets, commitments or indications of interest received by any Target Group Company, any Buyer Group Company or the Lead Promoter during the last six months in relation to a proposed financing, investment or other corporate transaction which could reasonably be used to finance a potential ICG Realisation Event"
Procedural history
Amendments to Mr Maloney's Defence to Counterclaim
The significance of SHA clause 5.4
i) If Mr Maloney were to win on the interpretation of clause 5.4, he would have established that the Shareholder Resolutions and the actions taken by Mr Maloney in relation to them did not require any Lender Investor Consent, and, accordingly, that there were no associated breaches by Mr Maloney or by Topco or Bidco. He therefore would succeed in principle on his claim.
ii) Success by Mr Maloney on this would not mean that Mr Maloney would win on all points, because Falcon VII still have complaints about other, subsequent breaches: notably concerning the engagement of Morgan Stanley and concerning Falcon VII's information requests. However, success on clause 5.4 would leave Mr Maloney in a significantly stronger position, even on these other points.
iii) Conversely, if Mr Maloney were to lose on the interpretation of clause 5.4, and Falcon VII were to win, that would be the end of the matter. Falcon VII thereby would not only defeat Mr Maloney's claim, it would also necessarily have established that Mr Maloney was not entitled to take the steps that followed the Shareholder Resolutions, which were dependent on his being entitled to cast three votes on the Topco board.
The words of SHA clause 5.4 and the relevant defined terms
"5. CONDUCT OF BUSINESS
5.4 The parties agree and acknowledge that, notwithstanding any provision of this Agreement or the Articles but subject to the provisions of the Finance Documents, an SF Repayment (as defined in the Articles) may be effected by the Buyer Group without any requirement for the consent or approval of the Lender Investors provided that the ICG Exit Conditions are satisfied and the terms of this Agreement, the Articles and the Financing Documents are all adhered to."
i) "Articles" refers to the Articles.
ii) "Finance Documents" is not a defined term. It was common ground that this was a typographical error for "Financing Documents", which is a defined term in the SHA with a definition that includes the SFA and the SF Notes issued under it.
iii) "SF Repayment" is defined only in the Articles, as follows:
""SF Repayment" means the full and final repayment of all amounts advanced under the Senior Facility Agreement (unless already repaid) and all amounts owing or due (then or in the future) in respect the SF Notes and/or under the Senior Facility Agreement including by way of interest, costs or otherwise or, with prior Lender Investor Consent, all amount other than USDl;"
iv) "Buyer Group" means Topco, Midco and Bidco.
v) "Lender Investors" means, in particular, Falcon VII.
vi) "ICG Exit Conditions" is stipulated in the SHA to have the definition in the Articles. There, the definition is given in terms that take the reader to the definition of "ICG Realisation Event" and the definition of "ICG Realisation Amount".
vii) "ICG Realisation Event" means (broadly) (a) the repayment of all sums due to Falcon Financing under the SFA and the SF Notes and (b) the sale/purchase and/or redemption of the Original A1 shares of Falcon VII, provided that Falcon VII receives no less than the Market Value[6], all subject to the following general proviso:
" provided that, in each case, unless a Lender Investor Consent agrees otherwise, such ICG Realisation Event takes place in accordance with the terms of the Equity Documents and the ICG Conditions[7] are met;"
viii) "Lender Investor Consent" means written consent from (in particular) Falcon VII or one of the directors appointed by it to the Topco board, i.e. Mr Coady and Mr McKelvey.
ix) "ICG Realisation Amount" means an amount referable to "Market Value", which in turn depends (in some circumstances) on the "Independent Value" as stated in writing by the "Agreed Investment Bank" i.e., the AIB.
x) "Equity Documents" includes the full suite of governing documents i.e., it includes the SFA, the Articles, the SHA and the Services Agreement.
The rival interpretations of clause 5.4
Mr Maloney's case on the interpretation of clause 5.4
Falcon VII's case on the interpretation of clause 5.4
The legal principles applicable to contractual interpretation
"I agree with Lord Mance that the appeals of interested parties C and D should be allowed for the reasons he gives, and I add only a few remarks of my own on the approach to interpretation. In complex documents of the kind in issue there are bound to be ambiguities, infelicities and inconsistencies. An over-literal interpretation of one provision without regard to the whole may distort or frustrate the commercial purpose. This is one of those too frequent cases where a document has been subjected to the type of textual analysis more appropriate to the interpretation of tax legislation which has been the subject of detailed scrutiny at all committee stages than to an instrument securing commercial obligations: cf Satyam Computer Services Ltd v Upaid Systems Ltd [2008] EWCA Civ 487 at [2], [2008] 2 All ER (Comm) 465 at [2]."
The text of clause 5.4
The central phrase: " an SF Repayment (as defined in the Articles) may be effected by the Buyer Group "
"SF Repayment"
"Buyer Group"
"effected"
i) If the central phrase in clause 5.4 is understood literally, as referring to the Buyer Group effecting an SF Repayment (as defined in the Articles), then it means effecting the relevant payment.[9] If the thing being "effected" is merely an SF Repayment, it seems to me natural to understand "effected" as referring to the act of paying, rather than anything anterior to this.
ii) If the central phrase is understood as referring to an ICG Realisation Event, this would require not only an SF Repayment (which would be effected, i.e. paid, by or on behalf of Bidco to Falcon Financing) but also the engagement of all the other mechanics of the ICG Exit Conditions including (for example) the selection of the AIB and its engagement with instructions by or on behalf of Mr Maloney and Falcon VII. If the thing being effected is an ICG Realisation Event, then "effected" therefore must extend to all the steps that are necessary for such an event to be achieved no matter how many and no matter by whom each step will be taken.
The contrast between "effected" and "steps taken in relation to"
The effect on each other of (i) the "notwithstanding" phrase and (ii) the proviso
i) First, the "notwithstanding" phrase, which stipulates that the central phrase operates notwithstanding any provision of the SHA or the Articles.
ii) Then, the proviso at the end of clause 5.4, which stipulates that the central phrase operates only provided that the ICG Exit Conditions are satisfied and the terms of the SHA, the Articles and the Financing Documents are all adhered to.
i) Does the "notwithstanding" phrase trump the proviso, so that the proviso in effect means, " provided that the terms of this Agreement are all adhered to except in so far as they require the consent or approval of the Lender Investors"?
ii) Or, does the proviso trump the "notwithstanding" phrase?
The overall contractual context
SHA clause 10.1
SHA clause 10.2
"Notwithstanding anything to the contrary, unless the Majority Lender Investors agree otherwise, no ICG Realisation Event, ICG Drag or Exit will take place unless it is carried out in accordance with the provisions of this Agreement and the Articles and the ICG Exit Conditions are satisfied."
SHA clause 10.3
SHA clauses 10.5 to 10.9
SHA Schedule 5 Part B covenant 24
SHA clause 10.20 and the Articles
The SFA Conditions
The factual matrix
The Term Sheet
"Private & Confidential Agreed form
Subject to Contract "
| 13. | ICG Exit | The ICG equity interests and Senior Facility are joined together so that, unless ICG agree otherwise, ICG's equity interests can only be forced into a sale if the Senior Facility is also being paid out at the same time in accordance with its terms and the Senior Facility can only be repaid if ICG's equity interests are being paid out at the same time in accordance with the terms below. The Buyer Group will only be able to force a refinancing or sale of ICG's equity interests if at the same time the Senior Facility is being repaid in full in accordance with its terms and in the circumstances set out below and where ICG is receiving cash for its equity interests in Topco with a specific value (the "Valuation") and each such Valuation shall be determined as follows: (e) where the ICG equity interests are to be paid out as a consequence of a refinancing of the Senior Facility where there is no related acquisition or disposal of shares in the Investment, the Valuation shall be the amount determined by an Independent Valuation. Implementation of Exit and refinancing provisions in relation to the Investment to be discussed. |
i) Mr Maloney contended that, because it was an agreed document, the Term Sheet was not merely a part of the pre-contractual negotiations but was among the "facts and circumstances" known to both parties: Arnold v Britton [2015] UKSC 36, at [15]; Mr Dhillon KC also described the Term Sheet as "a fact relevant as background", referring to Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38, at [42].
ii) Falcon VII contended that, although its form was agreed, the substance of the Term Sheet was expressly subject to contract, and so not (finally) agreed; as such, it was merely part of the pre-contractual negotiations; in any event it was irrelevant, even if not excluded by clause 19.1 of the SHA an Entire Agreement clause.
Article 61(1A) of the Companies (Jersey) Law 1991
Overall commercial purpose of clause 5.4
"Falcon VII's interpretation of Clause 5.4 has the unlikely result that Falcon VII would, notwithstanding its position as a minority shareholder in a business in which Mr Maloney had been instrumental for many years, have an unconstrained veto over the Buyer Group's ability if it so wished to refinance elsewhere by discharging the Falcon Financing debt in full and redeem the Stapled Equity at the specified value prior to 21 December 2025. Such an outcome, whereby the shareholder with the vast majority of the economic interests in the Falcon Group is unable to repay its debt early and redeem the minority shareholding to which that borrowing is stapled, does not accord with commercial commonsense."
"Falcon VII's argument ignores the fundamental purpose of Clause 5.4, namely to allow Mr Maloney as borrower to refinance Falcon VII (and Falcon Financing) without being required to go, cap in hand, to beg permission from Falcon VII on whatever terms they see fit."
Mr Maloney's argument against redundancy
Conclusion on the interpretation of clause 5.4
The significance of my conclusion on the interpretation of clause 5.4
Why did Falcon VII withhold its consent for the Proposed Transaction?
From April 2023, did Falcon VII seek to prevent an SF Repayment for an improper purpose?
Was the appointment of Morgan Stanley as AIB valid?
i) Was Morgan Stanley validly selected to be the AIB, per the definition of the AIB in the Articles?
ii) If so, was Morgan Stanley validly engaged by Topco, per the definition of "Independent Value" in the Articles?
iii) If so, was Morgan Stanley validly instructed by or on behalf of the Majority Lender Investors and the Lead Promoter, per the definition of "Independent Value" in the Articles?
i) On 31 May 2023, Falcon VII proposed either or both of Morgan Stanley or JP Morgan as the AIB i.e., leaving it to Mr Maloney to decide which. On 13 June 2023, McCann responded on behalf of Mr Maloney, agreeing to Morgan Stanley. Morgan Stanley therefore was agreed by the parties as the AIB. This fulfilled the requirements of the definition of AIB in the Articles. It means that Morgan Stanley was the bank selected as the AIB. If anyone were to be engaged by Topco as AIB and then instructed accordingly, it had to be Morgan Stanley.
ii) A number of the Topco board meetings appear to have been somewhat chaotic, hence the dispute as to whether what happened could be characterised as a vote, in some instances. However, I accept Mr Maloney's evidence that, at the meetings of 13 June 2023 and 22 August 2023, he supported his own proposals in relation to the AIB (and other matters) and purported to cast three votes; and Mr Coady and Mr McKelvey each disagreed, each being entitled to one vote. The procedure followed was informal, but it was objectively clear that each side was intending to express its wishes in the normal manner, by reference to their respective voting capacities. In other words, there was a vote. However, for the reasons already given, Mr Maloney in fact had only one vote. He therefore was outvoted on each occasion, by two votes to one. This is why Morgan Stanley was never validly engaged by Topco as AIB.
iii) The third sub-issue does not arise. However, the terms of the purported engagement letter (signed by Mr Maloney, but without Topco's authority, as I have found) referred to Morgan Stanley being engaged by Topco, but did not refer to it being instructed by or on behalf of Falcon VII and Mr Maloney. This was required by the definition of "Independent Value". It is noticeable that Morgan Stanley appears to have behaved as if its client, to whom it was answerable, was Topco, not Falcon VII. Whether this made any difference is another matter, but it was not what the Articles required.
Was Bidco or Mr Maloney in breach in relation to Falcon VII's information requests?
i) Clause 6.1.5 of the SHA (which imposes information obligations on the Buyer Group Companies) refers to:
" information or document relating to or held by any Target Group which Bidco is entitled to request under any [of] the Target Investment Documents law or otherwise "
ii) Clause 6.2.4 of the SHA (which imposes information obligations on Mr Maloney) refers to:
" additional information relating to the Target Group "
iii) Paragraph 2.4 of Schedule 1 to the Services Agreement (which also imposes information obligations on Mr Maloney) again refers to:
" additional information relating to the Target Group "
i) I do not accept the first of these suggested implied terms. The express definition in clause 6.1.5 of the SHA as to the kind of information that can be requested is clear and must be respected. There is no need or scope for the implied term suggested by Mr Maloney.
ii) I accept that the parties must have intended that any right to request information would not be exercised in bad faith or for an improper purpose. I would also accept that they must have intended that they would not be exercised unreasonably in the 'Wednesbury' sense, i.e. so unreasonable that no reasonable contracting party could make such a request. However, each of these is a high bar. Having considered the evidence of Mr Coady and Mr McKelvey, I do not accept that they or anyone at Falcon VII acted in bad faith or for an improper purpose. They requested the information that they did because the relationship between Mr Maloney and Falcon VII had broken down, so that neither side trusted the other. This was not, in itself, inherently unreasonable. The requests made were wide, but this reflected the parties' divergent views as to clause 5.4 and their respective rights arising from it, and the generally acrimonious circumstances. Against this background, Falcon VII did not act inconsistently with the implied terms that I have found.
The appointment of PwC, McCann and/or William Fry as advisers
Clause 5.2.2 of the Services Agreement
Overall conclusion
ANNEX TO JUDGMENT EXTRACTS FROM GOVERNING DOCUMENTS
SFA
10. Enforcement
... each Obligor undertakes that it will duly observe and perform the obligations on its part contained in this Agreement and the Notes shall be issued and held subject to and with the benefit of the provisions of this Agreement, the Conditions, the Schedules and the Annexures, all of which shall be deemed to be incorporated in this Agreement and shall enure for the benefit of all Noteholders.
Annexure 2
The Conditions
7.3 Voluntary Redemption
(a) Subject to Clause 7.3(b) (Voluntary Redemption) and Clause 9.5 (Redemption in full in accordance with the Equity Documents), the Company may:
(i) on or prior to the date falling three years after the Closing Date, and if it gives the Agent not less than five Business Days' (or such shorter period as the Majority Noteholders may agree) prior notice redeem the whole or any part of the Notes (but, if in part, being an amount that reduces the Notes by a minimum amount of $500,000) provided that:
(A) unless such redemption of Notes relates to a redemption of capitalised interest only (including for the avoidance of doubt any partial redemption of capitalised interest in a minimum amount of $500,000), all accrued interest (including interest that has capitalised and any interest that has accrued on such capitalised amounts) under the Notes since the Closing Date has been, or will be as part of such redemption, paid, or in the case of capitalised amounts, redeemed in full; and
(B) without prejudice to paragraph (A) above, no redemption of principal amounts outstanding in respect of the Loan B Notes may be made unless the principal amounts outstanding in respect of the Loan A Notes have been redeemed in full; and
(ii) after the date falling three years after the Closing Date, and if it gives the Agent not less than five Business Days' (or such shorter period as the Majority Noteholders may agree) prior written notice:
(A) redeem any accrued and capitalised interest in respect of the Notes (provided that such redemption is in a minimum amount of $500,000); or
(B) subject to a payment in full under paragraph (A) above, redeem all (but not part) of the Notes.
(b) The Company may only make a voluntary redemption of the Notes on an Interest Payment Date, unless there is a redemption in full of the Notes in accordance with this Agreement, in which case such redemption in full can be made on any Business Day.
(c) The Company may not make a voluntary redemption of the Notes other than in
accordance with this Clause 7.3.
Clause 9 Restrictions
9.4 Redemption and call protection
(a) Subject to paragraph (b) below, during the Non-Call Period, all or any part of the Loan B Notes that are redeemed pursuant to Clause 7.3 (Voluntary Redemption), Clause 7.4 (Right of cancellation and redemption in relation to a single Noteholder), Clause 8.1 (Exit) and Clause 8.2 (Disposal, Acquisition Proceeds and Cash Proceeds) or as a direct result of action taken by the Noteholders pursuant to Clause 22.16 (Acceleration), shall be so redeemed by the Company at a price equal to 100% of the principal amount that is to be redeemed plus accrued interest on such amount to the date of redemption plus (but without double counting) the Applicable Premium.
(b) The Company shall not be obliged to pay the Applicable Premium to any Noteholder pursuant to paragraph (a) above to the extent that a Noteholder is being redeemed pursuant to Clause 7.1 (Illegality)
9.5 Redemption in full in accordance with the Equity Documents
(a) Notwithstanding any other provision in this Agreement:
(i) the Company may not voluntarily redeem the Notes in full in accordance with Clause 7.3 (Voluntary Redemption); and
(ii) the Company shall not be required to redeem the Notes in full in accordance with Clause 8.1 (Exit) or Clause 8.2 (Disposal, Acquisition Proceeds and Cash Proceeds),
unless there is an ICG Realisation Event on the date of such redemption. For the avoidance of doubt, mandatory redemptions of the Notes in accordance with Clause 8.1 (Exit) or Clause 8.2 (Disposal, Acquisition Proceeds and Cash Proceeds) shall continue to be made in the full amount required to be redeemed under the terms of this Agreement subject to there being at least $1 of principal outstanding under the Notes at any time while a redemption of the Notes in full is prohibited by this Agreement.
(b) If the Company is required to redeem the Notes in full in accordance with any provision of this Agreement it shall also be required to effect an ICG Realisation Event on the date of such redemption.
Topco Articles
2. DEFINITIONS AND INTERPRETATIONS
2.1 In these Articles the following expressions shall have the following meanings:
"Agreed Investment Bank" means either (a) the corporate finance team based in either Manhattan, New York City, San Francisco or Los Angeles of United States of America any of Jefferies Group LLC, Credit Suisse Group AG, Morgan Stanley, Barclays Investment Bank, Deutsche Bank AG or JP Morgan. (each a "Leading Investment Bank") as agreed in writing by the Majority Lender Investors and the Lead Promoter; or (b) if the Lead Promoter and the Majority Lender Investors cannot agree on which Leading Investment Bank should be appointed within 15 Business Days of the earlier of (i) receipt by the Lead Promoter of a written request from the Majority Lender Investors to so nominate; or (ii) receipt by the Majority Lender Investors of a written request from the Lead Promoter to so nominate, a Leading Investment Bank selected by the President for the time being of the Institute of Chartered Accountants of England and Wales following a request to do so from either the Lead Promoter or the Majority Lender Investors, provided that such President may not select a Leading Investment Bank which was originally nominated by either the Majority Lender Investors or the Lead Promoter;
"Buyer Default Event" shall mean any of the following:
(a) any Buyer Group Company, the Lead Promoter or any BM Investco having been being in Material Breach (and for this purpose no account shall be taken of any waiver given in respect of any such breach (other than an Unconditional Waiver) or non-compliance by any person or any standstill agreement or any person signing and/or voting on similar arrangements with any person); and (b) a Senior Event of Default having occurred (and for this purpose no account shall be taken of any waiver given in respect of any such breach, other than an Unconditional
Waiver) or non-compliance by any person or any standstill agreement or any person signing and/or voting on similar arrangements with any person);
(c) failure by the Company to redeem any Al Ordinary Shares in accordance with these Articles, in each case, without prior Lender Investor Consent by either (i) the date falling 10 Business Days after the relevant due date; or (ii) any earlier date on which any holder of Al Ordinary Shares (other than a Lender Investor) has threatened to take action in respect of the failure to so redeem, irrespective of whether such redemption would be unlawful or would be incapable of payment by virtue of Article 26 (Overriding Provisions);
(d) failure by any (Buyer Group Company Consent) to pay any amount in respect of any Securities (whether interest or principal), without prior Lender Investor Consent, by either (i) the date falling 10 Business Days after the relevant due date; or (ii) any earlier date on which any Security Holder (other than a Lender Investor) has threatened to take action in respect of such non-payment in each case, (irrespective of whether such payment would be prohibited by virtue of Article 26 (Overriding Provisions);
(e) an Insolvency Event having occurred in relation to a Buyer Group Company;
(f) any Buyer Group Company being in breach of any provision of Clause 20 (Financial Covenants) of the Senior Facility Agreement (and for this purpose no account shall be taken of any waiver (other than an Unconditional Waiver) given in respect of any such breach or non-compliance by any person or any standstill agreement or any person signing and/or voting on similar arrangements with any person); or
(g) it being reasonably likely in the opinion of the Majority Lender Investors that any of the matters set out in (c), (d), (e) or (f), will occur in the following 3 months provided that such opinion is based on:
(i) financial information provided by the Target Group Companies to Bidco; or
(ii) if the Majority Lender Investors can show that such information is incorrect, the reasonable opinion of the Majority Lender Investors,
(and for this purpose no account shall be taken of any waiver given in respect of any such breach or non-compliance by any person (other than an Unconditional Waiver) or any standstill agreement or any person signing and/or voting on similar arrangements with any person) and provided that it will not be reasonable for the Majority Lender Investors to determine that a matter set out in (f) which can be remedied by a Cure Amount (as defined in the Buyer Financing Documents) being paid in accordance with the terms of the Buyer Financing Documents is reasonably likely to occur until such time as the deadline for paying such Cure Amount in cash into the Cash Collateral Account (as defined in the Buyer Financing Documents) in accordance with the terms of the Buyer Financing Documents has passed;
"Buyer Group" means the Company and any undertaking which is a subsidiary undertaking of the Company from time to time (but excluding each Target Group Company) and, if applicable, any New Buyer Holding Company and references to "Buyer Group Company" and "member of the Buyer Group" shall be construed accordingly;
"Default Event" shall mean either an Buyer Default Event or a Target Default Event;
"Equity Documents" means any and all of these Articles, the Shareholders Agreement, the Implementation Agreement, the Services Agreement, the Promissory Note Documents and any instrument or agreement under which any other Security has been issued and/or constituted;
"ICG Drag" means an ICG Realisation taking place in part pursuant to Article 13 and clauses 10.2, 10.3, 10.5, or 10.15.5 of the Shareholders Agreement;
"ICG Exit Conditions" means, unless a Lender Investor Consent agrees otherwise in writing, both (i) an ICG Realisation Event occurring, and (ii) the Lender Investors receiving an amount in cash at least equal to or greater than the ICG Realisation Amount, at the same time;
"ICG Realisation Event" means:
(a) the full and final repayment in cash of all amounts advanced under the Senior Facility Agreement (unless already repaid) and all amounts owing or due then in respect the SF Notes and/or under the Senior Facility Agreement including by way of interest, costs or otherwise;
(b) either:
(i) the sale for cash of all of the Original Al Shares then held by the Lender Investors to a buyer or buyers who is permitted under and who has complied with Clauses 10.2 and 10.3 of the Shareholders Agreement as part of a single transaction or a series of connected transactions which happen simultaneously (other than as part of a Buyer Reorganisation or to a Lender Investor Permitted Transferee);
(ii) the redemption or purchase by the Company for cash of the Original Al Shares then held by the Lender Investors;
(iii) the payment of cash dividends in respect of the Original A1 Shares then held by the Lender Investors;
(iv) the cash payment on a return of capital in respect of the Original Al Shares then held by the Lender Investors; or
(v) any combination of (i), (ii), (iii) or (iv),
provided that as a result of which the Lender Investors receive an amount in cash equal to or greater than the Relevant Proportion of the applicable Market Value; and
(c) the purchase, redemption, repayment or payment of all Debt Securities (other than any within (a) above held by the Lender Investors, for an amount in cash equal to all principal and interest thereon,
provided that, in each case, unless a Lender Investor Consent agrees otherwise, such ICG Realisation Event takes place in accordance with the terms of the Equity Documents and the ICG Conditions are met;
"Independent Expert" means the Nominated Partner at the Agreed Investment Bank;
"Independent Value" means the aggregate market value for all of the Shares then in issue, either (A) as stated in writing by the Independent Expert; or (B) if the Independent Expert produces a range of aggregate values for the Shares, the mid-point of such range as stated in writing by the Agreed Investment Bank, in each case, as at the relevant Exchange Date unless agreed otherwise by the Majority Lender Investors and the Lead Promoter. In calculating such Independent Value the Independent Expert must calculate the aggregate value of all Shares on the basis of a sale of the entire issued share capital of the Company between a willing seller and a willing buyer on arms' length terms and, in determining the aggregate market value of the Shares, the Independent Expert shall in particular:
(i) be engaged by the Company and instructed by or on behalf of the Majority Lender Investors and the Lead Promoter to calculate the Independent Value as a specific number but that, if the Independent Expert determines that a range is required, the high point of such range may be no more than 105% of the low point of such range ( or such other percentage as the Majority Lender Investors and the Lead Promoter may agree in writing);
(ii) assume that all amounts outstanding under the Buyer Financing Documents are being repaid in full, in each case, as at completion of the relevant Exit, ICG Drag or ICG Realisation Event;
(iii) take account of the provisions of Article 5;
(iv) disregard any restrictions as to transfer, redemption, purchase and/or repayment in respect of any of the Shares;
(v) assume that the Target Group is then carrying on business as a going concern;
(vi) calculate the value of the Target Group Companies on a cash free debt free basis subject to normalised working capital for the Target Group using the same methodology in calculating and determining what is debt and cash and the normalised working capital for the Target Group as has been agreed between the Lender Investors and the Initial Lead Promoter ( or their advisers) by the Completion Date, with such methodology being confirmed as being the same by Nick Jeal (of such other Transactional Services partner of Deloitte LLP based in the City of London nominated by Deloitte LLP at the relevant time) to the Independent Expert on a non-reliance basis (the "Value Methodology"). For the avoidance of doubt, deferred revenue redemption costs less accounts receivable (management definition of "restricted" cash) shall be included in the Value Methodology as a debt-like item and reclassified from working capital; and
(vii) assume that all amounts due in respect of the Securities (including all accrued dividends and interest thereon) are due and payable on the relevant Exit, ICG Drag or ICG Realisation Event whether the relevant company could lawfully make such payment or not;
"Market Value" means, in relation to the total amount of Shares in issue at the relevant time:
(c) in respect of an ICG Realisation Event which occurs simultaneously with or following an SF Repayment:
(i) if such SF Repayment was related to or in connection with the acquisition by any Buyer Group Company of equity securities in the Target Group from any person other than a Target Group Company ("Acquired Target Shares"), the higher of:
(A) the amount equal to the aggregate consideration which would be payable to the Buyer Group if all of the Securities in the Target Group held by any Buyer Group Company at the relevant time were purchased at a price per share equal to the weighted average of the price per share paid by the relevant Buyer Group Company for the Acquired Target Shares over the previous 6 months, less the Relevant Net Indebtedness immediately prior to such SF Repayment and adjusted in accordance with the Value Methodology if such Value Methodology was not used in agreeing the consideration payable for such Acquired Target Shares; and
(B) such value as would result in the Original Al Shares held by the Lender Investors at such time receiving a payment which in aggregate is at least equal to or greater than two times the ICG Equity Investment; and otherwise
(ii) if not referred to in paragraph (a), (b), (d) or (e), the Independent Value;
(g) in respect of any other ICG Realisation Event or the ICG Drag, the Independent Value;
"Material Breach" means:
(a) any breach or failure to comply with (A) any provision of Articles 4, 5, 7, 8 or 11; or (B) any provision of clauses 5.3, 6.10, 8, 10.2, 10.12, 10.13, 10.14, 10.15 or 11.4 of the Shareholders Agreement; and/or
(b) the circulation of a resolution by or with the authority of the Board or some other person who is ostensibly legally entitled to do so: (A) for a Buyer Winding-Up; (B) for a reduction in the capital of the Company; or (C) varying any of the rights attaching to any of the Al Ordinary Shares, in each case without Lender Investor Consent;
"Relevant Proportion" means the proportion which the number of Original A 1 Shares held by the Lender Investors at the relevant time represents of the total number of Original Equity Shares at the relevant time;
"SF Repayment" means the full and final repayment of all amounts advanced under the Senior Facility Agreement (unless already repaid) and all amounts owing or due (then or in the future) in respect the SF Notes and/or under the Senior Facility Agreement including by way of interest, costs or otherwise or, with prior Lender Investor Consent, all amount other than USDl;
"Target" means Globoforce Group Public Limited Company, a public limited company incorporated in Ireland (Irish company number 533586);
"Target Group" means the Target and its subsidiary undertakings from time to time and
references to a "Target Group Company" shall be construed accordingly;
4. DIVIDEND RIGHTS
4.1 Subject to: (i) the Board recommending payment of the same; (ii) the Law; (iii) the receipt of any consent required pursuant to the Shareholders Agreement and in accordance with the terms of the Shareholders Agreement; and (iv) the remaining provisions of this Article 4, any Available Sources which the Company may determine to distribute at any time shall be distributed in the following order:
4.1.1 in priority to any other payments under this Article 4.1, where following an ICG Realisation Event ( other than an ICG Realisation Event which occurs after a Target Listing in respect of which the Lender Investors have served an Equity Retention Notice), the Al Ordinary Shareholders elect to receive some or all of the amount due to them as a consequence of such ICG Realisation Event by way of dividend, by paying to the holders of the Original Al Shares an aggregate amount equal to the Prior Return less any amounts that have been paid or which are to be paid to in respect of the Original Al Shares in respect of the same ICG Realisation Event by way of return of capital pursuant to Article 5, redemption pursuant to Article 7 or a buyback by the Company in respect of such Original A 1 Shares, such amount to be distributed between the holders of such Original Al Shares in proportion to their respective holdings of such Original Al Shares;
7. REDEMPTION RIGHTS
Redemption of A1 Ordinary Shares
7.1 All of the Original Al Shares then in issue shall, subject to any restrictions set out in the Law, be redeemed by the Company, subject to receipt of a Lender Investor Consent:
7 .1.1 immediately prior to completion of an Exit, or ICG Drag (except in respect of any
Original Al Shares being transferred in connection with such Exit or ICG Drag) provided that the redemption of the Original Al Shares is part of a simultaneous ICG Realisation Event and the ICG Exit Conditions are being satisfied at the same time; or
7 .1.2 on an ICG Realisation Event (other than an ICG Realisation Event which occurs after a Target Listing in respect of which the Lender Investors have served an Equity Retention Notice), provided that (unless a Lender Investor Consent agrees otherwise) on completion of such ICG Realisation Event the ICG Realisation Amount is being received by the Lender Investors and the ICG Exit Conditions are being satisfied at the same time,
provided that, in each case, no Al Ordinary Shares shall be redeemed for a period of 24 months from the Completion Date where such redemption would be prohibited by Regulation 43 of the AIFM Regulations.
27. NOTICES
27.1 Subject to the specific terms of these Articles, any notice to be given to or by any person
pursuant to these Articles (other than a notice calling a meeting of the Board or a committee thereof) shall be in writing.
SHA
1. DEFINITIONS AND INTERPRETATION
1.1 The following words and expressions where used in this Agreement have the meanings given to them below:
"Buyer Group" means the Company and any undertaking which is a subsidiary undertaking of the Company from time to time (but excluding each Target Group Company) and, if applicable, any New Buyer Holding Company and references to "Buyer Group Company" and "member of the Buyer Group" shall be construed accordingly;
"Exit" means a Buyer Sale, a Buyer Assets Sale (provided it is promptly followed by (i) the passing of a shareholders resolution or (ii) the filing of a court order in respect of a Buyer Winding-Up), a Buyer Listing or a Buyer Winding-Up;
"Financing Documents" means the Senior Facility Agreement and the SF Notes together with the associated security documents and ancillary documents including any intercreditor deed referred to therein and any other similar finance or facility agreements entered into from time to time by any Buyer Group Company together with the associated security documents and ancillary documents including any intercreditor deed referred to therein;
"Initial Lead Promoter" means Barry Maloney;
"Initial Lender Investor" means Falcon VII Investment S.a r.l;
"Lender Investor" means (a) Falcon VII Investment S.a.r.l; (b) any Lender Investor Associate; and ( c) any other person who undertakes to perform the obligations of a Lender Investor under a Deed of Adherence, in each case for so long as it (or any person who holds the legal title to Shares and/or any other Securities as nominee, custodian, trustee or otherwise on its behalf) holds any Share and/or other Security or is otherwise owed any sum by any Buyer Group Company, and "Lender Investors" shall be construed accordingly;
"Material Target Information" means (i) written details of any circumstances which the Lead Promoter is aware of and is reasonably likely to (A) cause any actual or prospective material adverse change in the financial position, prospects, assets or business of any Target Group Company; (B) constitute a material breach of, or materially adversely affect, any Target Group Company's ability to perform its obligations under this any Target Investment Document or the Target Financing Documents; (C) cause any reputational damage to any Target Group Company (including issues relating to bribery, corruption or whistleblowing); or result in any threatened or instituted litigation, arbitration, administrative proceedings or claim materially and adversely affecting any member of the Target Group (whether financially, commercially or reputationally); and (ii) the board packs and management reports received by Bidco and/or the Lead Promoter from any Target Group Company and the minutes of any board or committee meeting;
"Relevant Party" means each party to this Agreement from time to time including, for the avoidance of doubt, a person joining through a Deed of Adherence) other than the Lender Investors;
"Services Default" means any action or omission of the Initial Lead Promoter or the Replacement Lead Promoter (after he becomes the Lead Promoter) at any time which entitles a party to the Services Agreement to terminate the Services Agreement in accordance with its terms (excluding where this arises by reason of his becoming a Fair Leaver) including where this arises by reason of his failure at any time to act in accordance with the terms of the Services Agreement (and for the purpose of this definition no account shall be taken of any waiver given in respect of any such breach (other than an Unconditional Waiver) by any person or any standstill agreement or similar arrangements with any person);
1.4.8 an "Lender Investor Consent" or an "Lender Investor Direction" shall mean the giving of a written consent or direction by the Majority Lender Investors, provided that for so long as there is a Lender Investor Director, any such consent or direction required or permitted to be given by the Majority Lender Investors under this Agreement shall be validly given if given by the Lender Investor Director in the manner set out in Clause 7 or, if at any time there is more than one Lender Investor Director, any Lender Investor Director, in the manner set out in Clause 7 (in each case such consent being given by the Lender Investor Director in his capacity as a representative of the Majority Lender Investors and not in his capacity as a director of the Company);
3. CONSTITUTION OF THE BOARD
3.1 At all times prior to (i) the occurrence of a Default Event or Services Default; or (ii) the Promoters together with the Promoter lnvestcos ceasing to hold, in aggregate, 5% in number
of all Company Equity Securities in the Company in issue at the relevant time:
3.1.1 subject to Clauses 3 .3 and 3.10, a Promoter Majority shall be entitled to appoint up to three people to the Board and to the board of each other Buyer Group Company (and to any committee of any such board) as directors ( each a "Promoter Director"), and to remove any such person as their appointee for any reason whatsoever and to appoint another person in his place; and
3.1.2 the Majority Lender Investors shall be entitled at any time to appoint up to two people to the Board and to the board of each other Buyer Group Company (and to any committee of any such board) as non-executive directors (each a "Lender Investor Director"), and to remove any such person as its appointee for any reason whatsoever and to appoint another person in his place.
Board resolutions
3.13 Meetings of the Board shall make decisions by passing resolutions. Subject to Clause 3.14 each Director shall have one vote and a resolution shall be considered to be passed if more votes are cast for it than against it.
3. 14 At all times prior to the occurrence of a Default Event or a Services Default (but not thereafter):
3.14.1 if only one Promoter Director has been appointed, that Promoter Director (or his alternate) voting on a resolution of the Board shall be deemed to exercise three votes in respect of such proposed resolution; and
3.14.2 if only two Promoter Directors have been appointed, such Promoter Directors (or their alternates) voting on a resolution at a meeting of Directors shall be deemed to exercise, between them, three votes in respect of such proposed resolution provided that, if both Promoter Director so vote, such votes are exercised in like manner; and
3.14.3 if only one Lender Investor Director has been appointed, that Lender Investor Director (or his alternate) voting on a resolution of the Board shall be deemed to exercise two votes in respect of such proposed resolution.
4. CONSTITUTION OF THE TARGET BOARD
4.1 Without prejudice to any other rights he may have whether under the Articles or the Target Articles, as a matter of law or otherwise, at all times prior to the occurrence of a Default Event or a Services Default, the Lead Promoter shall be entitled to act as the Target Investor Director. Without prejudice to his right to appoint a temporary alternate director in accordance with Clauses 3.5 and 4.3, in no circumstances shall the Lead Promoter or Bidco (without prior Lender Investor Consent) appoint any other person to act as the Target Investor Director.
4.2 Without prejudice to any other rights any person (other than a Promoter) may have whether under the Articles, this Agreement, as a matter of law or otherwise, following a Default Event or a Services Default, the Majority Lender Investors shall be the only person entitled to appoint and/or remove the Target Investor Director and if so directed to so by an Lender Investor Direction, the Buyer Group Companies shall exercise their rights and powers to remove any Target Investor Director and appoint the replacement set out in such Lender Investor Direction.
5. CONDUCT OF BUSINESS
5 .2 Each Buyer Group Company covenants and undertakes to the Lender Investors (except to the extent that this would constitute an unlawful fetter on its statutory powers, for which purpose each paragraph of Schedule 5 is separate and severable) to comply with the obligations and restrictions contained in Schedule 5 and to procure that each Buyer Group Company shall comply with the obligations and restrictions contained in Schedule 5.
5.3 The parties agree and acknowledge that the Buyer Group shall conduct its affairs in accordance with the restrictions and obligations set out in Schedule 5 and, accordingly:
5 .3. 1 each Relevant Party covenants and undertakes to the Lender Investors that he shall at all times conduct himself and exercise his rights (whether as a security holder, director, or employee or otherwise of any Buyer Group Company and/or Target Group Company, as applicable) in a way which is consistent with, and to ensure compliance with, the obligations and restrictions set out in Schedule 5 and he shall procure the performance of each obligation or adherence to such restrictions and obligations as set out in Schedule 5 by each Buyer Group Company; and
5 .3 .2 until the occurrence of a Default Event, each Lender Investor covenants and undertakes to the Promoters that it shall not exercise any of its voting rights attached to any of its Equity Securities to pass a shareholder resolution of the Company to take an action which is prohibited under Part E of Schedule 5.
5.4 The parties agree and acknowledge that, notwithstanding any provision of this Agreement or the Articles but subject to the provisions of the Finance Documents, an SF Repayment (as defined in the Articles) may be effected by the Buyer Group without any requirement for the consent or approval of the Lender Investors provided that the ICG Exit Conditions are satisfied and the terms of this Agreement, the Articles and the Financing Documents are all adhered to.
6. PROVISION OF INFORMATION
Target Group Information
6.1 Each of the Buyer Group Companies hereby agrees with the Investors that they will:
6.1.5 promptly following a request from an Investor:
(a) obtain any other information or document relating to or held by any Target Group which Bidco is entitled to request under any the Target Investment Documents law or otherwise and promptly deliver such information to all Investors upon receipt; and
(b) procure the enforcement of(or, in the case of Bidco, enforce) Bidco's rights in relation to the receipt of any information under any of the Target Investment Documents or the law or otherwise; and
6.1.6 promptly following receipt, inform the Majority Lender Investors and the Lead Promoter and deliver to the Investors all such information and/or docum~nts referred to in clauses 6.1.1 to 6.1.3 and all Material Target Information received by the Buyer Group.
6.2 The Lead Promoter hereby agrees with the Buyer Group Companies and the Lender Investors that he will:
6.2.4 upon receipt of an email request from any of the Lender Investors for additional information relating to the Target Group (such request to be made no more frequently than monthly):
(a) if such information is known or available to the Lead Promoter, promptly respond to such email request with the relevant information; or
(b) if such information is not known or available to the Lead Promoter and/or if the Majority Lender Investors reasonably determine that the response from the Lead Promoter does not adequately address the Lender Investors' request(s) for information:
(i) procure that the chief financial officer of the Target Group promptly receives the request(s) for information made by the Lender Investors;
(ii) if Bidco is entitled to receive such information under the Target Investment Documents:
(A) procure the delivery of such information; and
(B) if the information is not forthcoming, procure the enforcement of Bidco's rights under the Target Investment Documents in relation to such request(s) for information; and
(iii) if Bidco does not have the right to receive the information requested by the Lender Investors, use reasonable endeavours in good faith to procure the prompt delivery of such information to the Lender Investors by the chief financial officer of the Target Group; and
6.2.5 promptly following receipt, inform the Majority Lender Investors and deliver to the Lender Investors all such information and/or documents referred to in Clause 6.2.4 and all Material Target Information received by the Lead Promoter
Buyer Group Information
6.3 Each Buyer Group Company agrees with the Investors that it will, if necessary, introduce and maintain effective and appropriate control systems in relation to the financial, accounting and record-keeping functions of the Buyer Group and will generally keep the Investors informed of the progress of each Buyer Group Company's business and affairs and in particular will:
6.3.1 procure that the Investors are given such information and such access to the officers, employees and premises of the Buyer Group as they may require for the purposes of enabling them to monitor their investment in the Buyer Group; and
6.3.2 direct each Buyer Group Company's auditors from time to time to provide direct to any Investor such information as that Investor may request for the purposes of enabling them to monitor their investment in the Buyer Group.
6.10 Each Relevant Party shall procure the full and prompt performance by each Buyer Group Company of its obligations under this Clause 6 (and shall ensure each relevant Buyer Group Company complies with any direction given by a Buyer Group Company or a Lender Investor Direction in respect of any provision of this Clause 6) and shall inform the Lender Investors in writing, forthwith upon the Relevant Party becoming aware of the same, of any circumstances giving rise to an obligation on any Buyer Group Company to inform the Lender Investors under the terms of this Clause 6. Each Buyer Group Company shall procure the full and prompt performance of each person's obligations under this Clause 6.
7. LENDER INVESTOR CONSENTS AND DIRECTIONS
7. I If the same proposed transaction or matter requires a Lender Investor Consent under more than one provision of this Agreement, a single Lender Investor Consent to that proposed transaction or matter shall be deemed to cover all required Lender Investor Consents.
7.2 A Lender Investor Consent or a Lender Investor Direction given by a Lender Investor Director may only be validly given (whether for the purposes of this Agreement, the Articles or otherwise) if the Lender Investor Director or, if at any time there is more than one Lender Investor Director, one of the Lender Investor Directors:
7.2.1 gives his consent or direction in writing to the Company; or
7.2.2 (in the case of a consent, as opposed to a direction, required from any of the Lender Investor Directors) signs a written resolution of the Board or signs the minutes of the Board or committee meeting approving the relevant transaction or matter, and provided that the relevant consent or direction is expressly referred to as a Lender Investor Consent or Lender Investor Direction. A Lender Investor Director may (in the absence of any such express reference) consent to or refer to a matter in his capacity as a director without that representing a Lender Investor Consent or a Lender Investor Direction.
10. EXIT AND ICG REALISATION EVENT
10.1 Subject to clauses 10.2, 10.6 and 10.8, each of the parties agree and acknowledge that:
10.1.1 prior to (i) the occurrence of a Default Event or Services Default or (ii) the Initial Lead Promoter becoming a Leaver (other than a Good Leaver), the Initial Lead Promoter shall have primary responsibility for determining the timing of any Exit or ICG Realisation Event, subject always to such Exit or ICG Realisation Event being effected on the terms of this Agreement, the Financing Documents and the Articles; and
10.1.2 prior to (i) the occurrence of a Default Event or Services Default but after (ii) the Initial Lead Promoter becoming a Fair Leaver, a Replacement Lead Promoter shall have primary responsibility for determining the timing of any Exit or ICG Realisation Event, subject always to such Exit or ICG Realisation Event being effected on the terms of this Agreement, the Financing Documents and the Articles; and
10.1.3 following (i) the occurrence of a Default Event or Services Default or (ii) the Lead Promoter becoming a Leaver (other than a Good Leaver), the board of the Company shall have primary responsibility for determining the timing of any Exit or ICG Realisation Event, subject always to such Exit or ICG Realisation Event being effected on the terms of this Agreement, the Financing Documents and the Article and in such circumstances each reference to "Initial Lead Investor" in this clause 10 shall be deemed to refer to the board of the Company, acting with Lender Investor Consent.
Exit Conditions
10.2 Notwithstanding anything to the contrary, unless the Majority Lender Investors agree otherwise, no ICG Realisation Event, ICG Drag or Exit will take place unless it is carried out in accordance with the provisions of this Agreement and the Articles and the ICG Exit Conditions are satisfied.
10.3 No Exit, ICG Drag and/or ICG Realisation Event shall take place without Lender Investor Consent unless:
10.3.1 all of the Lender Investors' requirements for KYC Information have been satisfied; and
10.3.2 none of the direct or indirect participants in the Exit, ICG Drag and/or ICG Realisation Event are Restricted Persons.
Obligations and Process
10.4 Subject to clause 10. l l, if an Exit or an ICG Realisation Event is proposed by the Board, provided all requisite Lender Investor Consents have been obtained in accordance with Clauses 10.2 and 10.3, then:
10.4.1 the Board shall appoint corporate finance advisers and financial, accounting and legal advisers to act in respect of such Exit or ICG Realisation Event on behalf of each Buyer Group Company and/or all of the Security Holders which, in each case shall be independent third parties who are not connected persons of any Relevant Party and/or any of their Affiliates (save that this shall not apply to prevent Capnua Limited being appointed for this role);
10.4.2 such advisers' fees will be borne by the Company or any other Buyer Group Company (to the extent permitted by law) and/or the Shareholders in accordance with the provisions of Clause IO. l 7 provided that such fees and any expenses are reasonable and proportionate in accordance with market practice for such engagements; and
10.4.3 the Lead Promoter and the Buyer Group Companies shall promptly give such co-operation and assistance in preparing for and implementing the Exit or an ICG Realisation Event and satisfying the ICG Exit Conditions as the Board may reasonably request, including in relation to the preparation of an information memorandum and vendor due diligence reports and the giving of presentations to potential buyers, investors, financiers and/or their advisers.
10.5 The parties acknowledge and agree that:
10.5.1 on an Exit, ICG Drag or ICG Realisation Event, the Lender Investors and the Lender Investor Directors will not give any representations, warranties or indemnities except for a warranty to be given by each Lender Investor as to the title to its Shares and as to its capacity to sell those Shares;
10.5.2 in view of the opportunity afforded to them by the terms of their participation in the transaction of which this Agreement forms part, on an Exit or an ICG Drag, those of the Promoters as are at that time directors, employees of or service providers to any Buyer Group Company or Security Holders will (and will procure that their Promoter Investees will) give such undertakings, warranties and indemnities as are reasonably requested by the buyer or the sponsor as the case may be, or which are customarily given to a buyer or a sponsor in the context of an Exit or other partial Exit, in each case subject to customary limitations on liability;
10.5.3 subject to clause 10.5.1, nothing herein shall oblige any of the Lender Investors to incur any potential liability or take on any obligation.
Exit Committee
10.6 If on the date falling five years from the Completion Date the Lender Investors hold any Securities, the Board shall constitute an exit committee (the "Exit Committee") (which shall at all times comprise an Investor Director, the Lead Promoter) which shall be authorised to have sole authority to together pursue, negotiate and execute an ICG Realisation Event which satisfies the ICG Exit Conditions.
10. 7 Subject to Clause 10.8 below, the Exit Committee, once constituted, shall determine the timing, structure, pricing and form of such ICG Realisation Event provided that such ICG Realisation Event satisfies the ICG Exit Conditions.
Buyer Group Listing
10.15 Without prejudice to Clauses 10.1 to 10.10, on an Exit by way of a Buyer Listing:
Disclosure
10.15.5 Each of the Relevant Parties each undertake to each of the Lender Investors that if an ICG Realisation Event, Exit or ICG Drag is contemplated he will, prior to the ICG Realisation Event, Exit or ICG Drag occurring, disclose to them in writing (whether or not at the specific request of the Lender Investors) the full details of any agreements, arrangements or understandings pursuant to which he (or any person connected with him) will or may receive any other consideration or payment, directly or indirectly in connection with the ICG Realisation Event, ICG Drag or an Exit.
The Articles
10.20 If the provisions of the articles of association for the time being of any Buyer Group Company and/or any other instrument or agreement pursuant to which Securities (other than the SF Notes) have been issued conflict with the provisions of this Agreement then, during such period, the parties agree that the provisions of this Agreement shall prevail.
10.21 If any such conflict should be identified, each of the Relevant Parties agrees and undertakes, if so requested by Lender Investor Direction, to procure the amendment of the articles of association of the relevant Buyer Group Company or the relevant instrument or agreement pursuant to which the relevant Securities have been issued to eliminate the conflict.
11. COMPLIANCE COVENANTS
11.1 Subject to clause 11.5, each party agrees to observe and comply fully and promptly with the provisions of the Articles to the intent and effect that each and every provision thereof shall be enforceable by the parties to this Agreement between themselves and in whatever capacity notwithstanding that any such provision might not have been so enforceable in the absence of this Clause 11.1.
11.2 Each of the Relevant Parties undertakes that he will exercise his rights in each Buyer Group Company and each Buyer Group Company (whether as a Security Holder, director, employee or otherwise) to procure that full effect is given to the obligations of each Buyer Group Company under this Agreement, the Articles and/or any other Transaction Document and/or any other instrument or agreement governing the relevant Security.
13. CONFIDENTIALITY
13.2 Subject to Clause 13.1, each party shall in all respects keep confidential and not at any time disclose or make known in any other way to anyone whomsoever or use for his own or any other person's benefit or to the detriment of any Buyer Group Company any Confidential
Information, provided that:
13 .2.1 such obligation shall not apply to information which becomes generally known (other
than through a breach by any party of this Clause);
13.2.2 any party shall be entitled at all times to disclose such information as may be required by law or by any competent judicial or regulatory authority or by any Recognised Stock Exchange or for tax or accounting purposes or required by the Financing Documents (provided that, so far as practicable, the disclosing party shall consult with the other parties prior to making such disclosure); and
13.2.3 nothing contained in this Clause shall prevent any employee of any Buyer Group Company from disclosing information in the proper performance of his duties as an employee.
19. GENERAL
Entire agreement
19.1 This Agreement (together with any documents referred to herein or entered into pursuant to this Agreement, which shall include the Transaction Documents) contains the entire agreement and understanding of the parties and supersedes all prior agreements, understandings or arrangements (both oral and written) relating to the subject matter of this Agreement and any such document. Each of the other parties acknowledges that he is entering into this Agreement without reliance on any undertaking or representation given by or on behalf of any Lender Investor other than as expressly contained in this Agreement, provided that nothing in this Clause shall exclude any liability of a party for fraudulent misrepresentation.
20. NOTICES
Form of Notice
20.1 Any notice, consent, request, demand, approval or other communication to be given or made under or in connection with this Agreement (each a "Notice" for the purposes of this Clause) shall be in writing and signed by or on behalf of the person giving it.
Method of service
20.2 Service of a Notice must be effected by one of the following methods:
20.2.1 by hand to the relevant address set out in Clause 20.4 and shall be deemed served upon delivery if delivered during a Business Day, or at the start of the next Business Day if delivered at any other time; or
20.2.2 if posted in the same jurisdiction as the recipient, by prepaid first-class post to the relevant address set out in Clause 20.4 and shall be deemed served at the start of the second Business Day after the date of posting; or
20.2.3 if not posted in the same jurisdiction as the recipient, by prepaid international airmail to the relevant address set out in Clause 20.4 and shall be deemed served at the start of the fourth Business Day after the date of posting; or
20.2.4 by email to the email address specified in Clause 20.4 and shall be deemed served at the time of sending, provided that service shall not be deemed to have occurred if the sender received an automated message indicating that the message has not been delivered to the recipient.
20.3 In Clause 20.2 "during a Business Day" means any time between 9.30 a.m. and 5.30 p.m. on a Business Day based on the local time where the recipient of the Notice is located. References to "the start of a Business Day" and "the end of a Business Day" shall be construed accordingly.
Address for service
20.4 Notices shall be addressed as follows:
20.4.1 Notices for any Buyer Group Company shall be marked for the attention of:
Name: the Directors
Address: c/o James Roddis and Bernard Coady, Intermediate Capital Group, Juxon House, 100 St Paul's Churchyard, London EC4M 8BU;
20.4.2 Notices for any Promoter or Promoter Investco shall be addressed or sent to the relevant Promoter at the address set out next to his name in Part A of Schedule 1.
20.4.3 Notices for any Lender Investor shall be addressed or sent to the relevant Lender Investor at the address set out next to its name in Part B of Schedule 1.
20.4.4 Notices for the Executive shall be addressed or sent to him at the address set out next to its name in Part C of Schedule 1.
20.4.5 Notices for any of the Capnua Entities shall be addressed or sent to him at the address set out next to its name at the start of this Agreement.
20.4.6 In the case of any other party to this Agreement from time to time, notices shall be addressed to the relevant party at the address set out in the Deed of Adherence relating to that party.
Copies of Notices
20.5 Copies of all Notices sent to any of the Buyer Group Companies and Lender Investors shall also be sent to Helen Croke of Ropes & Gray International LLP, 60 Ludgate Hill, London,
EC4M 7AW. Failure to do so shall not invalidate such Notice.
20.6 Copies of all Notices sent to the Initial Lead Promoter shall also be sent to Niall Powderly and Ben Gaffikin of McCann FitzGerald, Riverside One, Sir John Rogerson's Quay, Dublin 2, Ireland. Failure to do so shall not invalidate such Notice.
Agent for service and deemed service
20.7 Each Promoter each irrevocably severally authorises and appoints each of his Promoter Investcos to be his agent, acting severally, for service of notices and/or proceedings in relation to any matter arising out of or in connection with this Agreement and vice versa. Service on such agent in accordance with this Clause 20 shall be deemed to be effective service on the Promoters and/or Promoter Investcos ( as appropriate).
Change of details
20.8 A party may change its address for service provided that it gives the other party not less than 28 days' prior notice in accordance with this Clause 20. Until the end of such notice period, service on either address shall remain effective.
No Buyer Group Company shall, and shall exercise its rights in each Buyer Group Company to procure that each Buyer Group Company shall not, without Lender Investor Consent (but in any event subject to the terms and conditions of the Financing Documents):
Agreements and arrangements
6. enter into, amend, vary or waive any provision of, or terminate (or give notice to terminate) any of, the Financing Documents, the Share Purchase Agreement, the Service Agreements, the Target Investment Documents, or any instrument or agreement governing or relating to any Securities or Target Group Securities or request any indulgence or waiver thereunder (excluding, for the avoidance of doubt, the exercise of any cure rights) or take any action inconsistent therewith;
Loans and borrowings
12. grant, create or allow to arise any Security Interest over any of its assets (other than as envisaged by the Senior Facility Agreement);
13. borrow any monies or incur any indebtedness or other liability other pursuant to the Senior
Facility Agreement;
24. instigate or take any steps in relation to an Exit or ICG Realisation Event unless the provisions of this Agreement and the Articles are being complied with and the ICG Exit Conditions are being satisfied (where applicable);
28. agree to do any of the things referred to in this Part B.
Without prior Lender Investor Consent (i) no Buyer Group Company or Relevant Party shall consent to (whether by exercising voting rights or otherwise) any of the following matters, (ii) each Buyer Group Company shall exercise its rights to procure that there shall not be, and (iii) each Relevant Party shall vote against any of the following matters if raised or proposed to any board of directors (or any committee thereof) of any Target Group Company in respect of which such Relevant Party is entitled to vote:
1. any (conditional or unconditional) increase or reduction or other alteration whatsoever (including by way of redemption, purchase, sub-division, consolidation or redesignation) of any Target Group Company's share capital
6. any amendments to the Target Investment Documents and/or any other constitutional documents or other equity documents of any Target Group Company other than any amendments necessary to implement a Target Listing provided that such Target Listing complies with the terms of this Agreement;
12. establishing or making any appointment to any committee of the board of directors of any Target Group Company other than the audit committee, remuneration committee and nomination committee of the Target which exist at the Completion Date; and/or
13. any agreement to do any of the things referred to in this Part D.
Services Agreement
1. DEFINITIONS AND INTERPRETATIONS
1.1 In this Agreement, the following terms shall, unless the context otherwise requires, have the following meanings:
"Loss" means all costs, expenses, liabilities, claims and losses (including legal costs) for any
Buyer Group Company or any Security Holder;
3. SERVICES
3.1 BM shall provide to the Buyer Group Companies the Services on the terms and conditions of this Agreement and perform the obligations under this Agreement in accordance with the terms of this Agreement.
5. TERM AND TERMINATION
5.2 Any Buyer Group Company (with prior Lender Investor Consent) or any Lender Investor may terminate this Agreement with immediate effect on giving notice of such to BM if BM or any BM Investco:
5.2.1 ceases to or fails to provide any of the Services in accordance with the terms of this Agreement in circumstances where he is a Fair Leaver;
5.2.2 breaches or fails to perform or meet any of his obligations under this Agreement, for whatever reason, where such breach or failure is either incapable of remedy or, where it is capable of remedy, it remains unremedied (provided that a breach or failure shall be deemed to be unremedied if there is any Loss either as a result of the breach or failure or in connection with the remedy) 5 Business Days after the earlier of (i) written notice of such breach or failure being sent by a Lender Investor to BM; or (ii) such breach of failure arising;
5.2.3 commits any fraud or provides any fraudulent misstatement in- connection with his role as a director of any Target Group Company or any Buyer Group Company, commits any criminal offence, is declared bankrupt or makes an arrangement with or for the benefit of his creditors, or has a county court administration order or similar made against him under the County Court Act 1984 or similar in any other jurisdiction;
5.2.4 is disqualified from acting as a director;
5.2.5 commits a Material Breach; or
5.2.6 following a Default Event occurring,
in each case, for whatever reason and no compensation, recompense or restitution shall be payable to BM in respect of any such termination.
10. NOTICES
10.1 Any notice, consent, statement, request or approval (a "Notice") to be given under this Agreement shall be in writing and signed by or on behalf of the party giving it. Any Notice shall be sent to the party to be served at the address set out at the front of this Agreement. Any alteration in such details shall, to have effect, be notified to the other party in accordance with this Clause 10.
10.2 Service of a Notice must be effected by prepaid recorded delivery or registered post. In
proving service, it shall be sufficient to prove that the envelope containing the Notice was
correctly addressed, postage paid and posted.
1. TARGET BOARD
1.1 Acting as the Target Investor Director and exercising all of the rights and powers of a Target Investor Director and exercising his voting rights and using any and all rights and powers vested in him or any Buyer Group Company from time to time as a holder of any securities in any and/or director of any Target Group Company and/or Buyer Group Company or otherwise in his discretion subject to the obligations in the Shareholders Agreement and the Articles.
1.3 Promptly reporting to the Lender Investors in respect of any matter on which the Target Investor Director or any Buyer Group Company has given any consent or direction or exercised any voting rights or negative control rights when such any matter required the consent of the Lender Investors under the Shareholders Agreement or Articles.
2. INFORMATION
2.2 Inform the Lender Investors in writing, forthwith upon becoming aware of the same, of any circumstances giving rise to an obligation on any Buyer Group Company to inform the Lender Investors under the terms of clause 6 of the Shareholders Agreement.
2.4 Upon receipt of an email request from any of the Lender Investors for additional information relating to the Target Group (such request to be made no more frequently than monthly):
(a) if such information is known or available to BM, promptly responding to such email request with the relevant information; or
(b) if such information is not known or available to BM and/or if the Majority Lender Investors reasonably determine that the response from BM does not adequately address the Lender Investors' request(s) for information:
(i) exercise his voting rights and use any and all powers vested in him or any Buyer Group Company from time to time as a holder of securities in any and/or a director of any Target Group Company or Buyer Group Company or otherwise to procure that:
(A) the chief financial officer of the Target Group promptly receives the request(s) for information made by the Lender Investors;
(B) if the Company is entitled to receive such information under the Target Investment Documents:
(1) such information is delivered; and
(2) if the information is not forthcoming, the Buyer Group Company's rights under the Target Investment Documents in relation to such request(s) for information are enforced; and
(ii) if the Company does not have the right to receive the information requested by the Lender Investors, using reasonable endeavours in good faith to procure the prompt delivery of such information to the Lender Investors by the chief financial officer of the Target Group.
3. CONDUCT
At all times conduct himself and exercise the rights and powers of vested in him or each Buyer Group Company from time to time whether as a security holder, director, or employee under Law or otherwise of any Buyer Group Company or Target Group Company:
3.1 in accordance with, and to ensure compliance with the obligations and restrictions set out in Parts B, C and D of Schedule 5 of the Shareholders Agreement; and
3.2 to procure that each BM Investco, alternate, proxy or any other person to which BM delegates (or who acts as BM's substitute) complies with the obligations and restrictions set out in Parts B, C and D of Schedule 5 of the Shareholders Agreement; and
3.3 in accordance with, and to ensure compliance with Clause 10 of the Shareholders Agreement.
Term Sheet
| 11. | Consent Matters | ICG will have agreed investor protections over the actions of the Buyer Group including, without limitation, those set out in Schedule 1. Suitable financial thresholds (where applicable) in relation to the matters set out in Schedule 1 to be agreed between ICG and BM. Unless there has been a Default Event and subject to Section 15, these investor protections shall not operate at the level of the Investment, and BM will have control over the exercise of the Buyer's vetoes at Investment level. However, ICG's consent will be required before any BM, any Promoter or any Buyer Group Company may give its consent or approval to the following actions (or knowingly refrain from exercising its rights to prevent any of the following actions happening) in relation to the Investment Group Companies (the "ICG Consent Rights"): (a) issue of shares or securities (or options or warrants etc.) other than any issue of shares issued (i) as part of reorganization of the Investment's share capital immediately prior to an IPO where the economic rights are unchanged by such issue and provided such IPO is taking place in compliance with ICG's rights; or (ii) as a primary offering which is taking place immediately following an IPO (provided such IPO is taking place in compliance with ICG's rights); or (iii) any issue of shares under a MIP or other employee share scheme provided that no more than 5% in aggregate of the fully diluted share capital of the Investment on Completion (on the basis that all Options have been exercised and satisfied) is so issued; (b) new borrowings or any amendments to any current borrowings other than (i) replacing some or all of the $15 million borrowings which the Investment Group Companies currently have for the sole purpose of providing balance sheet support for the facilitation of the payment of dividends by Globoforce (the "Existing Dividend Borrowings") on the same terms as the Existing Dividend Borrowings (the "Replacement Borrowings"); or (ii) increasing the Existing Dividend Borrowings on the same terms (the "Increased Dividend Borrowings") provided that such Increased Dividend Borrowings, all Replacement Borrowings and Existing Dividend Borrowings do not in aggregate exceed $25 million and such Increased Borrowings are on the same terms as the Existing Dividend Borrowings;5 (c) any granting of security; (d) any appointment or removal of the director(s) appointed by the Buyer to any board of any Investment Group Company; (e) any alteration of the rights attached to any securities or the introduction of new rights for any securities; (f) any amendments to constitutional documents or other equity documents other than any amendments necessary to implement an IPO provided such IPO is taking place in compliance with ICG's rights; (g) any action or omission which BM knows (having consulted with ICG) is a breach of any law or regulation; (h) the entry into liquidation, etc. The list above is subject to due diligence. In addition, ICG will be consulted by BM before any decisions are made to appoint or remove any other directors to the board of any Investment Group Company (other than any directors being appointed by Atlas in accordance with the rights to appoint their representative to the board). Unless there has been a Default Event and subject to Section 15, BM will have the following consent rights in relation to the Buyer Group (the "BM Consent Rights"): (a) issue of shares or securities convertible into shares; (b) new borrowings other than Replacement Borrowings or Increased Dividend Borrowings; (c) any granting of security; (d) any alteration of the rights attached to the shares in any member of the Buyer Group unless the alteration has an equivalent and proportionate effect on the economic rights of the shares held by the Promoters as it does held by ICG; (e) any redemption, buyback of shares or return of capital; (f) any amendments to constitutional documents which materially affect the economic rights of the shares in the Buyer Group held by the Promoters unless such amendment has an equivalent and proportionate effect on the economic rights of the shares held by ICG; (g) the entry into liquidation, etc. It is intended that unless there has been a Default Event and subject to Section 15 and without prejudice to the ICG Consent Rights and the other provisions of this term sheet, the Buyer Group's veto rights relating to operational matters for the Investment will be delegated by the Topco board to BM under the Services Agreement. For the avoidance of doubt, unless there has been a Default Event and subject to Section 15, BM shall have sole responsibility for any decision to dispose of, or not dispose of, any shares in the Investment as part of a bona fide exit process to an independent third party (which for the avoidance of doubt excludes any related parties) on arms' length terms and provided that the proceeds are being used to first repay the Senior Facility in accordance with its terms and to acquire ICG's equity interests in accordance with Section 13 below and the other terms set out in this term sheet. Bidco shall exercise the powers and rights it has to procure that (i) the Investment Group Companies maintain systems and policies to ensure compliance with any applicable laws and regulations that apply to any of them and take all steps to comply with all such obligations; and (ii) ICG is promptly informed upon BM or any Buyer Group Company becoming aware of any facts or circumstances which are reasonably likely to constitute a breach by any Investment Group Company or any relevant person of any law or regulation in any jurisdiction in which any Investment Group Company operates and of any action taken to remedy the situation. |
| 13. | ICG Exit | The ICG equity interests and Senior Facility are joined together so that, unless ICG agree otherwise, ICG's equity interests can only be forced into a sale if the Senior Facility is also being paid out at the same time in accordance with its terms and the Senior Facility can only be repaid if ICG's equity interests are being paid out at the same time in accordance with the terms below. The Buyer Group will only be able to force a refinancing or sale of ICG's equity interests if at the same time the Senior Facility is being repaid in full in accordance with its terms and in the circumstances set out below and where ICG is receiving cash for its equity interests in Topco with a specific value (the "Valuation") and each such Valuation shall be determined as follows: (a) where the ICG equity interests are to be paid out as a consequence of a disposal of Bidco's shares in the Investment to an independent third party on arms' length terms (so other than a disposal to Atlas, another shareholder in the Investment, BM, a Promoter or a related party of any such person (a "Related Person") or as part of an IPO of the whole equity share capital of the Investment other than as set out in (d) below) the Valuation shall be determined on the basis of the price paid for such shares in the Investment (the "Third Party Price"); or (b) where the ICG equity interests are to be paid out as a consequence of a disposal of Bidco's shares in the Investment to a Related Person and: (i) the disposal takes place prior to the 3rd anniversary of Completion, the Valuation shall be the higher of (A) the equity valuation calculated based on the price paid for such shares in the Investment by the Related Person (the "Related Person Price") and (B) a 2x return on the ICG equity interests (based on the amount paid for the ICG equity interests at the date of Completion (adjusted to exclude any premium ICG has had to pay for their subscription for their internal purposes) (the "Subscription Price")); or (ii) the disposal takes place after the 3rd anniversary of Completion, the Valuation shall be the determined by a valuation by an independent partner (or person of equivalent standing) with experience in such matters based in either New York, LA or San Francisco at an investment bank from the list of investment banks set out in Schedule 3, as agreed by B and ICG, (or, failing agreement, chosen by the President of the Charted Accountants from such list provided that in making such choice the President can not pick either investment bank originally proposed by ICG or by BM) will be carried out to establish the equity value of the Investment if it was being sold on arms length terms to an independent third party with no minority discount being applied and therefore the value of ICG's equity interests in Topco (again with no minority discount being applied) (an "Independent Valuation") and the Valuation shall be the amount determined by such Independent Valuation. The valuer shall be instructed that the Independent Valuation should be determined as a specific number but that, if a range is required, the high point of such range may be no more than 105% of the low point of such range (or such other percentage as BM and ICG may agree). If the valuation provided is a range of values then the Independent Valuation will be at the midpoint of such range, unless agreed otherwise by BM and ICG. The Independent Valuation shall be addressed to ICG and BM or, where ICG and BM agree, to a member of the Buyer Group; or (c) where the ICG equity interests are to be paid out as a consequence of a refinancing of the Senior Facility which is related or in connection with an acquisition of shares by a Buyer Group Company in the Investment, the Valuation shall be the higher of (A) the equity valuation calculated based on the price paid for such shares in the Investment; and (B) a 2x return on the ICG equity interests (based on the Subscription Price); or (d) if after an IPO ICG continues to hold equity interests in Topco and the ICG equity interests are to be refinanced/acquired (either at the same time as the repayment in full of the Senior Facility or if the Senior Facility is no longer outstanding) and BM's equity interests in Topco are not, (but not, for the avoidance of doubt, where ICG exercises its right referred to in Section 7 to require the sale of Listed Shares) the valuation will be the higher of (A) the listing price at the time of the IPO; and (B) the price equal to the Listed Price for the Listed Shares at that time; or (e) where the ICG equity interests are to be paid out as a consequence of a refinancing of the Senior Facility where there is no related acquisition or disposal of shares in the Investment, the Valuation shall be the amount determined by an Independent Valuation. A 12 month anti-embarrassment protection will be required on any onward sale etc. If there has not already been an exit or disposal of all of the ICG equity interests, from 5th anniversary of this transaction completing, an Exit Committee of the Buyer Group will be formed (consisting of an ICG Director, BM and others to be discussed) to take steps on behalf of the Buyer Group to effect a purchase or refinancing of all of ICG's equity interests (at a value at least equal to the Valuation) and repayment of the Senior Facility in accordance with its terms (an "ICG Exit"). If an ICG Exit has not occurred by the 6th anniversary of this transaction completing, ICG will have the right and the power to effect an ICG Exit itself (subject to BM having right of first refusal to provide, or procure the provision of, funding that would facilitate the ICG Exit) with ICG's equity interests being acquired at a Valuation determined by an Independent Valuation. Implementation of Exit and refinancing provisions in relation to the Investment to be discussed. |
| 21. | Governing Law | The terms of this term sheet are confidential and this term sheet is governed by the laws of England and Wales and will be subject to the subject to the exclusive jurisdiction of the courts of England and Wales. Other than the preceding sentence, this term sheet is not and is not intended to be legally binding upon any person. |
Note 1 Where the Annex indicates that a particular definition is provided in the Articles, the same definition is also applicable to the SHA, as relevant and unless otherwise indicated. [Back] Note 2 Or their sale, purchase or other cash payment resulting in Falcon VII receiving the Relevant Proportion of the applicable Market Value. [Back] Note 3 The Articles and SHA generally use this spelling, rather than advisor, and this is also the spelling generally used by the parties in their dealings with each other and in the course of these proceedings. [Back] Note 4 The request for information had also sought documents within other categories, in relation to which McCann replied referring to various documents which, as they said, had already been provided. [Back] Note 5 This last element was redundant, because Mr Maloney had not purported to appoint them to the board of Topco. [Back] Note 6 The definition provides for a further limb, (c), which relates to any Debt Securities. Limb (c) is not relevant on the facts of this case. [Back] Note 7 This must be a typographical error for ICG Exit Conditions. [Back] Note 8 See the previous footnote. [Back] Note 9 Or payments there may be more than one payment required, under the SF Notes and under the SFA; or, at least, one total payment that comprises a number of elements. [Back] Note 10 Or otherwise doing anything for which consent was required by clause 5.3 and Schedule 5 e.g., amend the Workhuman Articles and the other matters that originally gave rise to these proceedings. [Back] Note 11 In the Articles, the definition of Agreed Investment Bank refers to agreement as to the identity of the AIB; but such agreement is not required, because there is a mechanism for identifying the AIB in the event that there is no such agreement within 15 Business Days. [Back]