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ASSET PURCHASE AGREEMENT
BY AND AMONG
ENTERTAINMENT DISTRIBUTION COMPANY (USA), LLC,
AS PURCHASER,
AND
UMG MANUFACTURING & LOGISTICS, INC.,
AND
UNIVERSAL MUSIC & VIDEO DISTRIBUTION, CORP.,
AS SELLERS
DATED AS OF MAY 9, 2005
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ASSET PURCHASE AGREEMENT dated as of May 9, 2005, by and among
ENTERTAINMENT DISTRIBUTION COMPANY (USA), LLC, a Delaware limited liability
company ("Purchaser"), and UMG MANUFACTURING & LOGISTICS, INC., a Delaware
corporation ("UML"), and UNIVERSAL MUSIC & VIDEO DISTRIBUTION, CORP., a Delaware
corporation ("UMVD," and together with UML, each a "Seller" and together the
"Sellers").
PREAMBLE
WHEREAS, Sellers conduct the U.S. Business;
WHEREAS, Sellers conduct a business similar to the U.S. Business in
Hannover, Germany (the "European Business");
WHEREAS, Sellers desire to sell to Purchaser, and Purchaser desires to
purchase from Sellers, certain specified Assets of Sellers related to the U.S.
Business, subject to Purchaser's assumption of certain specified Liabilities of
Sellers related to the U.S. Business, all on the terms and subject to the
conditions contained in this Agreement;
WHEREAS, pursuant to a Share Purchase Agreement dated as of the date
hereof (the "Share Purchase Agreement"), Affiliates of Sellers have agreed to
sell to Purchaser (or its Affiliate), all of the Equity Interests of Universal
Manufacturing and Logistics GmbH relating to the European Business; and
WHEREAS, certain capitalized terms used in this Agreement are defined on
Annex I attached hereto and incorporated herein.
ACCORDINGLY, in consideration of the premises and the mutual
representations hereinafter set forth and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows.
ARTICLE 1
PURCHASE AND SALE OF ASSETS
1.1 TRANSFER OF PURCHASED ASSETS.
(a) On the terms and subject to the conditions contained in this
Agreement, at the Closing, Sellers shall (and shall cause their Affiliates to)
sell, transfer, convey, assign and deliver to Purchaser, free and clear of all
Encumbrances (with the exception of Permitted Encumbrances), and Purchaser shall
purchase and acquire from Sellers (or their Affiliates, as applicable), all of
the right, title and interest of Sellers (or the applicable Affiliate) in, to
and under the Assets of every kind, nature and description, whether real,
personal or mixed, tangible or intangible, exclusively used in, held for use in
or otherwise relating exclusively to the U.S. Business (but excluding all the
Excluded Assets), including the following:
(i) all Inventory;
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(ii) all Other Inventory;
(iii) without regard to the use of the term "exclusively" used
in the initial paragraph of Section 1.1(a), all machinery, equipment,
fixtures, office furniture, tools and other tangible Assets, including all
manufacturing, production, maintenance, packaging, testing and other
machinery, tooling and equipment, molds, presses, motor vehicles and other
vehicles, spare or replacement parts, metal parts, silk screens,
furniture, office equipment, supplies and other items of tangible personal
property used in the U.S. Business and located at the Facilities (other
than office furniture used by employees to be retained by Sellers or their
Affiliates in Fishers, Indiana) or listed in Section 1.1(a)(iii) of the
Seller Disclosure Schedule;
(iv) all rights under all Contracts specifically and
exclusively relating to the U.S. Business (other than the Excluded
Contracts) (collectively, the "Assigned Contracts");
(v) the Owned Real Property of Sellers and their Affiliates,
together with all appurtenances to such Real Property and all structures,
fixtures, equipment, machinery and improvements, in each case as required
to operate the Real Property located thereon;
(vi) the leases for Real Property listed in Section 5.9(b) of
the Seller Disclosure Schedule (the "Leases");
(vii) all Permits in favor of Sellers as of the Closing that
relate to or are necessary for or used in connection with the operation of
the Purchased Assets as heretofore operated by Sellers as set forth in
Section 5.13(b) of the Seller Disclosure Schedule except for and to the
extent such permits relate to the Excluded Assets, provided, however, such
Permits shall be included within the Purchased Assets only to the extent
they are lawfully transferable to Purchaser;
(viii) all other sales and promotional literature and all
books, records, files and data (including customer and supplier lists),
production records, engineering records, purchasing and sales records,
personnel and payroll records, accounting records, mailing lists, customer
and vendor lists and records, either in computer or original or
photostatic form, whether or not in computer or machine readable format,
in each case that are located at the Facilities, except (a) to the extent
such materials are subject to confidentiality or non-disclosure agreements
in favor of third parties (with any such materials listed in Section
1.1(a)(viii) of the Seller Disclosure Schedule) whose consent to transfer
is not obtained; (b) for personnel and payroll records and files where
information is not otherwise available at the Facilities, (i) copies of
which will be provided to Purchaser to the extent permitted by Law, and
(ii) will be deemed included in this Section 1.1(a)(viii) whether or not
located at the Facilities; and (c) for any such materials that use or
include either Seller's tradenames or trademarks;
(ix) all rights, recoveries, rights to claims, refunds,
counterclaims, rights to offset, other rights, causes of action, choses in
actions, Proceedings (known or
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unknown, matured or unmatured, accrued or contingent) against third
parties (including all warranty and other contractual claims (express,
implied or otherwise)), rights of recovery, rights of set-off and similar
rights of Sellers which relate to or arise out of the Post-Closing Period
and relate to the Purchased Assets or the U.S. Business (unless any such
rights can be allocated to the Excluded Assets or the Excluded
Liabilities, and then less such amount);
(x) all Requisite Rights;
(xi) all unexpired warranties and guarantees that are
transferable to Purchaser that Sellers have received from vendors,
suppliers or manufacturers with respect specifically to the Purchased
Assets or the U.S. Business for matters that arise in the Post-Closing
Period; provided, however, nothing set forth in this paragraph shall be
construed as a representation by Sellers that any unexpired warranty or
guarantee remains enforceable;
(xii) all stationery, sales and purchase orders, forms,
labels, shipping material, catalogs, brochures, art work (other than
production components), photographs and advertising material located at
the Facilities and used in the U.S. Business, except for any materials
that use or include either Seller's tradenames (other than labels or
shipping materials used in the manufacturing or distribution of any
product by Purchaser for or to either Seller (or their Affiliates) which
shall be Purchased Assets and may only be used in the provision of
services to Sellers and their Affiliates at no charge to Sellers and their
Affiliates);
(xiii) the goodwill of the U.S. Business as a going concern,
and subject to the provisions of Section 7.6(b) hereof, the right to
represent to third parties that Purchaser acquired the U.S. Business from
Sellers;
(xiv) the Employee Plans sponsored and maintained by Sellers,
or one of their Affiliates, and related Assets, each as set forth in
Section 1.1(a)(xiv) of the Seller Disclosure Schedule (the "Assumed
Employee Plans");
(xv) the prepayments, prepaid expenses, advances, credits from
suppliers and deposits with or paid to third parties and paid for by
Purchaser pursuant to Section 3.4 hereof;
(xvi) the Assets related exclusively to the separate
distribution function located at Gloversville, New York; and
(xvii) all other Assets listed in Section 1.1(a)(xvii) of the
Seller Disclosure Schedule.
(b) For convenience of reference, the Assets that are to be sold,
transferred, conveyed and assigned to Purchaser by Sellers at the Closing
pursuant to Section 1.1(a) are collectively called the "Purchased Assets" in
this Agreement.
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1.2 ASSETS NOT BEING TRANSFERRED.
Anything contained in Section 1.1 or elsewhere in this Agreement to the
contrary notwithstanding, there are expressly excluded from the Purchased Assets
the following Assets (the "Excluded Assets"):
(a) cash, cash equivalents and securities held by Sellers as of the
Closing;
(b) accounts receivable of Sellers arising prior to the Closing Date
and any amounts outstanding that have been invoiced by Sellers prior to the
Closing Date, in each case whether current or noncurrent;
(c) all insurance claims (and related policies) and all rights under
any insurance policy, insurance reserves and accruals, insurance deposits,
including reserves, deposits, dividends, refunds or premium adjustments relating
to worker's compensation, insurance prepayments and all rights thereunder with
respect to claims arising prior to the Closing, except to the extent such policy
insures for occurrences that are included in the Assumed Liabilities (it being
understood however that Sellers will not be obligated to take any action under
any such policy to seek any recovery on behalf of Purchaser with respect to such
Assumed Liabilities);
(d) the Supplied Production Components listed in Section 1.2(d) of
the Seller Disclosure Schedule and the Finished Goods (the "Excluded
Inventory");
(e) all prepayments, prepaid expenses, advances, credits from
suppliers and deposits with or paid to third parties, except as are paid for by
Purchaser pursuant to Section 3.4 hereof;
(f) all of Sellers' (and their Affiliates') right, title and
interest in their Employee Plans and the related Assets, except the Assumed
Employee Plans (the "Excluded Employee Plans");
(g) all rights in either Seller's corporate charters, qualifications
to do business as a foreign corporation, arrangements with registered agents
relating to such qualifications, taxpayer or other identification numbers,
seals, minute books, stock transfer books, and blank stock certificates of
Sellers;
(h) all of Sellers' rights arising under this Agreement;
(i) all rights to receive mail and other communications addressed to
Sellers, or addressed to any of the Facilities, solely to the extent such mail
or other communication relates solely to Excluded Assets or Excluded
Liabilities, which mail and communications shall be promptly forwarded by
Purchaser to Sellers;
(j) all rights, recoveries, refunds, credits, counterclaims, rights
to offset, other rights, choses and Proceedings (known or unknown, matured or
unmatured, accrued or contingent) for Taxes relating to the Pre-Closing Tax
Period;
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(k) all rights to claims, refunds, causes of action, choses in
actions, rights of recovery, rights of set-off and similar rights in favor of
Sellers of any kind relating to or arising out of the Pre-Closing Period, or
relating to the Excluded Assets or Excluded Liabilities (unless any such rights
can be allocated to the Purchased Assets or the Assumed Liabilities and then
less such allocable amount);
(l) any and all personnel and employment records of or related to
the operation of the Facilities or otherwise related to Sellers' personnel,
whether or not maintained at or by the Facilities, other than those personnel
records included in the Purchased Assets under Section 1.1(a)(viii);
(m) the Assets related exclusively to the separate marketing and
sales, credit and collections, technology and customer service located at the
facility in Fishers, Indiana which are set forth in Section 1.2(m) of the Seller
Disclosure Schedule hereof;
(n) the Excluded Contracts;
(o) any and all Equity Interests owned by Sellers;
(p) the rights to any of Sellers' and their Affiliates' tradenames,
trademarks, service marks (whether or not registered), including, the use of the
name "UML," "UMVD," "UMG" or any formulation including the word "Universal,"
except as permitted in Section 1.1(a)(xii) in connection with the provision of
services to Sellers and their Affiliates or the use of any name under which the
U.S. Business prior to Closing has done business;
(q) the Assets at the facility located in Gloversville, New York,
including all real property in Gloversville, New York, other than those Assets
that relate exclusively to the distribution operations; and
(r) all other Assets listed in Section 1.2(r) of the Seller
Disclosure Schedule.
1.3 FURTHER ASSURANCES.
Sellers shall, at any time and from time to time after the Closing, upon
the written request of Purchaser, do, execute, acknowledge and deliver, and
cause to be done, executed, acknowledged or delivered, all such further acts,
deeds, assignments, transfers, conveyances, powers of attorney or assurances as
may be reasonably required to sell, transfer, convey, assign and deliver to
Purchaser, or to aid and assist in the collection of or reducing to possession
by Purchaser, of the applicable Purchased Assets, or to vest in Purchaser good
and marketable title to the Purchased Assets. Additionally, Sellers agree, for a
period of two years after the Closing, upon the written request of Purchaser
(with Purchaser being required in any such instance to reimburse Sellers for
their out-of-pocket costs, including the cost of any temporary employees or the
overtime costs of regular employees), to assist Purchaser in compiling
historical information for any financing of the U.S. Business (including the
compilation of financial information or otherwise) and to comply with any
financial reporting obligations imposed by law, including the provision of
audited financial statements for the years ended December 31, 2002, 2003 and
2004 in accordance with GAAP; provided, however, that (a) Sellers and their
Affiliates shall receive indemnities reasonably acceptable to them to protect
them from any and all Liabilities arising from or related to the
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provision and use of such information (except to the extent that any such
Liabilities result from Sellers' breach of any representations or warranties
under this Agreement) and (b) the requirements on Sellers and their Affiliates
pursuant to this sentence shall not require the performance of tasks that
unreasonably interfere with the ordinary course performance of the regular
employment duties of the employees of Sellers and their Affiliates.
1.4 ASSIGNMENT OF CONTRACTS, RIGHTS, ETC.
Anything contained in this Agreement to the contrary notwithstanding, this
Agreement and the transactions contemplated hereby shall not constitute an
agreement (whether by operation of Law or otherwise) or attempted agreement to
transfer, sublease or assign any Contract, or any Proceeding or right with
respect to any benefit or obligation arising thereunder or resulting therefrom,
or any Permit, if an attempted transfer, sublease or assignment thereof, without
the required consent of any other party thereto, would constitute a breach
thereof or in any way adversely affect the rights or increase the obligations of
Purchaser or Sellers thereunder and consent to transfer has not been obtained.
The parties shall use reasonable commercial efforts to obtain the consent of any
such third party to any of the foregoing to the transfer or assignment thereof
to Purchaser in all cases in which such consent is required for such transfer or
assignment; provided, however, the expenditure of out-of-pocket costs or other
out-of-pocket economic concessions shall not be required by Sellers. If such
consent is not timely obtained, the parties shall enter into such commercially
reasonable cooperative arrangements (at no additional material costs to Sellers)
to provide for Purchaser the benefits and obligations thereunder (at the ongoing
expense of Purchaser, with such ongoing expense not to exceed the ongoing
expense that would have been incurred under such consent, including maintaining
any corporate "group" cost allocations in a manner consistent with past
practice) and any and all rights of Sellers thereunder against the other party
thereto. If any such arrangement is not commercially reasonably practicable,
then such Contract, Proceeding or Permit, as the case may be, shall be deemed to
be an Excluded Asset or an Excluded Liability, as the case may be.
ARTICLE 2
ASSUMED OBLIGATIONS; EXCLUDED OBLIGATIONS
2.1 LIABILITIES BEING ASSUMED AT CLOSING.
On the terms and subject to the conditions contained in this Agreement and
without limiting the representations and warranties in Article 5, and except for
the Excluded Liabilities, simultaneously with the sale, transfer, conveyance and
assignment to Purchaser of the Purchased Assets, Purchaser shall assume and pay,
discharge and perform, as and when due only the following Liabilities
(collectively, the "Assumed Liabilities"):
(a) Liabilities arising solely out of events, acts or transactions
occurring after the Closing under the Assigned Contracts and the Permits that
are included in the Purchased Assets;
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(b) Liabilities for amounts due for third-party materials or
services received by Purchaser on or after the Closing Date, whether or not such
amounts would be classified as accounts payable (including accrued expenses and
interest) in accordance with GAAP;
(c) all Environmental Costs or Liabilities imposed or required by
Environmental Health and Safety Laws arising in connection with or to the extent
resulting from any events, facts or circumstances arising after the Closing Date
relating to any Site, or the operations of the Purchaser or any of its
Affiliates or their respective assigns at any time after the Closing Date, other
than Sellers' Environmental Obligations;
(d) Liabilities to the Transferred Employees for which Purchaser
will be responsible as set forth in Article 8;
(e) any and all Liabilities (including those Liabilities relating to
Proceedings) arising under or with respect to (A) personal injury, property
damage, workers' compensation, violation of Law, comprehensive and general
liability claims, medical claims or any other actual or threatened Proceeding,
(B) returns, product liability, guaranteed sales, advertising commitments,
allowances, customer chargebacks or any other customer allowance and (C)
commissions or other payments due to sales representatives, in each case in
clauses (A), (B) and (C) above, only to the extent any Liability or portion
thereof results from or arises out of events, facts or circumstances occurring
or existing after the Closing Date or which are based on or related to the
manufacture, distribution or sale of products or performance of services after
the Closing Date;
(f) any and all Liabilities arising out of any Proceeding relating
to or arising out of the U.S. Business or the Purchased Assets, only to the
extent such Liability or portion thereof results from or arises out of events,
facts or circumstances occurring or existing after the Closing Date;
(g) any and all Liabilities arising by reason of any violation or
alleged violation of any Law or Order, only to the extent such Liability or
portion thereof results from or arises out of events, facts or circumstances
occurring or existing after the Closing Date; and
(h) any and all Liabilities not otherwise enumerated in Section 2.1
which in any way, and only to the extent that they, arise out of or are related
to or associated with the ownership, possession, use or operation of the
Purchased Assets or any business conducted therewith or therefrom after the
Closing.
2.2 LIABILITIES NOT BEING ASSUMED.
(a) EXCEPT FOR THE ASSUMED LIABILITIES, PURCHASER SHALL NOT AND DOES
NOT ASSUME ANY LIABILITIES (AS DEFINED HEREIN) OF SELLERS (OR ANY PREDECESSOR OF
SELLERS OR ANY PRIOR OWNER OF ALL OR ANY PART OF THE U.S. BUSINESS OR PURCHASED
ASSETS), THEIR AFFILIATES OR RELATING TO THE U.S. BUSINESS, WHETHER OR NOT
ARISING OUT OF OR RELATING TO THE PURCHASED ASSETS OR THE U.S. BUSINESS OR ANY
OTHER BUSINESS OF SELLERS OR THEIR AFFILIATES, ALL OF SUCH LIABILITIES SHALL
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AT AND AFTER THE CLOSING REMAIN THE EXCLUSIVE RESPONSIBILITY OF SELLERS OR THEIR
AFFILIATES (AS APPLICABLE).
(b) Without limiting the generality of Section 2.2(a), Purchaser is
not assuming any of the following Liabilities:
(i) any and all Liabilities (including any accrued expenses
and interest) for accounts payable and notes payable for third- party
materials or services received by Sellers or the U.S. Business prior to
the Closing Date;
(ii) any and all Liabilities for Taxes of Sellers or any of
their Affiliates, and all Liabilities for Taxes relating to the
Pre-Closing Tax Period (in each case, except with respect to Transfer
Taxes (which are governed by Section 9.2(b)), regardless of whether
arising as a result of or in connection with the transactions contemplated
hereby or otherwise);
(iii) any and all Liabilities (including those Liabilities
relating to Proceedings) arising under or with respect to (A) personal
injury, property damage, workers' compensation, violation of Law,
comprehensive and general liability claims, medical claims or any other
actual or threatened Proceeding, (B) returns, product liability,
guaranteed sales, advertising commitments, allowances, customer
chargebacks or any other customer allowance and (C) commissions or other
payments due to sales representatives, in each case in clauses (A), (B)
and (C) above, only to the extent any Liability or portion thereof results
from or arises out of events, facts or circumstances occurring or existing
on or before the Closing Date or which are based on or related to the
manufacture, distribution or sale of products or the performance of
services on or before the Closing Date, notwithstanding that the date on
which the Proceeding or Liability is asserted is after the Closing Date;
(iv) any and all Liabilities arising out of any Proceeding
relating to or arising out of the U.S. Business or the Purchased Assets,
only to the extent such Liability or portion thereof results from or
arises out of events, facts or circumstances occurring or existing on or
before the Closing Date, including all Proceedings listed in Section 5.12
of the Seller Disclosure Schedule;
(v) any and all Liabilities relating to an Excluded Asset;
(vi) any and all Proceedings or Liabilities arising under any
Contract which is not an Assigned Contract;
(vii) any and all Liabilities of Sellers or any of their
Affiliates arising by reason of any violation or alleged violation of any
Law or Order, only to the extent such Liability or portion thereof results
from or arises out of events, facts or circumstances occurring or existing
on or prior to the Closing Date, notwithstanding that the date on which
any Proceeding or Liability is asserted is after the Closing Date;
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(viii) any and all Liabilities of Sellers or any of their
Affiliates, to any of their respective Affiliates, except as expressly
provided in any of the Assigned Contracts, this Agreement or a Related
Document;
(ix) any and all Proceedings by and all Liabilities to
employees and independent contractors for periods prior to and including
the Closing Date, including any Proceedings or Liabilities arising out of
any employee benefit plan or arrangement (other than Liabilities to
provide benefits to participants and beneficiaries under the Assumed
Employee Plans), and including any Liabilities for accrued vacation and
sick time of the employees who are not Transferred Employees, Sellers' or
any of their Affiliates failure to deposit or fund any amounts withheld
from employees pursuant to any retirement plan or arrangement or retiree
medical plan or arrangement, or any unfunded retirement plan or
arrangement or retiree medical plan or arrangement or any obligations to
current or former plan participants or beneficiaries under any plan or
arrangement intended to provide benefits to current or former employees of
Sellers or any of their Affiliates that is not expressly included in the
Purchased Assets under Section 1.1(a)(xiv) of the Seller Disclosure
Schedule or provided for in Article 8;
(x) any and all Liabilities of Sellers or any of their
Affiliates to financial institutions or other Persons for Indebtedness or
with respect to Indebtedness or Liabilities of others which Sellers or any
of their Affiliates has guaranteed other than in connection with an
Assigned Contract, in which case, the Liability shall transfer to
Purchaser or be extinguished;
(xi) any and all Liabilities of Sellers or any of their
Affiliates relating to or arising out of and all Liabilities of Sellers or
any of their Affiliates under or arising out of this Agreement and/or any
Related Document or with respect to the transactions contemplated hereby
and thereby, including legal and accounting fees and expenses incurred by
Sellers or any of their Affiliates; and
(xii) all Environmental Costs or Liabilities imposed or
required by Environmental Health and Safety Laws, arising in connection
with or to the extent resulting from any events, facts or circumstances
existing on or before the Closing Date relating to any Site, or the
operations of Sellers or any of their Affiliates or their respective
predecessors and assigns at such Site at any time on or before the Closing
Date, including any Post-Closing effects thereof (regardless of whether
such matters have been disclosed in this Agreement, the Seller Disclosure
Schedule or otherwise), except to the extent, and only to the extent, that
such Post-Closing effects are caused by or contributed to by Purchaser,
Purchaser's Affiliates, employees, contractors or assigns, including (A)
the presence, Release, threatened Release, or migration of any Hazardous
Materials, at from, in, to, on or under any Site in concentrations
requiring remediation or corrective action pursuant to applicable
Environmental, Health and Safety Laws or at any location to which
Hazardous Materials were sent by or on behalf of either Seller or any of
their Affiliates or any of their respective predecessors or assigns
("Off-Site Disposal Location"); (B) exposure to or injury (including
death) of Persons as a result of Hazardous Materials at or emanating from
any Site or Off-Site Disposal Location; (C) any fine or penalty resulting
from a violation of any Environmental, Health and Safety
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Law or Permit by Sellers or any of their Affiliates or their respective
predecessors and assigns (all of the above collectively defined as
"Sellers' Environmental Obligations").
For purposes of this subparagraph, Purchaser shall not be
deemed to have contributed to a condition existing on or before the
Closing Date if there is no Purchaser Environmental Knowledge of such
condition, provided, however, that Purchaser shall be deemed to have
contributed to such condition if there is Purchaser Environmental
Knowledge of such condition, and Purchaser shall have failed to provide
timely notification of such condition to Sellers.
(c) For convenience of reference, the Liabilities not being assumed
by Purchaser pursuant to Section 2.2(b) of this Agreement are hereinafter
collectively called the "Excluded Liabilities" in this Agreement.
(d) For sake of clarity, the parties hereto provide the following
example to illustrate the effect of events, facts and circumstances that exist
on or before the Closing Date and after the Closing Date. If a personal injury
claim is made after the Closing Date related to the operation of any Facility,
then to the extent the claim relates to actions on or prior to the Closing Date,
the Sellers would be responsible for any Liabilities attributable to that time
period, and to the extent the claim relates to actions after the Closing Date;
the Purchaser would be responsible for any Liabilities attributable to that time
period; it being the intention of the parties that the mere existence of the
event, fact or circumstance on or prior to the Closing Date shall not result in
the Liability being solely that of the Sellers.
ARTICLE 3
PURCHASE PRICE
3.1 PURCHASE PRICE.
The aggregate consideration to be paid at the Closing by Purchaser to
Sellers for the Purchased Assets shall be $28,000,000 (the "Purchase Price").
The Purchase Price will be paid as provided in Section 3.2 and shall be subject
to adjustments as provided in Sections 3.3 and 3.4.
3.2 PAYMENT OF PURCHASE PRICE AT CLOSING.
At the Closing, subject to the satisfaction of the conditions set forth in
this Agreement, the Purchase Price shall be paid by Purchaser to Sellers by wire
transfer of immediately available funds to the account designated by Sellers.
The Closing shall be deemed effective as of 24:00 on the Closing Date/00:00 the
day after the Closing Date German Time.
3.3 INVENTORY PURCHASE PRICE ADJUSTMENT.
(a) On or as promptly as practicable after the Closing Date,
Purchaser shall take, using either Transferred Employees or a third-party entity
reasonably acceptable to Sellers, a physical count of the Inventory (and a
simultaneous physical identification of the Finished Goods). Representatives of
Sellers shall be given an opportunity in all reasonable respects and in good
faith to (i) observe, along with their accountants, such taking of the Inventory
(and such physical identification of the Finished Goods) and (ii) to conduct
test counts of the Inventory (and such
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physical identification of the Finished Goods) and in connection with such test
counts Purchaser agrees not to release an area from the process until such
opportunity to take test counts has been provided to Sellers. Following
preparation of an inventory report, Sellers shall be given an opportunity in all
reasonable respects to review the inventory report and work papers.
(b) Within forty-five (45) days after the Closing Date, Purchaser
shall prepare and deliver, or cause to be prepared and delivered, to Sellers a
statement as of the Closing Date (collectively, the "Initial Inventory
Statement", and in its final and binding form as determined pursuant to this
Section 3.3(b), the "Final Inventory Statement") setting forth the aggregate
value of Inventory as of the Closing Date (the "Applicable Inventory"). Unless
otherwise agreed upon, the Initial Inventory Statement and the Final Inventory
Statement shall be prepared in accordance with GAAP, except with respect to the
valuations to be applied to the Supplied Production Components and WIP as set
forth in the respective definitions of such terms. The Initial Inventory
Statement shall become final and binding upon the parties on the tenth Business
Day following receipt thereof by Sellers unless Sellers give written notice of
their disagreement (with such notice so timely delivered referred to herein as a
"Notice of Disagreement") to Purchaser prior to such date in accordance with
Section 13.7 hereof. Any Notice of Disagreement shall specify in reasonable
detail the basis and amount of any disagreement. In the event of a Notice of
Disagreement, then the Initial Inventory Statement (as revised in accordance
with clause (x) or (y) below) shall only become final and binding upon the
parties on the earlier of (x) the date the parties hereto resolve any
differences they have with respect to any matter specified in the Notice of
Disagreement or (y) the date any matters in dispute are resolved by an
accounting firm jointly selected by Purchaser and Sellers or, if the parties are
unable to agree, an independent accounting firm jointly selected by Purchaser's,
on the one hand, and Sellers', on the other hand, independent accounting firms
(such firm, the "Accounting Firm"). During the thirty (30) days immediately
following the delivery of a Notice of Disagreement, Purchaser and Sellers shall
seek in good faith to resolve in writing any differences which they may have
with respect to any matter specified in the Notice of Disagreement. At the end
of such 30-day period, or such longer period as may be mutually agreed, either
Purchaser, on the one hand, or Sellers, on the other hand, shall submit for
review and resolution by the Accounting Firm any and all matters which remain in
dispute and are related to the matters included in the Notice of Disagreement,
and the Accounting Firm shall make a final determination with respect to the
dispute, which determination shall be binding on the parties. In making such
determination: (i) the Accounting Firm shall determine only those matters which
remain in dispute and which were included in the Notice of Disagreement and (ii)
the scope of any dispute shall be limited as to whether the calculation in
dispute under the Notice of Disagreement was done in accordance with this
Section 3.3. The Final Inventory Statement shall become final and binding on
Purchaser and Sellers on the date the Accounting Firm delivers the Final
Inventory Statement to the parties. Each party shall pay its own fees and
expenses incurred in connection with any Notice of Disagreement; provided, that
the fees and expenses of the Accounting Firm pursuant to this Section 3.3 shall
be borne one-half each by Purchaser, on the one hand, and Sellers, on the other
hand.
(c) Within two (2) Business Days after the date the Final Inventory
Statement becomes final and binding pursuant to Section 3.3(b), Purchaser will
reduce Sellers' accounts payable balance due to Purchaser pursuant to the
Manufacturing and Distribution Agreements
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(and issue a credit to be utilized immediately against any such future accounts
payable balance if the existing accounts payable balance is not of sufficient
size) in an aggregate amount equal to the value of the Applicable Inventory set
forth in the Final Inventory Statement; provided, however, that if Sellers
provide a Notice of Disagreement and certain amounts in the Initial Inventory
Statement are undisputed, then Purchaser shall make a partial adjustment for
such undisputed amounts within five (5) Business Days after such Notice of
Disagreement and a final adjustment within two (2) Business Days after the Final
Inventory Statement becomes final and binding pursuant to Section 3.3(b).
3.4 ADJUSTMENT FOR PREPAYMENTS, ETC.
At least five (5) Business Days prior to Closing, Sellers shall provide
Purchaser with an officer's certificate certifying in good faith the amount of
their prepayments, prepaid expenses, advances, credits from suppliers and
deposits actually with or paid to third parties (the "Prepayment
Certification"), together with reasonable supporting documentation from such
third parties. At the Closing, Purchaser shall pay to Sellers (by wire transfer
of immediately available funds to the account designated by Sellers), the
aggregate amount reflected in the Prepayment Certification (the "Adjustment
Payment")). If the Prepayment Certification is not acceptable to Purchaser, the
Purchaser shall give written notice of its disagreement to Seller in accordance
with Section 13.7 hereof. Any such notice of disagreement shall specify in
reasonable detail the basis and amount of any disagreement. During the thirty
(30) days immediately following the delivery of such notice of disagreement, the
parties shall seek in good faith to resolve in writing any differences which
they may have with respect to any matter specified in such notice of
disagreement. If at the end of such thirty (30) day period, such disagreement
remains unresolved, then the Accounting Firm shall resolve any such dispute in a
commercially reasonable manner and the Accounting Firm shall make a final
determination with respect to any such dispute, which determination shall be
binding on the parties. If such final determination indicates that the amount
paid by Purchaser at Closing for Sellers' prepayments, prepaid expenses,
advances, credits from suppliers and deposits actually with or paid to third
parties exceeded the actual amount of such items, within two (2) Business Days
of the Accounting Firm providing written notice to Sellers of the such final
determination, Sellers shall pay to Purchaser (by wire transfer of immediately
available funds to the account designated by Purchaser) the aggregate amount of
any such overpayment. If such final determination indicates that the amount paid
by Purchaser at Closing for Sellers' prepayments, prepaid expenses, advances,
credits from suppliers and deposits actually with or paid to third parties was
less than the actual amount of such items, within two (2) Business Days of the
Accounting Firm providing written notice to Purchaser of the such final
determination, the Purchaser shall pay to Sellers (by wire transfer of
immediately available funds to the account designated by Sellers) the aggregate
amount of any such underpayment. Each party shall pay its own fees and expenses
incurred in connection with any dispute relating to the Prepayment
Certification; provided, that the fees and expenses of the Accounting Firm
pursuant to this Section 3.4 shall be borne one-half each by Purchaser, on the
one hand, and Sellers, on the other hand.
3.5 ALLOCATION OF PURCHASE PRICE.
Within ninety (90) days after the Closing Date, Purchaser shall prepare an
allocation schedule allocating the aggregate deemed sales price payable
hereunder as determined by
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applying Federal Income Tax principles among the Purchased Assets in accordance
with applicable Law (the "Allocation Schedule"), subject to the consent of
Sellers, which consent shall not be unreasonably withheld. The Allocation
Schedule shall be binding on all parties for all applicable purposes, including
tax purposes, and no party shall file any Tax Returns or take any other action
which is inconsistent with the Allocation Schedule. The parties acknowledge and
agree that the making of a protective election out of the installment method
shall not be a breach of this Agreement, including this Section 3.5.
ARTICLE 4
THE CLOSING
4.1 THE CLOSING.
The closing (the "Closing") of the transactions contemplated by this
Agreement shall take place at the offices of Xxxxxxxxx Xxxxxxx LLP, counsel for
Purchaser, at 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, xx May 31, 2005 or on the
next month-end occurring after the satisfaction or waiver of all of the
conditions set forth in Article 10 (other than those conditions which by their
nature are to be satisfied at the Closing) (the "Closing Date").
4.2 INSTRUMENTS OF TRANSFER.
At the Closing, Sellers and Purchaser shall execute and deliver a xxxx of
sale and assignment and assumption agreements in substantially the form set
forth in Exhibit 4.2 (collectively, the "Bills of Sale and Assumption
Agreements").
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF
SELLERS
Sellers jointly and severally represent and warrant to Purchaser as of the
date hereof as follows:
5.1 ORGANIZATION, POWER, AUTHORITY AND GOOD STANDING.
(a) Each Seller is a corporation, duly organized, validly existing
and in good standing under the Laws of its jurisdiction of organization and has
all requisite corporate power and authority to own, lease and operate its Assets
and to carry on its business as currently conducted.
(b) Sellers are each duly qualified and in good standing to transact
business as a foreign Person in those jurisdictions set forth opposite its name
in Section 5.1(b) of the Seller Disclosure Schedule, which constitute all the
jurisdictions in which the character of the property owned, leased or operated
by Sellers or the nature of the business or activities conducted by Sellers
makes such qualification necessary, except where the failure to be so qualified
has not had or would not reasonably be expected to have a Material Adverse
Effect.
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(c) Each Seller has not, within the last five years, (i) used any
trade names or assumed names other than the trade names or assumed names set
forth opposite its name in Section 5.1(c)(i)of the Seller Disclosure Schedule or
(ii) operated any business other than the U.S. Business or as set forth in
Section 5.1(c)(ii) of the Seller Disclosure Schedule.
5.2 AUTHORITY; NON-CONTRAVENTION.
Each Seller has all requisite corporate power and authority to execute,
deliver and perform its obligations under this Agreement and each Related
Document to which it is or will be a party and to consummate the transactions
contemplated hereby and thereby. The execution, delivery and performance by each
Seller of this Agreement and each Related Document to which it is or will be a
party, and performance of its obligations hereunder and thereunder have been
duly and validly authorized by all necessary action on the part of each Seller
and its shareholders. This Agreement and each Related Document to which each
Seller is or will be a party has been, or upon the execution thereof will be,
duly and validly executed and delivered by each Seller and constitutes, or upon
its execution and delivery will constitute, a valid and binding obligation of
each Seller, enforceable against each Seller in accordance with its terms,
except as the enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance, fraudulent transfer or other
similar laws relating to or affecting enforcement of creditors' rights generally
or by general equitable principles. Neither the execution and delivery of,
and/or performance by each Seller of its obligations under this Agreement and
each Related Document to which it is or will be a party, nor the consummation by
each Seller of the transactions contemplated hereby and thereby shall (a)
conflict with or result in any violation or breach of, any of the terms,
conditions or provisions of, or constitute (with due notice or lapse of time, or
both) a default (with or without notice), or give rise to any right of
termination, cancellation or acceleration or result in the creation of any
Encumbrance upon any of the Purchased Assets or Sellers, under any provision of
its Organizational Documents or any Contract to which such Seller is a party or
by which it or any of its Assets is or may be bound, except, with respect to
Contracts only, where such violation, breach, or default, would not reasonably
be expected to have a Material Adverse Effect or (b) contravene any Law or cause
the suspension or revocation of any material Permit included in the Purchased
Assets and presently in effect, which affects or binds Sellers, except where all
such contraventions, suspensions or revocations would in the aggregate not
reasonably be expected to have a Material Adverse Effect.
5.3 CONSENTS AND AUTHORIZATIONS.
Except as set forth in Section 5.3 of the Seller Disclosure Schedule, no
consent, approval, Permit, Order, notification or authorization of, or any
registration, declaration or filing with, any Governmental Entity or any third
Person is required in connection with the execution, delivery and performance by
either Seller or any of their Affiliates of this Agreement or any Related
Document to which it is or will be a party or the consummation by Sellers of the
transactions contemplated hereby or thereby.
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5.4 SUBSIDIARIES.
None of Sellers has any Subsidiary or owns any Equity Interests in any
Person that operates any portion of the U.S. Business.
5.5 ABSENCE OF CHANGES.
Since December 31, 2004, except as set forth in Section 5.5 of the Seller
Disclosure Schedule and except for the transactions contemplated by this
Agreement, there has not been:
(a) any change in the Tax or other accounting methods or practices
followed by Seller, any change in depreciation or amortization policies or rates
previously adopted or any write-up of inventory or other Assets, to the extent
any such change would reasonably be expected to adversely affect the U.S.
Business after the Closing Date;
(b) any sale, transfer or assignment of any of Sellers' Assets
used in the U.S. Business at the Facilities involving more than $1,000,000 in
the aggregate, except in the ordinary course of business consistent with past
practice; or
(c) any agreement, whether in writing or otherwise, to take any of
the foregoing actions.
5.6 TAX MATTERS.
(a) Sellers have timely filed all Tax Returns that each was
required to file. All such Tax Returns were correct and complete. All Taxes owed
by Sellers (whether or not shown on any Tax Return) have been paid. Except as
otherwise set forth in Section 5.6(a) of the Seller Disclosure Schedule, neither
Seller is currently the beneficiary of any extension of time within which to
file any Tax Return. Each Seller has withheld and timely paid all Taxes required
to have been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other third party,
and all Forms W-2 and 1099 required with respect thereto have been properly
completed and timely filed. Except as set forth in Section 5.6(a) of the Seller
Disclosure Schedule, neither Seller has waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(b) Except as set forth in Section 5.6(b) of the Seller Disclosure
Schedule, there is no dispute or claim concerning any Tax Liability of any
Seller either (i) claimed or raised by any Tax Authority in writing or (ii) as
to which any Seller has Knowledge.
(c) Neither Seller has made any payments, is obligated to make any
payments, or is a party to any agreement that could obligate it to make any
payments that will not be deductible under Section 280G or 162(m) of the Code.
Neither Seller is a party to any Tax allocation or sharing agreement that will
bind Purchaser after the Closing. Except as set forth in Section 5.6(c) of the
Seller Disclosure Schedule, neither Seller (i) has been a member of an
affiliated group filing a consolidated federal Income Tax Return (other than a
group the common parent of which was Vivendi Universal Holding II Corporation)
or (ii) has any Liability for the
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Taxes of any Person (other than its own) under Reg. Section 1.1502-6 (or any
similar provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise. Neither Seller is or has ever been a
"United States real property holding corporation" within the meaning of Section
897(c)(2) of the Code.
(d) Neither Seller is, nor has ever been, a party to any tax
sharing, indemnity or similar agreement allocating Tax Liability that will not
be terminated on the Closing Date without any future Liability to Purchaser
(including for past Taxes).
(e) No written claim has been made in the past five years by any
Taxing Authority in a jurisdiction in which Sellers or any of their Subsidiaries
do not file Tax Returns that any such Person is or may be subject to taxation by
that jurisdiction.
(f) No Encumbrance (except for Permitted Encumbrances) for Taxes
exists with respect to any Assets of Sellers or any of their Subsidiaries.
(g) Section 5.6(g) of the Seller Disclosure Schedule lists all of
the jurisdiction in which Sellers or any of their Subsidiaries is required to
file a Tax Return or pay Taxes.
5.7 FINANCIAL INFORMATION.
(a) Section 5.7(a) of the Seller Disclosure Schedule attached
hereto contains true, correct and complete copies of the following:
(i) an unaudited statement of expenses of the U.S. Business
for the fiscal years ending December 25, 2004 and December 20, 2003 and
the quarter ended March 26, 2005 ("Historical Expenses"); and
(ii) an unaudited statement of the number of units
manufactured by the U.S. Business for the fiscal years ending December 25,
2004, December 20, 2003 and December 21, 2002 and the quarter ended March
26, 2005 ("Manufactured Volumes").
(b) The Historical Expenses and Manufactured Volumes accurately
and completely show in all material respects the expenses and volumes of the
Company in the period indicated. The Historical Expenses and Manufactured
Volumes have been prepared from, and are consistent with, the books and records
of the Sellers. The Historical Expenses have been prepared using certain
assumptions for the allocation of internal overheads or other internal charges.
Such allocations and overheads may not be reflective of the actual costs
incurred by Sellers or that would be incurred by Purchaser in the operation of
the U.S. Business. The financial information referred to in this Section 5.7 was
prepared in accordance with Sellers' practices for the preparation of internal
financial statements and reflect the consistent application of accounting
principles throughout the periods involved except as otherwise disclosed
therein. The Historical Expenses have been prepared in accordance with GAAP
except that the Historical Expenses are subject to a lack of footnotes and, for
the interim period, a lack of normal and recurring year-end adjustments.
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5.8 TITLE TO PURCHASED ASSETS AND RELATED MATTERS.
(a) Except as set forth in Section 5.8 of the Seller Disclosure
Schedule, Sellers at the Closing will have, and will transfer to Purchaser, good
and marketable title in each of the Purchased Assets that are tangible in
nature, or a valid leasehold interest, free and clear of all Encumbrances,
except for Permitted Encumbrances. Except as set forth in Section 5.8 of the
Seller Disclosure Schedule, the Purchased Assets and the rights conveyed to
Purchaser under this Agreement, including the Licensed Requisite Rights and the
Assigned Contracts, and the Related Documents, including the provision of
materials and services under the Transition Services Agreement and the Leases,
constitute the Assets used in the U.S. Business that together are sufficient for
the conduct of the U.S. Business immediately following the Closing in
substantially the same manner as currently conducted.
(b) All of the Purchased Assets are in good operating condition
and repair considering their respective years in service (except for normal wear
and tear and taking into account the intermittent nature of the use of certain
equipment that shall not be held to a condition and repair of full-time use) and
are suitable for the uses for which they are used in the U.S. Business.
5.9 REAL PROPERTY-OWNED OR LEASED.
(a) Section 5.9(a) of the Seller Disclosure Schedule contains a
correct and complete list of all of the owned real property of Sellers or any of
their Affiliates used in the operations of the U.S. Business (the "Owned Real
Property"). Sellers are not parties to an agreement, and have not agreed, to
subject the Purchased Real Property to any easements, rights, duties,
obligations, covenants, conditions, restrictions, limitations or agreements not
of record.
(b) Section 5.9(b) of the Seller Disclosure Schedule contains a
correct and complete list of all real property leased, subleased, or licensed
pursuant to an occupancy agreement by Sellers or any of their Affiliates used in
the operations of the U.S. Business (the "Leased Real Property"), and sets forth
the names of the lessor and the lessee.
(c) The Owned Real Property and the Leased Real Property
(together, the "Real Property") constitute all real property used or occupied by
the operations of the U.S. Business.
(d) To the Knowledge of Sellers with respect to the Real Property,
except as set forth in Section 5.9(d) of the Seller Disclosure Schedule: (i) no
portion thereof is subject to any pending condemnation, zoning or other land use
Proceeding by any Governmental Entity which would have a material adverse effect
on the use and operation of any portion of the Real Property for its intended
purpose; (ii) there are no Contracts to which either Seller or any of their
Affiliates is a party, granting to any party or parties except Sellers the right
of use or occupancy of any portion of the parcels of the Real Property other
than agreements for the placement of equipment by vendors; (iii) there are no
parties in possession of the Real Property except Sellers and their Affiliates;
and (iv) no notice of any increase in the assessed valuation of the Real
Property and no notice of any contemplated special assessment has been received
by Sellers or
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any of their Affiliates and to the Knowledge of Seller, there is no threatened
increase in assessed valuation or threatened special assessment pertaining to
any of the Real Property.
(e) Each Lease is valid and enforceable in accordance with its
terms and in full force and effect. Sellers have not and, to Seller's Knowledge,
the other parties thereto have not violated any provision of, or committed or
failed to perform any act which could constitute a material default under the
provisions of, any Lease.
(f) There are no material disputes or forbearance programs in
effect as to any Leased Real Property.
(g) In addition to the Leases, Purchaser has been furnished with
true, correct and complete copies of all material amendments, modifications or
supplements, memoranda of leases and all current estoppel certificates,
subordination, non disturbance and attornment agreements, if any, entered into
or received by Sellers and related to the Leases.
(h) There is no law, ordinance, order, regulation or requirement
now in existence, including, without limitation, any Environmental, Health and
Safety Law, which would require any material expenditure to modify or improve
any of the Real Property, as it is currently used and assuming no changes to its
use or the Real Property or any structures thereon, in order to bring it into
compliance therewith.
(i) There is no pending, or to Sellers' Knowledge threatened,
governmental proceeding which could impair or curtail the current access from
the Owned Real Property to public roads.
(j) To Sellers' Knowledge, there are presently in existence water,
sewer, gas and/or electrical lines or private systems on the Real Property which
have been completed, installed and paid for and which are sufficient to service
adequately the current operations of each building or facility located on the
Real Property.
(k) To Sellers' Knowledge, there are no material structural,
electrical, mechanical, plumbing, air conditioning, heating or other defects in
the buildings located on the Real Property and the roofs of the building located
on the Real Property are free from material structural defects, leaks and are in
good condition, ordinary wear and tear excepted.
5.10 INTELLECTUAL PROPERTY.
(a) Section 5.10(a) of the Seller Disclosure Schedule sets forth a
correct and complete list of all Licensed Requisite Rights, other than normal
and routine commercially available off the shelf software agreements. There are
no Owned Requisite Rights.
(b) Sellers have a valid license or other right to use the
Licensed Requisite Rights all of which licenses are in full force and effect and
neither of Sellers has violated any provision of, or committed or failed to
perform any act which could constitute a default under, the provisions of any
such licenses.
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(c) Except as set forth in Section 5.10(c) of the Seller
Disclosure Schedule, each Seller has previously made available to Purchaser
correct and complete copies of each Contract under or pursuant to which the
Licensed Requisite Rights are licensed to Sellers and/or their Affiliates, other
than normal and routine commercially available off the shelf software license
agreements.
(d) Purchaser's continued operation of the U.S. Business as
presently conducted, including the manufacture, use or sale of any Product or
the use of any process now used or offered by Sellers or their Affiliates will
not, infringe, violate, misappropriate or conflict with any Intellectual
Property Rights of any Person who licenses the Intellectual Property Rights to
Sellers or to the Knowledge of Sellers, any other Person.
5.11 AGREEMENTS, NO DEFAULTS, ETC.
(a) Section 5.11(a) of the Seller Disclosure Schedule contains a
true and complete list of all Contracts that both:
(i) specifically and exclusively relate to the U.S. Business
to which either Seller (or any of their Affiliates) is currently a party;
and
(ii) (A) involve the payment or receipt by Sellers of at
least $50,000 in the case of any single Contract during the last fiscal
year or pursuant to which Sellers expects to pay or receive at least
$50,000 in the case of any single Contract during the current fiscal year;
(B) have a binding remaining term of at least one year which cannot be
cancelled without penalty on written notice of 60 days or less, provided
the aggregate of the payments remaining on all Contracts that have a
binding term of less than one year and may be cancelled without penalty on
written notice of sixty days or less does not exceed $150,000; (C) contain
a covenant limiting the freedom of either Seller to engage in any line of
the U.S. Business in any geographic area or to compete with any Person
that limits the conduct of either Seller; (D) provide for the employment
of any officer, employee or consultant or any other type of Contract or
understanding with any officer, employee or consultant, including any
agreement or understanding relating to severance payments; (E) provide for
indemnification by either Seller with respect to Liabilities relating to
any Site of either Seller or any of its respective predecessor Persons or
with respect to Liabilities under any Environmental, Health and Safety Law
or for the investigation, remediation, or clean up of and Hazardous
Materials other than as entered into in the ordinary course of business
when entering into a service agreement with a service provider or
contractor performing services for the U.S. Business or (F) provide for
any joint venture, partnership or similar arrangement by either Seller.
(b) All such Contracts are legal, valid and binding obligations of
the Sellers and are in full force and effect. Neither of Sellers have and, to
Seller's Knowledge, none of the other parties thereto have violated any
provision of, or committed or failed to perform any act which could constitute a
material default under the provisions of, any such Contract.
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(c) Section 5.11(c) of the Seller Disclosure Schedule contains a
true and complete list or description of all Contracts that relate to or are
used by the U.S. Business that are not Assigned Contracts (the "Excluded
Contracts").
(d) Section 5.11(d) of the Seller Disclosure Schedule contains a
true and complete list of all Assigned Contracts that are between or among
either Seller and its Affiliates.
(e) Except as set forth in Section 5.11(e) of the Seller
Disclosure Schedule, Purchaser has been furnished with true and complete copies
of all written items individually listed in Sections 5.11(a), 5.11(c) and
5.11(d) of the Seller Disclosure Schedule.
5.12 LITIGATION, ETC.
Except as disclosed in Section 5.12 of the Seller Disclosure Schedule,
there are no (a) Proceedings pending or, to the Knowledge of Sellers, threatened
against Sellers or any of their Affiliates relating to the U.S. Business,
including the Licensed Requisite Rights, whether at law or in equity, whether
civil or criminal in nature or before or by any Governmental Entity or
arbitrator, or (b) Orders of any Governmental Entity or arbitrator involving or
against Sellers or their Affiliates related to the U.S. Business, including the
Licensed Requisite Rights. Except as disclosed in Section 5.12 of the Seller
Disclosure Schedule, during the past two (2) years, there have not been any
settled or finally determined material Proceedings against Sellers or their
Subsidiaries relating to the U.S. Business, including the Licensed Requisite
Rights.
5.13 COMPLIANCE WITH LAWS.
(a) Except as set forth in Section 5.13(a) of the Seller
Disclosure Schedule, and other than as specifically addressed elsewhere in this
Agreement, each Seller (i) is in compliance with and during the past two (2)
years has complied with and operated and maintained the U.S. Business in
compliance with, all Laws applicable to it and the U.S. Business, except where
the failure to so comply would not reasonably be expected to have a Material
Adverse Effect and (ii) has all Permits from, and during the past two (2) years
has had all Permits from and has made all filings with and payments to, all
Governmental Entities required to conduct the U.S. Business as currently
conducted, except where the failure to have such Permits or make such filings or
payments would in the aggregate not reasonably be expected to have a Material
Adverse Effect. Neither of Sellers has received any written notice regarding any
actual or alleged violation by such Seller of any material Laws in connection
with the U.S. Business.
(b) Section 5.13(b) of the Seller Disclosure Schedule contains a
correct and complete list of all material Permits used by or held for use in the
U.S. Business (copies of which have been previously provided to Purchaser).
(c) No event has occurred that would reasonably be expected to
constitute or result directly in a violation of or a failure to comply with the
term or requirement of any Permit or result in the revocation, withdrawal,
suspension, cancellation or termination of any Permit.
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5.14 INSURANCE.
(a) Section 5.14(a) of the Seller Disclosure Schedule contains a
correct and complete list of all currently existing policies of liability,
theft, fidelity, life, fire, product liability, workmen's compensation, health
and other forms of insurance for the U.S. Business (specifying the insurer,
amount of coverage, type of insurance, policy number, deductible or retention
amount, policy term and any claims submitted to the insurance company and not
acted upon that were exclusively related to the U.S. Business). Such insurance
coverage or similar insurance coverage has been maintained at all times in the
past three years during the course of the operation of the U.S. Business.
(b) Except as set forth in Section 5.14(b) of the Seller
Disclosure Schedule, with respect to each policy of insurance listed in Section
5.14(a) of the Seller Disclosure Schedule: (i) all premiums due are currently
paid, and neither Sellers nor any of their Affiliates party to such policies is
in default in any respect with respect to its obligations under such policy; and
(ii) neither Sellers nor any of their Affiliates has received any written notice
that such policy has been or shall be canceled or terminated or will not be
renewed or that the issuer of any policy of insurance is not willing to perform
its obligations thereunder.
5.15 LABOR RELATIONS; EMPLOYEES.
(a) Section 5.15(a) of the Seller Disclosure Schedule sets forth a
complete and correct list, as of the date hereof (which list shall be updated by
Sellers no more than three days prior to the Closing for any employment changes
occurring in compliance with this Agreement or in the ordinary course of the
U.S. Business and consistent with historical practices from the date hereof
until the Closing), of all employees of each of Sellers providing services to
the U.S. Business (the "U.S. Business Employees"). Opposite the name of each
individual listed in Section 5.15(a) of the Seller Disclosure Schedule is (i) a
notation classifying each as officer, regular employee, leased employee,
temporary employee, part-time employee, or consultant and providing the position
of each; (ii) such person's current base salary or compensation rate (including
bonuses and commissions); (iii) such person's current accrual of vacation pay;
(iv) the respective dates upon which each individual commenced employment; (iv)
a notation as to whether such person is a member of a union related to each
Seller and, if a member of a union, the name of the union to which they are a
member; and (v) a notation as to whether such person is on leave. All regular
full-time employees listed in Section 5.15(a) of the Seller Disclosure Schedule
(except as noted thereon) are devoting all or substantially all of their
business time to a Seller, and, to the Knowledge of Sellers, none of the
employees listed in Section 5.15(a) of the Seller Disclosure Schedule has
provided written notice that he or she intends to terminate his or her
employment or engagement. Unless otherwise noted in Section 5.15(a) of the
Seller Disclosure Schedule, each such person is employed or retained on an
"at-will" basis. Except as set forth in Section 5.15(a) of the Seller Disclosure
Schedule, no bonus, severance or other payments or benefits of any kind are due
to any U.S. Business Employee listed in Section 5.15(a) of the Seller Disclosure
Schedule, except such payments or benefits due under any of the plans listed in
Section 5.16(b) of the Seller Disclosure Schedule or under any Excluded Employee
Plan.
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(b) Except as set forth in Section 5.15(b) of the Seller
Disclosure Schedule and in each instance with respect to a Seller or the U.S.
Business: (i) neither Seller is party to any collective bargaining agreement
with respect to any U.S. Business Employees, (ii) no collective bargaining agent
has been certified as a representative of any of the U.S. Business Employees and
(iii) to each of Seller's Knowledge no organizing activity or representation
campaign or election is now in progress with respect to any U.S. Business
Employee. Except as set forth in Section 5.15(b) of the Seller Disclosure
Schedule, there are no written unfair labor practice complaints, written
grievances, strikes, slowdowns, work stoppages, picketing, or lockouts, or
written requests for union representation pending, or to the Knowledge of
Sellers, threatened, relating to or affecting either Seller or the U.S.
Business. No event has occurred that is likely to give rise to any such
complaint, dispute, grievance, controversy, strike, slowdown, work stoppage,
picketing, or lockout, or request for representation, in each case, which could
have a Material Adverse Effect on Sellers, individually or in the aggregate,
except as disclosed in Section 5.15(b) of the Seller Disclosure Schedule. Except
as set forth in Section 5.15(b) of the Seller Disclosure Schedule, there are no
currently pending labor-related negotiations with any group or other
organization purporting to represent the U.S. Business Employees or the U.S.
Business.
(c) Except as set forth in Section 5.15(c) of the Seller
Disclosure Schedule, there are no Proceedings regarding harassment,
discrimination, wages, hours, collective bargaining, employment standards,
employment classifications, working conditions, immigration, disability, equal
opportunity, occupational safety and health, the payment of social security and
other taxes, or any other employment-related issue or claim, pending or, to the
Knowledge of Sellers, threatened, relating to or affecting any employee listed
in Section 5.15(a) of the Seller Disclosure Schedule, except for such
Proceedings which (i) by their nature are confidential and for which Sellers
have no Knowledge or (ii) have been filed yet have not been disclosed (via
notice or otherwise) to either Seller. Except as set forth in Section 5.13 of
the Seller Disclosure Schedule, Sellers and their Affiliates (to the extent any
are acting in the capacity as an employer of a U.S. Business Employee) have
complied in all material respects with all Laws during the past two years
relating to the hiring and retention of all U.S. Business Employees listed in
Section 5.15(a) of the Seller Disclosure Schedule which relate to wages, hours,
equal opportunity, collective bargaining, employment standards, employment
classifications, working conditions, immigration, disability, the payment of
social security and other taxes, and any other employment-related Laws. Except
as set forth in Section 5.15(c) of the Seller Disclosure Schedule, neither
Seller nor any of its Affiliates has received notice during the past year of the
intent of any Governmental Entity responsible for the enforcement of labor or
employment Laws to conduct an investigation of either Seller or its Affiliates
exclusively with respect to the U.S. Business, and no such investigation is
ongoing, pending or, to the Knowledge of Sellers, threatened.
(d) Except as set forth in Section 5.15(d) of the Seller
Disclosure Schedule, during the ninety (90) days prior to the date of this
Agreement, neither Seller with respect to the U.S. Business has experienced a
"plant closing" or "mass layoff" within the meaning of the U.S. Worker
Adjustment and Retraining Notification Act, 29 U.S.C. Sections 2101 et seq., or
the regulations promulgated thereunder (collectively, the "WARN Act"). Further,
except to the extent disclosed in Section 5.15(d) of the Seller Disclosure
Schedule, no employee of the U.S.
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Business has suffered a "separation from employment" or "employment loss" as
those terms are defined by the WARN Act, for ninety (90) days prior to the date
of this Agreement.
(e) Neither Seller nor any of its Affiliates is delinquent in any
payment to any U.S. Business Employee for any material wages, salaries,
commissions, bonuses or other compensation for any services performed by them or
amounts required to be reimbursed to such U.S. Business Employees.
5.16 ERISA COMPLIANCE.
(a) "Employee Plan" means any "employee benefit plan" (as that
term is defined in Section 3(3) of ERISA), as well as any other bonus, equity
compensation, deferred compensation, incentive compensation, stock purchase,
stock option, severance or termination plan, hospitalization or other medical,
life or other insurance, supplemental unemployment benefits, pension, profit
sharing or retirement plan, or other employee benefit plan, program or
arrangement involving direct or indirect compensation, fringe benefits or
perquisites under which Sellers, or any Person that is a member of a "controlled
group of corporations" with or is under "common control" with Sellers as defined
in Section 414(b) or (c) of the Code ("ERISA Affiliate"), has any present or
future obligations or Liability on behalf of its current or former employees,
directors or agents of the U.S. Business or their dependents or beneficiaries.
(b) Section 5.16(b) of the Seller Disclosure Schedule contains a
true and complete list of all Assumed Employee Plans. None of the Assumed
Employee Plans are subject to Title IV of ERISA.
(c) To the Knowledge of Sellers, except as set forth in Section
5.16(c) of the Seller Disclosure Schedule with respect to the Assumed Employee
Plans and the Vivendi Universal 401(k) Plan (the "Sellers' 401(k)"), and
together with the Assumed Employee Plans, the "Selected Plans":
(i) Each Selected Employee Plan has been established,
maintained, operated and administered in accordance with its terms and in
material compliance with ERISA, the Code, the regulations and published
authorities thereunder, and all other Laws applicable to the Selected
Employee Plans;
(ii) Neither of the Sellers nor any of their ERISA
Affiliates, nor any other "disqualified person" or "party in interest" (as
defined in Section 4975 of the Code and Section 3(14) of ERISA,
respectively) with respect to any Selected Employee Plan has committed any
act or omission which could subject Purchaser or its ERISA Affiliates to
any material Tax or penalty, including without limitation any Tax or
penalty imposed under Chapter 43 of the Code or Section 502(i), (j) or (l)
of ERISA and neither Sellers nor any ERISA Affiliate has any Liability to
the Pension Benefit Guaranty Corporation with respect to any Employee Plan
other than current quarterly premiums payable in the ordinary course of
business;
(iii) All contributions due and payable on or before the
Closing Date in respect of any Selected Employee Plan have been made in
full and proper form and adequate accruals have been provided for in the
financial statements for all other
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contributions or amounts in respect of the Selected Employee Plans for
periods ending on the Closing Date;
(iv) There are no Proceedings (except for routine benefit
claims) pending or, to the Knowledge of Sellers, threatened against any
Assumed Employee Plan or its assets or arising out of any Selected
Employee Plan, or to the Knowledge of Sellers, pending or threatened
against any other Person relating to any Selected Employee Plan, and, to
the Knowledge of Sellers, no reasonable basis exists for any such
Proceeding against any Selected Employee Plan or its assets or arising out
of any Selected Employee Plan;
(v) With respect to any Selected Employee Plan that provides
medical benefits to any former employee, independent contractor or
director, such plan may be amended by Sellers, or any of its subsidiaries,
as applicable, on and after the Closing, including by an amendment which
reduces or eliminates benefits to participants who are currently receiving
benefits, other than any former employees of Sellers receiving COBRA
coverage; provided, however, that the notice requirement of ERISA Section
104(b) has been satisfied; and
(vi) Except as specified in Section 5.16(c)(vi) of the Seller
Disclosure Schedule, (A) Purchaser shall not be obligated to pay
separation, severance, termination or similar benefits under any Selected
Employee Plan as a result of any transaction contemplated by this
Agreement, nor will any such transaction accelerate the time of payment or
vesting, or increase the amount, of any benefit or other compensation due
to any individual; and (B) the transactions contemplated by this Agreement
shall not be the direct or indirect cause of any amount paid or payable by
Purchaser under any Selected Employee Plan being classified as an excess
parachute payment under Section 280G of the Code.
(d) Sellers have delivered or made available to Purchaser true and
complete copies of the following documents relating to the Selected Employee
Plans or other Employee Plans that are a health, life insurance or disability
plan to enable Purchaser to satisfy its obligations under Section 8.5: (i) all
such Employee Plan documents or summary descriptions of such Employee Plans;
(ii) the current summary plan description, if any, for each of such Employee
Plans; (iii) any Form 5500 for any Assumed Employee Plan filed in each of the
two most recent plan years, including all schedules thereto and audited
financial statements with attached opinions of independent accountants; (iv) the
most recent determination letter from the Internal Revenue Service for any
Assumed Employee Plan that is intended to be qualified under Section 401(a) of
the Code; (v) the most recent actuarial report, if any, for any Assumed Employee
Plan; (vi) the Form PBGC-1, if any, filed for any Assumed Employee Plan in each
plan year; and (vii) in the case of any Assumed Employee Plan that includes a
"cash or deferred arrangement" as defined in Section 401(k)(2) of the Code,
copies of the non-discrimination testing results for the three (3) most recent
years.
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(e) Purchaser shall not have any Liability under any Excluded
Employee Plans, regardless of whether such Liability was incurred before, on or
after the Closing Date unless the Secondment Agreements are entered into, and
then as specifically provided for in the Secondment Agreements.
5.17 ENVIRONMENTAL MATTERS.
(a) Except as set forth in Section 5.17(a) of the Seller
Disclosure Schedule, Sellers possess all Permits and governmental authorizations
required under Environmental, Health and Safety Law to operate the U.S. Business
as currently operated, and, at the time of Closing are in material compliance
with all applicable Environmental, Health and Safety Laws and Permits.
(b) Except as set forth in Section 5.17(b) of the Seller
Disclosure Schedule, in the past five years, neither Seller nor any of their
Affiliates has received any written notice regarding any actual or alleged
material violation by Sellers or any of their Affiliates of any Environmental,
Health and Safety Laws in connection with the U.S. Business.
(c) Except as set forth in Section 5.17(c) of the Seller
Disclosure Schedule, there are no pending, or to Sellers' Knowledge, threatened,
Environmental Claims, against Sellers or any of their Affiliates arising out of
the operation of any of the Facilities, the operation of the U.S. Business, or
any Off-Site Disposal Location to which Hazardous Materials or materials
containing Hazardous Materials were sent for handling, storage, treatment or
disposal from the Facilities.
(d) Except as set forth in Section 5.17(d) of the Seller
Disclosure Schedule, there have been no Releases of Hazardous Materials into the
soil or groundwater of the Facilities in concentrations legally requiring
notification, remediation or other corrective action (other than de minimis
quantities of Hazardous Materials).
(e) Sellers have provided Purchaser with correct and complete
copies of all Phase I or Phase II studies, environmental compliance audits, and
periodic environmental compliance updates completed by Sellers or on behalf of
Sellers with respect to the Sites conducted in the past five years.
(f) Except as set forth in Section 5.17(f) of the Seller
Disclosure Schedule, there are no Encumbrances (other than Permitted
Encumbrances) arising under or pursuant to any Environmental, Health and Safety
Law on any Facility and material to the continued operation of the U.S. Business
as currently conducted, including those which would be reasonably expected to
give rise to the imposition of special conditions under any Environmental,
Health and Safety Law with respect to the ownership, occupancy, development, use
or transferability of any such Facility.
(g) Except as set forth in Section 5.17(g) of the Seller
Disclosure Schedule, there is not now and there has never been any
asbestos-containing material in any form or condition, any underground storage
tanks or above-ground storage tanks containing Hazardous Materials, any
landfill, waste pile, surface impoundment (other than for storm water), or
article or equipment containing polychlorinated biphenyls on or at any of the
Real Properties.
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5.18 BROKERS.
Neither Sellers nor any of their Affiliates has employed any broker or
finder or incurred any Liability for any brokerage fees, commissions or finders'
fees in connection with the transactions contemplated hereby for which Purchaser
will have any Liability after the Closing.
5.19 SUPPLIERS AND VENDORS; FRANCHISEES AND LICENSEES.
Except as set forth in Section 5.19 of the Seller Disclosure Schedule, in
the ordinary course of business, since October 31, 2004, no material supplier or
vendor used in connection with the U.S. Business and no Person providing
material maintenance services to the U.S. Business has canceled or otherwise
terminated any Contract or, to the Knowledge of Seller, threatened to cancel or
otherwise terminate, its relationship with Sellers or any of their Subsidiaries
or has during that period decreased, limited or otherwise modified, or, to the
Knowledge of Sellers, threatened to decrease, limit or otherwise modify, the
services, supplies or materials it provides to the U.S. Business unless at the
request or with the consent of Sellers in the ordinary course of the business.
5.20 INVENTORIES; PREPAYMENTS AND CREDITS.
(a) Since December 31, 2004, the Inventory related to the U.S.
Business has been maintained in the ordinary course of business.
(b) The amount of the U.S. Business' prepayments, prepaid
expenses, advances, credits from suppliers and deposits with or paid to third
parties is less than $550,000.
5.21 SOLVENCY AND PAYMENT OF LIABILITIES.
Each of Sellers will on the Closing Date, either as a result of the
transactions contemplated by this Agreement or otherwise, (a) not be insolvent,
as such term is defined in the Title 11 Bankruptcy of the United States Code or
any New York statute relating to insolvency, (b) shall have debts not greater
than all of its property and (c) will be able to pay its debts as they mature.
5.22 NO OTHER REPRESENTATIONS AND WARRANTIES.
SELLERS ARE NOT MAKING ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED,
OF ANY NATURE WHATSOEVER, WITH RESPECT TO SELLERS OR ANY OF SELLERS' AFFILIATES
OR TO ANY OF THE ASSETS OR LIABILITIES BEING ACQUIRED, EXCEPT FOR THE
REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN THIS ARTICLE 5.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF
PURCHASER
Purchaser represents and warrants to Sellers on the date hereof as
follows:
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6.1 ORGANIZATION; AUTHORITY.
(a) Purchaser is a limited liability company duly organized,
validly existing and in good standing under the Laws of the jurisdiction of
organization and has all requisite power and authority to own, lease and operate
its Assets and to carry on its business as currently conducted and as presently
proposed to be conducted. Section 6.1(a) of the Purchaser Disclosure Schedule
sets forth the names of each member of Purchaser.
(b) Purchaser is, or will on the Closing Date be, duly qualified
and in good standing to transact business as a foreign Person in those
jurisdictions set forth opposite its name in Section 6.1(b) of the Purchaser
Disclosure Schedule, which constitute all of the jurisdictions in which the
character of the property owned, leased or operated by Purchaser or the nature
of the business or activities conducted by Purchaser and as presently proposed
to be conducted makes such qualification necessary, except where the failure to
be so qualified has not had or would not reasonably be expected to have a
Purchaser Material Adverse Effect.
6.2 ACTION; AUTHORITY; NON-CONTRAVENTION.
Purchaser has all requisite power and authority to execute, deliver and
perform its obligations under this Agreement and each Related Document to which
it is or will be a party and to consummate the transactions contemplated hereby
and thereby. The execution, delivery and performance by Purchaser of this
Agreement and each Related Document to which it is or will be a party, and
performance of its obligations hereunder and thereunder have been duly and
validly authorized by all necessary action on the part of Purchaser and its
members. This Agreement and each Related Document to which Purchaser is or will
be a party has been, or upon the execution thereof will be, duly and validly
executed and delivered by Purchaser and constitutes, or upon its execution and
delivery will constitute, a valid and binding obligation of Purchaser,
enforceable against Purchaser in accordance with its terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance, fraudulent transfer or other similar laws
relating to or affecting enforcement of creditors' rights generally or by
general equitable principles. Neither the execution and delivery of, and/or
performance by Purchaser of its obligations under this Agreement and each
Related Document to which it is or will be a party, nor the consummation by
Purchaser of the transactions contemplated hereby and thereby shall (a) conflict
with or result in any violation or breach of, any of the terms, conditions or
provisions of, or constitute (with due notice or lapse of time, or both) a
default (with or without notice), or give rise to any right of termination,
cancellation or acceleration or result in the creation of any Encumbrance upon
any of the Assets of Purchaser, under any provision of its Organizational
Documents or any Contract to which Purchaser is a party or by which it or any of
its Assets is or may be bound, except, with respect to Contracts only, where
such violation, breach, or default, would not reasonably be expected to have a
Purchaser Material Adverse Effect or (b) violate, or result in the creation of
an Encumbrance (other than a Permitted Encumbrance) upon any of Purchaser's
Assets as a result of, any Laws applicable to Purchaser or any of its properties
or Assets, except where such violation or Encumbrance would not reasonably be
expected to have a Purchaser Material Adverse Effect.
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6.3 BROKERS.
Purchaser has not employed any broker or finder or incurred any Liability
for any brokerage fees, commissions or finders' fees in connection with the
transactions contemplated hereby for which Sellers or their Affiliates will have
any Liability after the Closing.
6.4 CONSENTS.
No consent, approval, Order or authorization of, or registration,
declaration or filing with or notification to, any Governmental Entity or any
third party is required in connection with the execution, delivery and
performance by Purchaser of this Agreement or the Related Documents to which
Purchaser is or will be a party or the consummation of the transactions
contemplated hereby or thereby.
6.5 AVAILABILITY OF FUNDS.
As of the date hereof and as of the Closing Date, Purchaser and/or its
Affiliates have the financial ability to satisfy Purchaser's obligations under,
and to consummate the transactions contemplated by, this Agreement.
6.6 SOLVENCY AND PAYMENT OF LIABILITIES.
Purchaser will on and immediately after the Closing, either as a result of
the transactions contemplated by this Agreement or otherwise, (a) not be
insolvent, as such term is defined in the Title 11 Bankruptcy of the United
States Code or any New York statute relating to insolvency, (b) shall have debts
not greater than all of its property and (c) will be able to pay its debts as
they mature.
ARTICLE 7
COVENANTS AND AGREEMENTS
7.1 ACCESS TO RECORDS AND PROPERTIES OF SELLERS; INVESTIGATIONS.
(a) From and after the date hereof until the earlier of the
Closing or the termination of this Agreement pursuant to Article 10, Sellers
shall afford (a) to Purchaser, Purchaser's potential lenders and Affiliates and
each of their respective authorized representatives, including accountants,
consultants and attorneys, free and full access at all reasonable times during
normal business hours to the Purchased Assets, business, facilities, properties,
books, records (including tax returns filed and in preparation), consultants,
and key employees of or relating exclusively to the U.S. Business in order that
Purchaser shall have the full opportunity to make such investigation as it shall
reasonably desire to make of the affairs of Sellers, and Sellers shall cooperate
fully in connection therewith, and (b) to the respective independent certified
public accountants of Purchaser, free and full access at all reasonable times
during normal business hours to the records of the independent certified public
accountants of Sellers. The investigation contemplated by this Section 7.1 and
any knowledge obtained by Purchaser prior to Closing shall not affect or
otherwise diminish or obviate in any respect any of the representations and
warranties or the indemnification rights of Purchaser Indemnified
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Persons contained in this Agreement. The parties hereto agree to use their
reasonable efforts to minimize any disruption to any other party's business in
connection with the conduct of the due diligence process contemplated herein.
Any information, documents or other material provided pursuant to this Section
7.1 shall be subject to the terms and conditions set forth in the
Confidentiality Agreement between the Universal Music Group and Glenayre
Electronics, Inc., dated as of December 17, 2004 (the "Confidentiality
Agreement").
(b) After the Closing, if requested by Purchaser, Sellers agree to
provide copies, at Purchaser's expense, of the property records, plans,
specifications and surveys relating to the Facilities.
7.2 CONDUCT PENDING CLOSING.
(a) Other than as set forth in Section 7.2 of the Seller
Disclosure Schedule, from and after the date hereof until the earlier of the
Closing or the termination of this Agreement pursuant to Article 10, Sellers
shall and shall cause their Affiliates to:
(i) conduct the U.S. Business, in all material respects, as
currently conducted and only in the ordinary course consistent with past
practice;
(ii) use commercially reasonable efforts to (A) maintain the
Purchased Assets, relations with present employees, suppliers, licensees
and operations as an ongoing operation in accordance with past custom and
practice, and (B) comply in all material respects with all applicable Laws
affecting or relating to the U.S. Business;
(iii) maintain in good standing all material Permits held by
Sellers to be transferred to Purchaser in respect of the U.S. Business on
a timely basis; and
(iv) maintain the Facilities consistent with past practice.
(b) Other than as set forth in Section 7.2 of the Seller
Disclosure Schedule, from and after the date hereof until the earlier of the
Closing or the termination of this Agreement pursuant to Article 10, Sellers
shall not, and Sellers shall cause their Affiliates not to:
(i) take or omit to take any action that is within the
control of Sellers which would result in the representations and
warranties contained in this Agreement and the Related Documents being
untrue on the Closing Date, other than such action as shall have been
previously agreed to in writing by the parties hereto;
(ii) sell, lease, license, transfer or otherwise dispose of
or mortgage, pledge or otherwise suffer to exist any Encumbrance (except
Permitted Encumbrances) on any of the Purchased Assets, except for sales
of inventory in the ordinary course of business or an Encumbrance that
upon its terms expires before the Closing;
(iii) modify, amend or terminate any material Contract that is
included in the Purchased Assets or waive, release or assign any material
rights thereunder;
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(iv) make any Tax election or settle or compromise any income
Tax Liability that could reasonably be anticipated to adversely affect the
U.S. Business after the Closing Date;
(v) change its practices, policies or procedures with
respect to the timing of the payment of accounts payable or the collection
of accounts receivable;
(vi) adopt, amend or otherwise modify in any respect any
Assumed Employee Plan or enter into, amend or otherwise modify any
collective bargaining agreement with any labor union or similar
organization that applies to, or covers, U.S. Business Employees, except,
in each case, as required by Law;
(vii) grant to any Employee whose annual salary is $100,000 or
more any increase in cash compensation, except as is required under
existing Employment Contracts, any renewal of an Employment Contract in
the ordinary course of the business or any Employee Plan;
(viii) enter into any contract relating to the provision of
services by Sellers in respect of the U.S. Business or the distribution,
sale or marketing by third parties of Sellers' services relating to the
U.S. Business in an amount in excess of $100,000;
(ix) purchase or make any contract for the purchase of an
amount of assets or properties, other than purchases in the ordinary
course of business or less than $100,000 in the aggregate;
(x) make any new commitments which would require expenditure
of more than $100,000 in the aggregate other than in the ordinary course
of business; or
(xi) agree or otherwise commit to take any of the actions set
forth above.
7.3 EFFORTS TO CONSUMMATE.
(a) Subject to the terms and conditions of this Agreement, each
party shall use commercially reasonable efforts to take or cause to be taken all
actions and do or cause to be done all things required under all applicable
Laws, in order to consummate the transactions contemplated hereby.
(b) From and after the date hereof until the earlier of the
Closing or the termination of this Agreement pursuant to Article 12, Purchaser
and Sellers shall use commercially reasonable efforts to satisfy each of the
closing conditions set forth in Article 10 to the extent such satisfaction is
within their power. Without limiting the foregoing, each party hereto shall
execute and deliver each Related Document to which it is a party.
(c) Purchaser shall be responsible, at Purchaser's expense, for
obtaining all Permits necessary for Purchaser to operate the U.S. Business.
Prior to the Closing Date, Sellers
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shall assist Purchaser in obtaining, at Purchaser's expense, all Permits
necessary for Purchaser to operate the U.S. Business.
(d) For every collective bargaining agreement listed in Section
5.15(b) of the Seller Disclosure Schedule, Sellers agree that they will
cooperate with Purchaser's effort to secure the agreement of the signatory labor
organization and/or union to the terms and conditions of employment proposed by
Purchaser for the employees who are subject to such collective bargaining
agreement as of the Closing Date.
7.4 NO SOLICITATION.
(a) Sellers each agree, and agree to cause their respective
Affiliates, directors, employees, advisors and representatives not to, directly
or indirectly,
(i) solicit, facilitate, encourage or discuss any proposals,
inquiries or offers relating to, Another Transaction,
(ii) (A) participate or engage in discussions or negotiations
with, or (B) disclose or provide any non-public information relating to
itself or the U.S. Business to, or afford access to any of its properties,
books or records to any Person with respect to Another Transaction, or
(iii) enter into any agreement or agreement in principle, in
connection with, any acquisition, disposition, business combination,
merger, or similar transaction involving Another Transaction;
provided, however, that (i) Sellers may take any of the actions described
in clause (ii) of this subsection (a) in response to any Person that has
made a bona fide written Acquisition Proposal if, but only if, (A) such
Person has submitted a written Acquisition Proposal which did not result
from a violation by any Seller of its obligations under this Section 7.4,
(B) the Sellers' boards of directors have determined in good faith by
resolution duly adopted, after consultation with outside legal counsel and
its financial advisor, that such Acquisition Proposal constitutes or would
reasonably be expected to lead to a Superior Proposal, (C) in the case of
Section 7.4(a)(ii)(B), such Person has entered into a confidentiality
agreement with either or both of the Sellers, on terms that are no less
favorable to the other than the Confidentiality Agreement (which shall not
preclude discussions or negotiation with Purchaser, relating to the
proposal or offer from such Person required by this Section 7.4 and which
shall not contain any exclusivity provision or other term that could
restrict in any manner Sellers' ability to consummate the transactions
contemplated by this Agreement), and (D) prior to, or substantially
concurrent with, disclosing or providing any such non-public information,
Sellers shall disclose or provide all such information to Purchaser.
(b) Each of the Sellers shall promptly advise Purchaser, in writing
(and in any event within one business day of attaining knowledge), of its
receipt of any Acquisition Proposal or any proposal, inquiry or request related
to, or that could reasonably be expected to lead to, any Acquisition Proposal.
Each of the Sellers shall promptly provide Purchaser, in writing, with the terms
and conditions of any such Acquisition Proposal, or such proposal, inquiry or
request, and the identity of the Person making the same. Each of the Sellers
shall promptly inform Purchaser of any material changes in the status and any
material changes or modifications in the terms of any Acquisition Proposal,
proposal, inquiry or request. Promptly upon determination by the Applicable
Board that an Acquisition Proposal constitutes a Superior Proposal, a Seller
shall deliver to Purchaser a written notice advising it that the Applicable
Board has so determined, specifying the terms and conditions of such Superior
Proposal and the identity of the Person making such Superior Proposal, and
providing Purchaser with a copy of the Superior Proposal.
(c) Each of the Applicable Boards has adopted a resolution
recommending the approval of this Agreement and the other transactions
contemplated hereby (the "Board Approval"), and, except as provided in the next
sentence, the Applicable Board shall at all times maintain the Board Approval.
An Applicable Board shall be permitted to (i) approve or recommend a Superior
Proposal, and/or (ii) enter into an agreement regarding such Superior Proposal
if, but only if, (a) a majority of the Applicable Board has determined in good
faith, following consultation with outside counsel, that taking such action is
required in order for the members of the Applicable Board to comply with their
fiduciary duties to the stockholders of a Seller under applicable law, (b) the
applicable Seller has given Purchaser three (3) Business Days' prior written
notice of its intention to take action, and the applicable Seller shall have
considered in good faith, with respect to actions set forth in clauses (i) and
(ii) of this Section 7.4.(c), any proposed changes to this Agreement proposed by
Purchaser (it being understood and agreed that any material amendment to the
financial or other material terms of a Superior Proposal, if any, shall require
a new three (3) Business Day period to afford Purchaser the opportunity to
negotiate with Sellers), and (c) the applicable Seller has materially complied
with its obligations under this Section 7.4 with respect to such Superior
Proposal, if any. In the event that this Agreement is terminated pursuant to
Section 12.1(g) or Section 12.1(h), including the payment of the Termination Fee
to Purchaser or its Affiliate pursuant to this Agreement or the Share Purchase
Agreement (it being understood that Purchaser and its Affiliates shall only be
entitled to one such Termination Fee), Purchaser shall have no further right of
action against Sellers or any of their Affiliates.
(d) In the event of a failure to close the transactions contemplated
hereby as a result of the breach of this Agreement by Purchaser (i) on and after
a third party completes a material transaction with Glenayre resulting in (A)
the board of directors of Glenayre immediately succeeding such transaction being
comprised of a majority of directors who were not directors immediately prior to
such transaction or (B) a third party contractually obtaining the right to cause
Purchaser to take or fail to take action with respect to this Agreement or (ii)
in connection with the entry into or completion of another material transaction
within eighteen months hereof resulting in Glenayre or an Affiliate acquiring,
or merging with or into, another company or acquiring another business or
substantial assets, then Sellers, collectively, shall be entitled to a minimum
recovery from Purchaser or Glenayre of the Termination Fee; provided, however,
that if the Termination Fee has been paid pursuant to the Share Purchase
Agreement, then no Termination Fee shall be due under this Agreement. The
foregoing is not intended to be, and shall not be construed as, a limitation in
any manner on the rights and remedies that may be pursued by Sellers or the
damages that may be recovered from Purchaser. Glenayre has affirmed its
agreement with respect to its obligations under this Section 7.4(d) by signing
this Agreement.
(e) The parties recognize and acknowledge that a breach of this
Section 7.4 will cause irreparable and material loss and damage to the
non-breaching party as to which it will not have an adequate remedy at Law or in
equity. Accordingly, each party acknowledges and agrees that Purchaser may seek
the issuance of an injunction or other equitable remedy as an appropriate remedy
for any such breach.
7.5 PUBLIC ANNOUNCEMENTS.
Each party agrees that, except (a) as otherwise required by Law or Order
and (b) for disclosure to its respective directors, officers, employees,
shareholders, partners, financial advisors, potential financing sources, legal
counsel, independent certified public accountants or other agents, advisors or
representatives on a need-to-know basis and with whom such party has a
confidential relationship, it will not issue any reports, statements or
releases, in each case pertaining to this Agreement or any Related Document to
which it is a party or the transactions contemplated hereby or thereby, without
the prior written consent of Purchaser and Sellers, and each party agrees to
cooperate as to the timing and contents of any such press release or public
announcement.
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7.6 CONFIDENTIALITY; NON-COMPETE AND NON-SOLICITATION.
(a) From and after the Closing, neither Sellers nor any of their
Affiliates shall use or disclose to any Person, except as required by any Law,
any Environmental, Health and Safety Laws or any Order, any Confidential or
Proprietary Information, for any reason or purpose whatsoever, and shall not
make use of any of the Confidential or Proprietary Information (i) for their own
purposes other than in connection with this Agreement or the Related Documents
and the transactions contemplated thereby or (ii) for the benefit of any Person
except Purchaser or any of its Affiliates.
(b) From and after the Closing, neither Purchaser nor any of its
Affiliates shall use or disclose to any Person, except as required by any Law,
any Environmental, Health and Safety Laws or any Order, any Seller Confidential
or Proprietary Information, for any reason or purpose whatsoever, and shall not
make use of any of the Seller Confidential or Proprietary Information (i) for
their own purposes other than in connection with this Agreement or the Related
Documents and the transactions contemplated thereby or (ii) for the benefit of
any Person except Sellers or any of their Affiliates.
(c) Sellers each acknowledge and recognize that the U.S. Business
has been conducted by Sellers, and further acknowledge and recognize the highly
competitive nature of the industry in which the U.S. Business is involved.
Accordingly, in consideration of the premises contained herein and the
consideration to be received hereunder, and in consideration of and as an
inducement to Purchaser to consummate the transactions contemplated hereby,
neither Sellers nor any other member of the Universal Music Group shall, from
and after the Closing until the date on which the U.S. Manufacturing and
Distribution Agreements expire or terminate (unless, in the case of termination,
termination is a result of the failure of Sellers to comply with the terms
thereof, in which event the period shall be the original expiration date of the
U.S. Manufacturing and Distribution Agreements) (the "Seller Restricted
Period"), directly or indirectly, engage in any of the Seller Restricted
Activities or have or Beneficially Own a Material Interest in any business or
Person that (i) manufactures Products or physical format successors or
replacements for the Products, or (ii) physically distributes Products or
physical format successors or replacements for the Products, in each of clauses
(i) and (ii), within any Restricted Territory. The activities described in
clauses (i) and (ii) are referred to herein as the "Seller Restricted
Activities."
(i) Notwithstanding anything to the contrary herein, this
Section 7.6(c) shall not prohibit or restrict Sellers or any of their
Affiliates from having or Beneficially Owning a Material Interest or
engaging in any business (A) which creates or sells custom compilations of
music (including through retail outlets, over the Internet or kiosk sales)
or consumer selected locally burned Products; (B) which is primarily a
record club; (C) which is a Joint Venture (as defined and set forth in any
of the Manufacturing and Distribution Agreements), but not beyond the
respective terms for such Joint Ventures as set forth in their respective
Organizational Documents; (D) which is a Seller Permitted Joint Venture on
the Effective Date; or (E) which distributes product by physical means for
orders placed by electronic means (e.g., over the Internet, radio,
television, etc.), nor shall this Section 7.6(c) prohibit or restrict
Sellers or their Affiliates from continuing or entering into manufacturing
or distribution agreements as permitted
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under any of the Manufacturing and Distribution Agreements (including new
P&D Agreements (as defined in the Manufacturing and Distribution
Agreements) with third parties). The ability of Sellers or their
Affiliates to have or Beneficially Own a Material Interest or engage in
the enumerated businesses of this Section 7.6(c)(i) shall in no way limit
their obligations to divest any Competing Business or such Material
Interest as contemplated by Section 7.6(c)(iii).
(ii) For purposes of clarity, this Section 7.6 (c) shall not
prohibit or restrict Sellers or any of their Affiliates from having or
Beneficially Owning a Material Interest or engaging in any business not
constituting a Seller Restricted Activity, including any business (A)
which produces or distributes product by non-physical means, or delivers
music or other audio and/or visual works by electronic means (e.g., over
the Internet, radio, television, etc.), (B) which promotes (including
through the promotional distribution of) Products; (C) which is part of
the Seller Core Business or (D) which licenses master recordings to third
parties.
(iii) This Section 7.6(c) shall not prohibit or restrict
Sellers or any of their Affiliates from acquiring or agreeing to acquire
an interest in any Person or business (a "Seller Acquired Business") which
is engaged in whole or in part in a Seller Restricted Activity (for
purposes of this Section 7.6(c), the portion of such Seller Acquired
Business which is engaged in a Seller Restricted Activity is a "Competing
Business") provided any such Seller or Affiliate disposes, terminates or
dissolves or otherwise divests of such Competing Business (or its Material
Interest therein) as soon as reasonably practicable, and in any event
prior to the eighteen month anniversary of the acquisition by such Seller
or Affiliate of such Competing Business. At the time a Seller Permitted
Joint Venture which is not owned by Seller on the Closing Date (a "New
Venture") fails to satisfy the criteria set forth in the definition of
Seller Permitted Joint Venture, such Seller or Affiliate shall be
obligated to dispose, terminate, dissolve or otherwise divest itself of
such New Venture. If such Seller or Affiliate determines that it will
dispose of (rather than terminate) such Competing Business (or Material
Interest) or New Venture, it will provide Purchaser an opportunity to
purchase the Competing Business (or Material Interest) or New Venture
(provided as to any New Venture, Seller may comply with any restrictions
on transfer or sale in such New Venture's organizational documents, e.g.
requiring a first offer to other equity holders or to the venture). If
Purchaser wishes to pursue such an acquisition, it shall notify such
Seller or Affiliate within thirty (30) Business Days of such Seller's
notice, and such Seller or Affiliate will thereafter provide Purchaser
with an exclusive right of first negotiation for a period of thirty (30)
Business Days from the date of Purchaser's notice. If the parties are
unable to agree to mutually acceptable terms within such thirty (30)
Business Day period, such Seller or Affiliate shall be free to dispose of
such Competing Business (or Material Interest) or New Venture to a third
party for the purchase price and other terms and conditions last offered
by such Seller or Affiliate in the course of such failed negotiations with
Purchaser (the "Seller's Last Offer") or for a purchase price and other
terms and conditions that are more favorable to such Seller or Affiliate
and less favorable to Purchaser than the Seller's Last Offer. Prior to
consummating any such disposition, such Seller or Affiliate shall, upon
request of Purchaser, provide Purchaser with reasonable supporting
documentation with respect to the terms and conditions of any such
disposition to a third party in order
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to demonstrate such Seller's or Affiliate's compliance with the provisions
of the preceding sentence. Notwithstanding any other provision of this
Agreement, any disposition or attempted disposition by such Seller or
Affiliate of such Competing Business (or Material Interest) or New Venture
on terms that are not more favorable to such Seller or Affiliate and less
favorable to Purchaser than the Seller's Last Offer ("Seller Reduced
Terms") shall be subject to the rights of Purchaser hereunder and
Purchaser shall have a right of first refusal to purchase such Competing
Business (or Material Interest) or New Venture on such Seller Reduced
Terms. Purchaser shall have a period of fifteen (15) Business Days from
date Purchaser receives notice of such disposition or proposed disposition
within which to exercise such right of first refusal by providing written
notice to such Seller or Affiliate.
(iv) Sellers each specifically agree that this covenant is an
integral part of the inducement of Purchaser to enter into this Agreement
and that Purchaser shall be entitled to injunctive relief in addition to
all other legal and equitable rights and remedies available to it in
connection with any breach by Sellers or either of their applicable
Affiliates of any provision of this Section 7.6(c) and that,
notwithstanding the foregoing, no right, power, or remedy conferred upon
or reserved or exercised by Purchaser in this Section 7.6(c) is intended
to be exclusive of any other right, power or remedy, each and every one of
which (now or hereafter existing at law, in equity, by statute or
otherwise) shall be cumulative and concurrent. The covenants contained in
this Section 7.6(c) shall be construed as a series of separate covenants,
one for each county or state of the United States (together, the
"Restricted Territory").
(d) Sellers and Purchaser each acknowledge and recognize that
Sellers are retaining, and will conduct, certain operations related to the
sales, marketing and promotion of Products and further acknowledge and recognize
that these lines of business may be substantially affected if Purchaser or its
Affiliates were to use the assets and good will that it is acquiring from
Sellers and its Affiliates to compete against Sellers in these lines of business
in the United States. Accordingly, in consideration of the premises contained
herein and the consideration to be received hereunder, and in consideration of
and as an inducement to Sellers to consummate the transactions contemplated
hereby, neither Purchaser nor any of its Affiliates with operations in any
segment of the music industry shall from and after the Closing until the date in
which the Manufacturing and Distribution Agreements expire or terminate (unless,
in the case of termination, termination is a result of the failure of Purchaser
to comply with the terms thereof) (the "Purchaser Restricted Period"), directly
or indirectly, engage in the Seller Core Business or have or Beneficially Own a
Material Interest in any business or Person in the following lines of business:
(i) sales of Product (i.e., solicitation of wholesale and/or retail purchasers
of Product) but not including rack jobbing; (ii) marketing and advertising of
Product; (iii) content acquisition (whether directly (e.g., as a producer of
music) or indirectly (e.g., by acquisition of record labels)); (iv) the
provision of credit and collection services to the owners, producers or
distributors of Product other than in connection with the services provided by
Purchaser to Sellers and their Affiliates after Closing; (v) account executive
services; (vi) catalog program management; (vii) special markets sales; (viii)
field marketing and merchandising; or (ix) the facilitation, for itself or third
parties, of the electronic distribution of music or other audio and/or visual
content but not including backroom services relating to such electronic
distribution; in each of clauses (i) through (ix), within any Restricted
Territory. The business operations
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described in clauses (i) through (ix) is the "Seller Core Business". For
purposes of this Section 7.6(d), Purchaser's "Affiliates" shall include only (i)
those entities controlled by Purchaser or (ii) entities which control Purchaser
(directly or indirectly) (each, a "Purchaser Parent") or which are controlled by
a Purchaser Parent. Purchaser shall deliver a side letter to Sellers from each
member of senior management of Purchaser in the form attached hereto as Exhibit
7.6.
(i) Notwithstanding anything to the contrary herein, this
Section 7.6(d) shall not prohibit or restrict Purchaser from having or
Beneficially Owning an interest in any Purchaser Permitted Joint Venture
or owning, managing, controlling, or participating in any business that
provides: (A) rack jobbing; (B) content protection and anti-piracy
measures for Products; (C) backroom services; or (D) those services to be
performed by Purchaser under the Manufacturing and Distribution
Agreements. The ability of Purchaser or its Affiliates to have or
Beneficially Own a Material Interest or engage in the enumerated
businesses of this Section 7.6(d)(i) shall in no way limit their
obligations to divest any Competing Business or such Material Interest as
contemplated by Section 7.6(d)(ii);
(ii) This Section 7.6(d) shall not prohibit or restrict
Purchaser from acquiring or agreeing to acquire an interest in any Person
or business (a "Purchaser Acquired Business") which is engaged in whole or
in part in a Seller Core Business (for purposes of this Section 7.6(d),
the portion of such Purchaser Acquired Business which is engaged in a
Seller Core Business is a "Seller Competing Business") provided Purchaser
disposes, terminates or dissolves, or otherwise divests of such Seller
Competing Business (or its Material Interest therein) as soon as
reasonably practicable, and in any event prior to the eighteen month
anniversary of the acquisition by Purchaser of such Seller Competing
Business. At the time a Purchaser Permitted Joint Venture fails to satisfy
the criteria set forth in the definition of Purchaser Permitted Joint
Venture, Purchaser or its Affiliate shall be obligated to dispose,
terminate, dissolve or otherwise divest itself of such Purchaser Permitted
Joint Venture. If Purchaser determines that it will dispose of (rather
than terminate) such Seller Competing Business (or Material Interest) or
Purchaser Permitted Joint Venture, it will provide Sellers an opportunity
to purchase the Seller Competing Business (or Material Interest) or
Purchaser Permitted Joint Venture. If either Seller wishes to pursue an
acquisition of the Seller Competing Business (or Material Interest) or
Purchaser Permitted Joint Venture, it shall notify Purchaser or such
Affiliate within thirty (30) Business Days of such Purchaser's notice, and
Purchaser or such Affiliate will thereafter provide Sellers with an
exclusive right of first negotiation for a period of thirty (30) Business
Days from the date of such Seller's notice. If the parties are unable to
agree to mutually acceptable terms within such thirty (30) Business Day
period, Purchaser Affiliate shall be free to dispose of such Seller
Competing Business (or Material Interest) or Purchaser Permitted Joint
Venture to a third party for the purchase price and other terms and
conditions last offered by Purchaser or such Affiliate in the course of
such failed negotiations with Seller (the "Purchaser's Last Offer") or for
a purchase price and other terms and conditions that are more favorable to
such Purchaser or Affiliate and less favorable to Seller than the
Purchaser's Last Offer. Prior to consummating any such disposition, such
Purchaser or Affiliate shall, upon request of Seller, provide Seller with
reasonable supporting documentation with respect to the terms and
conditions of any such disposition to a third party in order to
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demonstrate such Purchaser's or Affiliate's compliance with the provisions
of the preceding sentence. Notwithstanding any other provision of this
Agreement, any disposition or attempted disposition by such Purchaser or
Affiliate of such Seller Competing Business (or Material Interest) or
Purchaser Permitted Joint Venture on terms that are not more favorable to
such Purchaser or Affiliate and less favorable to Seller than the
Purchaser's Last Offer ("Purchaser Reduced Terms") shall be subject to the
rights of Seller hereunder and Seller shall have a right of first refusal
to purchase such Seller Competing Business (or Material Interest) or
Purchaser Permitted Joint Venture on such Purchaser Reduced Terms. Seller
shall have a period of fifteen (15) Business Days from date Seller
receives notice of such disposition or proposed disposition within which
to exercise such right of first refusal by providing written notice to
such Purchaser or Affiliate; and
(iii) Purchaser specifically agrees that this covenant is an
integral part of the inducement of Sellers to enter into this Agreement
and that Sellers shall be entitled to injunctive relief in addition to all
other legal and equitable rights and remedies available to each in
connection with any material breach by Purchaser of any provision of this
Section 7.6(d) and that, notwithstanding the foregoing, no right, power,
or remedy conferred upon or reserved or exercised by Sellers in this
Section 7.6(d) is intended to be exclusive of any other right, power or
remedy, each and every one of which (now or hereafter existing at law, in
equity, by statute or otherwise) shall be cumulative and concurrent. The
covenants contained in this Section 7.6(d) shall be construed as a series
of separate covenants, one for each Restricted Territory.
(e) Neither Sellers nor any of their Affiliates with operations in
any segment of the music industry shall during the Seller Restricted Period,
solicit, employ or offer to employ any employee of the U.S. Business who is, at
the time of the solicitation, employment or offer, employed by Purchaser or one
of its Affiliates in a management capacity. Neither Purchaser nor any of its
Affiliates (as such term is used in Section 7.6(d)) shall during the Purchaser
Restricted Period, solicit, employ or offer to employ any employee of Sellers or
their Affiliates who is, at the time of solicitation, employment or offer,
employed by Sellers or one of their Affiliates. Nothing in this Section 7.6(e)
shall prohibit the placement of advertising or other solicitation materials
which are not specifically targeted at the other's employees (e.g., postings to
an on-line employment site, newspaper advertising are not prohibited).
(f) It is the desire and intent of the parties that the provisions
of this Section 7.6 be enforced to the fullest extent permissible under the Laws
and public policies applied in each jurisdiction in which enforcement is sought.
Accordingly, if any particular provision of this Section 7.6 shall be
adjudicated to be invalid or unenforceable, such provision shall be deemed
amended to the extent necessary in order that such provision be valid and
enforceable, such amendment to apply only with respect to the operation of such
provision of this Section 7.6 in the particular jurisdiction in which such
adjudication is made.
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7.7 NOTICE OF CHANGES.
(a) On or prior to the Closing Date, Sellers will promptly notify
Purchaser in writing of any event related to the U.S. Business which has had or
would reasonably be expected to have a Material Adverse Effect.
(b) Each party shall immediately notify the other parties in writing
upon the occurrence, or failure to occur, of any event, which occurrence or
failure to occur would be reasonably likely to cause any representation or
warranty of such party that is contained in this Agreement or any Related
Document to be untrue or inaccurate in any material respect at any time from the
date of this Agreement to the Closing as if such representation and warranty
were made at such time. In addition, each party shall immediately notify the
other parties in writing in the event it reasonably believes that any condition
set forth in Article 8 cannot be satisfied.
(c) The parties agree that notification pursuant to this Section 7.7
shall not impact the rights and remedies of any party under this Agreement and
such notification shall not be deemed to cure a breach by any party hereunder.
7.8 REPAIR OF DAMAGE; CONDEMNATION.
(a) In the event that prior to the Closing there is any
"Non-Material" (as defined in subsection (c) hereof) damage to the Purchased
Assets, or any part thereof, other than ordinary wear and tear, at Sellers'
option either (i) Sellers shall at their cost and in a good and workmanlike
manner repair or replace such damage after the Closing, or (ii) Purchaser shall
accept such Purchased Assets in their then-current condition, with an abatement
or reduction in the Purchase Price in the amount necessary to fully repair and
restore such damaged Purchased Assets, and Purchaser and Sellers shall proceed
with the Closing.
(b) In the event that prior to the Closing, any Non-Material portion
of the Purchased Assets is subject to a taking, Purchaser shall accept the
Purchased Assets in their then-current condition and proceed with the Closing,
in which case Purchaser shall be entitled to an assignment of all of Sellers'
rights to any award in connection with such taking. In the event of any such
Non-Material taking, Sellers shall not compromise, settle or adjust any claims
to such award without Purchaser's prior written consent.
(c) For the purposes of this Section 7.8, damage to the Purchased
Assets or a taking of a portion thereof shall be deemed to be "Non-Material" if
the reasonably estimated cost of restoration or repair of such damage or the
amount of the condemnation award with respect of such taking shall not exceed
$300,000.
(d) Sellers agree to give Purchaser prompt notice of any taking,
damage or destruction of the Purchased Assets prior to the Closing.
7.9 AFFILIATE AGREEMENTS AND INTERCOMPANY ACCOUNTS.
Other than as expressly provided in this Agreement or any Related
Document, each Seller agrees to cause (a) all agreements between or among a
Seller and any of its Affiliates that relate exclusively to the U.S. Business,
and which are listed in Section 5.11(d) of the Seller Disclosure
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Schedule, to be terminated and to be of no further force or effect upon or prior
to the consummation of the Closing, and (b) any and all intercompany receivable
and payable balances owing by, between or among a Seller and any of its
Affiliates that relate to the U.S. Business to be terminated and to be of no
further force or effect upon or prior to the consummation of the Closing.
7.10 SERVICES AND PERIOD PAYABLES; CERTAIN TAXES.
All of the services and period payables for the U.S. Business for items
set forth in Section 7.10 of the Seller Disclosure Schedule and all personal or
real property taxes (and any other Taxes charged based on the ownership of the
Assets and not operation, activities, receipts or other income of the U.S.
Business) and similar ad valorem obligations levied with respect to any of the
Purchased Assets (collectively, the "Apportioned Payables") shall be apportioned
between Purchaser, on the one hand, and Sellers, on the other hand, based on the
number of days relating to a particular Apportioned Payable that relates to the
period prior to the Closing (the "Pre-Closing Period") and the number of days
relating to a particular Apportioned Payable on and after the Closing Date (the
"Post-Closing Period"). Sellers shall be liable for the proportionate amount of
all Apportioned Payables that are attributable to the Pre-Closing Period, and
Purchaser shall be liable for the proportionate amount of all Apportioned
Payables that are attributable to the Post-Closing Period. Upon receipt of any
xxxx relating to any Apportioned Payable, the party that receives such xxxx
shall present a statement to the other party setting forth the amount for which
such other party is responsible, together with such supporting evidence as is
reasonably necessary to calculate the pro-ration amount. The pro-ration amount
shall be paid by the party owing it to the other party within fifteen (15) days
after delivery of such statement. In the event that either Sellers or Purchaser
shall make any payment for which the other party is responsible pursuant to this
Section 7.10, such Person shall be entitled to be reimbursed for the amount of
such payment and the other party shall make such reimbursement promptly but in
no event later than fifteen (15) days after the presentation of a statement
setting forth the amount of reimbursement to which the presenting party is
entitled, together with such supporting evidence as is reasonably necessary to
calculate the amount of such reimbursement.
7.11 ENVIRONMENTAL MATTERS.
(a) Remediation. Purchaser will provide Sellers with prompt written
notice of the discovery of conditions that are potentially part of Sellers'
Environmental Obligations under Section 2.2(b)(xii) hereof. Sellers shall remain
responsible for the cost and performance of Remediation Measures solely to the
extent that such Remediation Measures are required by any Governmental Entity
under Environmental, Health and Safety Laws, including Environmental, Health and
Safety Laws amended or enacted after Closing, and are part of Sellers'
Environmental Obligations or Sellers' obligations under Article 11 hereof. In
the event of a Third Party Claim seeking the performance of remediation
measures, Purchaser shall comply with the notice requirements of Section 11.3(a)
of this Agreement. In addition to performing tasks that are part of Sellers'
Environmental Obligations, Sellers may undertake such Remediation Measures as
they reasonably determine are required under Environmental, Health and Safety
Law or which they otherwise reasonably believe are appropriate but they shall
not be obligated to do so under the terms hereof. In undertaking such
Remediation Measures, Sellers shall not unreasonably interfere with the
operation of the U.S. Business and Purchaser shall
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reasonably cooperate with Sellers to facilitate Seller's performance and
completion of such Remediation Measures, including, allowing reasonable access
to the Facilities to Sellers and Sellers' consultants and contractors. Neither
of Sellers shall have any responsibility for the cost or performance of
Remediation Measures undertaken by Purchaser or any Affiliate of Purchaser,
except to the extent Purchaser is entitled to indemnification under Article 11.
With respect to any Remediation Measure undertaken by Sellers pursuant to the
second sentence of this paragraph, Sellers shall be deemed to have discharged
such undertaking and its obligations with respect thereto whenever it has paid
the cost of such Remediation Measure and it has received written notice from the
pertinent Governmental Entity or Entities that no further material Remediation
Measures are then required. Before submitting plans or reports to Governmental
Authorities, Sellers will give Purchaser an opportunity to comment on such
reports and plans, and will make reasonable good faith efforts to consider and
address such comments. Purchaser shall not have the rights of approval over such
plans or reports.
(b) Purchaser Covenants. With respect to Sellers' rights and
obligations in respect of Remediation Measures, Purchaser agrees as follows:
(i) It will grant to Sellers any easements or licenses (in
recordable form, and in form and substance reasonably acceptable to
Sellers) as reasonably necessary to allow Sellers and their
representatives, contractors and agents, at reasonable times and upon
reasonable notice, to use all facilities or equipment located at the
Facilities (at Sellers' sole cost and risk, and subject to the
availability of such facilities and equipment after accounting for
Purchaser's reasonable, good faith needs) and install equipment for the
purpose of performing the Remediation Measures, and to carry out its
rights and obligations under this Section 7.11, and it will not relocate,
disturb or interfere with such equipment or the performance of such
Remediation Measures in compliance with the provisions of this Section
7.11;
(ii) It will provide Sellers and their representatives,
contractors and agents with reasonable access to environmental and other
relevant records (other than those which are privileged) respecting the
site as reasonably necessary for the purpose of carrying out such
Remediation Measures and will provide Sellers with copies of all material
correspondence and communications with Governmental Entities about such
Remediation Measures;
(iii) It will not submit, or cause to be submitted, to any
Governmental Entity any information or comments concerning any Remediation
Measures undertaken by Sellers except for information routinely submitted
to Governmental Entities or as may be otherwise required by Environmental,
Health and Safety Law; and
(iv) Except as set forth on Section 7.11(b)(iv) of the Seller
Disclosure Schedule, it will consult with Sellers in good faith prior to
extracting, excavating or removing any soil or groundwater at any of the
Facilities or otherwise disturbing or disrupting the same or undertaking
any activities or construction that would disturb or disrupt any asbestos
containing materials at any building included in the Facilities, and will
otherwise make reasonable efforts to avoid taking any action, and will
take reasonable steps to cause others to avoid taking any action, that
will increase or
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accelerate any of Sellers' obligations hereunder including with respect to
Remediation Measures.
(c) Information. Prior to the date hereof, Purchaser has provided
Sellers with correct and complete copies of all studies and reports on the
environmental condition of the Real Property, including any Phase I and
Phase II studies of the Facilities, completed by or on behalf of Purchaser.
7.12 SELLERS ACCESS TO RECORDS.
Purchaser shall maintain the books and records included in the Purchased
Assets in accordance with applicable Law and, in any case, for not less than
seven (7) years following the Closing Date. Following the Closing Date,
Purchaser shall promptly provide such copies of the books and records included
in the Purchased Assets as Sellers shall reasonably request, provided that, from
and after the Closing Date, Sellers shall reimburse Purchaser for its
out-of-pocket costs incurred in connection therewith.
7.13 FINANCIAL ASSURANCES.
(a) In the event, as of the end of any fiscal quarter period of
Purchaser that ends prior to the Expiration Date, the Consolidated Interest
Coverage Ratio for the four (4) fiscal quarters then ended (calculated on a pro
forma basis taking into account any acquisitions made by Purchaser and its
Affiliates including the assumption or retirement of interest-bearing debt in
connection therewith) is less than 1.0, then Purchaser shall deliver, within 10
days of the date on which the Financial Certificate is required to be delivered
to Universal Music Group, Inc. in accordance with Section 7.13(e), a security
deposit in the amount of Five Million Dollars ($5,000,000) (the "Security
Deposit"), as security for the full and faithful performance by Purchaser of its
Applicable Obligations. The Security Deposit shall be in the form of an
unconditional, clean and irrevocable letter of credit ("Letter of Credit")
issued by and drawable upon any commercial bank with offices in the City of New
York having a net worth of not less than $500,000,000. The Letter of Credit
shall (i) name Universal Music Group, Inc. as beneficiary, (ii) permit multiple
drawings, (iii) be in the amount of the Security Deposit, and (iv) be
automatically self-renewing, without amendment until the final date of any of
the Manufacturing and Distribution Agreements (the "Expiration Date"). If the
Letter of Credit is not renewed at least 60 days prior to the expiration
thereof, Universal Music Group, Inc. may draw upon the Letter of Credit and hold
the proceeds thereof as security for the performance of the Applicable
Obligations.
(b) Notwithstanding the foregoing, if Purchaser is required at any
time to deliver the Security Deposit and if as of the end of any subsequent
fiscal quarter period, the Consolidated Interest Coverage Ratio for the four (4)
fiscal quarters then ended (calculated on a pro forma basis taking into account
any acquisitions made by Purchaser and its Affiliates including the assumption
or retirement of interest-bearing debt in connection therewith) is equal to or
greater than 1.0, then Purchaser shall no longer be obligated to provide the
Security Deposit with respect to the past failure to meet the required
Consolidated Interest Coverage Ratio. In such event, Universal Music Group, Inc.
shall (i) return to Purchaser the Letter of Credit then held by Universal Music
Group, Inc. and (ii) if Universal Music Group, Inc. shall have properly drawn
upon such Letter of Credit in accordance with this Section 7.13, return to
Purchaser that
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portion, if any, of the proceeds of the Letter of Credit remaining in Universal
Music Group, Inc.'s possession after application of such proceeds to any
Applicable Obligations not paid by Purchaser.
(c) Purchaser agrees that in the event Purchaser fails to pay any of
its Applicable Obligations, Universal Music Group, Inc. may draw upon the Letter
of Credit (or the proceeds thereof) in an amount equal to the amount of the
Applicable Obligations not so paid by Purchaser.
(d) On the Expiration Date, to the extent Universal Music Group,
Inc. holds all or any portion of the Security Deposit: (i) Universal Music
Group, Inc. shall return to Purchaser the Letter of Credit (or the proceeds
thereof) then held by Universal Music Group, Inc. or (ii) if Universal Music
Group, Inc. shall have properly drawn upon such Letter of Credit in accordance
with this Section 7.13, then Universal Music Group, Inc. shall return to
Purchaser that portion, if any, of the proceeds of the Letter of Credit
remaining in Universal Music Group, Inc.'s possession after application of such
proceeds to any Applicable Obligations not paid by Purchaser.
(e) Purchaser shall be required to deliver to Universal Music Group,
Inc. within forty-five (45) days after the end of each fiscal quarter, either
(i) an officer's certificate (the "Financial Certificate"), signed by a
financial officer of Purchaser, which shall state the Consolidated Interest
Coverage Ratio for such previous fiscal quarter, and such certificate shall have
appended thereto calculations which set forth Purchaser's calculation of the
Consolidated Interest Coverage Ratio with respect to such fiscal quarter, or
(ii) an officer's certificate delivered by Purchaser or the parent of Purchaser
to its primary lender with a credit facility having a borrowing amount of no
less than $25 million, which states that Purchaser or the parent of Purchaser
and its Subsidiaries are in compliance with the consolidated interest coverage
ratio contained in such credit facility, provided, however, such consolidated
interest coverage ratio is calculated on a basis that is no less restrictive to
the borrowing party than the calculation of Consolidated Interest Coverage Ratio
under this Agreement. If Purchaser complies with this covenant through delivery
of the certificate set forth in subsection (i) hereof, then Seller shall have
the right to audit the records of Purchaser and its Subsidiaries with respect to
the calculation of the Consolidated Interest Coverage Ratio. If Purchaser
complies with this covenant through delivery of the certificate by the primary
lender as set forth in subsection (ii) hereof, then Purchaser shall, or shall
cause its parent to, instruct its primary lender to send Seller copies of any
correspondence related to the consolidated interest coverage ratio in the credit
facility and instruct the primary lender to permit Seller to review any audit
performed by the primary lender related to the consolidated interest coverage
ratio.
(f) Sellers acknowledge that the obligations of Purchaser under this
Section 7.13 are coextensive with the obligations of the Purchaser under the
Share Purchase Agreement with respect to Section 6.13 thereof and that if two
Security Deposits shall be required to be delivered at one time, under this
Agreement and the Share Purchase Agreement, the maximum amount that may be drawn
upon such Security Deposits in the aggregate shall be $5 million.
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7.14 RECEIVABLES.
Set forth in Section 7.14 of the Seller Disclosure Schedule is a list of
accounts receivables due to the Sellers from third parties identified in Section
7.14 of the Seller Disclosure Schedule (the "Third Party Receivables"). Section
7.14 of the Seller Disclosure Schedule shall be updated immediately prior to the
Closing Date to reflect the estimated accounts receivable as of such date and
Sellers shall deliver a final listing within thirty (30) days after the Closing.
Purchaser agrees to exercise commercially reasonable efforts to collect the
Third Party Receivables on behalf of Sellers for a period of ninety (90) days
after the Closing Date; provided, however, that Purchaser shall not be required
to commence litigation or grant any accommodation (financial or otherwise), or
incur any other liability or obligation in connection with such collection. Any
payments received by Purchaser or its successors and assigns after the Closing
Date from any client, customer or other party who is an obligor on any Third
Party Receivable (an "Account Party") shall, unless any such Account Party
objects or specifies otherwise, be applied to the oldest remaining undisputed
Third Party Receivables from such Account Party. Purchaser shall not agree to
set-off or otherwise discount any uncollected Third Party Receivables without
Sellers' approval in their absolute and sole discretion. Upon Purchaser's
receipt of payments on account of any Third Party Receivables, Purchaser shall
remit such amounts to Sellers each thirty (30) days after the Closing Date by
wire transfer of immediately available funds. If ninety (90) days after the
Closing Date the full amount of the Third Party Receivables has not been
collected from any Account Party, then Purchaser shall turn over to Sellers all
evidence of and documents pertaining to any unpaid Third Party Receivables in
Purchaser's possession. After such ninety (90) day period, Sellers and any
designee shall be free to institute such collection efforts, including, without
limitation, initiating such legal proceedings with respect thereto as they shall
determine; provided that Sellers and any such designee shall exercise reasonable
care to avoid unnecessary damage to Purchaser's relationships with such clients,
customers and other obligors.
7.15 DISCLOSURE SCHEDULES.
Each of Sellers and Purchaser will promptly notify the other of any
changes or additions to the Seller Disclosure Schedule or the Purchaser
Disclosure Schedule, as applicable, by the delivery of updates thereof, if any,
as of a reasonably current date prior to the Closing but not later than five (5)
Business Days prior to the Closing. Such update will constitute a part of the
Seller Disclosure Schedule or the Purchaser Disclosure Schedule, as applicable,
from and after the date of delivery unless otherwise noted in this Agreement.
7.16 EXPENSES
Whether or not the Closing contemplated hereunder occurs, except as
otherwise provided by this Agreement, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such expenses. Notwithstanding the foregoing, costs
associated with preliminary title reports and title policies shall be borne by
Sellers up to the costs that would have been incurred were the title policies
standard coverage policies of title insurance, and the remaining costs, if any,
including costs for extended coverage, surveys and any endorsements will be
borne by Purchaser.
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ARTICLE 8
EMPLOYEE MATTERS
8.1 EMPLOYEES.
(a) Section 5.15(a) of the Seller Disclosure Schedule lists those
employees of the U.S. Business to which Purchaser agrees to make offers of
Comparable Employment to be effective on either (i) the Closing Date or (ii) the
later of the Closing Date or if the Secondment Agreements are entered into by
Purchaser and Sellers, the date on which the Secondment Agreement terminates or
expires (the effective date of any employees' offer shall be the "Employment
Date"). Purchaser shall provide Sellers with prior written notice of its intent
to make such offers of Comparable Employment, which notice shall include the
names of such employees. Purchaser will offer employment to all employees of
Sellers set forth in Section 5.15(a) of the Seller Disclosure Schedule. From the
date hereof until the date which is thirty (30) days after the Employment Date,
none of Sellers nor any of their respective Affiliates with operations in any
segment of the music industry shall interfere with Purchaser's ability to make
offers of Comparable Employment to the employees listed in Section 5.15(a) of
the Seller Disclosure Schedule or the ability of any of Sellers' employees to
accept such offers. Subject to applicable Law, Purchaser shall have reasonable
access to the employees of the U.S. Business for the purpose of making offers of
Comparable Employment. Each such employee who accepts Purchaser's offer of
employment and is hired by Purchaser as of the Employment Date shall at such
time become a "Transferred Employee."
(b) Purchaser shall recognize the service time of all Transferred
Employees, as said service time is reflected in Section 5.15(a) of the Seller
Disclosure Schedule for purposes of eligibility to participate and vest in
Purchaser's employee benefit plans. Purchaser agrees to give the Transferred
Employees full credit for the accrued vacation, sick time, holiday pay and
personal days earned or accrued by them during, and to which they are entitled
as a result of, their employment by Sellers, by allowing such Transferred
Employee such accrued vacation, sick time, holiday pay and personal days as to
which such Transferred Employees would have been entitled at the Employment Date
under the policies of Sellers if such Transferred Employees had remained
employees of Sellers, and, upon termination of employment, by making full
payment to such Transferred Employees of the accrued vacation, sick time,
holiday pay and personal days that such employees would have received had they
taken such accrued vacation, sick time, holiday pay and personal days at their
final rate of pay. Purchaser shall recognize the vesting schedule for any
portion of the 401(k) account of a Transferred Employee which is unvested and
will continue to vest such amounts in accordance with the vesting schedule.
(c) Except as may be required by law or by any union agreements as a
result of a change in position, Purchaser shall not reduce the salary of a
Transferred Employee, as said salary is reflected in Section 5.15(a) of the
Seller Disclosure Schedule, for a period of twelve (12) months from the Closing
Date, to the extent such Transferred Employee remains employed by Purchaser.
Purchaser shall provide the same severance compensation and substantially the
same severance benefits, and shall recognize service time of each Transferred
Employee, as provided by Sellers for a period of twelve (12) months from the
Closing Date.
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(d) Purchaser will continue the employment of all management
personnel identified in Section 8.1(d) of the Seller Disclosure Schedule for a
minimum of twelve (12) consecutive months after the Closing Date on terms no
less favorable than would constitute terms of Comparable Employment for each
management person listed in Section 8.1(d) of the Seller Disclosure Schedule,
except for any individual management person who is terminated for cause during
such time period.
(e) Purchaser shall cause each of the Transferred Employees who was
a participant in the Sellers' 401(k) to be eligible to participate as of the
Closing Date in a plan ("Purchaser's 401(k)") qualifed under section 401(a) of
the Code that includes a cash or deferred arrangement under Section 401(k) of
the Code. Purchaser's 401(k) shall include such provisions as are necessary to
permit Purchaser's 401(k) to accept a plan-to-plan transfer of assets and
liabilities (including without limitation participant loans) from Sellers'
401(k) to Purchaser's 401(k) attributable to the account balances in Sellers'
401(k) of the Transferred Employees and to accept direct rollovers by
Transferred Employees with respect to eligible rollover distributions from any
other Employee Plan which is qualified under section 401(a) of the Code and
which is maintained by Sellers or any of Sellers' ERISA Affiliates. With respect
to the account balances of Transferred Employees transferred to Purchaser's
401(k), Purchaser's 401(k) shall contain the same "section 411(d)(6) protected
benefits," within the meaning of section 411(d)(6) of the Code and the
regulations thereunder, and the same vesting provisions, as Sellers' 401(k)
applicable to such transferred account balances, except to the extent that such
"section 411(d)(6) protected benefits," and/or vesting provisions may be
unilaterally eliminated or reduced by a plan sponsor in connection with a
plan-to-plan transfer. Sellers shall, or shall cause one of their ERISA
Affiliates, to assign the sponsorship of the Kings Mountain 401(k) to Purchaser,
or one of Purchaser's ERISA Affiliates, at the Closing Date. Purchaser, or one
of its ERISA Affiliates shall be solely responsible for all benefits accrued
under the Kings Mountain 401(k) after the Closing Date.
(f) Purchaser shall provide to Sellers evidence satisfactory to
Sellers that Purchaser's 401(k) is qualified under section 401(a) of the Code
("Evidence"). For such purposes, a favorable determination letter issued by the
Internal Revenue Service that Purchaser's 401(k) is so qualified or the adoption
by Purchaser of a standardized prototype plan which has received a favorable
opinion letter from the Internal Revenue Service that it is so qualified shall
be deemed satisfactory. Within 10 business days of Sellers' receipt of the
Evidence, Purchaser and Sellers shall each timely file a Form 5310-A with
respect to the proposed transfer of assets and liabilities of Sellers' 401(k)
attributable to the Transferred Employees, and Sellers shall provide all
requisite notices to the Transferred Employees of the transfer, including a
notice of any "blackout period." The transfer date shall be the date agreed upon
by Purchaser and Sellers and, in the absence of such agreement, it shall be the
first day of the third calendar month following the calendar month of Sellers'
receipt of the Evidence. Purchaser shall be responsible for "mapping" the
investments of the account balances of Transferred Employees in Sellers' 401(k)
to the investment options available under Purchaser's 401(k), with the
objectives of minimizing both the duration of any "blackout period" and the
extent to which account balances in Sellers' 401(k) are required to be
liquidated. Purchaser shall be responsible for setting up on its payroll system
repayment of participant loans included in the transferred account balances of
the Transferred Employees.
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8.2 LIABILITIES RELATED TO EMPLOYMENT AND BENEFITS.
Except as otherwise expressly provided in Section 8.1(d), nothing in this
Agreement shall be deemed to limit Purchaser's authority to terminate any
Transferred Employee at any time after the Employment Date. All U.S. Business
Employees who are not Transferred Employees shall remain the sole responsibility
of Sellers. Additionally, as provided in Section 2.2(b)(ix) of this Agreement,
and except as provided in Section 8.3 of this Agreement, Sellers will at all
times before and after the Closing Date be solely responsible for Liabilities
incurred prior to the Closing Date which arise from or are related to Sellers'
or their Subsidiaries' failure to comply with all Laws concerning the hiring and
retention of U.S. Business Employees which relate to wages, hours, equal
opportunity, collective bargaining, employment standards, employment
classifications, working conditions, immigration, disability, the payment of
social security and other taxes, or any other employment-related Law. Each
Transferred Employee shall be entitled to benefits under the employee benefit
plans of Purchaser under the terms of each such plan.
8.3 WARN ACT.
(a) Purchaser will be solely responsible for obligations (including
notice) under the WARN Act that arise based in any part on events that occur on
or after the Closing Date with respect to any Transferred Employee or arising as
a result of any breach of Purchaser's obligations under Section 8.1(a); provided
that Purchaser shall have a right of indemnity against Sellers to the extent
that WARN Act Liability results, in whole or in part, from a breach of Sellers'
representations under Section 5.15(d) or Seller's obligations pursuant to
Section 8.4.
(b) Sellers will be solely responsible for obligations under the
WARN Act with respect to the any employee of the U.S. Business that is not a
Transferred Employee, except to the extent provided in Section 8.3(a).
(c) Except as set forth in Section 8.3(c) of the Seller Disclosure
Schedule, Sellers shall not cause any "plant closing" or "mass layoff" with
respect to the U.S. Business within the meaning of the WARN Act between the date
hereof and the Closing Date. Sellers shall update Section 5.15(a) of the Seller
Disclosure Schedule within three days of the Closing Date to reflect any
employee of the U.S. Business who suffered a "separation from employment" or
"employment loss" as those terms are defined by the WARN Act.
8.4 LAYOFF BY SELLERS.
Neither Seller shall, on or within ninety (90) days after the Closing
Date, provide notice of or otherwise effectuate a "Plant Closing" or "Mass
Layoff", as those terms are defined for purposes of the WARN Act, affecting in
whole or in part any facility, site of employment, operating unit or employee of
such Seller; provided that such Sellers' performance of its duties under Section
8.3 of this Agreement shall not constitute a violation of this Section 8.4.
8.5 HEALTH BENEFITS.
Purchaser shall provide the Transferred Employees a program of health
care, life insurance, and disability benefits which is substantially comparable
in the aggregate to the program of health care, life insurance, and disability
benefits currently provided by Sellers or
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their pertinent Affiliates, as the case may be, provided, however, that such
health care, life insurance, and disability benefits shall be immediately
available to the Transferred Employees as of the Employment Date, and the
Transferred Employees shall become as of the Employment Date participants
thereunder, without regard to any applicable waiting period or any limitation
with respect to preexisting conditions except insofar as such waiting period or
limitation gives full credit to such Transferred Employees for the period of
time during which he or she was employed by Sellers and their Affiliates.
Purchaser shall be responsible for all legally mandated continuation coverage
for all Transferred Employees and their covered dependents who have a loss of
health care coverage due to a qualifying event on or occurring following the
Closing Date. Sellers shall be responsible for all legally mandated continuation
coverage for all employees of Sellers who are not Transferred Employees and
their covered dependents who have a loss of health care coverage due to a
qualifying event occurring on or before the Closing Date.
8.6 WORKER'S COMPENSATION CLAIMS.
Sellers shall be responsible and liable for the expense of all worker's
compensation claims that arise out of any illness or injury sustained by any
Transferred Employee on or before the Closing Date. Purchaser shall be liable
for the expense of all worker's compensation claims that arise out of any
illness or injury sustained by any Transferred Employee after the Closing Date.
ARTICLE 9
TAX COOPERATION; ALLOCATION OF TAXES
9.1 TAX DEFINITIONS.
The following terms, as used herein, have the following meanings:
"Pre-Closing Tax Period" means (a) any Tax period ending on or before the
Closing Date and (b) with respect to a Tax period that commences before but ends
after the Closing Date, the portion of such period up to and including the
Closing Date.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
9.2 TAX COOPERATION; ALLOCATION OF TAXES.
(a) Purchaser and Sellers each agree to furnish or cause to be
furnished to each other, upon request, as promptly as practicable, such
information and assistance relating to the U.S. Business and the Purchased
Assets (including access to books and records) as is reasonably necessary for
the filing of all Tax Returns, the making of an election relating to Taxes, the
preparation of any audit by any Taxing Authority and the prosecution or defense
of any claim, suit or proceeding relating to any Tax. Sellers shall retain all
books and records with respect to Taxes for the Pre-Closing Tax Period
pertaining to the Purchased Assets for a period of at least six (6) years
following the Closing Date. At the end of such period, Sellers shall provide
Purchaser with at least ten (10) days prior written notice before destroying any
such
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books and records, during which period the party receiving such notice can elect
to take possession, at its own expense, of such books and records.
(b) All excise, sales, use, value added, registration stamp,
recording, documentary, conveyancing, transfer, and similar Taxes, levies,
charges and fees (collectively, the "Transfer Taxes") incurred solely in
connection with the transactions contemplated by this Agreement shall be borne
one-half by Purchaser, on the one hand, and one-half by Sellers, on the other
hand. Purchaser and Sellers shall cooperate in providing each other with any
appropriate resale exemption certifications and other similar documentation. The
party that is required by applicable Law to make the filings, reports or returns
with respect to any applicable Transfer Taxes shall do so, and the other party
shall cooperate with respect thereto as necessary to complete the calculation
and payment of all applicable Transfer Taxes.
(c) All payments hereunder shall be made free and clear and without
the withholding of any Taxes, except to the extent required by applicable Law;
provided, however, that if a party hereto determines that withholding is
required with respect to a payment hereunder, it shall (i) notify the recipient
of the payment promptly of its intent to withhold (and in any event no later
that two days preceding the date of payment) and (ii) pay over the withheld
amount to the appropriate Taxing Authority on the date of the payment to the
recipient of the amounts not withheld.
ARTICLE 10
CLOSING CONDITIONS
10.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS TO CONSUMMATE THE CLOSING.
The respective obligations of each party to consummate the transactions
contemplated by this Agreement are subject to the satisfaction prior to or at
the Closing of the following conditions unless expressly waived (to the extent
such conditions can be waived) by Sellers and Purchaser:
(a) GOVERNMENTAL APPROVALS. The authorizations, consents, Orders or
approvals of, or declarations or filings with, or expiration of waiting periods
of any Governmental Entity required to consummate the transactions contemplated
hereby and pursuant to the Related Documents shall have been obtained or made.
(b) NO INJUNCTIONS OR RESTRAINTS. No temporary restraining order,
preliminary or permanent injunction or other Order issued by any court or
Governmental Entity of competent jurisdiction nor other legal restraint or
prohibition preventing the consummation of the transactions contemplated hereby
and pursuant to the Related Documents shall be in effect.
(c) ACTIONS AND STATUTES. No Proceeding shall exist or shall be
threatened, and no Law or Order shall have been enacted, promulgated or issued
or deemed applicable to the transactions contemplated by this Agreement or the
Related Documents by any Governmental Entity that would (i) make the
consummation of the transactions contemplated hereby or thereby illegal or
substantially delay the consummation of any material aspect of the transactions
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contemplated hereby or thereby or (ii) render any party unable to consummate the
transactions contemplated hereby or thereby.
(d) THIRD-PARTY NOTICES AND CONSENTS. All notices required to be
given prior to the Closing to, and all consents, approvals, authorizations,
waivers and amendments required to be obtained prior to the Closing from, any
third party in connection with the consummation of the transactions contemplated
hereby which are set forth in Section 10.1(d) of the Seller Disclosure Schedule
shall have been made and/or obtained.
(e) PROCEEDINGS. There shall not be threatened, instituted or
pending any Proceeding by any Person before any Governmental Entity (i) seeking
to restrain, prohibit or otherwise interfere with the ownership or operation by
Purchaser or any of its Affiliates of all or any material portion of the
Purchased Assets or the business or assets of Purchaser or to compel Purchaser
to dispose of all or any material portion of the Purchased Assets or of
Purchaser or any of its Affiliates or (ii) seeking to require divestiture by
Purchaser or any of its Affiliates of any Purchased Assets.
10.2 CONDITIONS TO OBLIGATIONS OF PURCHASER.
The obligations of Purchaser to consummate the transactions consummated by
this Agreement are subject to the satisfaction prior to or at the Closing of the
following conditions unless waived (to the extent such conditions can be waived)
by Purchaser:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties made by Sellers in this Agreement and the Related
Documents and in each closing certificate and document delivered by Sellers to
Purchaser pursuant hereto shall be true and correct in all material respects
(except those representations and warranties which are qualified as to
materiality, which shall be true and correct in all respects) as of the date
hereof and (except those representations and warranties which are made expressly
only as of another date) as of the Closing Date, without giving effect to any
supplement to the Seller Disclosure Schedule, with the same effect as if such
representations and warranties had been made at and as of the Closing Date;
provided, that, subject to Section 11.5(c), there shall be no failure of this
condition unless the aggregate value of the breaches of all representations and
warranties described in the certificate delivered pursuant to Section 10.2(h)(i)
exceeds $500,000 (the "Closing Threshold"); provided, further, that nothing
contained in this Agreement shall be deemed to limit or otherwise restrict
Purchaser's ability to bring a claim for indemnification with respect to any
such breaches of representations and warranties the aggregate value of which
does not exceed the Closing Threshold.
(b) PERFORMANCE OF OBLIGATIONS. Sellers shall have performed or
complied in all material respects with all obligations and covenants required to
have been performed or complied with by them under this Agreement and the
Related Documents prior to or as of the Closing.
(c) ABSENCE OF MATERIAL ADVERSE CHANGE. Since the date hereof, there
shall have been no Material Adverse Change with respect to Sellers.
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(d) OPINION OF COUNSEL. Purchaser shall have received an opinion
dated the Closing Date from counsel for Sellers, in substantially the form set
forth in Exhibit 10.2(d).
(e) RELATED DOCUMENTS. Each of the following documents (collectively
with respect to subsections (ii)(A), (B) and (C) and (iii) through (ix), the
"Related Documents") and the Related Documents (as defined in the Share Purchase
Agreement) shall have been executed and delivered by the parties thereto other
than Purchaser and the transactions contemplated thereby to be completed at or
prior to the Closing substantially consummated or effected, as the case may be,
in accordance with the terms thereof:
(i) Share Purchase Agreement. All conditions to closing under
the Share Purchase Agreement shall have been satisfied and the closing
thereunder shall occur substantially simultaneously with the Closing
hereunder (a copy of the Share Purchase Agreement is attached hereto as
Exhibit 10.2(e)(i)).
(ii) Manufacturing and Distribution Agreements. Sellers or
their Affiliates shall have executed and delivered the (A) U.S. CD
Manufacturing Agreement, (B) U.S. HDFD Manufacturing Agreement, (C) U.S.
Distribution Agreement (the agreements set forth in ((A), (B), and (C))
referred to herein as the "U.S. Manufacturing and Distribution
Agreements", (D) International Manufacturing Agreement (as defined in the
Share Purchase Agreement), and (E) International Distribution Agreement
(as defined in the Share Purchase Agreement) (collectively, with the U.S.
Manufacturing Agreements, the "Manufacturing and Distributions
Agreements"), and with respect to the U.S. Manufacturing Agreements, in
substantially the form set forth in Exhibits 10.2(e)(ii)(A), (B), and (C),
respectively.
(iii) Limited Liability Company Agreement. Sellers or their
Affiliates shall have executed and delivered the Limited Liability Company
Agreement (the "Limited Liability Agreement"), in substantially the form
set forth in Exhibit 10.2(e)(iii).
(iv) IT Transition Services Agreement. Sellers or their
Affiliates shall have executed and delivered the IT Transition Services
Agreement (the "IT Transition Services Agreement"), in substantially the
form set forth in Exhibit 10.2(e)(iv).
(v) Xxxx of Sale and Assignment and Assumption Agreements. The
receipt by Purchaser of the Bills of Sale and Assignment and Assumption
Agreements and such other instruments of transfer as is necessary or
advisable to transfer the Purchased Assets, each in substantially the form
set forth in Exhibit 4.2.
(vi) Subleases/Assignments. Sellers or their Affiliates shall
have executed and delivered (A) the Sublease Agreement (the "Fishers
Sublease") for the space at Fishers, Indiana in substantially the form set
forth in Exhibit 10.2(e)(vi)(A), (B) the Assignment Agreement (the "Reno
Assignment") for the space at Reno, Nevada in substantially the form set
forth in Exhibit 10.2(e)(vi)(B), and (C) the Assignment Agreement (the
"Xxxxxx-Xxxxx Assignment") for the space at Xxxxxx-Xxxxx, Pennsylvania in
substantially the form set forth in Exhibit 10.2(e)(vi)(C), or in each
case, a sublease or assignment in accordance with Section 1.4.
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(vii) Letter Agreement. Sellers or their Affiliates shall have
executed and delivered the Letter Agreement (the "Letter Agreement"), in
substantially the form set forth in Exhibit 10.2(e)(vii).
(viii) Title to Property. Title to Owned Real Property shall
have been evidenced by the willingness of Chicago Title Company (or
another title company acceptable to Purchaser) (the "Title Insurer") to
issue at regular rates ALTA owner's extended coverage policies of title
insurance (1990 Form B) (the "Title Policy") in amounts equal to the
respective portion of the Purchase Price allocated to such interests,
showing title to such interests in real property vested in the Purchaser
subject to transfer of such interest to Purchaser. Such Title Policy shall
show title vested in Purchaser subject to:
(A) A lien or liens to secure payment of real estate
taxes not delinquent;
(B) Exceptions, other than those disapproved exceptions
listed on Section 10.2(e)(viii) of the Purchaser Disclosure
Schedules, disclosed by the current standard ALTA Preliminary Title
Reports, delivered to Purchaser prior to the date hereof;
(C) Matters created by, or with the consent of
Purchaser; and
(D) Other possible minor matters that in the aggregate
are not substantial in amount and do not materially detract from or
interfere with the present or intended use of such real property,
including such matters as may be disclosed by surveys taken after
the date hereof.
The willingness of the Title Insurer to issue the Title Policy shall
be evidenced either by the issuance thereof at the Closing or by the
Title Insurer's delivery of written commitments or binders, dated as
of the Closing Date, to issue such Title Policy within a reasonable
time after the Closing Date, subject to actual transfer of the real
property in question.
(ix) Secondment Agreements. If the Closing occurs prior to
July 1, 2005 and Purchaser requests execution of the Secondment Agreements
in substantially the form set forth in Exhibit 10.2(e)(ix), Sellers shall
have executed and delivered the Secondment Agreements.
(f) CERTIFICATES. Each of the following certificates shall have been
executed and/or delivered, as the case may be, by the Person who or which is the
subject thereof:
(i) a certificate signed by an executive officer of each
Seller, dated as of the Closing Date, and certifying as to (A) the
incumbency and genuineness of the signatures of each Person executing this
Agreement and the Related Documents on behalf of each Seller; (B) the
genuineness of the resolutions (attached thereto) of the board of
directors or similar governing body of each Seller authorizing the
execution, delivery and performance of this Agreement and the Related
Documents to which each Seller is a
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party and the consummation of the transactions contemplated hereby and
thereby; (C) the accuracy of the representations and warranties of each
Seller contained herein, as contemplated by Section 10.2(a) hereof, and
(D) the performance of the covenants of each Seller contained herein, as
contemplated in Section 10.2(b) hereof; and
(ii) a certificate of an executive officer of each Seller,
dated as of the Closing Date, certifying that each Seller is not a foreign
person within the meaning of Section 1445 of the Code or otherwise
satisfying the requirements of Section 1445 of the Code, such that payment
may be made without withholding Tax.
(g) PAYOFF OF INDEBTEDNESS; RELEASE OF ENCUMBRANCES. Sellers shall
have (i) satisfied in full all obligations for Indebtedness (including any
interest, prepayment premiums or penalties and other fees and charges) of
Sellers relating to the U.S. Business or the Purchased Assets and (ii) provided
Purchaser with correct and complete payoff letters with respect to such
Indebtedness and directed its financing sources to pay the amounts set forth in
such payoff letters to the parties referred to therein, and all documents
related thereto shall be reasonably satisfactory to Purchaser. Purchaser shall
have received duly executed releases (including UCC-3 termination statements) of
all Encumbrances (other than Permitted Encumbrances) on the Purchased Assets, in
form and substance reasonably satisfactory to Purchaser and its counsel.
(h) COLLECTIVE BARGAINING AGREEMENTS. All notices required to be
given prior to the Closing to, and all consents, approvals, authorizations,
waivers and amendments required to be obtained prior to the Closing under the
collective bargaining agreements set forth in Section 5.15(b) of the Seller
Disclosure Schedule in connection with the consummation of the transactions
contemplated shall have been made and/or obtained.
10.3 CONDITIONS TO OBLIGATIONS OF SELLERS.
The obligations of Sellers to consummate the transactions contemplated by
this Agreement are subject to the satisfaction of the following additional
conditions unless waived (to the extent such conditions can be waived) by
Sellers:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties made by Purchaser in this Agreement and the Related Documents and
in each closing certificate and document delivered by Purchaser to Sellers
pursuant hereto shall be true and correct in all material respects (except those
representations and warranties which are qualified as to materiality, which
shall be true and correct in all respects) as of the date hereof and (except
those representations and warranties which are made expressly only as of another
date) as of the Closing Date, without giving effect to any supplement to the
Purchaser Disclosure Schedule, with the same effect as if such representations
and warranties had been made at and as of the Closing Date.
(b) PERFORMANCE OF OBLIGATIONS. Purchaser shall have performed or
complied with in all material respects all obligations and covenants required to
have been performed or complied with by them under this Agreement and the
Related Documents prior to or as of the Closing Date.
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(c) RELATED DOCUMENTS. Each of the Related Documents shall have been
executed and/or delivered by the parties thereto other than Sellers or their
Affiliates, as applicable, and the transactions contemplated thereby to be
completed at or prior to the Closing shall have been substantially consummated
or effected, as the case may be, in accordance with the terms thereof and the
transactions contemplated by the Share Purchase Agreement shall close
substantially simultaneously with the closing of the transaction under this
Agreement.
(d) CERTIFICATES. Sellers shall have received a duly executed
certificate signed by an executive officer of Purchaser, dated as of the Closing
Date, and certifying as to (i) the incumbency and genuineness of the signatures
of each Person executing this Agreement and the Related Documents on behalf of
Purchaser; (ii) the accuracy of the representations and warranties of Purchaser
contained herein, as contemplated by Section 10.3(a) hereof, and (iii) the
performance of the covenants of Purchaser contained herein, as contemplated in
Section 10.3(b) hereof.
ARTICLE 11
INDEMNIFICATION
11.1 INDEMNIFICATION GENERALLY.
(a) From and after the Closing, subject to the further terms of this
Article 11, Seller Indemnifying Persons, jointly and severally, agree to
indemnify each Purchaser Indemnified Person for, and hold them harmless from and
against, any and all Purchaser Losses arising from or in connection with any of
the following:
(i) the untruth, inaccuracy or breach of any representation or
warranty (other than the Excluded Representations) of Sellers contained in
this Agreement giving effect, subject to Section 10.2(a), to any
supplements to the Seller Disclosure Schedule;
(ii) the untruth, inaccuracy or breach of any Excluded
Representation of Sellers contained in this Agreement giving effect,
subject to Section 10.2(a), to any supplements to the Seller Disclosure
Schedule;
(iii) the breach or violation of or failure to perform any
agreement, undertaking, obligation or covenant of Sellers contained in
this Agreement;
(iv) any Excluded Liability or Excluded Asset;
(v) the assertion of any Losses against any Purchaser
Indemnified Person arising out of, relating to or in connection with any
fee, commission or like payment due any broker, finder or financial
advisor for Sellers in connection with the transactions contemplated by
this Agreement; and
(vi) any amounts that are the responsibility of Sellers
pursuant to Sections 7.10 or 9.2 hereof.
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(b) From and after the Closing, subject to the further terms of this
Article 11, Purchaser Indemnifying Person agrees to indemnify Seller Indemnified
Persons for, and hold them harmless from and against, any and all Seller Losses
arising from or in connection with any of the following:
(i) the untruth, inaccuracy or breach of any representation or
warranty of Purchaser contained in this Agreement giving effect to any
supplement to the schedules hereto;
(ii) the breach of any agreement, undertaking, obligation or
covenant of Purchaser contained in this Agreement;
(iii) any Assumed Liability;
(iv) the assertion of any Losses against any Seller
Indemnified Person arising out of, relating to or in connection with any
fee, commission or like payment due any broker, finder or financial
advisor for Purchaser in connection with the transactions contemplated by
this Agreement; and
(v) any amounts that are the responsibility of Purchaser
pursuant to Sections 7.10 or 9.2 hereof.
11.2 ASSERTION OF CLAIMS.
No claim shall be brought under Section 11.1 hereof unless the Indemnified
Persons, or any of them, at any time prior to the applicable Survival Date, give
the Indemnifying Persons (a) written notice of the existence of any such claim,
specifying the nature and basis of such claim and the amount thereof, to the
extent known or ascertainable, or (b) written notice pursuant to Section 11.3 of
any Third Party Claim, the existence of which might reasonably be expected to
give rise to such a claim; provided, however, that no delay on the part of the
Indemnified Persons in notifying any Indemnifying Persons shall relieve the
Indemnifying Persons from any Liability hereunder unless (and then solely to the
extent) the Indemnifying Person thereby is materially prejudiced by the delay.
Upon the giving of such written notice as aforesaid, the Indemnified Persons, or
any of them, shall have the right to commence legal proceedings subsequent to
the Survival Date (for a period up to ninety (90) days after the Survival Date)
for the enforcement of their rights under Section 11.1 with respect to the
matters indicated in such notice.
11.3 NOTICE AND DEFENSE OF THIRD PARTY CLAIMS.
The obligations and Liabilities of an Indemnifying Person with respect to
Losses resulting from the assertion of Liability by third parties (including any
Governmental Entity) (each, a "Third Party Claim") shall be subject to the
following additional terms and conditions (provided, however, that subparagraphs
(b), (c), (d), and (e) of this Section 11.3 shall not apply to Third Party
Claims seeking the performance of remediation measures, which are subject to the
procedures set forth in Section 7.11 of this Agreement):
(a) The Indemnified Persons, or any one of them, shall promptly give
written notice to the Indemnifying Persons, or any of them, of any Third Party
Claim which might give
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rise to any Loss by the Indemnified Persons, stating the nature and basis of
such Third Party Claim, and the amount thereof to the extent known; provided,
however, that no delay on the part of the Indemnified Persons in notifying any
Indemnifying Persons shall relieve the Indemnifying Persons from any Liability
or obligation hereunder unless (and then solely to the extent) the Indemnifying
Person thereby is materially prejudiced by the delay. Such notice shall be
accompanied by copies of all relevant documentation with respect to such Third
Party Claim, including any summons, complaint or other pleading which may have
been served, any written demand or any other document or instrument or other
documents received and the Indemnified Person shall otherwise make available to
the Indemnifying Person all relevant information material to the defense of such
claim and within such Indemnified Person's possession.
(b) The Indemnifying Persons shall have the right to assume the
defense of any Third Party Claim at their own expense and by their own counsel,
which counsel shall be reasonably satisfactory to the Indemnified Persons;
provided, however, that the Indemnifying Persons shall not have the right to
assume the defense of any Third Party Claim upon receipt of a written notice
from an Indemnified Person that: (i) the Indemnified Persons shall have been
advised by counsel that there are one or more legal or equitable defenses
available to them which are different from or in addition to those available to
the Indemnifying Persons and representation of both parties by the same counsel
would be inappropriate due to the actual or potential differences between them,
(ii) such action could have a material effect on the business, operations,
assets, properties, prospects or relationships of the Indemnified Persons, or
(iii) the Indemnifying Persons shall not have assumed the defense of the Third
Party Claim in a timely fashion such that the Indemnified Person has suffered
material prejudice.
(c) If the Indemnifying Persons shall assume the defense of a Third
Party Claim, the Indemnifying Persons shall not be responsible for any legal or
other defense costs subsequently incurred by the Indemnified Persons in
connection with the defense thereof. If the Indemnifying Persons do not assume
the defense of any Third Party Claim or are otherwise restricted from so
assuming by the proviso to the first sentence of Section 11.3(b), the
Indemnifying Persons shall nevertheless be entitled to participate in such
defense with their own counsel and at their own expense. If the defense of a
Third Party Claim is assumed by the Indemnified Persons, the Indemnified Persons
shall not be entitled to settle such Third Party Claim without the prior written
consent of the Indemnifying Persons, which consent shall not be unreasonably
withheld or delayed.
(d) If the Indemnifying Persons assume the defense of a Third Party
Claim, (i) the Indemnified Persons shall be entitled to participate in such
defense with their own counsel at their own expense and (ii) the Indemnifying
Persons shall not make any settlement of any claims without the written consent
of the Indemnified Persons, which consent shall not be unreasonably withheld or
delayed.
(e) The Indemnifying Person may assume and control, or bear the
costs, of any defense of a Third Party Claim, subject to its reservation of a
right to contest the Indemnified Person's right to indemnification hereunder,
provided that the Indemnifying Person gives the Indemnified Person notice of
such reservation within fifteen (15) days of the date of the written notice of
the Third Party Claim.
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11.4 SURVIVAL.
The representations and warranties contained in this Agreement shall
survive the Closing until the date that is 18 months after the Closing;
provided, however, that (a) the representations and warranties contained in
Sections 5.1, 5.2, 5.4 and the first sentence of Section 5.8(a)(1) of this
Agreement, shall survive the termination of this Agreement indefinitely, (b) the
representations and warranties contained in (i) Sections 5.6 and (ii) Section
5.16, shall survive the Closing Date until sixty (60) days following the
expiration of the respective statutes of limitation applicable to the matters
covered thereby and (c) the representations and warranties contained in Section
5.17 and the indemnities for Sellers' Environmental Obligations, shall survive
the Closing until the date that is seven (7) years after the Closing (the
representations and warranties listed in the foregoing clauses (a), (b) and (c)
(the "Excluded Representations"). The covenants and other agreements of the
parties contained in this Agreement shall survive the Closing Date until they
are fully performed. For convenience of reference, the date upon which any
representation, warranty, covenant or other agreement contained herein shall
terminate is referred to herein as the "Survival Date". Subject to the specific
provisions of this Article II, indemnification claims made hereunder shall be
made on or before the applicable Survival Date for such claim as provided in
this Section 11.4.
11.5 LIMITS ON INDEMNIFICATION.
(a) No amount shall be payable by any Indemnifying Person pursuant
to Section 11.1(a)(i) of this Agreement or Section 10.1(a)(i) of the Share
Purchase Agreement, on the one hand, or Section 11.1(b)(i) of this Agreement or
Section 10.1(b)(i) of the Share Purchase Agreement, on the other hand, unless
the aggregate amount of Losses indemnifiable under such sections exceeds
$400,000 (the "Threshold Amount"), in which event the right to be indemnified
shall apply to the full amount of such Losses in excess of the Threshold Amount;
provided, however, that individual claims resulting from a breach of Section
5.8(b) of $5,000 or less shall not be aggregated for purposes of calculating the
Threshold Amount or the Losses in excess of the Threshold Amount. Purchaser
shall not be entitled to recover any amounts under Article 11 from Sellers if
the basis for any claim for indemnity is or has been the basis for any claim
under the Manufacturing and Distribution Agreements. The parties agree that the
same claim shall not be permitted to be brought under both this Agreement and
any Related Document.
(b) Notwithstanding anything to the contrary contained in this
Agreement, (i) the maximum amount of aggregate indemnifiable Losses which may be
recovered from any Indemnifying Person pursuant to Section 11.1(a)(i) of this
Agreement or Section 10.1(a)(i) or of the Share Purchase Agreement, on the one
hand, or Section 11.1(b)(i) of this Agreement or Section 10.1(b)(i) of the Share
Purchase Agreement, on the other hand, shall be an amount equal to $8,000,000 in
the aggregate and a maximum of $4,000,000 under each of this Agreement and the
Share Purchase Agreement, and (ii) the maximum amount of the aggregate
indemnifiable Losses which may be recovered from Seller Indemnifying Persons
pursuant to Section 11.1(a)(ii), and 11.1(a)(vi) of this Agreement shall be an
amount equal to the aggregate Purchase Price paid under this Agreement, as
finally adjusted in accordance with Article 3, plus the aggregate amount of the
credits issued under Section 10.8 of the U.S. CD Manufacturing Agreement and
10.8 of the U.S. Distribution Agreement.
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(c) It is understood by the parties hereto that the limitations set
forth in Section 11.5(a) or Section 11.5(b) do not apply to, and will not limit
in any manner, Purchaser's or Sellers' right to indemnification pursuant to any
other provision of Article 11 of this Agreement or Article X of the Share
Purchase Agreement. It is further understood by the parties hereto that the
limitations set forth in Section 11.5(a) or Section 11.5(b) do not apply to, and
will not limit in any manner, Purchaser's right to indemnification with respect
to any breaches of representations and warranties which do not exceed the
Closing Threshold and, therefore, do not cause a failure of the condition in
Section 10.2(a).
(d) In computing Losses, such amounts shall be computed net of any
related recoveries the Indemnified Person has received from insurance policies,
or other related payments received from third parties, and net of any Tax
benefits that actually reduce cash taxes by the Indemnified Person. If an
Indemnified Person is entitled to receive an insurance recovery or related
payment from a third party with respect to any Loss and receives any amounts
after payment by the Indemnifying Party of such Loss or actually reduces cash
taxes as a result of any such Loss, then the Indemnified Person shall reimburse
the Indemnifying Party for any such amount.
(e) In computing Losses that result from the untruth, inaccuracy or
breach of any representation or warranty contained in this Agreement that is
qualified by materiality or Material Adverse Effect, the related "Losses" shall
be deemed to be the entire value associated with the untruth, inaccuracy or
breach once such representation or warranty has been determined to be untrue,
inaccurate or breached. For illustration purposes solely, and without the dollar
values expressed in this paragraph being probative in any way with respect to
the intent of the parties with respect to the definition of Material Adverse
Effect and materiality, if (i) a Material Adverse Effect is deemed to be valued
at $250,000; and (ii) a breach of a representation has resulted in "Losses" of
$250,001, then the applicable "Losses" associated with such breach shall be
deemed to be $250,001 (and not $1.00).
(f) Absent fraud or unless otherwise specifically provided herein,
the sole remedy for damages of a party hereto for any breach of the
representations, warranties, covenants and agreements contained in this
Agreement shall be the remedies contained in Article 11.
(g) Any conversions between United States dollars and another
currency shall be based on the average of the exchange rates for such conversion
published in the Wall Street Journal on each of the five (5) Business Days
preceding the day on which such conversion is to be calculated for purposes of
carrying the terms of this Agreement. If the Wall Street Journal is not
published on a Business Day in question, then the exchange rate published in the
New York Times on such Business Day shall be used or, if neither is published on
such Business Day, then the exchange rate quoted on such Business Day, or quoted
the nearest Business Day preceding such Business Day, by Citibank, N.A. (or its
successor), in New York City, New York, shall be used.
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11.6 INDEMNIFICATION PAYMENTS.
Once a Loss is finally adjudicated to be payable pursuant to this Article
11, the Indemnifying Person shall satisfy its obligations within fifteen (15)
Business Days of such final, nonappealable adjudication by wire transfer of
immediately available funds. The parties hereto agree that should an
Indemnifying Person not make full payment within such fifteen (15) Business Day
period, that any amount payable shall accrue interest, compounded annually,
calculated from the date of final, nonappealable adjudication until such payment
has been made, at a rate of 6% per annum. The parties hereto agree that any
indemnification payment pursuant to this Agreement shall be treated as an
adjustment to the Purchase Price.
ARTICLE 12
TERMINATION; EFFECT OF TERMINATION
12.1 TERMINATION.
This Agreement may be terminated at any time prior to the consummation of
the Closing by:
(a) the mutual written consent of Sellers and Purchaser; or
(b) Purchaser, if there has been a material breach by Sellers of any
representation, warranty, covenant or agreement set forth in this Agreement
which is not cured by Sellers within ten (10) days after written notice thereof;
or
(c) Sellers, if there has been a material breach by Purchaser of any
representation, warranty, covenant or agreement set forth in this Agreement
which is not cured by Purchaser within ten (10) days after written notice
thereof; or
(d) Purchaser, if the conditions set forth in Sections 10.1 or 10.2
(other than those conditions which by their nature are to be satisfied as part
of the Closing) shall not have been satisfied or waived on or prior to July 31,
2005; or
(e) Sellers, if the conditions set forth in Sections 10.1 or 10.3
(other than those conditions which by their nature are to be satisfied as part
of the Closing) shall not have been satisfied or waived on or prior to July 31,
2005; or
(f) Purchaser, or Sellers, if any permanent injunction or other
Order of a court or other competent authority preventing the Closing shall have
become final and nonappealable; or
(g) either Seller, if a Seller concurrently enters into a definitive
agreement for a Superior Proposal in accordance with, or has otherwise complied
with, all provisions of Section 7.4 hereof and concurrently with such
termination, Seller shall have paid to Purchaser the Termination Fee; or
(h) either Seller or Purchaser, if a Termination Fee has been paid
by Sellers' Affiliate upon the termination of the Share Purchase Agreement by
Sellers' Affiliate.
provided, however, that no party shall be entitled to terminate this Agreement
if such party's breach of this Agreement has prevented the satisfaction of a
condition. Any termination pursuant to this Section 12.1 (other than a
termination pursuant to Section 12.1(a)) shall be effected by written notice
from the party or parties so terminating to the other parties hereto, which
notice shall specify the section of this Agreement pursuant to which this
Agreement is being terminated.
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12.2 EFFECT OF TERMINATION.
In the event of the termination of this Agreement as provided in Section
12.1, this Agreement shall be of no further force or effect, except for the last
sentence of Section 7.1, Section 7.5, this Section 12.2 and Article 13, each of
which shall survive the termination of this Agreement. Without limiting the
rights of the parties pursuant to Section 13.13, if there shall have occurred an
intentional or willful breach by any party of any one or more representations
and warranties or covenants in this Agreement and as a result thereof this
Agreement is terminated by Sellers, on the one hand, or Purchaser, on the other
hand, pursuant to Sections 12.1(b), (c), (d) or (e), respectively, then the
remedies shall not be limited by the provisions of this Agreement.
ARTICLE 13
MISCELLANEOUS PROVISIONS
13.1 AMENDMENT.
This Agreement shall not be altered or otherwise modified or amended
except pursuant to an instrument in writing signed by Purchaser and Sellers. No
waiver by any party of any default, misrepresentation, or breach of warranty or
covenant hereunder, whether intentional or not, shall be deemed to extend to any
prior or subsequent default, misrepresentation, or breach of warranty or
covenant hereunder or affect in any way any rights arising by virtue of any
prior or subsequent such occurrence.
13.2 ENTIRE AGREEMENT.
This Agreement and the other agreements and documents referenced herein
(including, the schedules and the exhibits attached hereto) contain all of the
agreements among the parties hereto with respect to the transactions
contemplated hereby and supersede all prior agreements, understandings and
negotiations, oral and written, among the parties with respect thereto.
13.3 SEVERABILITY.
It is the desire and intent of the parties that the provisions of this
Agreement be enforced to the fullest extent permissible under the Law and public
policies applied in each jurisdiction in which enforcement is sought.
Accordingly, in the event that any provision of this Agreement would be held in
any jurisdiction to be invalid, prohibited or unenforceable for any reason, such
provision, as to such jurisdiction, shall be ineffective, without invalidating
the remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction. Notwithstanding the
foregoing, if such provision could be more narrowly drawn so as not to be
invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such
jurisdiction, be so narrowly drawn, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.
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13.4 BENEFITS OF AGREEMENT.
All the terms and provisions of this Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and
permitted assigns. This Agreement shall not be assignable by any party hereto
without the consent of the other parties hereto; provided, however, that
anything contained herein to the contrary notwithstanding, Purchaser may,
without the prior written consent of any other party, assign any or all of their
rights and interests hereunder to any lender providing financing to Purchaser or
to any Affiliate of Purchaser. No assignment shall relieve the assignor of any
of its obligations hereunder. Sellers agree that, if either Seller is acquired
(or any portion of either Seller is acquired in a transaction that purports to
transfer such Sellers' rights and/or obligations under this Agreement), any
acquiring Person (or such transferee) must agree in writing to be bound by the
obligations of Sellers, as applicable, under this Agreement or any Related
Document prior to such acquisition (or transfer) becoming effective.
Notwithstanding the foregoing, Sellers agree to remain liable for their
respective obligations hereunder regardless of whether such entity (or portion
thereof) is acquired (or transferred). Except as specifically set forth herein,
no Person other than Sellers, Purchaser and their respective successors and
permitted assigns shall have any rights under this Agreement.
13.5 FEES AND EXPENSES.
Except as otherwise expressly provided in this Agreement, the parties
hereto shall each bear their own expenses incurred in connection with this
Agreement and the Related Documents.
13.6 HEADINGS.
Descriptive headings are for convenience only and shall not control or
affect in any way the meaning or construction of any provision of this
Agreement.
13.7 NOTICES.
All notices or other communications pursuant to this Agreement shall be in
writing and shall be deemed to be sufficient if delivered personally, sent by
nationally-recognized, overnight courier or mailed by registered or certified
mail (return receipt requested), postage prepaid, to the parties or other
Persons specified below at the following addresses (or at such other address for
a party as shall be specified by like notice):
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(a) if to Sellers, to:
UMG Manufacturing & Logistics, Inc.
Universal Music & Video Distribution, Corp.
c/o Universal Music Group
0000 Xxxxxxxx Xxxxxx
Xxxxx Xxxxxx, XX 00000
Attention: Executive Vice President, Business and Legal
Affairs
Telephone No.: 000-000-0000
with a copy to:
Xxxxxx, Xxxxxx & Xxxxx LLP
000 X. Xxxxx Xxx.
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx Xxxxxxx-Xxxxx, Esq.
Telephone No.: (000) 000-0000
(b) if to Purchaser, to:
Entertainment Distribution Company (USA), LLC
c/o Glenayre Technologies, Inc.
0000 Xxxxxxxxx Xxxxx
Xxxxxx, Xxxxxxx 00000
Attention: Chief Financial Officer
Telephone No.: (000) 000-0000
and
Entertainment Distribution Company LLC
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxx, Xxx Xxxx 00000
Attention: Chief Financial Officer
Telephone No.: (000) 000-0000
and with a copy to:
Xxxxxxxxx Xxxxxxx LLP
The Forum
0000 Xxxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxxx, Esq.
Telephone No.: (000) 000-0000
All such notices and other communications shall be deemed to have been
given and received (i) in the case of personal delivery, on the date of such
delivery, (ii) in the case of
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delivery by nationally-recognized, overnight courier, on the Business Day
following dispatch, and (iii) in the case of mailing, on the third Business Day
following such mailing.
13.8 COUNTERPARTS.
This Agreement may be executed in any number of counterparts, and each
such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute one agreement.
13.9 GOVERNING LAW.
THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR
CONFLICTING PROVISION OR RULE (WHETHER OF THE STATE OF NEW YORK OR ANY OTHER
JURISDICTION) THAT WOULD CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN NEW YORK
TO BE APPLIED. IN FURTHERANCE OF THE FOREGOING, THE LAW OF NEW YORK WILL CONTROL
THE INTERPRETATION AND CONSTRUCTION OF THIS AGREEMENT, EVEN IF UNDER SUCH
JURISDICTION'S CHOICE OF LAW OR CONFLICT OF LAW ANALYSIS, THE SUBSTANTIVE LAW OF
SOME OTHER JURISDICTION WOULD ORDINARILY APPLY.
13.10 INCORPORATION OF EXHIBITS AND SCHEDULES.
The Annexes, Exhibits, Schedules, Seller Disclosure Schedule and Purchaser
Disclosure Schedule identified in this Agreement are incorporated herein by
reference and made a part hereof.
13.11 INDEPENDENCE OF COVENANTS AND REPRESENTATIONS AND WARRANTIES
All covenants hereunder shall be given independent effect so that if a
certain action or condition constitutes a default under a certain covenant, the
fact that such action or condition is permitted by another covenant shall not
affect the occurrence of such default, unless expressly permitted under an
exception to such initial covenant; provided that if a certain action requires
consent with respect to a certain conduct hereunder and the party required to
grant consent to such action in order for the other party to avoid a breach of
such covenant grants such consent in accordance with the requirements of this
Agreement, such granted consent shall be deemed granted as well hereunder with
respect to any additional covenant for which a consent would be required in
order to avoid a covenant breach. In addition, all representations and
warranties hereunder shall be given independent effect so that if a particular
representation or warranty is breached, the fact that another representation or
warranty concerning the same or similar subject matter is not breached shall not
affect a breach of the particular representation and warranty hereunder.
13.12 INTERPRETATION; CONSTRUCTION.
The term "Agreement" means this agreement together with the Seller
Disclosure Schedule, the Purchaser Disclosure Schedule and all Schedules and
Exhibits hereto, as the same
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may from time to time be amended, modified, supplemented or restated in
accordance with the terms hereof. Unless the context otherwise requires, words
importing the singular shall include the plural, and vice versa. The use in this
Agreement of the term "includes" or "including" means "including, without
limitation." The words "herein", "hereof", "hereunder", "hereby", "hereto",
"hereinafter", and other words of similar import refer to this Agreement as a
whole, including the schedules and exhibits, as the same may from time to time
be amended, modified, supplemented or restated, and not to any particular
article, section, subsection, paragraph, subparagraph or clause contained in
this Agreement. All references to articles, sections, subsections, clauses,
paragraphs, schedules and exhibits mean such provisions of this Agreement and
the schedules and exhibits to this Agreement, except where otherwise stated. The
title of and the article, section and paragraph headings in this Agreement are
for convenience of reference only and shall not govern or affect the
interpretation of any of the terms or provisions of this Agreement. The use
herein of the masculine, feminine or neuter forms shall also denote the other
forms, as in each case the context may require. The language used in this
Agreement has been chosen by the parties to express their mutual intent, and no
rule of strict construction shall be applied against any party, nor shall any
previous drafts of this Agreement be utilized by any party to demonstrate the
purported intent of the parties with respect to any provision of this Agreement.
Accounting terms used but not otherwise defined herein shall have the meanings
given to them under GAAP. Unless expressly provided otherwise, the measure of a
period of one month or year for purposes of this Agreement shall be that date of
the following month or year corresponding to the starting date, provided that if
no corresponding date exists, the measure shall be that date of the following
month or year corresponding to the next day following the starting date.
13.13 REMEDIES.
With respect to the agreements and covenants contained in this Agreement,
the parties shall each have and retain all rights and remedies existing in their
favor under this Agreement, at law or equity, including rights to bring actions
for specific performance and injunctive and other equitable relief to enforce or
prevent a breach or any violation of the agreements and covenants contained in
this Agreement. All such rights and remedies shall, to the extent permitted by
applicable Law, be cumulative.
13.14 WAIVER OF JURY TRIAL; SUBMISSION TO JURISDICTION.
EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR ANY RELATED DOCUMENT.
* * * * *
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IN WITNESS WHEREOF, the parties hereto have executed this Asset Purchase
Agreement as of the date first written above.
SELLERS:
UMG MANUFACTURING & LOGISTICS, INC.
By: /s/ Xxxx Xxxxxxxx
-------------------------------
Name: Xxxx Xxxxxxxx
Title: Executive Vice President
UNIVERSAL MUSIC & VIDEO
DISTRIBUTION, CORP.
By: /s/ Xxxx Xxxxxxxx
-------------------------------
Name: Xxxx Xxxxxxxx
Title: Executive Vice President
PURCHASER:
ENTERTAINMENT DISTRIBUTION
COMPANY (USA), LLC
By: /s/ Xxxxxx Xxxxxxxxx
-------------------------------
Name: Xxxxxx Xxxxxxxxx
Title: EVP and Chief Operating
Officer
GLENAYRE:
GLENAYRE TECHNOLOGIES, INC.
(with respect only to Section 7.4(d) hereof)
By: /s/ Xxxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Chairman and CEO
ANNEX I
DEFINITIONS
"Accounting Firm" has the meaning set forth in Section 3.3(b).
"Account Party" has the meaning set forth in Section 7.14.
"Acquisition Proposal" means any inquiry, offer or proposal from any
Third Party (whether or not in writing) relating to, or that could reasonably be
expected to lead to Another Transaction.
"Adjustment Payment" has the meaning set forth in Section 3.4.
"Affiliate" means, with respect to any Person, any other Person that,
directly or indirectly through one or more intermediaries, Controls, or is
Controlled by, or is under common Control with, such Person, including such
Person's Subsidiaries.
"Agreement" has the meaning set forth in Section 13.12; provided that for
purposes of Article 11 only, the term Agreement does not include the Exhibits
hereto.
"Allocation Schedule" has the meaning set forth in Section 3.5.
"Another Transaction" shall mean any acquisition, disposition, business
combination, merger, or similar transaction involving all or a material portion
of the U.S. Business or a material part of the operating Assets of the U.S.
Business; provided, however, that nothing herein shall be deemed to apply to, or
restricts, any proposal, inquiry, offer, negotiation or agreement related to any
transaction which is not primarily a sale of Sellers or of the U.S. Business.
"Applicable Board" means the Board of Directors of a Seller.
"Applicable Inventory" has the meaning set forth in Section 3.3(b).
"Applicable Obligations" means the Liabilities of Purchaser arising under
this Agreement and the Related Documents and Liabilities of Purchaser's
Affiliates under the Share Purchase Agreement and the Related Documents (as
defined in the Share Purchase Agreement).
"Apportioned Payables" has the meaning set forth in Section 7.10.
"Assets" means the assets, rights, interests and other properties, real,
personal and mixed, tangible and intangible, of whatever nature.
"Assigned Contracts" has the meaning set forth in Section 1.1(a)(iv).
"Assumed Employee Plans" has the meaning set forth in Section 1.1(a)(xiv).
"Assumed Liabilities" has the meaning set forth in Section 2.1.
"Beneficial Ownership" (and the correlative meanings, "Beneficially Own"
and "Beneficially Owning") means having "beneficial ownership", as determined
pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as amended,
including pursuant to any agreement, arrangement or understanding, whether or
not in writing.
"Bills of Sale and Assumption Agreements" has the meaning set forth in
Section 4.2.
"Board Approval" has the meaning set forth in Section 7.4(c).
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"Business Day" means any day that is not a Saturday, Sunday or a day on
which banking institutions in New York, New York are not required to be open.
"Capital Lease" means any obligation of a Person to pay rent or other
amounts under any lease of (or other arrangement conveying the right to use)
real or personal property, or a combination thereof, which obligations are
required to be classified and accounted for as capital leases on a balance sheet
of such Person as of a specified date computed in accordance with GAAP.
"Closing" has the meaning set forth in Section 4.1.
"Closing Threshold" has the meaning set forth in Section 10.2(a).
"Closing Date" has the meaning set forth in Section 4.1.
"Code" means the Internal Revenue Code of 1986, as amended.
"Competing Business" has the meaning set forth in Section 7.6(c)(iii).
"Comparable Employment" means a position that: (i) has comparable duties
and responsibilities as the position the relevant employee currently holds with
Sellers and their Subsidiaries; and (ii) has compensation and benefits as are
comparable to the present compensation and benefits paid by Sellers or any of
their Subsidiaries as of the Closing (but without taking into account any
equity-based compensation that was provided by Sellers).
"Confidential or Proprietary Information" means all information about or
relating to the U.S. Business, including all Intellectual Property Rights,
provided that Confidential or Proprietary Information shall not include
information to the extent it: (i) is or becomes generally available or known to
the public, other than as a result of any disclosure by Sellers or any of their
Affiliates in violation of this Agreement, (ii) is or becomes available to
Sellers or one of their Affiliates from any source (not in violation of any
confidentiality agreement) other than Purchaser, (iii) is generated by or
related to the Sellers' Core Business, or (iv) is related to the Excluded
Assets.
"Confidentiality Agreement" has the meaning set forth in Section 7.1(a).
"Consolidated EBITDA" means, for any period, Consolidated Net Income for
such period, plus, without duplication and to the extent deducted from revenues
in determining Consolidated Net Income for such period, the sum of (a) the
aggregate amount of Consolidated Interest Expense for such period, (b) the
aggregate amount of income Tax expense for such period, (c) all amounts
attributable to depreciation, amortization and other non-cash charges or losses
for such period, (d) all extraordinary charges during such period and (e) all
non-recurring expenses incurred during such period, all as determined on a
consolidated basis with respect to Purchaser and its Affiliates (which shall
have the same meaning as such term means in Section 7.6(d)) in accordance with
GAAP.
"Consolidated Interest Coverage Ratio" means, with respect to any period,
the ratio of (a) Consolidated EBITDA for such period to (b) Consolidated
Interest Expense for such period.
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"Consolidated Interest Expense" means, for any period (a) the cash
interest payable by Purchaser and its Affiliates (which shall have the same
meaning as such term means in Section 7.6(d)) during such period minus (b)
interest income, in each case determined on a consolidated basis in accordance
with GAAP.
"Consolidated Net Income" means, for any period, net income or loss of
Purchaser and its Affiliates (which shall have the same meaning as such term
means in Section 7.6(d)) for such period determined on a consolidated basis in
accordance with GAAP.
"Contract" means any loan or credit agreement, note, bond, mortgage,
indenture, lease, sublease, purchase order or sales order with a minimum
purchase requirement or other agreement, contract, commitment or license.
"Control" means, with respect to any Person, the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of a Person, whether through the ownership of voting securities, by
Contract or otherwise.
"Employee Plan" has the meaning set forth in Section 5.16(a).
"Employment Contract" shall mean any employment, retention, severance,
change-in-control or similar-type agreement.
"Employment Date" has the meaning set forth in Section 8.1(a).
"Encumbrances" shall mean and include security interests, mortgages,
liens, pledges, charges, and all other encumbrances, whether or not relating to
the extension of credit or the borrowing of money.
"Environmental Claims" means any and all Proceedings arising out of, or
related to the presence, Release or threatened Release of any Hazardous
Materials, including Proceedings alleging common law Liability arising out of,
or related to the presence, Release or threatened Release of any Hazardous
Materials or any violation or alleged violation of any Environmental, Health and
Safety Laws.
"Environmental Costs or Liability" shall mean any Losses arising under any
applicable Environmental Health and Safety Law or any order or contract existing
prior to the Closing, including any natural resource damages.
"Environmental, Health and Safety Laws" means all civil and criminal Laws,
rules, Permits, or Orders relating to or addressing pollution or protection of
the environment, public health and safety, including all those relating to the
presence, use, production, processing, generation, handling, labeling,
transportation, treatment, storage, disposal, distribution, labeling, testing,
processing, discharge, Release, threatened Release, control, cleanup of, or
exposure to any Hazardous Materials, substances or wastes, provided, however,
that any zoning, building or land use ordinances shall not be included in the
definition of Environmental, Health and Safety Laws.
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"Equity Interests" means (i) with respect to a corporation, any and all
shares, interests, participation or other equivalents (however designated) of
corporate stock, including all common stock and preferred stock, or warrants,
options or other rights to acquire any of the foregoing and (ii) with respect to
a partnership, limited liability company or similar Person, any and all units,
interests, rights to purchase, warrants, options or other equivalents of, or
other ownership interests in, any such Person.
"ERISA" means the Employment Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" has the meaning set forth in Section 5.16(a).
"European Business" has the meaning set forth in the preamble to this
Agreement.
"Evidence" has the meaning set forth in Section 8.1(f).
"Excluded Assets" has the meaning set forth in Section 1.2.
"Excluded Contracts" has the meaning set forth in Section 5.11(c).
"Excluded Employee Plans" has the meaning set forth in Section 1.2(f).
"Excluded Inventory" has the meaning set forth in Section 1.2(d).
"Excluded Liabilities" has the meaning set forth in Section 2.2(c).
"Excluded Representations" has the meaning set forth in Section 11.4.
"Expiration Date" has the meaning set forth in Section 7.13(a).
"Facilities" means the Real Property and the facilities located on the
Real Property.
"Final Inventory Statement" has the meaning set forth in Section 3.3(b).
"Financial Certificate" has the meaning set forth in Section 7.13(e).
"Finished Goods" means the finished goods inventory (as defined by GAAP
and consistent with past practice) located in the manufacturing plants of the
U.S. Business or held by third parties on consignment for Sellers.
"Fishers Sublease" has the meaning set forth in Section 10.2(e)(vi).
"GAAP" means U.S. generally accepted accounting principles, applied on a
basis consistent with past practice.
"Glenayre" means Glenayre Technologies, Inc., a Delaware corporation.
"Governmental Entity" means federal, state, local or foreign government
and any court, tribunal, arbitral body, administrative agency, commission or
other governmental, government appointed, or regulatory authority, reporting
entity or agency.
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"Hazardous Materials" shall mean any and all radioactive materials or
wastes, petroleum (including crude oil or any fraction thereof), petroleum
products or petroleum distillates, fractions or wastes, pesticides,
asbestos-containing materials, urea formaldehyde foam, heavy metals and any
other wastes, materials, chemicals or substances regulated pursuant to any
applicable Environmental, Health and Safety Law .
"Historical Expenses" has the meaning set forth in Section 5.8(a)(i)
"Historical Financial Statements" has the meaning set forth in Section
5.7(a)(i).
"Income Tax" means any federal, state, local, or foreign tax, measured by
or with respect to net income, gains or net receipts, including any interest,
penalty, or addition thereto, whether disputed or not.
"Indebtedness" means indebtedness for borrowed money, reimbursement
obligations with respect to letters of credit and similar instruments,
obligations incurred, issued or assumed as the deferred purchase price of
property or services (other than accounts payable incurred in the ordinary
course of business consistent with past practice), obligations of others secured
by (or, for which the holder of such indebtedness has an existing right,
contingent or otherwise, to be secured) any Encumbrance (other than a Permitted
Encumbrance) on property or Assets of Sellers, Capital Lease obligations, and
obligations in respect of guarantees of any of the foregoing or any "keep well"
or other agreement to maintain any financial statement condition of another
person, in each case, whether or not matured, liquidated, fixed, or contingent,
and without duplication. The term "Indebtedness" shall mean the amount required
to retire such Indebtedness on the date in question and includes all principal,
interest, fees, expenses, prepayment penalties and other similar obligations
owed in respect of any outstanding Indebtedness.
"Indemnified Persons" means and includes Purchaser Indemnified Persons
and/or Seller Indemnified Persons, as the case may be.
"Indemnifying Persons" means and includes Purchaser Indemnifying Persons
and/or Seller Indemnifying Persons, as the case may be.
"Initial Inventory Statement" has the meaning set forth in Section 3.3(b).
"Intellectual Property Rights" means all intellectual property rights,
including patents, trademarks, trade names, service marks, service xxxx
applications, trade dress, logos, designs, devices, domain names and the
goodwill connected with the foregoing, copyrights, software, databases, mask
works, know-how, technical information, trade secrets, processes, formulae,
licenses, inventions, discoveries, designs or design protocols, drawings,
blueprints, specifications, and all documentation and media constituting,
describing or relating to the foregoing, including manuals, memoranda and
records, and any registrations or applications for registration of any of the
foregoing.
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"Inventory" means the Supplied Production Components (other than those
listed in Section 1.2(d) of the Seller Disclosure Schedule) and WIP of Sellers
related to the U.S. Business. For the avoidance of doubt, Inventory does not
include any Other Inventory or any Excluded Inventory.
"IT Transition Services Agreement" has the meaning set forth in Section
10.2(e)(iv).
"Knowledge" of either Seller means the actual knowledge of any Person who
is listed in Section I of the Seller Disclosure Schedule.
"Law" means any applicable federal, state or local law, statute, treaty,
regulation, ordinances, or similar provision having the force or effect of law,
but excluding all Environmental, Health and Safety Laws.
"Leases" has the meaning set forth in Section 1.1(a)(vi).
"Leased Real Property" has the meaning set forth in Section 5.9(b).
"Letter Agreement" has the meaning set forth in Section 10.2(e)(vii).
"Letter of Credit" has the meaning set forth in Section 7.13(a).
"Liability" means any debt, liability, commitment or obligation, of any
kind, character or nature whatsoever, whether known or unknown, asserted or
unasserted, xxxxxx or inchoate, secured or unsecured, accrued, fixed, absolute
or contingent, accrued or unaccrued, liquidated or unliquidated and whether due
or to become due.
"Licensed Requisite Rights" means all Intellectual Property Rights which
Sellers (or any of their Affiliates) have a Contract (other than a contract for
the purchase of equipment that includes Intellectual Property Rights licensed
with such equipment) to use and which are used in, held for use in or otherwise
relate to, the U.S. Business, other than in connection with the Excluded Assets
or the Excluded Contracts.
"Losses" means any and all losses, claims, costs, damages, Liabilities,
fines, penalties, judgments, settlements, expenses (including reasonable
attorneys', accountants', experts, engineers, consultants, and other
professionals' fees and costs of investigation, litigation) settlement, fees,
judgments, assessments and Taxes (including interest or penalties thereon)
provided, however, Losses shall not include any consequential damages, lost
profits, damage to reputation or the like, but such damages shall be limited to
out-of-pocket Losses.
"Manufactured Volumes" has the meaning set forth in Section 5.7(b).
"Manufacturing and Distribution Agreements" has the meaning set forth in
Section 10.2(e)(ii).
"Material Adverse Change" means any adverse change, loss or damage, which,
individually or in the aggregate, has had or would reasonably be expected to
have, with respect
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to Sellers, a material adverse change to (i) (A) the Purchased Assets or (B) the
Assumed Liabilities or (ii) the performance of any obligations hereunder or
under the Related Documents.
"Material Adverse Effect" means any event, condition, change, fact,
circumstance or effect, which, individually or in the aggregate, has had or
would reasonably be expected to have a material adverse effect on (A) (1) the
Purchased Assets or (2) the Assumed Liabilities or (B) on the performance of any
obligations hereunder or under the Related Documents.
"Material Interest" means (i) an ownership interest (equity or otherwise)
in any Person, directly or indirectly, which is in excess of 10% of the total
ownership interests of such Person (other than any Seller Permitted Joint
Venture or Purchaser Permitted Joint Venture, as the case may be) or (ii) the
ability to control or manage the operations of a Person, whether by contract,
voting agreement or otherwise or (iii) the ability to elect any member of the
Board of Directors or similar governing body, or the ability to appoint the
Chief Executive Officer, President or comparable senior management of such
Person.
"New Venture" has the meaning set forth in Section 7.6(c)(iii).
"Non-Material" has the meaning set forth in Section 7.8(c).
"Notice of Disagreement" has the meaning set forth in Section 3.3(b).
"Off-Site Disposal Location" has the meaning set forth in Section
2.2(b)(xii).
"Orders" means judgments, writs, decrees, injunctions or judicial or
administrative orders of any Governmental Entity.
"Organizational Documents" means (i) any certificate or articles filed
with any state which filing forms a Person and (ii) all agreements, documents or
instruments governing the internal affairs of a Person, including such Person's
by-laws, codes of regulations, partnership agreements, limited liability company
agreements and operating agreements.
"Other Inventory" means all parts, supplies and other inventory (but
excluding Inventory and Excluded Inventory) located at the Facilities.
"Owned Real Property" has the meaning set forth in Section 5.9(a).
"Owned Requisite Rights" means all Intellectual Property Rights owned by
Sellers (or any of their Affiliates) and which are used in, held for use in, or
otherwise relate to the U.S. Business, other than Intellectual Property Rights
that are Excluded Assets.
"PBGC" has the meaning set forth in Section 5.16(d).
"Permits" means all permits, licenses, authorizations, registrations,
franchises, approvals, certificates, variances and similar rights obtained, or
required to be obtained, from Governmental Entities.
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"Permitted Encumbrances" means (i) Encumbrances for Taxes not yet due and
payable or being contested in good faith by appropriate proceedings and for
which there are adequate reserves on the books, (ii) workers, or unemployment
compensation liens arising in the ordinary course of business; (iii) mechanic's,
materialman's, supplier's, vendor's or similar liens arising in the ordinary
course of business securing amounts that are not delinquent or are being
contested in good faith by appropriate proceedings; (iv) Encumbrances expressly
permitted by this Agreement and the Related Documents; (v) Encumbrances
discharged or released at or prior to Closing but for which public filings to
record such discharges or releases will be filed substantially simultaneously or
immediately after Closing; (vi) those items identified in Section 5.8 of the
Seller Disclosure Schedule; (vii) zoning, set back, building and other similar
restrictions including restrictions and requirements affecting the real property
on which the Facilities are located imposed by deeds, leases, development
agreements, declarations and redevelopment authorities provided that such
Encumbrances do not, individually or in the aggregate have a material adverse
effect on the operations of the U.S. Business; and (viii) the interests of
lessors in equipment leased or loaned to Sellers.
"Person" shall be construed broadly and shall include an individual, a
partnership, a corporation, a limited liability company, an association, a joint
stock company, a trust, a joint venture, an unincorporated organization or a
Governmental Entity (or any department, agency or political subdivision
thereof).
"Post-Closing Period" has the meaning set forth in Section 7.10.
"Pre-Closing Period" has the meaning set forth in Section 7.10.
"Pre-Closing Tax Period" has the meaning set forth in Section 9.1.
"Prepayment Certification" has the meaning set forth in Section 3.4.
"Proceedings" means any lawsuit, complaint, claim, action, suit or
proceedings before any Governmental Entity.
"Products" means any and all types of optical discs now known or hereafter
devised, including compact discs in any form and Digital Versatile Discs in any
forms and any other high-density optical discs, including, in each case, any
successor format or replacement product. For the purposes of this definition, a
compact disc includes audio CD, CD-ROM, Video CD, CD-I, CD-R, CD-RW, Photo CD,
Enhanced CD and CD+G as each such term is commonly used and understood. For the
purposes of this definition, a Digital Versatile Disc includes DVD-Audio,
DVD-Video, DVD-ROM, DVD-R, DVD-RW and DVD-RAM, as each such term is commonly
used and understood.
"Purchase Price" has the meaning set forth in Section 3.1.
"Purchased Assets" has the meaning set forth in Section 1.1(b).
"Purchaser" has the meaning set forth in the preamble to this Agreement.
"Purchaser Acquired Business" has the meaning set forth in Section
7.6(d)(ii).
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"Purchaser Disclosure Schedule" means the written information entitled
"Purchaser Disclosure Schedule" delivered by Purchaser to Sellers prior to
execution of this Agreement and, with respect to each disclosure made therein,
specifically referencing each Section of this Agreement under which such
disclosure is being made.
"Purchaser Environmental Knowledge" means the actual knowledge of the
general manager of a Facility and the persons at the Facility with managerial
responsibility for matters relating to Environmental, Health and Safety Laws
which knowledge was required after the Closing Date.
"Purchaser Indemnified Persons" means and includes Purchaser and Purchaser
(as defined in the Share Purchase Agreement( and each of their Affiliates, and
each of their permitted successors and assigns, and the respective officers,
directors, employees, shareholders, partners and agents of each of the
foregoing.
"Purchaser Indemnifying Person" means Purchaser and its successors and
assigns.
"Purchaser Losses" means any and all Losses sustained, suffered or
incurred by any Purchaser Indemnified Person arising from or in connection with
any matter which is the subject of indemnification under Article 11.
"Purchaser Material Adverse Effect" means any event, condition, change,
fact, circumstance or effect, which, individually or in the aggregate, has had
or would reasonably be expected to have, with respect to Purchaser, a material
adverse effect (i) on the business, operations, and condition (financial or
otherwise), operating results or Liabilities of Purchaser or (ii) on its
performance of any of its obligations hereunder or under the Related Documents.
"Purchaser Parent" has the meaning set forth in Section 7.6(d).
"Purchaser Permitted Joint Venture" means any entity organized as a
corporation, limited partnership, limited liability company or limited liability
limited partnership of which: (i) neither Purchaser nor any of its Affiliates
acts as general partner or controls the operations of such entity, and (ii)
Purchaser or any of its Affiliates, separately or as a member of a group, (A)
Beneficially Own 50% or less of the economic or voting interests of such entity
and the revenues derived from any Seller Core Business represent less than
thirty million dollars.
"Purchaser Reduced Terms" has the meaning set forth in Section 7.6(d)(ii).
"Purchaser Restricted Period" has the meaning set forth in Section 7.6(d).
"Purchaser's 401(k)" has the meaning set forth in Section 8.1(e).
"Purchaser's Last Offer" has the meaning set forth in Section 7.6(d)(ii).
"Real Property" has the meaning set forth in Section 5.9(c).
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"Related Documents" has the meaning set forth in Section 10.2(e).
"Release" means any release, spill, emission, leaking, dumping, injection,
pouring, deposit, disposal, discharge, dispersal, leaching or migration of a
Hazardous Material into the environment (including ambient air, surface water,
groundwater, land surface or subsurface strata) or within any building,
structure or facility.
"Remediation Measures" means any (i) investigation, monitoring, clean-up,
containment, remediation, mitigation, removal or treatment, including, the
preparation and implementation of any work plans and the obtaining of
authorizations, approvals and permits with Governmental Entities with respect
thereto, and (ii) any response to, or preparation for, any inquiry, order,
hearing or other proceeding by or before any Governmental Entity.
"Reno Assignment" has the meaning set forth in Section 10.2(e)(vi).
"Requisite Rights" means, collectively, the Owned Requisite Rights and the
Licensed Requisite Rights.
"Restricted Territory" has the meaning set forth in Section 7.6(c)(iv).
"Security Deposit" has the meaning set forth in Section 7.13(a).
"Selected Plans" has the meaning set forth in Section 5.16(c).
"Seller(s)" has the meaning set forth in the preamble to this Agreement.
"Seller Acquired Business" has the meaning set forth in Section
7.6(c)(iii).
"Seller Competing Business" has the meaning set forth in Section
7.6(d)(ii).
"Seller Confidential or Proprietary Information" means all information
about or relating to Sellers' business, assets and operations (other than the
U.S. Business), including all Intellectual Property Rights, provided that Seller
Confidential or Proprietary Information shall not include information which: (i)
is or becomes generally available or known to the public, other than as a result
of any disclosure by Purchaser or any of its Affiliates in violation of this
Agreement, or (ii) is or becomes available to Purchaser or one of its Affiliates
from any source other than Sellers or their Affiliates.
"Seller Core Business" has the meaning set forth in Section 7.6(d).
"Seller Disclosure Schedule" means the written information entitled
"Seller Disclosure Schedule" delivered by Sellers to Purchaser prior to
execution of this Agreement and, with respect to each disclosure made therein,
specifically referencing each Section of this Agreement under which such
disclosure is being made.
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"Seller Indemnified Persons" means and includes Sellers and Seller (as
defined in the Share Purchase Agreement) and each of their Affiliates, each of
their respective successors and assigns, and the respective officers, directors,
employees, shareholders, partners and agents of each of the foregoing.
"Seller Indemnifying Persons" means Sellers and each of their respective
successors and assigns.
"Seller Losses" shall mean any and all Losses sustained, suffered or
incurred by any Seller Indemnified Person arising from or in connection with any
matter which is the subject of indemnification under Article 11.
"Seller Permitted Joint Venture" means any entity organized as a
corporation, limited partnership, limited liability company or limited liability
limited partnership of which: (i) neither Seller nor any of their Affiliates
acts as general partner or controls the operations of such entity, and (ii)
Sellers or any of their Affiliates, separately or as a member of a Group, (A)
Beneficially Own 50% or less of the economic or voting interests of such entity
and the revenues of such entity derived from Seller Restricted Activities (I)
represent less than 10% of Purchaser's then-existing revenues and (II) represent
less than 10% of such entity's then-existing revenues, or (B) Beneficially Own
20% or less of the economic or voting interests of such entity and the revenues
of such entity derived from Seller Restricted Activities represent less than 10%
of Purchaser's then-existing revenues.
"Seller Reduced Terms" has the meaning set forth in Section 7.6(c)(iii).
"Seller Restricted Activities" has the meaning set forth in Section
7.6(c).
"Seller Restricted Period" has the meaning set forth in Section 7.6(c).
"Sellers' 401(k)" has the meaning set forth in Section 5.16(c).
"Sellers' Environmental Obligations" has the meaning set forth in Section
2.2(b)(xii).
"Seller's Last Offer" has the meaning set forth in Section 7.6(c)(iii).
"Share Purchase Agreement" has the meaning set forth in the preamble to
this Agreement.
"Site" shall mean any of the Real Property, in each case, including all
soil, subsoil, surface waters and groundwater thereat and thereunder.
"Subsidiary" of any Person shall mean and include (i) any corporation more
than 50% of whose stock of any classes having by the terms thereof ordinary
voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person directly or
indirectly through Subsidiaries and (ii) any partnership, association, joint
venture or other entity (other than a
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corporation) in which such Person directly or indirectly through Subsidiaries,
has more than a 50% equity interest at the time.
"Superior Proposal" means any bona fide written Acquisition Proposal that
a majority of the members of the Applicable Board determines in good faith by
resolution duly adopted after conclusion with its outside legal counsel and
financial advisor (a) could result in a transaction, that if consummated, is
more favorable to the stockholders of a Seller from a financial point of view
than the transaction contemplated by this Agreement (after taking into account
any revisions made or proposed by Purchaser) and (b) is reasonably capable of
being consummated on the terms proposed (taking into account all legal,
financial, regulatory, and other relevant considerations).
"Supplied Production Components" means the jewel boxes, trays,
polycarbonate, ink, lacquer, spine label stock, corrugated boxes, shrink film
and blank sticker/label paper stock, valued at Sellers' actual cost of such
items for purposes of Section 3.3.
"Survival Date" has the meaning set forth in Section 11.4.
"Taxes" means, with respect to any Person, (i) all taxes (including any
tax on or based upon net income, or gross income, or income as specially
defined, or earnings, or profits, or selected items of income, earnings or
profits) and all gross receipts, sales, use, ad valorem, transfer, franchise,
escheat, license, withholding, payroll, employment, excise, severance,
occupation, premium, property or windfall profits taxes, real property tax,
alternative or add-on minimum taxes, customs duties or other taxes, fees
(including accounting, financial advisor and legal fees directly associated
therewith), assessments or charges of any kind whatsoever, together with any
interest and any penalties, additions to tax or additional amounts imposed by
any Governmental Authority and (ii) any Liability for the payment of any amount
of the type described in the immediately preceding clause (i) as a result of (A)
being a "transferee" (within the meaning of Section 6901 of the Code or any
other applicable Law) of another Person or a member of an affiliated or combined
group, (B) being a member of an affiliated, consolidated or combined group with
any other competitors or (C) a contractual obligation or otherwise.
"Taxing Authority" means any Governmental Entity with the power to impose
Taxes.
"Tax Return" has the meaning set forth in Section 9.1.
"Termination Fee" shall mean $3 million.
"Third Party Claim" has the meaning set forth in Section 11.3.
"Third Party Receivables" has the meaning set forth in Section 7.14.
"Threshold Amount" has the meaning set forth in Section 11.5(a).
"Title Insurer" has the meaning set forth in Section 10.2(e)(viii).
"Title Policy" has the meaning set forth in Section 10.2(e)(viii).
"Transfer Taxes" has the meaning set forth in Section 9.2(b).
"Transferred Employee" has the meaning set forth in Section 8.1(a).
"UML" has the meaning set forth in the preamble to this Agreement.
"UMVD" has the meaning set forth in the preamble to this Agreement.
"U.S. Business" means the following services with respect to Products in
the United States, in each case to the extent conducted by Sellers or their
Affiliates as of the date hereof: (i)
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pre-production services (expressly excluding content mastering (other than glass
mastering), authoring and similar content preparation); (ii) selection of raw
materials suppliers; (iii) ordering raw materials (including components) from
various suppliers such as pressing plants, duplicators and printers (unless
Purchaser and Sellers have agreed that Sellers or its Affiliates will perform
such function); (iv) replication and manufacturing; (v) assembly; (vi) staging
for shipment components to various points; (vii) staging for shipment finished
units from point of manufacture to distributors and other shipment locations;
(viii) inventory control with respect to raw material component parts; (ix)
physical distribution (excluding promotions, in-store displays and similar sales
and mastering distributions); (x) processing of returns for scrap or return to
inventory; (xi) inventory control (but excluding the ordering and determination
of such inventory levels) and warehousing with respect to finished units; and
(xii) shipment of finished units, and, in all cases, expressly excluding the
Seller Core Business.
"U.S. Business Employees" has the meaning set forth in Section 5.15(a).
"U.S. CD Manufacturing Agreement" means the U.S. CD Manufacturing and
Related Services Agreement by and between UMG Recordings, Inc. and Purchaser.
"U.S. Distribution Agreement" means the U.S. Distribution and Related
Services Agreement by and between UMG Recordings, Inc. and Purchaser.
"U.S. HDFD Manufacturing Agreement" means the U.S. HDFD Manufacturing and
Related Services Agreement by and between UMG Recordings, Inc. and Purchaser.
"U.S. Manufacturing and Distribution Agreements" has the meaning set forth
in Section 10.2(e)(ii).
"WARN Act" has the meaning set forth in Section 5.15(d).
"Xxxxxx-Xxxxx Assignment" has the meaning set forth in Section
10.2(e)(vi).
"WIP" means those items of Inventory located at the Facilities considered
works-in-progress (as defined by GAAP and consistent with past practice), valued
at Sellers' net book value of such items for purposes of Section 3.3.
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