EXHIBIT 2.3
UNIT PURCHASE AGREEMENT
This Unit Purchase Agreement (this "AGREEMENT") is made as of May 10, 2005,
by and between SOURCE INTERLINK COMPANIES, INC., a Delaware corporation
("BUYER"), and XXXX. XXXX COMPANY LLC, a Delaware limited liability company
("SELLER").
RECITALS
Seller is the sole member of XXXX. LEVY CIRCULATING CO. LLC, a Delaware
limited liability company (the "COMPANY"). Seller desires to sell, and Buyer
desires to purchase, all of the issued and outstanding membership interests (the
"SECURITIES") of the Company for the consideration and on the terms set forth in
this Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1:
ACCOUNTS RECEIVABLE - as defined in Section 3.12.
ADJUSTED CLOSING NET WORTH - subject to Section 2.9, the Closing Net Worth
as shown on the Closing Balance Sheet, as adjusted upward or downward during the
Survival Period to reflect (a) the actual returns of Product distributed by the
Company as of the close of business on May 8, 2005 which Product is either
returnable as of the Closing Date or will be returnable at a time after the
Closing Date, in each case to the extent that the reduction in gross margin
attributable to such returns exceeds the reserve for such returns reflected on
the Closing Balance Sheet, (b) the actual amounts paid to National Distributors
to resolve any material unreconciled balances with such National Distributors
with respect to Product purchased by the Company prior to the Closing Date to
the extent such amounts differ from the reserves for disputed amounts reflected
on the Closing Balance Sheet, (c) any amounts paid by the Company to resolve any
discrepancies pertaining to any return affidavits submitted prior to the Closing
Date by the Company to National Distributors and other vendors to justify and
support credits taken by the Company against account balances with each such
National Distributor not being accurate and complete in all material respects to
the extent such amounts are not covered by clause (b) immediately above, (d) the
amount, if any, by which the value of the inventory of the Company as of the
close of business on May 8, 2005 (determined in accordance with the valuation
methodologies as set forth in Section 3.13) differs from the value of such
inventory shown on the Closing Balance Sheet, and (e) the actual assets or the
actual liabilities of the Company as of the close of business on May 8, 2005
based on information obtained during the Survival Period (as opposed to any
estimates or reserves reflected on the Closing Balance Sheet or omissions
thereon), but in each of the cases in clauses (a) through (e) above, without
taking into account (i) any decrease in Accounts Receivable or increases in the
reserves for bad debt therefor to the
extent attributable to (A) a customer ceasing to do business with the Company
after the Closing Date, so long as Seller had no Knowledge prior to the Closing
Date that such customer intended to cease doing business with the Company after
the Closing Date, or (B) the commencement of a proceeding in bankruptcy more
than 90 days following the Closing Date with respect to a customer, or (ii) any
increases in liabilities or decreases in assets for which any amount is paid or
payable to Buyer by Seller pursuant to Section 5.2 or 5.3 (or would be payable
pursuant to such Sections but for the limitations on indemnity contained in
Sections 5.6, 5.8 and 5.9).
ADJUSTMENT AMOUNT - as defined in Section 2.5.
ADJUSTMENT DATE - as defined in Section 6.8(e).
AFFILIATE - with respect to any Person, a Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such Person.
APPLICABLE CONTRACT - any Contract to which (a) the Company is a party or
is otherwise obligated, or (b) any of the assets owned by the Company are
subject.
APPLICABLE W/C CLAIM - any claim under any worker's compensation policies
which covered the Company or its business prior to the Closing Date for an act,
omission or occurrence that occurred prior to the Closing which is (a) asserted
prior to the Closing Date, or (b) for an accident (defined as a single event
that is the sole cause of the claimed injury) that occurred prior to the Closing
Date, asserted within 30 days following the Closing Date (but not including
claims asserted after the Closing Date by employees who have been terminated or
notified that they will be terminated or who were employed at locations closed
by Buyer or the Company within three months following the Closing Date), but in
each case only to the extent that Xxxxx Xxxxxxx is responsible for managing such
claim.
ASSETS - as defined in Section 2.8.
BASE RATE - as defined in Section 2.5.
BREACH - a "Breach" of a representation, warranty, covenant, obligation, or
other provision of this Agreement, or any instrument delivered pursuant to this
Agreement, will be deemed to have occurred if there is or has been any
inaccuracy in or breach of, or any failure to perform or comply with, such
representation, warranty, covenant, obligation or other provision.
BUYER - as defined in the first paragraph of this Agreement.
BUYER INDEMNIFIED PARTIES - as defined in Section 5.2.
BUYER'S SAVINGS PLAN - as defined in Section 6.2(b).
CLOSING - as defined in Section 2.3.
CLOSING BALANCE SHEET - as defined in Section 2.6(a).
CLOSING DATE - the date and time as of which the Closing actually takes
place.
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CLOSING FINANCIAL STATEMENTS - as defined in Section 2.6(a).
CLOSING NET WORTH - as defined in Section 2.5.
CLOSING PAYMENT - as defined in Section 2.2.
COMPANY - as defined in the Recitals of this Agreement.
COMPANY GAAP - generally accepted United States accounting principles,
applied on a basis consistent with the Company's past practices. By way of
illustration, any accounting treatment that is not permissible under generally
accepted United States accounting principles and is not identified on Exhibit
2.6 shall not be considered Company GAAP irrespective of whether or not such
accounting treatment is consistent with the Company's past practices. To the
extent the Company's practices in applying generally accepted accounting
principles has varied in the presentation of its Historical Statements on
account of the interpretation of generally accepted accounting principles, as of
the date of each such Historical Statement, by the Company's independent
auditors, Deloitte & Touche LLP, the Company's past practices shall mean the
Company's practices as reflected in its most recent Historical Statement.
COMPANY INDEMNIFIED PERSONS - as defined in Section 6.3.
COMPETING BUSINESS - as defined in Section 3.29(b).
COMPETITIVE BUSINESS - as defined in Section 6.5(a).
CONSENT - any approval, consent, ratification, waiver, or other
authorization from any Person other than a Governmental Body.
CONTEMPLATED TRANSACTIONS - all of the transactions contemplated by this
Agreement, including:
(a) the sale of the Securities by Seller to Buyer;
(b) the execution and delivery of the Transaction Documents; and
(c) the performance by Buyer and Seller of their respective covenants
and obligations under this Agreement.
CONTINUED EMPLOYEES - as defined in Section 6.2(b).
CONTRACT - any agreement, contract, obligation, promise, or undertaking
(whether written or oral and whether express or implied) that is legally
binding.
COPYRIGHTS - as defined in Section 3.26(a).
DAMAGES - as defined in Section 5.2.
DESIGNATED REPRESENTATIONS - as defined in Section 5.8(g).
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DISCLOSURE LETTER - the disclosure letter delivered by Seller to Buyer
concurrently with the execution and delivery of this Agreement.
DISTRIBUTION AND SUPPLY AGREEMENT - as defined in Section 2.4(a)(ii).
ENCUMBRANCE - any charge, claim, community property interest, condition,
equitable interest, lien, option, pledge, security interest, right of first
refusal, or restriction of any kind, including any restriction on use, voting,
transfer, receipt of income, or exercise of any other attribute of ownership.
ENTERPRISE - as defined in Section 6.5(a).
ENVIRONMENT - soil, land surface or subsurface strata, surface waters
(including navigable waters, streams, ponds, drainage basins, and wetlands),
groundwaters, ambient air (including indoor air) and plant and animal life.
ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES - any cost, damages, expense,
liability or legal obligation arising from or under Environmental Law or
Occupational Safety and Health Law and consisting of or relating to :
(a) fines, penalties, judgments, awards, settlements, orders, legal or
administrative proceedings, notices, requests for information, damages,
losses, claims, demands and response, investigative, remedial, or
inspection costs and expenses arising under Environmental Law or
Occupational Safety and Health Law;
(b) responsibility under Environmental Law or Occupational Safety and
Health Law for cleanup costs or corrective action, including any
investigation, cleanup, removal, containment, or other remediation or
response actions ("CLEANUP") required by applicable Environmental Law or
Occupational Safety and Health Law, to the extent such Cleanup has been
required or requested, or such responsibility has been noticed or inquired
into, by any Governmental Body or third party, and for any natural resource
damages;
(c) any other compliance, corrective, investigative, or remedial
measures required under Environmental Law or Occupational Safety and Health
Law; or
(d) the presence of contamination on, under or above, or that has
migrated onto any property adjacent to, any property currently or formerly
owned by Seller or the Company.
The terms "removal," "remedial," and "response action," include the types
of activities covered by the United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq., as amended
("CERCLA").
ENVIRONMENTAL LAW - any Legal Requirement that relates to (i) pollution,
contamination, Cleanup or protection of the Environment; (ii) the manufacture,
process, distribution, use, treatment, storage, disposal, transport, or handling
of Hazardous Materials or (iii) any release, discharge, disposal or threatened
release of Hazardous Materials.
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ERISA - the Employee Retirement Income Security Act of 1974 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
EXISTING EMPLOYEES - as defined in Section 2.4(d).
FACILITIES - any real property leaseholds, or other real property interests
currently or formerly owned or operated by the Company and any buildings, plants
or structures currently or formerly owned or operated by the Company.
FIFTY PERCENT CAP - as defined in Section 5.8(b).
FIFTY PERCENT REPRESENTATIONS - as defined in Section 5.8(e).
FINANCIAL STATEMENTS - as defined in Section 3.4.
GOVERNMENTAL AUTHORIZATION - any approval, consent, license, permit,
registration, waiver, or other authorization issued, granted, given, or
otherwise required by or under the authority of any Governmental Body or
pursuant to any Legal Requirement.
GOVERNMENTAL BODY - any:
(a) nation, state, county, city, town, village, district, or other
jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or entity
and any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing authority
or power of any nature.
HAZARDOUS ACTIVITY - the distribution, generation, handling, importing,
management, manufacturing, processing, production, refinement, Release, storage,
transfer, transportation, treatment, or use of Hazardous Materials in, on, under
or from the Facilities.
HAZARDOUS MATERIALS - any waste or other substance that is listed, defined,
designated, or classified as, or otherwise determined to be, hazardous,
radioactive, or toxic or a pollutant or a contaminant under or pursuant to any
Environmental Law, or the generation, use, processing, treatment, storage,
release, transport or disposal of which is regulated by any Environmental Law,
including any admixture or solution thereof, and specifically including
petroleum and all derivatives thereof or synthetic substitutes therefor and
asbestos or asbestos-containing materials.
HISTORICAL STATEMENTS - as defined in Section 3.4.
HUNDRED PERCENT REPRESENTATIONS - as defined in Section 5.8(f).
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INCOME TAX -- (i) federal, state, local or foreign income taxes or other
taxes measured by income, together with any interest, penalties or additions to
tax imposed with respect thereto and (ii) any obligations under any agreements
or arrangements with respect to any Income Taxes described in clause (i) above.
INCOME TAX RETURN - any return, declaration, report, claim for refund or
information return or statement relating to Income Taxes, including any schedule
or attachment thereto, and including any amendment thereof.
INDEPENDENT ACCOUNTANTS - as defined in Section 2.6(c).
INTELLECTUAL PROPERTY ASSETS - as defined in Section 3.26.
INTERCOMPANY DEBT - as defined in Section 2.4(e).
INTERIM BALANCE SHEET - as defined in Section 3.4.
INTERIM STATEMENTS - as defined in Section 3.4.
IRC - the Internal Revenue Code of 1986, as amended, or any successor law,
and regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
IRS - the United States Internal Revenue Service or any successor agency,
and, to the extent relevant, the United States Department of the Treasury.
KNOWLEDGE - Seller will be deemed to have "Knowledge" of a particular fact
or other matter if any of the Persons listed on Exhibit 1-1 is actually aware
(as opposed to any imputed knowledge) of such fact or other matter. Buyer will
be deemed to have "Knowledge" of a particular fact or matter if any of the
Persons listed on Exhibit 1-2 is actually aware (as opposed to any imputed
knowledge) of such fact or matter:
LEASES - as defined in Section 2.4(a)(iv).
LEGAL REQUIREMENT - any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, rule, regulation, guidance, statute, or
treaty.
LHE - as defined in Section 2.4(a)(ii).
LICENSE AGREEMENT - as defined in Section 2.4(a)(v).
LONG-TERM INCENTIVE PROGRAM - The Xxxx. Xxxx Long-Term Incentive Plan,
effective April 1, 1995, as described in the Plan Booklet dated July 1995.
LUN - Levy United News, LLC, a Delaware limited liability company.
MARKS - as defined in Section 3.26(a).
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MATERIAL ADVERSE EFFECT - any material adverse change in the business,
operations, properties, assets, or condition of the Company, taken as a whole,
other than (a) general economic conditions, (b) conditions which affect the
magazine distribution industry generally (and are not specific to the Company),
(c) the announcement or consummation of the Contemplated Transactions, and (d)
the commencement of a proceeding in bankruptcy with respect to a Material
Customer.
MATERIAL APPLICABLE CONTRACT - any Applicable Contract listed or required
to be listed on Schedule 3.21(a) of the Disclosure Letter, including any
Applicable Contract which would have been required to be listed on Schedule
3.21(a) of the Disclosure Letter but for the fact that it is listed on another
Schedule of the Disclosure Letter.
MATERIAL CUSTOMER - any of the twenty largest customers of Company listed
on Schedule 3.21(a) of the Disclosure Letter.
NATIONAL DISTRIBUTORS - Time Warner Retail Sales and Marketing, Inc.,
Xxxxxx Circulation Company, COMAG Marketing Group, LLC and Kable Distribution
Services, Inc.
NET WORTH - at any time, (a) the total assets of the Company which would be
shown as assets on a balance sheet of the Company as of such time, minus (b) the
total liabilities of the Company which would be shown as liabilities on a
balance sheet of the Company as of such time, in each case determined first in a
manner consistent with the methodology set forth on Exhibit 2.6 and second in
accordance with Company GAAP (it being acknowledged that, where alternatives or
conflicts exist, Net Worth shall be determined first in a manner consistent with
the methodology set forth on Exhibit 2.6, and second in accordance with Company
GAAP).
NET WORTH CALCULATION - as defined in Section 2.6(a).
NET WORTH GAP - as defined in Section 5.6.
OCCUPATIONAL SAFETY AND HEALTH LAW - any Legal Requirement designed to
provide safe and healthful working conditions and to reduce occupational safety
and health hazards, and any program, whether governmental or private (including
those promulgated or sponsored by industry associations and insurance
companies), designed to provide safe and healthful working conditions.
ORDER - any award, decision, injunction, judgment, order, ruling, subpoena,
or verdict entered, issued, made, or rendered by any court, administrative
agency, or other Governmental Body or by any arbitrator.
ORGANIZATIONAL DOCUMENTS - (a) the articles or certificate of incorporation
and the bylaws of a corporation; (b) the certificate of formation and the
operating agreement or like agreement of a limited liability company, (c) the
partnership agreement and any statement of partnership of a general partnership;
(d) the limited partnership agreement and the certificate of limited partnership
of a limited partnership; (e) any charter or similar document adopted or filed
in connection with the creation, formation, or organization of a Person; and (f)
any amendment to any of the foregoing.
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PATENTS - as defined in Section 3.26(a).
PERSON - any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
PLAN - as defined in Section 3.17.
POST-CLOSING TAX PERIOD(S) - any taxable periods beginning after the
Closing Date.
PRE-CLOSING TAX PERIOD(S) - any taxable period ending on or before the
Closing Date.
PROCEEDING - any action, arbitration, audit, hearing, litigation, or suit
(whether civil, criminal, administrative or investigative) commenced, brought,
conducted, or heard by or before any Governmental Body or arbitrator.
PRODUCTS - the magazines, periodicals and similar products (including all
issues and editions thereof) distributed by the Company in the ordinary course
of business, consistent with past practice.
PROPRIETARY RIGHTS AGREEMENT - as defined in Section 3.24(b).
PURCHASE PRICE - as defined in Section 2.2.
RELATED PERSON - with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by such
individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material
Interest; and
(d) any Person with respect to which such individual or one or more
members of such individual's Family serves as a director, officer, partner,
executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is directly or
indirectly controlled by, or is directly or indirectly under common control
with such specified Person;
(b) any Person that holds a Material Interest in such specified
Person;
(c) each Person that serves as a director, officer, partner, executor,
or trustee of such specified Person (or in a similar capacity);
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(d) any Person in which such specified Person holds a Material
Interest;
(e) any Person with respect to which such specified Person serves as a
general partner or a trustee (or in a similar capacity); and
(f) any Related Person of any individual described in clause (b) or
(c).
For purposes of this definition, (a) the "FAMILY" of an individual includes (i)
the individual, (ii) the individual's spouse or domestic partner, and (iii) any
other natural person who is a parent or child of the individual or the
individual's spouse, and (b) "MATERIAL INTEREST" means direct or indirect
beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange Act
of 1934) of voting securities or other voting interests representing at least 5%
of the outstanding voting power of a Person or equity securities or other equity
interests representing at least 5% of the outstanding equity securities or
equity interests in a Person.
RELEASE - any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping, or other releasing into the Environment.
REPRESENTATIVE - with respect to a particular Person, any director,
officer, manager, employee, agent, consultant, advisor, or other representative
of such Person, including legal counsel, accountants, and financial advisors.
RESTRICTION PERIOD - as defined in Section 6.5(a).
RELEASED PARTY - as defined in Section 9.1.
RELEASOR - as defined in Section 9.1.
RIGHTS IN MASK WORKS - as defined in Section 3.26(a).
SECURITIES - as defined in the Recitals of this Agreement.
SECURITIES ACT - the Securities Act of 1933 or any successor law, and
regulations and rules issued pursuant to that Act or any successor law.
SELLER - as defined in the first paragraph of this Agreement.
SELLER INDEMNIFIED PARTIES - as defined in Section 5.4.
SELLER PARTIES - as defined in Section 3.15.
SELLER'S SAVINGS PLAN - as defined in Section 6.2(b).
SEVERANCE AGREEMENT - as defined in Section 2.4(d).
STRADDLE PERIOD(S) - all taxable periods or portions thereof beginning
before and ending after the Closing Date.
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SUBSIDIARY - with respect to any Person (the "OWNER"), any corporation or
other Person of which securities or other interests having the power to elect a
majority of that corporation's or other Person's board of directors or similar
governing body, or otherwise having the power to direct the business and
policies of that corporation or other Person (other than securities or other
interests having such power only upon the happening of a contingency that has
not occurred) are held by the Owner or one or more of its Subsidiaries.
SURVIVAL PERIOD - as defined in Section 5.5.
TAXES - (a) any and all Income Taxes and all other taxes, including,
without limitation, income, gross receipts, excise, tariff, value-added, net
worth, duties, property, sales, withholding, social security, occupation, use,
service, license, payroll, franchise, transfer and recording taxes, fees and
charges, windfall profits, severance, customs, import, export, employment or
similar taxes, charges, fees, levies or other assessments imposed by the United
States, or any state, local or foreign government or subdivision or agency
thereof, (regardless of whether they are computed on a separate, consolidated,
unitary, combined or any other basis) together with all interest, penalties,
deficiencies and additions imposed with respect to such amounts, (b) any
liability for the payment of any amount described in section (a) of this
definition as a result of being a member of an affiliated, consolidated,
combined or unitary group for any period and (c) any obligations under any
agreements or arrangements with any other Person with respect to amounts
described in sections (a) and (b) of this definition (including any liability
for such amounts of a predecessor entity).
TAX RETURN - any return (including any information return), report,
declaration, document, filing, statement, schedule, notice, form, or other
document or information (whether consolidated, combined or otherwise) filed with
or submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection, or payment of
any Tax or in connection with the administration, implementation, or enforcement
of or compliance with any Legal Requirement relating to any Tax.
TEN PERCENT CAP - as defined in Section 5.8(a).
THREAT OF RELEASE - a substantial likelihood of a Release that may require
action under Environmental Law in order to prevent or mitigate damage to the
Environment that may result from such Release.
THREATENED - a claim, Proceeding, dispute, action, or other matter will be
deemed to have been "Threatened" if any demand or statement has been made
(orally or in writing) or any notice has been given (orally or in writing) that
such a claim, Proceeding, dispute, action, or other matter is likely to be
asserted, commenced, taken, or otherwise pursued in the future.
TRADE SECRETS - as defined in Section 3.26(a).
TRANSACTION DOCUMENTS - the agreements, documents and instruments
identified in Section 2.4.
TRANSITION SERVICES AGREEMENT - as defined in Section 2.4(a)(iii).
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TW - as defined in Section 2.9.
TW OBLIGATIONS - as defined in Section 2.9.
UNUSED BASKET - an amount equal to (a) the Net Worth Gap, plus (b) any
reserves for the retrospective premium adjustments and claims for benefits
referred to in Section 5.4(d) to the extent reflected on the Closing Balance
Sheet, minus (c) the sum of (i) the aggregate amount of Damages which the Buyer
Indemnified Parties are entitled to receive under Sections 5.2 and 5.3 but are
not being, and have not been, paid solely because of Section 5.6, plus (ii) the
aggregate amount previously paid by Buyer pursuant to Section 5.4(d).
2. SALE AND TRANSFER OF SECURITIES; CLOSING
2.1. Securities.
Subject to the terms and conditions of this Agreement, at the Closing,
Seller will sell and transfer the Securities to Buyer, and Buyer will purchase
the Securities from Seller.
2.2. Purchase Price.
The purchase price for the Securities will be $29,808,824.29, as reduced by
the Adjustment Amount, if any (such amount, as it may be reduced, being called
the "PURCHASE PRICE"). Buyer shall pay Seller $29,808,824.29 at the Closing by
wire transfer of immediately available funds (the "CLOSING PAYMENT"). The
Adjustment Amount, if any, shall be paid to Buyer in accordance with Section
2.5.
2.3. Closing.
The parties intend that the purchase and sale provided for in this
Agreement (the "CLOSING") will take place simultaneously with the execution and
delivery of this Agreement at the offices of Buyer at 00000 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxx 000, Xxxxxx Xxxxxxx, XX 00000, on the date hereof. Accordingly,
all references herein to the Closing shall mean and include the closing of the
Contemplated Transactions on the date hereof. The Closing shall be effective as
of the open of business on the Closing Date.
2.4. Closing Deliveries.
At the Closing:
(a) Seller will deliver to Buyer:
(i) instruments of transfer, duly signed by Seller, conveying the
Securities to Buyer;
(ii) a Distribution and Supply Agreement in the form of Exhibit
2.4(a)(ii) (the "DISTRIBUTION AND SUPPLY AGREEMENT"), duly executed by
Levy Home Entertainment, LLC, a Delaware limited liability company
("LHE");
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(iii) a Transition Services Agreement in the form of Exhibit
2.4(a)(iii) (the "TRANSITION SERVICES AGREEMENT"), duly executed by
Seller;
(iv) Leases in the forms of Exhibits 2.4(a)(iv) (the "LEASES"),
duly executed by, as applicable, Seller or a Subsidiary of Seller; and
(v) a License Agreement in the form of Exhibit 2.4(a)(v) (the
"LICENSE AGREEMENT"), duly executed by Seller.
(b) Buyer will deliver to Seller:
(i) the Closing Payment by wire transfer to an account specified
by Seller;
(ii) the Distribution and Supply Agreement, duly executed by
Buyer;
(iii) the Transition Services Agreement, duly executed by the
Company and guaranteed by Buyer;
(iv) the Leases, duly executed by the Company and guaranteed by
Buyer; and
(v) the License Agreement, duly executed by the Company and
guaranteed by Buyer.
(c) The Company and each of Xxxxx Xxxx, Xxxxxx Xxxx and Xxxxx Xxxx
shall enter into Employment (or, in the case of Xxxxx Xxxx, Consulting)
Agreements, and Xxxxx Xxxxxxx and Buyer shall enter into an Employment
Agreement, in each case in the forms of Exhibits 2.4(c)-1, 2.4(c)-2,
2.4(c)-3 and 2.4(c)-4, respectively, it being agreed that the obligations
of the Company pursuant to each such Employment Agreement (or Consulting
Agreement) shall be guaranteed by Buyer.
(d) No later than thirty (30) days following the Closing Date, Buyer
shall cause the Company to make an offer of employment to each of the
individuals identified on Schedule 2.4(d) (the "EXISTING EMPLOYEES") for a
period of two years with (i) positions, salaries and bonus opportunities
substantially similar to the positions, salaries and bonus opportunities
applicable to each Existing Employee immediately prior to the Closing, (ii)
an annual cost of living salary adjustment, (iii) fringe benefits
substantially similar to those offered by Buyer to those of its employees
holding similar positions, and (iv) severance benefits equal to one year
salary and the payment of one year of COBRA premiums payable in the event
the Existing Employee is terminated or his or her employment is not renewed
at the end of its term for reasons other than voluntary resignation, cause,
death or disability or in the event any such Existing Employee resigns
following a relocation of his or her place of employment without his or her
consent to a location more than fifty miles from his or her current place
of employment. It will be a condition to the Company's obligation to
provide such severance to any Existing Employee that such Existing Employee
execute and deliver a severance agreement in the form of Exhibit 2.4(d)-1
(a "SEVERANCE AGREEMENT"). Buyer shall cause the Company to
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execute and deliver a Severance Agreement to each Existing Employee who
accepts the offer made by the Company within the time period first set
forth above and executes and delivers to the Company such a Severance
Agreement. Each Severance Agreement shall be guaranteed by Buyer.
Alternatively, in lieu of making such offer to any specific Existing
Employee, Buyer may in its sole discretion elect to pay to such Existing
Employee one and one-half years salary, at the rate in effect immediately
prior to the Closing, in a lump sum and one and one-half years of COBRA
premiums when such premiums are due and payable. In the case of any
election by Buyer to pursue such payment alternative, it will be a
condition to Buyer's obligation to make such lump sum payment and to pay
such premiums to any such Existing Employee that such Existing Employee
execute and deliver a Separation Agreement in substantially the form of
Exhibit 2.4(d)-2 hereto (a "SEPARATION AGREEMENT").
(e) Concurrently with the Closing, Buyer shall make a capital
contribution to the Company in an amount equal to the Company's outstanding
repayment obligations to Seller as of the date hereof as reflected on the
books of Seller and the Company pursuant to that certain Loan Agreement,
dated as of June 30, 2004, between Seller and the Company (the
"INTERCOMPANY DEBT"), which amount shall be certified by an executive
officer of Seller at the Closing. The Company shall repay the Intercompany
Debt concurrently with the Closing, and Seller shall provide a written
satisfaction and release of the Company and its assets therefrom in a form
acceptable to Buyer and its counsel.
2.5. Adjustment Amount and Payment.
The "ADJUSTMENT AMOUNT" shall be the amount, if any, by which, subject to
Section 2.9, the Net Worth as of the close of business on May 8, 2005 (the
"CLOSING NET WORTH") is more negative than negative $50.154 million, as shown on
the Closing Balance Sheet prepared in accordance with Section 2.6. In the event
the Closing Net Worth is equal to or less negative than negative $50.154
million, the Adjustment Amount shall be zero. The Adjustment Amount shall be
paid by Seller to Buyer by wire transfer within three (3) business days after
the Closing Balance Sheet becomes binding on the parties pursuant to Section
2.6. Any payment made pursuant to this Section 2.5 shall be made together with
interest at an annual rate equal to the Base Rate, accruing from the Closing
through the date payment is made, such interest to fluctuate with any announced
change in the Base Rate. As used herein, the term "BASE RATE" means the rate of
interest announced from time to time within Xxxxx Fargo Bank at its principal
office in San Francisco as its "prime rate", with the understanding that the
"prime rate" is one of Xxxxx Fargo's base rates (not necessarily the lowest of
such rates).
2.6. Adjustment Procedure.
(a) Seller shall, with the cooperation of Buyer and the Company,
prepare a balance sheet of the Acquired Company as of the close of business
on May 8, 2005 (the "CLOSING BALANCE SHEET"), together with the related
statement of income or loss for the period from the date of the Interim
Balance Sheet through the close of business on May 8, 2005 (collectively
with the Closing Balance Sheet, the "CLOSING FINANCIAL STATEMENTS"), it
being understood that the Closing Financial Statements shall not reflect
any payments made or to be made or liabilities that arise on account of or
related to the
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consummation of the Contemplated Transactions, such as the execution and
delivery of the Transaction Documents, the capital contribution and
corresponding payment of the Intercompany Debt pursuant to Section 2.4(e)
and the obligation to pay any severance to any employees of the Company who
Buyer elects not to have the continue as employees of the Company following
the Closing. The Closing Financial Statements shall be prepared first in a
manner consistent with the methodology set forth on Exhibit 2.6, and second
in accordance with Company GAAP (it being acknowledged that, where
alternatives or conflicts exist, the Closing Financial Statements shall be
prepared first in a manner consistent with the methodology set forth on
Exhibit 2.6, and second in accordance with Company GAAP). The Closing
Financial Statements shall include all year-end adjustments that would be
included and made if the Closing Financial Statements had been prepared at
a fiscal year end. Seller shall deliver the Closing Financial Statements,
together with Seller's written calculation of the Closing Net Worth (the
"NET WORTH CALCULATION"), to Buyer within ninety (90) days following the
Closing Date.
(b) If within thirty (30) days following delivery of the Closing
Financial Statements and the Net Worth Calculation Buyer has not given
Seller written notice of its objection as to any amounts set forth on the
Closing Balance Sheet or the calculations set forth in the Net Worth
Calculation (which notice shall state the basis of Buyer's objection), then
the Closing Balance Sheet and the Net Worth Calculation as prepared by
Seller shall be final, binding and conclusive on the parties and used to
compute the Adjustment Amount. Seller shall retain, and cause its
accountants and other agents to retain, all such work papers and other
documentation and information for a period of at least two (2) years from
the date the same is created.
(c) If Buyer duly gives Seller such notice of objection, and if Buyer
and Seller fail to resolve the issues outstanding with respect to the
Closing Balance Sheet and/or the Net Worth Calculation within thirty (30)
days of Seller's receipt of Buyer's objection notice, either Buyer or
Seller may elect to submit the issues remaining in dispute to Xxxxx
Xxxxxxxx LLP, independent public accountants, or if that firm declines such
engagement, another independent certified public accounting firm mutually
agreed to by the parties, in each case utilizing partners that have not
represented and have no relationship with either party (the "INDEPENDENT
ACCOUNTANTS"), for resolution applying the principles, policies and
practices set forth in Section 2.6(a). If issues are submitted to the
Independent Accountants for resolution, then:
(i) Buyer and Seller shall execute any agreements required by the
Independent Accountants to accept their engagement pursuant to this
Section 2.6(c);
(ii) Buyer and Seller shall promptly furnish or cause to be
furnished to the Independent Accountants such work papers and other
documents and information relating to the disputed issues as the
Independent Accountants may request and are available to that party or
its accountants or other agents, and shall be afforded the opportunity
to present to the Independent Accountants, with a copy to the other
party, any written material relating to the disputed issues;
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(iii) the determination by the Independent Accountants, as set
forth in a written notice to be delivered by the Independent
Accountants to both Buyer and Seller, shall be final, binding and
conclusive on the parties and shall be used by Buyer to prepare the
final Closing Balance Sheet and the Net Worth Calculation, which shall
become binding on the parties as of the date of the determination
notice sent by the Independent Accountants; and
(iv) Buyer and Seller shall each bear fifty percent (50%) of the
fees and costs of the Independent Accountants for such determination;
provided, however, that the engagement agreements referred to in
subpart (i) above may require the parties to be bound jointly and
severally to the Independent Accountants for those fees and costs, and
in the event Buyer or Seller pays to the Independent Accountants any
amount in excess of 50% of the fees and costs of their engagement, the
other party agrees to reimburse the other, as applicable, to the
extent required to equalize the payments made by Buyer and Seller with
respect to the fees and costs of the Independent Accountants.
2.7. Cooperation and Access.
For purposes of any calculations to be made or statements to be prepared
pursuant to this Agreement, any objections to such calculations or statements,
the evaluation of any claims for indemnity made pursuant to Article 5 or any
audits of the financial statements of the Company, each party shall cooperate
with and make available to the other party and its Representatives, without
charge, all information, records, data and working papers, and will permit
access to its facilities and the right to utilize its personnel, as may be
reasonably required in connection with the making of such calculations,
preparation and analysis of such statements, evaluation of claims for indemnity,
the resolution of any disputes thereunder and any such audits. Without limiting
the foregoing, (a) Buyer agrees that, for the purposes described above, Seller,
promptly following its request therefor, shall, at no cost to Seller, have
reasonable access to and the right to utilize the Company's officers, financial
personnel, accountants and such work papers and other documents and information
as reasonably requested, and (b) Seller agrees that, for the purposes described
above, Buyer, promptly following its request therefor, shall, at no cost to
Buyer, have reasonable access to and the right to utilize Seller's officers,
financial personnel, accountants and such work papers and other documents and
information as reasonably requested.
2.8. Allocation.
Buyer and Seller agree that the Purchase Price shall be allocated among the
assets (the "ASSETS") of the Company as set forth in Exhibit 2.8. The parties
shall file an IRS Form 8594 with the IRS reflecting such allocation in
accordance with IRC Section 1060. Each of the parties hereto agrees to report
the transactions described herein consistently with such allocation for all Tax
purposes. Each of the parties shall utilize such allocations for all Tax
reporting purposes and shall defend any examination or audit relating thereto in
a manner consistent with such allocation. Each party shall update such
allocation to reflect any post-Closing adjustments to the Purchase Price.
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2.9. Time Warner Debt.
The parties agree that any adverse balance sheet impact of any settlement
or agreement between the Company, Buyer or any of their respective affiliates
and Time Warner, Inc. or its affiliates (collectively and individually "TW")
relating to or affecting the long term debt owed to TW by the Company or LHE, or
the prepaid interest paid by either the Company or LHE to TW (collectively, the
"TW OBLIGATIONS"), on account of such settlement or agreement (meaning any
increase in liabilities owed to TW or decrease in any asset reflecting prepaid
interest on account of such debt) shall not be reflected on the Closing Balance
Sheet or taken into account in the preparation or calculation of the Adjustment
Amount, the Net Worth Calculation, Adjusted Closing Net Worth or the Net Worth
Gap. Buyer shall not, and shall cause the Company not to, settle or compromise
any such long term debt or prepaid interest without the prior approval of LHE.
3. REPRESENTATIONS AND WARRANTIES OF SELLER
Except as set forth in this Agreement, in the Disclosure Letter or in the
column entitled "Disclosure Letter Items" on Exhibit 2.6, Seller represents and
warrants to Buyer as follows as of the effective time of the Closing. The
following representations and warranties are qualified by the information set
forth in this Agreement to the extent it is sufficiently clear from such
information that it qualifies the particular representation and warranty.
Information in each Schedule of the Disclosure Letter and in the column entitled
"Disclosure Letter Items" on Exhibit 2.6 qualifies the representations and
warranties to which the Schedule or such entry on Exhibit 2.6 relates (or makes
cross-reference), as well as other representations and warranties in this
Agreement to the extent it is sufficiently clear from such information that it
qualifies such other representations and warranties. Certain information
reflected in the Disclosure Letter or in the column entitled "Disclosure Letter
Items" on Exhibit 2.6 may not be matters required by this Agreement to be
disclosed and such disclosure does not imply that such information is material
(or set any standard of materiality) or that such information is responsive to
the representations or warranties.
3.1. Organization and Good Standing.
(a) Schedule 3.1 of the Disclosure Letter contains a complete and
accurate list for the Company of its jurisdiction of formation, other
jurisdictions in which it is authorized to do business, and its
capitalization (including the identity of each equity holder and the number
of securities held by each). The Company is a business entity duly
organized, validly existing, and in good standing under the laws of its
jurisdiction of organization, with full power and authority to conduct its
business as it is now being conducted, to own or use the properties and
assets that it purports to own or use, and to perform all its obligations
under Applicable Contracts. The Company is duly qualified to do business as
a foreign business entity and is in good standing under the laws of each
state or other jurisdiction in which either the ownership or use of the
properties owned or used by it, or the nature of the activities conducted
by it, requires such qualification, except where the failure to be so
qualified would not have a Material Adverse Effect.
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(b) Seller has delivered, or has caused to be delivered, to Buyer
copies of the Organizational Documents of the Company, as currently in
effect.
3.2. Authority; No Conflict.
(a) This Agreement and the Contemplated Transactions have been duly
authorized by Seller, including all necessary actions of Seller's managers
and members. Assuming the due execution and delivery of this Agreement by
Buyer, this Agreement constitutes the legal, valid, and binding obligation
of Seller, enforceable against Seller in accordance with its terms, except
to the extent enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement
of creditors' rights in general and subject to general principles of equity
and the discretion of courts in granting equitable remedies. Upon the
execution and delivery by Seller of the Transaction Documents to which
Seller is a party, and assuming the due execution and delivery of such
Transaction Documents by the other parties thereto, such Transaction
Documents will constitute the legal, valid, and binding obligations of
Seller, enforceable against Seller in accordance with their respective
terms, except to the extent enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights in general and subject to general
principles of equity and the discretion of courts in granting equitable
remedies. Seller has the absolute and unrestricted right, power, authority,
and capacity to execute and deliver this Agreement and the Transaction
Documents to which it will be a party and to perform its obligations under
this Agreement and the Transaction Documents to which it will be a party.
(b) Except as set forth in Schedule 3.2 of the Disclosure Letter,
neither the execution and delivery of this Agreement nor the consummation
or performance of any of the Contemplated Transactions will, directly or
indirectly (with or without notice or lapse of time):
(i) contravene, conflict with, or result in a violation of (A)
any provision of the Organizational Documents of the Company, or (B)
any resolution adopted by the members or managers of the Company; or
(ii) contravene, conflict with, or result in a violation of any
of the terms or requirements of, or give any Governmental Body the
right to revoke, withdraw, suspend, cancel, terminate, or modify, any
Governmental Authorization that is held by the Company.
(c) Except as set forth in Schedule 3.2(c) of the Disclosure Letter,
neither the execution and delivery of this Agreement nor the consummation
or performance of the transaction described in clause (a) of the definition
of Contemplated Transactions will, directly or indirectly (with or without
notice or lapse of time) contravene, conflict with, or result in a
violation of, any Legal Requirement or any Order to which the Company,
Seller or any of their respective Affiliates is a party, or to which any of
the assets owned or used by the Company is subject.
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3.3. Capitalization.
(a) Seller is the record and beneficial owner and holder of all the
issued and outstanding limited liability company membership interests of
the Company, which constitute the Securities, free and clear of all
Encumbrances other than restrictions on disposition contained in any
applicable federal or state securities laws. No legend or other reference
to any purported Encumbrance appears upon any certificate representing
equity securities of the Company. All of the outstanding equity securities
of the Company have been duly authorized and validly issued and are fully
paid. There are no Contracts relating to the issuance, sale, or transfer of
any equity securities or other securities of the Company. None of the
outstanding equity securities or other securities of the Company was issued
in violation of the Securities Act or any other Legal Requirement.
(b) The Company does not own, or have any Contract to acquire, any
equity securities or other securities of any Person or any direct or
indirect equity or ownership interest in any other business.
3.4. Financial Statements.
Seller has delivered to Buyer: (a) audited combined balance sheets of the
Company and LUN as at September 30 in each of the years 2002 through 2004, and
the related audited combined statements of income, changes in members'
deficiency, and cash flow for each of the fiscal years then ended, including in
each case the notes thereto (collectively, the "HISTORICAL STATEMENTS"),
together with the report thereon of Deloitte & Touche LLP, independent certified
public accountants, and (b) an unaudited balance sheet of the Company as at
February 19, 2005 (the "INTERIM BALANCE SHEET") and the related unaudited
statement of income for the period from October 1, 2004 through February 19,
2005 (collectively with the Interim Balance Sheet, the "INTERIM STATEMENTS").
The Historical Statements, together with the notes thereto, and the Interim
Statements (collectively, the "FINANCIAL STATEMENTS") fairly present, in all
material respects, the financial condition and the results of operations,
changes in members' deficiency, and cash flow of the Company (in the case of the
Historical Statements, on a combined basis with LUN) as at the respective dates
of and for the periods referred to in such Financial Statements, all in
accordance with (i) in the case of the Historical Statements, Company GAAP, and
(ii) in the case of the Interim Statements, first, the methodology set forth on
Exhibit 2.6 and second, Company GAAP (it being acknowledged that, where
alternatives or conflicts exist, the Interim Statements were prepared first in a
manner consistent with the methodology set forth on Exhibit 2.6, and second in
accordance with Company GAAP), subject, in the case of the Interim Statements,
to normal recurring quarter-end and year-end adjustments, the absence of notes
(that, if presented, would not differ materially in methodology from that
applied in developing those included in the balance sheets referred to in clause
(a) above); and, except as set forth in Schedule 3.4 of the Disclosure Letter,
the Historical Financial Statements reflect the consistent application of such
accounting principles throughout the periods involved.
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3.5. Books and Records.
The books of account, minute books and other records of the Company, all of
which have been made available to Buyer, are complete and correct in all
material respects and have been maintained in the ordinary course of business.
The minute books of the Company contain accurate and complete records of all
meetings, if any, held of, and written consents executed in lieu of meetings of,
the members and managers of the Company. At the Closing, all of those books and
records will be in the possession of the Company.
3.6. Title to Properties; Encumbrances.
(a) The Company does not own any real property. Schedule 3.6(a) of the
Disclosure Letter contains a complete and accurate list of all leaseholds
or other interests in real property owned by the Company.
(b) At or prior to the Closing, Seller shall provide to Buyer a
complete and accurate written list of the Company's material tangible
properties and assets (the "FIXED ASSET LIST"). Except as set forth on
Schedule 3.6(b) of the Disclosure Letter, the Company owns (i) all of the
tangible properties and assets reflected on the Fixed Asset List other than
tangible property sold, disposed of or consumed since the date of the Fixed
Asset List, in the ordinary course of business, consistent with past
practice), and (ii) all of the tangible properties and assets purchased or
otherwise acquired by the Company since the date of the Fixed Asset List
(except for tangible property acquired and sold, disposed of or consumed
since the date of the Fixed Asset List in the ordinary course of business,
consistent with past practice), which subsequently purchased or acquired
tangible properties and assets (other than inventory, supplies,
disposables, consumables and other properties and assets purchased or
otherwise acquired in the ordinary course of business) are listed in
Schedule 3.6(b) of the Disclosure Letter. All properties and assets
reflected in the Fixed Asset List or in Schedule 3.6(b) are free and clear
of all Encumbrances other than, with respect to all such properties and
assets, (A) security interests shown on the Interim Balance Sheet as
securing specified liabilities or obligations, with respect to which no
default (or event that, with notice or lapse of time or both, would
constitute a default) exists, (B) security interests incurred in connection
with the purchase of property or assets after the date of the Interim
Balance Sheet (security interests being limited to the property or assets
so acquired), with respect to which no default (or event that, with notice
or lapse of time or both, would constitute a default) exists, (C) statutory
liens for current taxes or assessments not yet due or payable, (D)
Encumbrances in favor of lessors of capital equipment, (E) mechanic's liens
or other Encumbrances arising in the ordinary course of business which are
immaterial to the value, financial condition or operations of the Company,
and (F) Encumbrances identified on Schedule 3.6(b) of the Disclosure
Letter.
3.7. Adequacy of Reserve for Returns.
The reserve for returns of Product distributed by the Company prior to the
Closing Date will be reflected on the Closing Balance Sheet and shall be
materially adequate to account for the actual returns of such Product which is
either returnable as of the Closing Date or will be
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returnable at a time following the Closing Date, in each case other than any
abnormal returns attributable to the occurrence of either of the following: (a)
a customer ceasing to doing business with the Company after the Closing Date so
long as Seller had no Knowledge prior to the Closing Date that such customer
intended to cease doing business with the Company after the Closing Date, or (b)
the commencement of a proceeding in bankruptcy more than 45 days following the
Closing Date with respect to a customer.
3.8. Account Reconciliations.
(a) As of March 31, 2005, there are no material unreconciled balances
with National Distributors for Product purchased by the Company except to
the extent of disputed amounts reserved on the Closing Balance Sheet or
disclosed in Schedule 3.8(a) of the Disclosure Letter.
(b) As of March 31, 2005, there are no material unreconciled balances
with vendors (other than National Distributors) for Product purchased from
them by the Company except to the extent of amounts reserved on the Closing
Balance Sheet or disclosed in Schedule 3.8(b) of the Disclosure Letter.
(c) As of April 23, 2005, there will be no material unreconciled
balances on any Accounts Receivable, that were, on such date, more than 120
days old, with any customers of the Company for Product sold to them by the
Company except to the extent of amounts reserved on the Closing Balance
Sheet or disclosed in Schedule 3.8(c) of the Disclosure Letter.
3.9. Return Affidavits.
All return affidavits submitted prior to the Closing Date by the Company to
National Distributors and other vendors to justify and support credits taken by
the Company against account balances with each such National Distributor and
vendor are accurate and complete in all material respects.
3.10. Certain Financial Terms.
(a) Schedule 3.10(a) of the Disclosure Letter sets forth the material
financial terms on which the Company has done business, as of March 31,
2005, with National Distributors.
(b) Schedule 3.10(b) of the Disclosure Letter sets forth the material
financial terms on which the Company has done business, as of March 31,
2005, with the following five Material Customers: Wal-Mart, Target, Host,
HDS and Wawa.
3.11. Condition and Sufficiency of Assets.
The equipment of the Company is sufficient for the operation of the
business of the Company as it is currently conducted, it being acknowledged
that, except as provided in the next sentence, Seller makes no representations
or warranties regarding the condition of such equipment. The Company's
distribution centers were operating in the ordinary course of
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business as of the last date prior to the Closing Date that such distribution
centers conducted operations.
3.12. Accounts Receivable and Payable.
(a) All accounts receivable of the Company that will be reflected on
the Closing Balance Sheet (collectively, the "ACCOUNTS RECEIVABLE") will
represent valid obligations arising from sales actually made or services
actually performed in the ordinary course of business. Subject to the
reserves shown on the Closing Balance Sheet (which reserves, based on
information known at Closing, will be adequate and calculated consistent
with past practice), each of the Accounts Receivable will be collected, in
cash or by credit (including as provided in Section 6.8), during the
Survival Period except for (i) Accounts Receivable of a customer that
following the Closing Date ceases doing business with the Company, so long
as Seller had no Knowledge prior to the Closing Date that such customer
intended to cease doing business with the Company after the Closing Date,
(ii) Accounts Receivable payable by a customer that is the subject of a
bankruptcy proceeding commenced more than 90 days following the Closing
Date, and (iii) Accounts Receivable from customers who are serviced by the
Company through the Company's scan based trading system to the extent that
such Accounts Receivable represent shrink (as that term is used in Exhibit
2.6). There will be no contest, claim, or right of set-off, other than
returns, shortages and other claims made in the ordinary course of
business, under any Applicable Contract with any obligor of an Accounts
Receivable relating to the amount or validity of such Accounts Receivable,
except to the extent of the reserves shown on the Closing Balance Sheet or
as disclosed in Schedule 3.12(a) of the Disclosure Letter. Schedule 3.12(a)
of the Disclosure Letter contains a complete and accurate list, in all
material respects, of all Accounts Receivable as of April 23, 2005, which
list sets forth the aging of such Accounts Receivable.
(b) Schedule 3.12(b) of the Disclosure Letter sets forth a correct and
complete list of all outstanding trade accounts payable of the Company as
of March 31, 2005, other than individual accounts payable of not more than
$100,000. Schedule 3.12(b) also identifies all trade payables of the
Company the payment of which is overdue (based on a due date consistent
with the Company's past practice for that creditor) by more than 120 days
as of March 31, 2005, and all trade payables of the Company as to which, to
Seller's Knowledge, the applicable trade creditor has taken collection
action at any time since October 31, 2004.
(c) Schedule 3.12(c) of the Disclosure Letter sets forth a correct and
complete list of all material outstanding non-trade accounts payable of the
Company as of April 23, 2005. Schedule 3.12(c) also identifies all
non-trade accounts payable of the Company the payment of which is overdue
(based on a due date consistent with the Company's past practice for that
creditor) by more than 120 days as of March 31, 2005, and all non-trade
payables of the Company as to which, to Seller's Knowledge, the applicable
non-trade creditor has taken collection action at any time since October
31, 2004.
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3.13. Inventory.
(a) The value of all inventory (other than consigned inventory) of the
Company as of the Closing (determined in accordance with the valuation
methodologies described in Section 3.13(b)) will not be more than $1
million less than the value of such inventory shown on the Closing Balance
Sheet.
(b) All inventory of the Company reflected in the Closing Balance
Sheet will consist of a quality and quantity usable and salable or
returnable in the ordinary course of business, except for obsolete items
and items of below-standard quality, all of which will be written off or
written down to net realizable value in the Closing Balance Sheet. All such
inventories not written off which is not returnable will be priced at the
lower of cost or net realizable value on a first in, first out basis.
3.14. No Undisclosed Liabilities.
Except as set forth on Schedule 3.14 of the Disclosure Letter, the Company
has no material liabilities or obligations of any nature (whether known or
unknown and whether absolute, accrued, contingent, or otherwise) except for (a)
liabilities or obligations (i) which will be reflected or reserved against in
the Closing Balance Sheet, or (ii) set forth in the notes to the Historical
Statements as at September 30, 2004, (b) liabilities under the executory portion
of Applicable Contracts, (c) liabilities disclosed, or not required to be
disclosed, in this Agreement or the Disclosure Letter, (d) liabilities resulting
from the consummation of the Contemplated Transactions, and (e) liabilities
which are not required under the methodology set forth in Exhibit 2.6 or Company
GAAP to be reflected or reserved against in the Closing Balance Sheet which, in
the aggregate, would not have a Material Adverse Effect. It is acknowledged and
agreed that Seller not shall be in Breach of this Section 3.14 with respect to
any liability or obligation of the Company if such liability or obligation
satisfies one or more of the exceptions set forth in clauses (a) through (e) of
this Section 3.14 and in the case of clause (i) such exception shall be
satisfied by disclosure in the Closing Balance Sheet prepared and approved by
the parties pursuant to Section 2.6 (regardless of whether the amount reflected
or reserved thereon is accurate).
3.15. Taxes.
Except as described on Schedule 3.15 of the Disclosure Letter:
(a) The Company has properly filed, in a timely manner, all Tax
Returns required by Legal Requirements to be filed by it, and such Tax
Returns and reports are true, complete and accurate in all material
respects. The Company has paid all Taxes shown to be due on all of their
respective Tax Returns or claimed to be due by any Governmental Body. The
reserves and provisions for Taxes on the Closing Balance Sheet are adequate
for all open years of the Company and for the Company's current fiscal
period. There are no unpaid Taxes with respect to the Seller or the Company
the non-payment of which could give rise to or become the basis for the
imposition of an Encumbrance (other than a Permitted Encumbrance) upon, or
otherwise could adversely affect, the Company or any of the assets of the
Company or the use thereof. All Taxes that the Company is required to
withhold, deduct and/or collect from any Person have
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been properly withheld, deducted and collected and have been paid over to
the appropriate Tax authority or other Governmental Body.
(b) Seller has no Knowledge of any proposed assessment of any
additional Taxes by any Governmental Body or of any basis for any such
assessment against the Company. The Company is not currently being audited
by any Governmental Body, and no such audit is pending or, to Seller's
Knowledge, Threatened.
(c) There are no agreements, waivers, or other arrangements providing
for the extension of time with respect to the assessment or collection of
any Tax against the Company. Neither the Seller nor the Company
(collectively, the "Seller Parties") has filed any Tax form with any
Governmental Body to intentionally make a Tax election with respect to the
Company (where it is not treated as a disregarded entity) which (i) was in
effect in any past year for which the time for audit has not expired, (ii)
is currently in effect or (iii) will be in effect at any future time.
Neither of the Seller Parties has given any waiver or extension of any
period of limitation governing the time of assessment or collection of any
Tax relating to the Company which is still currently in effect.
(d) There do not exist any past due unpaid federal, state or local Tax
deficiencies assessed against the Company. All Taxes owed by the Company
which are due and payable on or before the Closing Date pursuant to any
Legal Requirements have been fully paid except to the extent reflected or
reserved against in the Closing Balance Sheet. All of the 1998, 1999, 2000,
2001, 2002, 2003 and 2004 Tax Returns for the Company have been made
available to the Buyer.
(e) The Company is treated as a disregarded entity for federal Income
Tax purposes, and the Seller is treated as a partnership for federal Income
Tax purposes. Neither the Seller nor its partners are considered to be
"foreign persons" as defined in IRC Section 1445. Schedule 3.15 sets forth
the states in which the Company both files Tax Returns and is not treated
as a disregarded entity for such Tax purposes.
(f) The Company has not (i) applied for any Tax ruling, or (ii)
entered into a closing agreement as described in IRC Section 7121 or
otherwise (or any corresponding or similar provision of state, municipal,
county, local, foreign or other tax law) or any other agreement with any
Tax authority.
3.16. No Material Adverse Effect.
Since the date of the Interim Balance Sheet, except as set forth in
Schedule 3.16 of the Disclosure Letter, there has not been any Material Adverse
Effect, and no event has occurred or circumstance exists, other than the
announcement or consummation of the Contemplated Transactions, that would
reasonably be expected to result in a Material Adverse Effect.
3.17. Employee Benefits.
(a) As used in this Section 3.17, the following terms have the
meanings set forth below.
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"COMPANY OTHER BENEFIT OBLIGATION" means an Other Benefit Obligation
owed, adopted, or followed by the Company or an ERISA Affiliate of the
Company.
"COMPANY PLAN" means all Plans of which the Company or an ERISA
Affiliate of the Company, during the last six (6) years, is or was a Plan
Sponsor or to which the Company or an ERISA Affiliate of the Company
otherwise contributes or, during the last six (6) years, has contributed or
has had an obligation to contribute, or in which the Company or an ERISA
Affiliate of the Company otherwise participates or, during the last six (6)
years, has participated or for which the Company has liability or potential
liability pursuant to a contract. All references to Plans are to Company
Plans unless the context requires otherwise.
"COMPANY VEBA" means a VEBA to which the Company or an ERISA Affiliate
of the Company contributes or during the last six (6) years has contributed
or has had an obligation to contribute, whose members include employees of
the Company or any ERISA Affiliate of the Company.
"ERISA AFFILIATE" means, with respect to the Company, any other person
that, together with the Company, would be treated as a single employer
under IRC Sec. 414.
"HIPAA" means the Health Insurance Portability and Accountability Act
of 1996.
"MULTIEMPLOYER PLAN" has the meaning given in ERISA Section 3(37)(A).
"OTHER BENEFIT OBLIGATIONS" means all material obligations,
arrangements, or customary practices, whether or not legally enforceable,
to provide benefits, other than salary, as compensation for services
rendered, to present or former directors, employees, officers or service
providers, other than obligations, arrangements, or practices that are
Plans. Other Benefit Obligations include consulting agreements under which
the compensation paid does not depend upon the amount of service rendered,
sabbatical policies, severance payment policies, fringe benefits within the
meaning of IRC Section 132 or IRC Section 6039D and other bonus, incentive
compensation, deferred compensation, profit sharing, stock-option, stock
appreciation right, stock bonus, stock purchase, employee-stock ownership,
savings, change-in-control, supplemental-employment, layoff or salary
continuation plans or policies.
"PBGC" means the Pension Benefit Guaranty Corporation, or any
successor thereto.
"PENSION PLAN" has the meaning given in ERISA Section 3(2)(A), other
than a Multiemployer Plan.
"PLAN" has the meaning given in ERISA Section 3(3).
"PLAN SPONSOR" has the meaning given in ERISA Section 3(16)(B).
-24-
"QUALIFIED PLAN" means any Plan that meets or purports to meet the
requirements of IRC Section 401(a).
"TITLE IV PLANS" means all Pension Plans that are subject to Title IV
of ERISA, 29 U.S.C. Section 1301 et seq., other than Multiemployer Plans.
"VEBA" means a voluntary employees' beneficiary association under IRC
Section 501(c)(9).
"WELFARE PLAN" has the meaning given in ERISA Section 3(1).
(b)
(i) Schedule 3.17(i) of the Disclosure Letter contains a complete
and accurate list of all Company Plans, and Company Other Benefit
Obligations and identifies as such all Company Plans that are (A)
Qualified Plans or (B) Multiemployer Plans. None of the Plans or
Company Plans is a Company VEBA, a defined benefit Pension Plan or a
Title IV Plan.
(ii) Schedule 3.17(ii) of the Disclosure Letter contains a
complete and accurate list of (A) all ERISA Affiliates of the Company,
and (B) all Plans of which any such ERISA Affiliate is or, during the
last six (6) years, was a Plan Sponsor, in which any such ERISA
Affiliate participates or, during the last six (6) years, has
participated, or to which any such ERISA Affiliate contributes or,
during the last six (6) years, has contributed.
(iii) Schedule 3.17(iii) of the Disclosure Letter sets forth, for
each Multiemployer Plan, as of its last valuation date, the amount of
potential withdrawal liability of the Company and the Company's ERISA
Affiliates, calculated according to information made available
pursuant to ERISA Sec. 4221(e).
(iv) Schedule 3.17(iv) of the Disclosure Letter sets forth, a
calculation of the liability of the Company for post-retirement
benefits other than pensions, made in accordance with Financial
Accounting Statement 106 of the Financial Accounting Standards Board,
regardless of whether the Company is required by this Statement to
disclose such information as of a date not more than one year prior to
the date of this Agreement.
(v) Schedule 3.17(v) of the Disclosure Letter sets forth
separately, for each Company Plan or Company Other Benefit Obligation,
the financial cost of all material obligations owed under any Company
Plan or Company Other Benefit Obligation that is not subject to the
disclosure and reporting requirements of ERISA and as of a date not
more than one year prior to the date of this Agreement.
(c) Seller has delivered to Buyer:
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(i) all documents that set forth the terms of each Company Plan,
or Company Other Benefit Obligation, and of any related trust,
including (A) all plan descriptions and summary plan descriptions of
Company Plans for which Seller or the Company are required to prepare,
file, and distribute plan descriptions and summary plan descriptions,
and (B) all summaries and descriptions furnished to participants and
beneficiaries regarding Company Plans and Company Other Benefit
Obligations, for which a plan description or summary plan description
is not required;
(ii) all personnel, payroll, and employment manuals and policies;
(iii) all collective bargaining agreements pursuant to which
contributions have been made or obligations incurred (including both
pension and welfare benefits) by the Company and the ERISA Affiliates
of the Company, and all collective bargaining agreements pursuant to
which contributions are being made or obligations are owed by such
entities;
(iv) a written description of any Company Plan or Company Other
Benefit Obligation that is not otherwise in writing;
(v) All insurance policies purchased by or to provide benefits
under any Company Plan;
(vi) all contracts with third party administrators, actuaries,
investment managers, consultants, and other independent contractors
that relate to any Company Plan, or Company Other Benefit Obligation;
(vii) all reports submitted within the three years preceding
January 1, 2005, and through the date of this Agreement by trustees,
third party administrators, actuaries, investment managers, insurance
companies, consultants, or other independent contractors with respect
to any Company Plan or Company Other Benefit Obligation;
(viii) all notifications to employees of their rights under
ERISA Section 601 et seq. and IRC Section 4980B;
(ix) the Form 5500 filed in each of the most recent three plan
years with respect to each Company Plan, including all schedules
thereto and the opinions of independent accountants;
(x) all written notices that were given by the Company or any
ERISA Affiliate of the Company or any Company Plan to the IRS, the
PBGC, or any participant or beneficiary, pursuant to statute, within
the three years preceding January 1, 2005, and through the date of
this Agreement, including notices that are expressly mentioned
elsewhere in this Section 3.17;
(xi) all written notices that were given by the IRS, the PBGC,
the Department of Labor, or the Secretary of Health and Human Services
to the
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Company, any ERISA Affiliate of the Company, or any Company Plan
within the three years preceding January 1, 2005, and through the date
of this Agreement ; and
(xii) with respect to Qualified Plans, the most recent
determination letter for each Plan of the Company that is a Qualified
Plan
(d) Except as set forth in Schedule 3.17(v) of the Disclosure Letter,
Seller represent and warrant that:
(i) The Company has materially performed all of its obligations
under all Company Plans, and Company Other Benefit Obligations. The
Company has made appropriate entries in its financial records and
statements for all material obligations and liabilities under such
Plans and Obligations that have accrued but are not due.
(ii) No statement, either written or, to Seller's Knowledge oral,
has been made by the Company or any employee, officer, director, or
agent thereof to any Person with regard to any Plan or Other Benefit
Obligation that was not in accordance with the Plan or Other Benefit
Obligation and that could have a material adverse economic consequence
to the Company or to Buyer.
(iii) All Company Plans and Company Other Benefits Obligations,
are, and each Company Plan and Company Other Benefit Obligation is,
in material compliance with all Legal Requirements and any applicable
collective bargaining agreement.
(A) To Seller's Knowledge, no transaction prohibited by
ERISA Section 406 and no "prohibited transaction" under IRC
Section 4975(c) have occurred with respect to any Company Plan.
(B) Neither Seller nor the Company has any liability to the
IRS with respect to any Plan, including any liability imposed by
Chapter 43 of the IRC.
(C) Neither Seller, the Company nor any ERISA Affiliate has
any liability to the PBGC with respect to any Plan or has any
liability under ERISA Section 502 or Section 4071.
(D) All filings required by ERISA, the IRC and HIPAA as to
each Plan have been timely filed, and all notices and disclosures
to participants required by either ERISA, the IRC or HIPAA have
been timely provided.
(E) All contributions and payments made or accrued with
respect to all Company Plans, and Company Other Benefit
Obligations are deductible under IRC Section 162 or Section 404.
No amount received by, or any
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asset of any Company Plan is subject to tax as unrelated business
taxable income.
(F) To the Seller's Knowledge, none of Seller, the Company,
any Company Plan or any employee, administrator or agent thereof,
is or has been in violation of the transaction and code set rules
under HIPAA Sections 1172-1175 or the HIPAA privacy rules under
45 CFR Part 160 and Subparts A and E of Part 164. No penalties
have been imposed on Seller, the Company or Plan, or any
employee, officer, director, administrator or agent under HIPAA
Sec. 1176 or Sec. 1177.
(iv) Except as set forth on Schedule 3.17(d) of the Disclosure
Letter, each Company Plan can be terminated unilaterally by the
Company within thirty days, without payment of any additional
contribution or amount and without the vesting or acceleration of any
benefits promised by such Plan.
(v) Except as set forth on Schedule 3.17(d) of the Disclosure
Letter, within the last twelve (12) months, there has been no
establishment or amendment of any Company Plan or Company Other
Benefit Obligation, nor has there been any material change in the
number of participants, the aggregate or per participant cost, or the
manner of administration or interpretation of any Plan.
(vi) Prior to the Closing Date, no event has occurred or
circumstance exists that could result in a material increase in
premium costs of Company Plans, and Company Other Benefit Obligations
that are insured, or a material increase in benefit costs of such
Plans and Obligations that are self-insured.
(vii) Other than claims for benefits submitted by participants or
beneficiaries, no claim against, or legal proceeding involving, any
Company Plan, or Company Other Benefit Obligation is pending or, to
Seller's Knowledge, is Threatened.
(viii) Each Qualified Plan of the Company is qualified in form
and operation under IRC Section 401(a); each trust for each such Plan
is exempt from federal income tax under IRC Section 501(a). No event
has occurred or circumstance exists that will or could give rise to
disqualification or loss of tax-exempt status of any such Plan or
trust.
(ix) No Company Plan or Company Other Benefit Obligation has ever
been a VEBA.
(x) No Company Plan, that is not a Multiemployer Plan, or Company
Other Benefit Obligation has ever been subject to the funding
requirements of ERISA Sec. 302 and IRC Sec. 412.
(xi) No Company Plan, that is not a Multiemployer Plan, or
Company Other Benefit Obligation is a Title IV Plan.
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(xii) Neither the Company nor any ERISA Affiliate of the Company
has filed a notice of intent to terminate any Plan or has adopted any
amendment to treat a Plan as terminated. No event has occurred or
circumstance exists that may constitute grounds under ERISA Section
4042 for the termination of, or the appointment of a trustee to
administer, any Company Plan.
(xiii) No amendment has been made, or is reasonably expected to
be made, to any Plan that has required or could require the provision
of security under ERISA Section 307 or IRC Section 401(a)(29).
(xiv) Except as set forth on Schedule 3.17(d) of the Disclosure
Letter, neither the Company nor any ERISA Affiliate of the Company has
withdrawn from any Multiemployer Plan with respect to which there is
any outstanding liability as of the date of this Agreement. No event
has occurred or circumstance exists that presents a risk of the
occurrence of any withdrawal from, or the participation, termination,
reorganization, or insolvency of, any Multiemployer Plan that could
result in any liability of either the Company or Buyer to a
Multiemployer Plan.
(xv) Neither the Company nor any ERISA Affiliate of the Company
has received written notice from any Multiemployer Plan that it is in
reorganization or is insolvent, that increased contributions may be
required to avoid a reduction in plan benefits or the imposition of
any excise tax, or that such Plan intends to terminate or has
terminated.
(xvi) To Seller's Knowledge, no Multiemployer Plan to which the
Company or any ERISA Affiliate of the Company contributes or has
contributed is a party to any pending merger or asset or liability
transfer or is subject to any proceeding brought by the PBGC.
(xvii) Except as set forth on Schedule 3.17(d) of the Disclosure
Letter and to the extent required under ERISA Section 601 et seq. and
IRC Section 4980B, the Company does not provide health or welfare
benefits for any retired or former employee nor is it obligated to
provide health or welfare benefits to any active employee officer,
director or service provider following such employee's retirement or
other termination of service.
(xviii) Except as set forth on Schedule 3.17(d) of the Disclosure
Letter, the Company has the unilateral right to modify and terminate
benefits to retirees (other than pensions) with respect to both
retired and active employees officers, directors or service providers.
(xix) Seller and the Company have complied with the provisions of
ERISA Section 601 et seq. and IRC Section 4980B.
(xx) No payment that is owed or may become due to any director,
officer, employee, or agent of the Company will be non-deductible to
the Company or subject to tax under IRC Section 280G or Section 4999;
nor will the Company be
-29-
required to "gross up" or otherwise compensate any such person because
of the imposition of any excise tax on a payment to such person.
(xxi) Except as set forth on Schedule 3.17(d) of the Disclosure
Letter, the consummation of the Contemplated Transactions will not
result in the payment, vesting, or acceleration of any benefit.
3.18. Compliance With Legal Requirements; Governmental Authorizations.
(a) Except as set forth in Schedule 3.18 of the Disclosure Letter:
(i) the Company is, and at all times since January 1, 2004 has
been, in material compliance with each material Legal Requirement that
is or was applicable to it or to the conduct or operation of its
business or the ownership or use of any of its assets, except where
the failure so to comply would not have a Material Adverse Effect;
(ii) no event has occurred or circumstance exists that (with or
without notice or lapse of time) (A) may constitute or result in a
violation by the Company of, or a failure on the part of the Company
to comply with, any Legal Requirement, or (B) may give rise to any
obligation on the part of the Company to undertake, or to bear all or
any portion of the cost of, any remedial action of any nature, except
to the extent any of the foregoing would not have a Material Adverse
Effect;
(iii) the Company has not received, at any time since January 1,
2004, any written notice or other written communication or, to the
Knowledge of Seller, any oral notice or communication, from any
Governmental Body regarding (A) any actual, alleged or Threatened
violation of, or failure to comply with, any material Legal
Requirement, or (B) any actual, alleged or Threatened obligation on
the part of the Company to undertake, or to bear all or any portion of
the cost of, any remedial action of any nature; and
(iv) the Company has obtained and is in possession of all
Governmental Authorizations required for the operation of the
Company's business, except where such failure would not have a
Material Adverse Effect.
3.19. Legal Proceedings; Orders.
(a) Except as set forth in Schedule 3.19 of the Disclosure Letter,
there is no pending Proceeding to which the Company is a party:
(i) that relates to or may affect the business of, or any of the
assets owned or used by, the Company; or
(ii) that challenges, or that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions.
-30-
To the Knowledge of Seller, except as set forth in Schedule 3.19 of the
Disclosure Letter, (1) no such Proceeding has been Threatened, and (2) no
event has occurred or circumstance exists that is reasonably likely to give
rise to or serve as a basis for the commencement of any such Proceeding
which could reasonably be expected to have a Material Adverse Effect.
Seller has made available for inspection by Buyer, to the extent requested
by Buyer, copies of all pleadings, correspondence, and other documents, if
any, in Seller's possession or control relating to each pending or
Threatened Proceeding listed in Schedule 3.19 of the Disclosure Letter.
(b) Except as set forth in Schedule 3.19 of the Disclosure Letter:
(i) Neither Seller, the Company nor any of their respective
Affiliates is a party to any Order that affects the business of, or
any of the assets owned or used by, the Company; and
(ii) no officer, director, or to Seller's Knowledge, agent, or
employee, of the Company is subject to any Order that prohibits such
officer, director, agent, or employee from engaging in or continuing
any conduct, activity, or practice relating to the business of the
Company.
(c) Except as set forth in Schedule 3.19 of the Disclosure Letter:
(i) the Company is, and at all times since October 31, 2004 has
been, in material compliance with all of the terms and requirements of
each Order to which it is a party, or to which any of the assets owned
or used by it, is or has been subject;
(ii) no event has occurred or circumstance exists that is
reasonably likely to constitute or result in (with or without notice
or lapse of time) a violation of or failure to comply, in all material
respects, with any term or requirement of any Order to which the
Company is a party, or to which any of the assets owned or used by the
Company, is subject; and
(iii) the Company has not received, at any time since October 31,
2004, any written notice or other written communication or, to the
Knowledge of Seller, oral notice or communication from any
Governmental Body or any other Person regarding any actual, alleged or
Threatened violation of, or failure to comply with, any term or
requirement of any Order to which the Company is a party, or to which
any of the assets owned or used by the Company, is subject.
3.20. Absence of Certain Changes and Events.
Except as set forth in Schedule 3.20 of the Disclosure Letter, since the
date of the Interim Balance Sheet, the Company has conducted its business only
in the ordinary course of business, consistent with past practice, and there has
not been any:
(a) change in the Company's authorized or issued membership units;
grant of any stock option or right to purchase Securities or capital stock
of the Company; issuance
-31-
of any security convertible into such capital stock; grant of any
registration rights; purchase, redemption, retirement, or other acquisition
by the Company of any Securities or any such capital stock; or declaration
or payment of any dividend or other distribution or payment in respect of
Securities or capital stock;
(b) amendment to the Organizational Documents of the Company;
(c) payment or increase by the Company of any bonuses, salaries, or
other compensation to any member, manager, director, officer, or (except in
the ordinary course of business, consistent with past practice) employee or
entry into any written employment, severance, or similar Contract with any
director, officer, or employee;
(d) adoption of, or increase in the payments to or benefits under, any
profit sharing, bonus, deferred compensation, savings, insurance, pension,
retirement, or other employee benefit plan for or with any employees of the
Company;
(e) damage to or destruction or loss of any material asset or property
of the Company, whether or not covered by insurance, materially and
adversely affecting the properties, assets, business, financial condition,
or prospects of the Company, taken as a whole;
(f) entry into, termination of, or receipt of notice of termination of
(i) any license, distributorship, sales representative, joint venture, bank
credit, or similar agreement, or (ii) any Contract or transaction involving
a total remaining commitment by or to the Company of at least $500,000;
(g) sale, lease, or other disposition of any material asset or
property of the Company (other than sales of inventory, consumption of
disposables and collections of receivables in the ordinary course of
business, consistent with past practice) or mortgage, pledge, or imposition
of any Encumbrance on any material asset or property of the Company,
including the sale, lease, or other disposition of any material
Intellectual Property Assets of the Company;
(h) cancellation or waiver of any claims or rights with a value to the
Company in excess of $500,000;
(i) material change in the accounting methods used by the
Company; or
(ii) agreement, whether oral or written, by the Company to do any
of the foregoing.
3.21. Contracts; No Defaults.
(a) Schedule 3.21(a) of the Disclosure Letter contains a complete and
accurate list, and Seller has delivered to Buyer true and complete copies,
of each written:
(i) Applicable Contract with each Material Customer;
-32-
(ii) Applicable Contract that involves performance of services or
delivery of goods or materials to the Company of an amount or value in
excess of $500,000 annually;
(iii) Applicable Contract that was not entered into in the
ordinary course of business and that involves expenditures or receipts
of the Company in excess of $250,000 annually and which cannot be
terminated on 60 days notice without penalty;
(iv) Applicable Contract with a wholesale distributor of
magazines in the United States who entered into such Applicable
Contract with the Company in such wholesaler's capacity as a wholesale
distributor of magazines;
(v) lease, rental or occupancy agreement, license, installment
and conditional sale agreement, and other written Applicable Contract
affecting the ownership of, leasing of, title to, use of, or any
leasehold or other interest in, any real or personal property (except
personal property leases and installment and conditional sales
agreements having a value per item or aggregate payments of less than
$100,000 annually);
(vi) collective bargaining agreement and other written Applicable
Contract to or with any labor union or other employee representative
of a group of employees;
(vii) joint venture, partnership, and other Applicable Contract
(however named) involving a sharing of profits, losses, costs, or
liabilities by the Company with any other Person;
(viii) Applicable Contract containing covenants that in any way
purport to restrict the business activity of the Company or limit the
freedom of the Company to engage in any line of business or to compete
with any Person;
(ix) Applicable Contract providing for payments in excess of
$100,000 annually to or by any Person based on sales, purchases, or
profits, other than direct payments for goods;
(x) power of attorney that is currently effective and
outstanding;
(xi) Applicable Contract for capital expenditures in excess of
$100,000 annually, other than any Applicable Contracts with customers
providing for the installation of display fixtures;
(xii) warranty, guaranty, and/or other similar undertaking with
respect to contractual performance extended by the Company other than
in the ordinary course of business; and
(xiii) amendment, supplement, and modification (whether oral or
written) in respect of any of the foregoing;
-33-
in each case other than those Applicable Contracts listed on another
Schedule of the Disclosure Letter.
(b) Except as set forth in Schedule 3.21(b) of the Disclosure Letter
or as contemplated by the Transaction Documents:
(i) No Applicable Contract that relates to the business of, or
any of the assets owned or used by, the Company (A) provides Seller
(or any Related Person of Seller) with any rights, or the ability to
acquire any rights, thereunder under, or (B) subjects Seller (or any
Related Person of Seller) to any obligation or liability thereunder;
and
(ii) No officer or director of the Company, and to Seller's
Knowledge, no agent, employee, consultant, or contractor of the
Company, is bound by any Contract that purports to limit the ability
of such officer, director, agent, employee, consultant, or contractor
to (A) engage in or continue any conduct, activity, or practice
relating to the business of the Company, or (B) assign to the Company
or to any other Person any rights to any invention, improvement, or
discovery.
(c) Except as set forth in Schedule 3.21(c) of the Disclosure Letter,
since October 31, 2004, the Company has not received from any Person, any
written notice or other written communication or, to the Knowledge of
Seller, any oral notice or communication that any Material Customer has
determined to cease doing business with the Company or materially reduce
the volume of Products purchased from the Company.
(d) Except as set forth in Schedule 3.21(d) of the Disclosure Letter,
there are no renegotiations of, attempts to renegotiate, or outstanding
rights to renegotiate, any material amounts paid or payable to the Company
under any Material Applicable Contracts and no such Person has made written
demand for such renegotiation, other than in connection with a dispute or
the expiration or renewal of such a Contract.
(e) The Material Applicable Contracts relating to the sale, provision
of products or services by the Company have been entered into in the
ordinary course of business.
(f) The Material Customers in the aggregate accounted for not less
than 80% of the Company's net revenues in the Company's last fiscal year.
3.22. Insurance.
(a) Seller has delivered to Buyer:
(i) true and complete copies of all policies of insurance to
which the Company is a party or under which the Company, or any
director of the Company, is covered;
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(ii) true and complete copies of all pending applications for
policies of insurance; and
(iii) any statement by the auditor of the Company's financial
statements with regard to the adequacy of such entity's coverage or of
the reserves for claims.
(b) Schedule 3.22(b) of the Disclosure Letter describes, as of March
31, 2005:
(i) any self-insurance arrangement by or affecting the Company,
including any reserves established thereunder; and
(ii) any contract or arrangement, other than a policy of
insurance, for the transfer or sharing of any risk by the Company.
(c) Schedule 3.22(c) of the Disclosure Letter sets forth, as of March
31, 2005, by year, for the current policy year and each of the two
preceding policy years, (i) a summary of the loss experience under each
policy, (ii) a statement describing each open claim under an insurance
policy for an amount in excess of $100,000, and (iii) a statement
describing the loss experience for all claims that were self-insured,
including the number and aggregate cost of such claims.
3.23. Environmental Matters.
Except as set forth in Schedule 3.23 of the Disclosure Letter and to
Seller's Knowledge:
(a) The Company is in material compliance with, is not in material
violation of or liable under, any Environmental Law. Neither Seller nor the
Company has any basis to expect, nor has any of them received, since
January 1, 2004, any actual or Threatened order, notice, or other
communication from (i) any Governmental Body or third party, or (ii) the
current or prior owner or operator of any Facilities, of any actual or
potential violation or failure to comply with any Environmental Law, or of
any actual or potential Environmental Health and Safety Liabilities.
(b) There are no pending or Threatened claims, Encumbrances, or other
restrictions of any nature, resulting from any Environmental, Health, and
Safety Liabilities or arising under or pursuant to any Environmental Law,
with respect to or affecting any of the Facilities or any other properties
in which the Company has or had an interest.
(c) Neither Seller nor the Company has received, since January 1,
2004, any citation, directive, inquiry, notice, Order, summons, warning,
request for information, or other communication that relates to any
alleged, actual, or potential violation or failure to comply with any
Environmental Law, or of any alleged, actual, or potential Environmental,
Health, and Safety Liabilities with respect to any of the Facilities or any
other properties in which the Company had an interest, or with respect to
any property or facility to which Hazardous Materials generated,
manufactured, refined, transferred, imported, used, or processed by the
Company, have been transported, treated, stored, handled, transferred,
disposed, recycled, or received.
-35-
(d) The Company has no Environmental, Health, and Safety Liabilities
with respect to the Facilities or with respect to any other properties in
which the Company has or had an interest.
(e) There are no Hazardous Materials present at levels greater than
applicable action, trigger, reporting or risk-based Cleanup levels under
Environmental Laws used in the operation of the Facilities on or in the
Environment at the Facilities, including without limitation any Hazardous
Materials contained in barrels, above or underground storage tanks,
landfills, dumps, equipment (whether moveable or fixed) or other
containers, and deposited or located in land, water, sumps, or any other
part of the Facilities. Since January 1, 2004, the Company has not
permitted or conducted, and the Company has no Knowledge of, any Hazardous
Activity conducted with respect to the Facilities or any other properties
in which the Company has or had an interest except in material compliance
with all applicable Environmental Laws.
(f) Since January 1, 2004, there has been no Release or Threat of
Release, of any Hazardous Materials caused by the Company at or from the
Facilities or from or by any other properties in which the Company has or
had an interest.
(g) Seller has delivered to Buyer true and complete copies and results
of any reports, studies, analyses, tests, or monitoring possessed or
initiated by Seller or the Company pertaining to Hazardous Materials or
Hazardous Activities in, on, or under the Facilities, or concerning
compliance by the Company with Environmental Laws, or otherwise concerning
the Company's or Seller's Environmental, Health and Safety Liabilities, in
each case since January 1, 2004.
(h) No underground storage tanks are located or were formerly located
on any property owned, operated, or used by the Company or Seller.
(i) No event has occurred and no condition exists with respect to the
Company or the Facilities or the Seller's business, properties, or assets
which has resulted in, or is likely to result in, any material liability,
cost or expense to Seller or any other Person who owns or operates the
Company or the Facilities under any applicable Environmental Laws.
3.24. Employees.
Except as set forth on Schedule 3.24 of the Disclosure Letter:
(a) Schedule 3.24 of the Disclosure Letter contains a complete and
accurate list of the following information for each Existing Employee:
name; job title; current compensation paid or payable and any change in
compensation since February 19, 2005; vacation accrued; and service
credited for purposes of vesting and eligibility to participate under any
Company pension, retirement, profit-sharing, thrift-savings, deferred
compensation, severance pay, insurance, medical, welfare, or vacation plan,
other Employee Pension Benefit Plan or Employee Welfare Benefit Plan, or
any other employee benefit plan or any Director Plan.
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(b) To Seller's Knowledge, no Existing Employee is a party to, or is
otherwise bound by, any agreement or arrangement, including any
confidentiality, noncompetition, or proprietary rights agreement, between
such Existing Employee and any other Person ("PROPRIETARY RIGHTS
AGREEMENT") that in any way adversely affects or will affect (i) the
performance of his duties as an employee of the Company, or (ii) the
ability of the Company to conduct its business, including any Proprietary
Rights Agreement with Seller or the Company by any such Existing Employee.
To Seller's Knowledge, except as set forth on Schedule 3.24 of the
Disclosure Letter, no Existing Employee intends to terminate his or her
employment with the Company during the twelve months Commencing on the
Closing Date.
(c) Schedule 3.24 of the Disclosure Letter also contains a complete
and accurate list of the following information for each retired employee or
director of the Company, or their dependents, receiving benefits or
scheduled to receive benefits in the future: name, pension benefit, pension
option election, retiree medical insurance coverage, retiree life insurance
coverage, and other benefits, except for retired employees to the extent
that Seller assumes, and the Company is relieved of, any obligation to
provide such benefits.
3.25. Labor Relations.
Except as set forth on Schedule 3.25 of the Disclosure Letter:
(a) Since January 1, 2004, the Company has not been or is a party to
any collective bargaining or other labor Contract. There is not presently
pending or existing, and to Seller's Knowledge there is not Threatened, (i)
any strike, slowdown, picketing, work stoppage, or employee grievance
process, (ii) any Proceeding against or affecting the Company relating to
the alleged violation of any Legal Requirement pertaining to labor
relations or employment matters, including any charge or complaint filed by
an employee or union with the National Labor Relations Board, the Equal
Employment Opportunity Commission, or any comparable Governmental Body,
organizational activity, or other labor or employment dispute against or
affecting the Company or its premises, or (iii) any application for
certification of a collective bargaining agent. To Seller's Knowledge no
event has occurred or circumstance exists that reasonably could be expected
to provide the basis for any work stoppage or other labor dispute. There is
no lockout of any employees by the Company, and no such action is currently
contemplated by the Company. The Company is not liable for the payment of
any compensation, damages, taxes, fines, penalties, or other amounts,
however designated, for failure to comply with any of the foregoing Legal
Requirements, except where the failure so to comply would not have a
Material Adverse Effect.
(b) There are no pending, or to Seller's Knowledge, Threatened claims
or actions against the Company under any worker's compensation policy or
long-term disability policy that would result in a material liability to
the Company. The Company has no direct or indirect liability with respect
to any misclassification of any person as an independent contractor rather
than as an employee, or with respect to any employee
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leased from another employer, except as would not result in material
liability to the Company.
3.26. Intellectual Property.
(a) Intellectual Property Assets- The term "INTELLECTUAL PROPERTY
ASSETS" means:
(i) all registered and unregistered trademarks, service marks,
and applications (collectively, "MARKS");
(ii) all patents and patent applications (collectively,
"PATENTS");
(iii) all copyrights in both published works and unpublished
works (collectively, "COPYRIGHTS");
(iv) all rights in mask works (collectively, "RIGHTS IN MASK
WORKS"); and
(v) all know-how, trade secrets, confidential information,
customer lists, software, technical information, data, process
technology, plans, drawings, and blue prints (collectively, "TRADE
SECRETS"); owned, used, or licensed as licensee or licensor, in each
case which are not part of the public knowledge or literature.
(b) Agreements. Schedule 3.26(b) of the Disclosure Letter contains a
complete and accurate list of all Applicable Contracts relating to
Intellectual Property Assets, except for any generally available
shrink-wrapped licenses or licenses for noncustomized software under which
the Company is the licensee. There are no outstanding and, to Seller's
Knowledge, no Threatened disputes or disagreements with respect to any such
Applicable Contracts identified or required to be identified in Schedule
3.26(b) of the Disclosure Letter.
(c) Intellectual Property Assets. Except for license agreements
described or not required to be described in Schedule 3.26(b) of the
Disclosure Letter, except for the Intellectual Property Assets which are
the subject of the License Agreement and except as contemplated by this
Agreement, the Company is the owner of all right, title, and interest in
and to each of its Intellectual Property Assets, free and clear of all
Encumbrances, and has the right to use without payment to a third party all
of its Intellectual Property Assets.
(d) Patents. The Company owns no material Patents.
(e) Trademarks. The Company owns no material Marks.
(f) Copyrights. The Company owns no material Copyrights.
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(g) Trade Secrets. Except as set forth in Schedule 3.26(g) of the
Disclosure Letter:
(i) The Company has taken all reasonable precautions to protect
the secrecy, confidentiality, and value of its customer pricing and
LIFT system to the extent that they are Trade Secrets.
(ii) The Company has good title and an absolute (but not
necessarily exclusive) right to use its customer pricing and LIFT
system to the extent that they are Trade Secrets. To Seller's
Knowledge, the Company's customer pricing and LIFT system to the
extent that they are Trade Secrets are not part of the public
knowledge or literature, and, to Seller's Knowledge, have not been
used, divulged, or appropriated either for the benefit of any Person
(other than one or more of the Company, Seller or Seller's Affiliates)
or to the detriment of the Company. To Seller's Knowledge, no Trade
Secret of the Company is subject to any adverse claim or has been
challenged or threatened in any way.
3.27. Certain Payments.
Since January 1, 2004, to Seller's Knowledge, neither the Company, nor any
director, officer, agent, or employee of the Company, or any other Person
associated with or acting for or on behalf of the Company, has directly or
indirectly (a) made any contribution, gift, bribe, rebate, payoff, influence
payment, kickback, or other payment to any Person, private or public, regardless
of form, whether in money, property, or services (i) to obtain favorable
treatment in securing business, (ii) to pay for favorable treatment for business
secured, or (iii) to obtain special concessions or for special concessions
already obtained, for or in respect of the Company, in each such case in
violation of any Legal Requirement, or (b) established or maintained any fund or
asset which should be recorded in the books and records of the Company that has
not been so recorded in the books and records of the Company.
3.28. Disclosure.
Seller has not intentionally made in this Agreement and the Disclosure
Letter, taken as a whole, any untrue or misleading statement of a material fact,
it being understood that the omission of information not expressly required to
be disclosed or stated herein or in the Disclosure Letter shall not be deemed
the making of an intentionally misleading statement.
3.29. Relationships With Related Persons.
Except as set forth in Schedule 3.29 of the Disclosure Letter:
(a) Neither Seller nor any Related Person of Seller or of the Acquired
Company has any interest in any property (whether real, personal, or mixed
and whether tangible or intangible), used in or pertaining to the Company's
business.
(b) Neither Seller nor any Related Person of Seller or of the Company
owns (of record or as a beneficial owner) an equity interest or any other
financial or profit interest in, a Person that (i) has business dealings or
a material financial interest in any
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transaction with the Company (other than business dealings or transactions
conducted in the ordinary course of business with the Company at
substantially prevailing market prices and on substantially prevailing
market terms), or (ii) engages in competition with the Company with respect
to any line of the products or services of the Company (a "COMPETING
BUSINESS") in any market presently served by the Company except for less
than one percent of the outstanding capital stock of any Competing Business
that is publicly traded on any recognized exchange or in the
over-the-counter market.
(c) Neither Seller nor any Related Person of Seller or of the Company
is a party to any Contract with, or has any claim or right against, the
Company.
3.30. Brokers or Finders.
Seller and its agents have incurred no obligation or liability, contingent
or otherwise, for brokerage or finders' fees or agents' commissions or other
similar payment in connection with this Agreement.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
4.1. Organization and Good Standing.
Buyer is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Delaware.
4.2. Authority; No Conflict.
(a) This Agreement and the Contemplated Transactions have been duly
authorized by Buyer, including all necessary actions of Buyer's directors.
Assuming the due execution and delivery of this Agreement by Seller, this
Agreement constitutes the legal, valid, and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms, except to the
extent enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement
of creditors' rights in general and subject to general principles of equity
and the discretion of courts in granting equitable remedies. Upon the
execution and delivery by Buyer of the Transaction Documents to which Buyer
is a party, and assuming the due execution and delivery of such Transaction
Documents by the other parties thereto, such Transaction Documents will
constitute the legal, valid, and binding obligations of Buyer, enforceable
against Buyer in accordance with their respective terms, except to the
extent enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement
of creditors' rights in general and subject to general principles of equity
and the discretion of courts in granting equitable remedies. Buyer has the
absolute and unrestricted right, power, authority, and capacity to execute
and deliver this Agreement and the Transaction Documents to which it will
be a party and to perform its obligations under this Agreement and the
Transaction Documents to which it will be a party.
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(b) Except as set forth in Schedule 4.2, neither the execution and
delivery of this Agreement by Buyer nor the consummation or performance of
any of the Contemplated Transactions by Buyer will give any Person the
right to prevent, delay, or otherwise interfere with any of the
Contemplated Transactions pursuant to:
(i) any provision of Buyer's Organizational Documents;
(ii) any resolution adopted by the board of directors or the
stockholders of Buyer;
(iii) any Legal Requirement or Order to which Buyer may be
subject; or
(iv) any Contract to which Buyer is a party or by which Buyer may
be bound.
(c) Except as set forth in Schedule 4.2, neither the execution and
delivery of this Agreement nor the consummation or performance of the
transaction described in clause (a) of the definition of Contemplated
Transactions will, directly or indirectly (with or without notice or lapse
of time) contravene, conflict with, or result in a violation of, any Legal
Requirement or any Order to which Buyer is a party, or to which any of the
assets owned or used by Buyer is subject, and Buyer is not required to
obtain any Consent or Governmental Authorization from any Person in
connection with the execution and delivery of this Agreement or the
consummation or performance of any of the Contemplated Transactions.
4.3. Investment Intent.
Buyer: (a) is acquiring the Securities for its own account, for investment
only, and not with a view to, or for sale in connection with, any distribution
in violation of the Securities Act or any rule or regulation under the
Securities Act, (b) is a sophisticated investor and has sufficient knowledge and
experience in financial and business matters to be able to evaluate the merits
and risks of its investment in the Securities, (c) acknowledges that Seller has
made available to Buyer (i) the opportunity to ask questions of (and to receive
answers from) the officers and directors of Seller and the Company, and (ii) the
opportunity to acquire all information about the Company as Buyer has determined
is necessary to evaluate the merits and risks of its investment in the
Securities, (d) understands that the Securities (A) have not been registered
under the Securities Act or under any state securities laws; (B) are being sold
to Buyer in reliance on exemptions from the registration requirements of the
Securities Act and such state securities laws; (C) are "restricted securities"
within the meaning of Rule 144 under the Securities Act; and (D) may not be
sold, transferred or otherwise disposed of unless subsequently registered under
the Securities Act and applicable state securities laws or unless an exemption
from registration is then available, and (e) is able to bear the economic risk
and lack of liquidity inherent in holding the Securities.
-41-
4.4. Certain Proceedings.
There is no pending Proceeding that has been commenced against Buyer and
that challenges, or may have the effect of preventing, delaying, making illegal,
or otherwise interfering with, any of the Contemplated Transactions. To Buyer's
Knowledge, no such Proceeding has been Threatened.
4.5. Brokers or Finders.
Buyer and its officers and agents have incurred no obligation or liability,
contingent or otherwise, for brokerage or finders' fees or agents' commissions
or other similar payment in connection with this Agreement and will indemnify
and hold Seller harmless from any such payment alleged to be due by or through
Buyer as a result of the action of Buyer or its officers or agents.
5. INDEMNIFICATION; REMEDIES
5.1. Survival.
Subject to Section 5.5, all representations, warranties, covenants, and
obligations in this Agreement, the Disclosure Letter, the supplements to the
Disclosure Letter, and any other certificate or document delivered pursuant to
this Agreement will survive the Closing.
5.2. Indemnification and Payment of Damages by Seller.
Seller will indemnify and hold harmless Buyer and its direct and indirect
Subsidiaries, the Company and their respective Representatives (collectively,
the "BUYER INDEMNIFIED PERSONS") for, and will pay to the Buyer Indemnified
Persons the amount of, any loss, liability, claim, damage (but not including
incidental and consequential damages), expense (including costs of investigation
and defense and reasonable attorneys' fees) or diminution of value, whether or
not involving a third-party claim (collectively, subject to Section 5.9(h),
"DAMAGES"), arising, directly or indirectly, from or in connection with:
(a) any Breach of any representation or warranty made by Seller in
this Agreement, the Disclosure Letter, or any other certificate delivered
by Seller pursuant to this Agreement;
(b) any Breach by Seller of any covenant or obligation of the Seller
set forth in this Agreement (other than those in Sections 5.2(a), (c) or
(d));
(c) (i) any claim for benefits made under any self-insured health
benefit plan or program covering employees of the Company (or a dependent
of any such employee) for services rendered to such employee or dependent
prior to the Closing Date in excess of the amounts reserved for such claims
on the Closing Balance Sheet, and (ii) fifty percent (50%) of the amount by
which any retrospective premium adjustment on worker's compensation
policies which covered the Company or its business prior to the Closing
relating to any Applicable W/C Claim exceed the reserves for retrospective
premium adjustments on worker's compensation policies which covered the
Company or its
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business prior to the Closing reflected on or in the calculations of
entries on the Closing Balance Sheet; or
(d) any matter disclosed in Exhibit 5.2(d) to the extent not reflected
or reserved against in the Closing Balance Sheet.
5.3. Indemnification and Payment of Damages by Seller- Environmental
Matters.
In addition to the provisions of Section 5.2, Seller will indemnify and
hold harmless the Buyer Indemnified Persons for, and will pay to the Buyer
Indemnified Persons the amount of, any Damages (including reasonable costs of
cleanup, containment, or other remediation) arising, directly or indirectly,
from or in connection with:
(a) any Environmental, Health, and Safety Liabilities arising out of
or relating to: (i) (A) the ownership, operation, or condition prior to the
Closing Date of the Facilities or any other properties in which the Company
has or had an interest at any time during which the Company or any
predecessor of the Company or Related Person owned or operated the
Facilities or such other property prior to the Closing Date or (B) any
Hazardous Materials or other contaminants that were present prior to the
Closing Date due to the operations or activities of the Company or any
predecessor of the Company or Related Person on the Facilities or such
other properties at any time during which the Company or any predecessor of
the Company or Related Person owned or operated the Facilities or such
other property prior to the Closing Date; or (ii) (A) any Hazardous
Materials or other contaminants that were generated, transported, stored,
treated, Released, disposed, or otherwise handled by the Company or any
predecessor of the Company or Related Person at any time prior to the
Closing Date, or (B) any Hazardous Activities that were conducted prior to
the Closing Date by the Company or any predecessor of the Company or
Related Person; or
(b) any bodily injury (including illness, disability, and death),
personal injury or property damage, of or to any Person, arising prior to
the Closing Date from Hazardous Material that was (i) present before the
Closing Date on or at the Facilities or (ii) Released by the Company or any
predecessor of the Company or Related Person at any time prior to the
Closing Date.
Seller will be entitled to control any Cleanup, any related Proceeding,
and, except as provided in the following sentence, any other Proceeding with
respect to which indemnity may be sought under this Section 5.3, provided that
Seller shall use commercially reasonable efforts in connection with any Cleanup
to minimize disruption to the Company's or Buyer's operations. The procedure
described in Section 5.10 will apply to any claim solely for monetary damages
relating to a matter covered by this Section 5.3. Notwithstanding the preceding
sentence, Buyer will be able to participate at its own expense in any Cleanup,
any related Proceeding and any other Proceeding with respect to which indemnity
may be sought under this Section 5.3 to ensure that Seller undertakes
commercially reasonable efforts in undertaking any Cleanup or resolving any
other proceedings and does not prejudice the rights or potential liabilities of
Buyer.
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5.4. Indemnification and Payment of Damages by Buyer.
Buyer will indemnify and hold harmless Seller, the direct and indirect
owners of Seller, the direct and indirect Subsidiaries of Seller and each of the
respective Representatives of each of the foregoing (collectively, the "SELLER
INDEMNIFIED PERSONS") for, and will pay to the Seller Indemnified Persons the
amount of any Damages arising, directly or indirectly, from or in connection
with:
(a) any Breach of any representation or warranty made by Buyer in this
Agreement or in any certificate delivered by Buyer pursuant to this
Agreement,
(b) any Breach by Buyer of any covenant or obligation of Buyer set
forth in this Agreement (other than those in Sections 5.4(a), (c), (d) or
(e)),
(c) any act or omission by the Company after the Closing Date,
including any failure of the Company to pay or otherwise discharge any of
its liabilities existing immediately prior to the Closing,
(d) any (i) retrospective premium adjustments on workers compensation
policies which covered the Company or its business prior to the Closing
relating to any claim made under any such policy for an act, omission or
occurrence that occurred prior to the Closing (except to the extent that
Seller had Knowledge of such claim prior to the Closing and did not
disclose such claim in this Agreement or the Disclosure Letter), or (ii)
any claim for benefits made under any self-insured health benefit plan or
program covering employees of the Company (or a dependent of any such
employee) for services rendered to such employee or dependent prior to the
Closing Date, but in each case only to the extent of the Unused Basket,
(e) any guaranties, if any, made by Seller or any of its Affiliates
(other than the Company) of any liabilities or obligations of the Company
to the extent that Buyer had Knowledge as of the Closing Date of the
obligation or liability so guaranteed and the Company, after the Closing
Date, took advantage of the benefits of the obligation or liability so
guaranteed, or
(f) The TW Obligations, but only if LHE has previously paid to the
Company $2.1 million in settlement and full payment of the TW Obligations.
5.5. Time Limitations.
(a) Neither Seller nor Buyer will have any liability pursuant to
Section 5.2(a) or 5.4(a) on account of the Breach of any representation or
warranty, other than those contained in Sections 3.2(a) (authorization),
3.3(a) (title to Securities), 3.6(b) (Title to Properties; Encumbrances),
3.15 (but only with respect to Income Taxes), 3.17 (ERISA), 3.23
(environmental) and 4.2(a) (authorization), and a claim for indemnification
or reimbursement pursuant Section 5.2(d),in any such case unless on or
before May 15, 2006 (the "SURVIVAL PERIOD") Buyer notifies Seller or Seller
notifies Buyer of a claim specifying the factual basis of that claim in
reasonable detail to the extent then known by Buyer or Seller, as the case
may be.
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(b) A claim pursuant to Section 5.2(a) or 5.4(a) on account of the
Breach of any representation or warranty contained in Section 3.2(a)
(authorization), 3.3(a) (title to Securities) or 4.2(a) (authorization), or
a claim for indemnification or reimbursement pursuant to Section 5.2(b),
5.2(d), 5.4(b), 5.4(c), 5.4(d), 5.4(e) or 5.4(f) may be made at any time
following the Closing.
(c) A claim pursuant to Section 5.2(a) on account of the Breach of any
representation or warranty contained in Section 3.15 (but only with respect
to Income Taxes) may be made at any time during the six year period
following the Closing.
(d) A claim pursuant to Section 5.2(a) on account of the Breach of any
representation or warranty contained in Section 3.6(b) (Title to
Properties; Encumbrances), 3.17 (ERISA) or 3.23 (environmental) or a claim
pursuant to Section 5.3 may be made at any time during the three year
period following the Closing.
5.6. Indemnification Threshold- Seller.
Seller will have no liability (for indemnification or otherwise) with
respect to the matters described in Section 5.2(a), 5.2(c), 5.2(d) or 5.3 until
the total of all Damages with respect to such matters exceeds the Net Worth Gap
(as defined below), and then only for the amount by which such Damages exceed
the Net Worth Gap. However, this Section 5.6 will not apply to any claim based
on a Breach of a representation or warranty that Seller had Knowledge was untrue
when made but only to the extent that (a) Seller had an actual intent to mislead
or defraud, (b) Buyer relied on such untrue representation or warranty without
any Knowledge by Buyer that such representation or warranty was untrue, and (c)
Buyer incurred Damages as a result of such Breach.
As used herein the term "NET WORTH GAP" shall mean, subject to Section 2.9,
(i) the greater of (A) Nine Hundred Thousand Dollars ($900,000) and (B) the
amount by which the Adjusted Closing Net Worth is less negative than negative
$50.154 million, (ii) minus any amounts paid to a Seller Indemnified Person
pursuant to Section 5.4(d) in excess of any reserves for the retrospective
premium adjustments and claims for benefits referred to in Section 5.4(d). For
example, if the Adjusted Closing Net Worth is negative $48 million, the Net
Worth Gap will be $2.154 million. Either party may elect to follow the
resolution procedure set forth in Section 2.6(c) in the event of any dispute
between the parties regarding a calculation of the Net Worth Gap that is not
resolved within thirty (30) days after either party provides written notice to
the other of its intention to seek resolution of the matter pursuant to such
Section.
5.7. Indemnification Threshold- Buyer.
Buyer will have no liability (for indemnification or otherwise) with
respect to the matters described in Section 5.4(a) until the total of all
Damages with respect to such matters exceeds $900,000, and then only for the
amount by which such Damages exceed $900,000. However, this Section 5.7 will not
apply to any claim based on a Breach of a representation or warranty that Buyer
had Knowledge was untrue when made but only to the extent that (a) Buyer had an
actual intent to mislead or defraud, (b) Seller relied on such untrue
representation or warranty
-45-
without any Knowledge by Seller that such representation or warranty was untrue,
and (c) Seller incurred Damages as a result of such Breach.
5.8. Maximum Liability.
Notwithstanding anything in this Article 5 to the contrary:
(a) the maximum liability that Seller shall have to Buyer Indemnified
Persons pursuant to Section 5.2 shall not exceed, in the aggregate, an
amount equal to ten percent (10%) of the Purchase Price (the "TEN PERCENT
CAP") for all Damages other than Damages resulting from a Breach of the
Designated Representations (as defined below);
(b) the maximum liability that Seller shall have to Buyer Indemnified
Persons pursuant to Section 5.2(a) for Damages resulting from a Breach of
the Fifty Percent Representations (as defined below) and pursuant to
Section 5.3 shall not exceed, in the aggregate, an amount equal to fifty
percent (50%) of the Purchase Price (the "FIFTY PERCENT CAP");
(c) the maximum liability that Seller shall have to Buyer Indemnified
Persons pursuant to Section 5.2 for Damages resulting from a Breach of the
Hundred Percent Representations (as defined below) shall not exceed, in the
aggregate, an amount (inclusive of the Ten Percent Cap and the Fifty
Percent Cap) equal to the Purchase Price;
(d) the parties agree that Damages shall never exceed, in the
aggregate, the Purchase Price and that if the Ten Percent Cap and the Fifty
Percent Cap were triggered on account of Damages incurred by Buyer
Indemnified Persons, then the maximum liability that Seller would have to
Buyer Indemnified Persons pursuant to the Hundred Percent Representations
could not exceed, in the aggregate, 40% of the Purchase Price;
(e) the "FIFTY PERCENT REPRESENTATIONS" shall be the representations
and warranties set forth in Sections 3.7 (reserve for returns), 3.8(a)
(account reconciliations), 3.9 (return affidavits), 3.13(a) (inventory) and
3.23 (environmental);
(f) the "HUNDRED PERCENT REPRESENTATIONS" shall be the representations
and warranties set forth in Sections 3.2(a) (authorization) and 3.3(a)
(title to Securities); and
(g) the "DESIGNATED REPRESENTATIONS" shall be Fifty Percent
Representations and the Hundred Percent Representations.
5.9. Additional Limitations of Liability.
Notwithstanding anything in this Article 5 to the contrary:
(a) Seller shall have no liability to Buyer Indemnified Persons (for
indemnification or otherwise) for the Breach of any representation or
warranty to the extent that Seller is able to prove that Buyer had
Knowledge at or prior to the time of Closing that such representation or
warranty was not true at the time of Closing.
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(b) Seller shall have no liability under this Agreement with respect
to any Damages on account of any liability to the extent reflected in the
Closing Balance Sheet.
(c) Buyer Indemnified Persons may not recover Damages more than once
for any specific facts, omissions or circumstances notwithstanding the fact
that such facts, omissions or circumstances may constitute the Breach of
more than one representation or warranty.
(d) Seller shall not be required to pay any Damages to Buyer
Indemnified Persons pursuant to Sections 5.2 and 5.3 until such time as the
Adjusted Closing Net Worth is finally determined (given that the Net Worth
Gap will not be calculable until such time); provided that any amounts so
deferred by Seller shall be paid together with interest at an annual rate
equal to the Base Rate, accruing from the date such Damages would have been
paid had the Net Worth Gap been known on the date of this Agreement. In the
event that Seller pays any amount to any Buyer Indemnified Person or other
Person pursuant to Section 5.2 or 5.3, or incurs any costs or expenses in
defending any third party claim, and it is finally determined that,
pursuant to the provisions of this Article 5 (including Sections 5.6, 5.8,
5.9 and 5.12) Seller was not required to pay such amount or incur such cost
or expense, Buyer shall, promptly following Seller's request therefor,
reimburse Seller for all such amounts paid or incurred together with
interest at an annual rate equal to the Base Rate, accruing from the date
such amounts were paid or incurred through the date such reimbursement is
made.
(e) Seller shall have no liability to Buyer Indemnified Persons with
respect to any Damages related to (i) any Accounts Receivable which are
compromised by the Company after Closing or any disputed payables paid by
the Company after Closing to the extent that such compromises or payments
exceed the amounts accounted or reserved therefor on the Closing Balance
Sheet (as evidenced by the work papers used to prepare the Closing Balance
Sheet), or (ii) any amounts paid on account of a claim for workers
compensation benefits, in each case unless Seller has approved such
compromise or payment in writing prior to the time such compromise is
agreed to by the Company or such payment is made by the Company, such
approval by Seller not to be unreasonably withheld or delayed.
(f) To the extent that any Applicable Contract required to be listed
in any Schedule to the Disclosure Letter is not so listed, but Buyer causes
the Company to accept the benefits of such Applicable Contract after the
Closing with Knowledge of the associated obligations, Seller shall have no
liability to Buyer Indemnified Persons with respect to any Damages
resulting from any breach of a representation or warranty as a result of
such failure so to disclose such Applicable Contract.
(g) Except for matters in which Buyer Indemnified Persons seek
injunctive relief and except in the case of fraud, the sole recourse and
exclusive remedy of Buyer Indemnified Persons against Seller arising out of
this Agreement, including the Schedules and Exhibits (but excluding the
Transaction Documents), or otherwise arising out of Buyer's acquisition of
the Securities, whether based on tort, contract, statutory or common law
remedy or equitable remedy or otherwise, including any misrepresentation,
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breach of warranty or otherwise, shall be to assert a claim for
indemnification under the indemnification provisions of this Article 5, and
Buyer covenants that it will not seek, or permit any other Buyer
Indemnified Person to seek, to obtain any remedy except as provided in this
Article 5.
(h) In no case shall Damages include (i) any incidental,
consequential, indirect or special losses or damages (including, without
limitation, lost profits, lost revenues and loss of business), or (ii) fees
and expenses of more than one counsel with respect to any indemnity claim
or claims arising out of the same general allegations or circumstances.
5.10. Procedure for Indemnification- Third Party Claims.
(a) Promptly after receipt by an indemnified party under Section 5.2,
5.4 or 5.3 (but only to the extent provided in the last sentence of Section
5.3) of notice of the commencement of any Proceeding (including any claim
for workers compensation benefits) against it, such indemnified party will,
if a claim is to be made with respect thereto against an indemnifying party
under such Section, give notice to the indemnifying party of the
commencement of such claim, but the failure to notify the indemnifying
party will not relieve the indemnifying party of any liability that it may
have to any indemnified party, except to the extent that the indemnifying
party demonstrates that the defense of such action is prejudiced by the
indemnifying party's failure to give such notice.
(b) If any Proceeding referred to in Section 5.9(a) is brought against
an indemnified party and it gives notice to the indemnifying party of the
commencement of such Proceeding, the indemnifying party will be entitled to
participate in such Proceeding and, to the extent that it wishes (unless
(i) the indemnifying party is also a party to such Proceeding and the
indemnified party determines in good faith that joint representation would
be inappropriate, or (ii) the indemnifying party fails to provide
reasonable assurance to the indemnified party of its financial capacity to
defend such Proceeding and provide indemnification with respect to such
Proceeding), to assume the defense of such Proceeding with counsel
reasonably satisfactory to the indemnified party and, after notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such Proceeding, the indemnifying party will not, as long as it
diligently conducts such defense, be liable to the indemnified party under
this Article 5 for any fees of other counsel or any other expenses with
respect to the defense of such Proceeding, in each case subsequently and
reasonably incurred by the indemnified party in connection with the defense
of such Proceeding. If the indemnifying party assumes the defense of a
Proceeding, (i) no compromise or settlement of such claims may be effected
by the indemnifying party without the indemnified party's consent unless
(A) there is no finding or admission of any violation of Legal Requirements
or any violation of the rights of any Person and no effect on any other
claims that may be made against the indemnified party, and (B) the sole
relief provided is monetary damages that are paid in full by the
indemnifying party; and (ii) the indemnified party will have no liability
with respect to any compromise or settlement of such claims effected
without its consent. If the indemnifying party does not deliver to the
indemnified party within 90 days after the indemnified party's notice is
given, a writing indicating that, based on the facts actually
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known to the indemnifying party at such time regarding such claim, the
indemnifying party reasonably believes that (without taking into account
the limitations contained in Sections 5.7, 5.8, 5.9 and 5.10) it is
obligated to provide indemnification pursuant to this Article 5 on account
of such claim (it being agreed that such writing shall not constitute any
binding obligation or waiver of rights of the indemnifying party), or if,
following the delivery of such writing or at any other time, the
indemnifying party notifies the indemnified party that it no longer
believes that it is obligated to provide indemnification for such claim
pursuant to this Article 5 (which notice the indemnifying party shall
provide to the indemnified party promptly following its becoming aware of
facts or circumstances leading it so to believe), then, in either such
case, the indemnified party shall be entitled to conduct the defense
against such claim, at the expense of the indemnifying party and shall so
notify the indemnifying party, and the indemnifying party will be bound by
any determination of a Proceeding so defended but will not be bound by any
compromise or settlement effected without its consent (which may not be
unreasonably withheld).
(c) Notwithstanding the foregoing, if a claim seeks injunctive or
other equitable relief against an indemnified party or otherwise would be
reasonably likely to have a material and adverse impact on the ability of
the indemnified party to conduct its business in the ordinary course, the
indemnified party may, by notice to the indemnifying party, assume the
exclusive right to defend, compromise, or settle such Proceeding, but the
indemnifying party will not be bound by any determination of a Proceeding
so defended or any compromise or settlement effected without its consent
(which may not be unreasonably withheld).
(d) Seller hereby consents to the non-exclusive jurisdiction of any
court in which a Proceeding is brought by a third party against any
Indemnified Person for purposes of any claim that an Indemnified Person may
have under this Agreement with respect to such Proceeding or the matters
alleged therein, and agree that process may be served on Seller with
respect to such a claim anywhere in the world.
5.11. Procedure for Indemnification- Other Claims.
A claim for indemnification for any matter not involving a third-party
claim may be asserted by notice to the party from whom indemnification is
sought.
5.12. Effect of Tax Benefits and Insurance Proceeds.
The amount due to any indemnified party for Damages pursuant to this
Article 5 shall be reduced by (a) the effect of any Tax deduction, credit,
refund or other Tax benefit actually received by such indemnified party relating
to the same or any other Tax period and resulting from the subject matter of
such Damages; and (b) the amount of any insurance proceeds actually received (or
to be received pursuant to confirmation from the applicable insurer) by such
indemnified party with respect to the subject matter of such Damages to the
extent that the indemnified party shall obtain or shall be entitled to obtain,
directly or indirectly, a benefit thereby.
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6. ADDITIONAL AGREEMENTS
6.1. Continuation of Insurance.
Buyer shall maintain insurance respecting its assets and those of its
subsidiaries (including after the Closing, the Company) wherever located,
covering loss or damage by fire, theft, explosion, and all other hazards and
risks as ordinarily are insured against by other Persons engaged in the same or
similar businesses.
6.2. Employee Matters.
(a) Long-Term Incentive Program. Buyer agrees to cause the Company to
pay benefits to eligible employees of the Company in accordance with the
terms of Seller's Long-Term Incentive Program as if the Company had
remained a wholly-owned subsidiary of Seller (except that vesting of such
benefits will accelerate upon each such employee's termination of
employment for any reason or no reason other than termination by the
Company for Cause (as defined in such employee's severance agreement) or
voluntary termination by such employee without Good Reason (as defined in
such employee's severance agreement) during the term of any applicable
Employment Agreement or severance agreement, as the case may be) subject to
compliance with IRC Sec. 409A to the extent applicable.
(b) Savings Plan. Effective as of the Closing, Buyer shall take all
action necessary and appropriate to extend coverage under a new or existing
defined contribution plan ("BUYER'S SAVINGS PLAN") qualified under section
401(a) of the Code to those employees of the Company immediately prior to
the Closing who continue to be employed by the Company after the Closing
(collectively, the "CONTINUED EMPLOYEES") who have account balances under
the defined contribution Qualified Plan maintained by Seller ("SELLER'S
SAVINGS PLAN") on the Closing Date. For purposes of eligibility and vesting
under Buyer's Savings Plan, the Continued Employees shall be credited with
their periods of service with Seller and the Company as of the Closing
Date. As soon as practicable following the Closing Date, Seller shall cause
to be transferred from the trustee of Seller's Savings Plan to the trustee
of Buyer's Savings Plan, an amount, in cash or in kind (including
participant loans which shall be transferred in kind), equal to the
aggregate account balances of the Continued Employees under the Seller's
Savings Plan determined as of the date of transfer in accordance with the
valuation methods of Seller's Savings Plan. From and after the date of such
transfer, Buyer shall cause Buyer's Savings Plan to assume the obligations
of Seller's Savings Plan for the benefits accrued by the Continued
Employees under Seller's Saving Plan, and Seller's Savings Plan shall cease
to be responsible therefor. Buyer and Seller shall use their best efforts
to ensure that any loan balances outstanding under Seller's Saving Plan for
any Continued Employees shall be transferred to Buyer's Savings Plan
without acceleration or default.
(c) Credit for Service. To the extent permitted under applicable law,
following the Closing Date, Buyer shall credit each Continued Employee with
such Continued Employee's periods of service with Seller as service with
Buyer for purposes of participation, vesting, vacation accrual and waiting
periods under the employee benefit
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plans offered to Continued Employees after Closing. Buyer shall cause to be
waived any eligibility waiting periods and pre-existing condition
limitations or restrictions under Buyer's Welfare Plans to the extent
necessary to provide immediate coverage of Continued Employees under such
welfare plans as of the Closing Date. Group health benefits provided by
Buyer to Continued Employees shall be sufficient to satisfy the obligations
of the Seller and its Affiliates under Section 4980B of IRC for Continued
Employees so that neither the Seller nor its Affiliates incurs any tax
under Section 4980B of IRC. Buyer and Seller agree to adjust the Continued
Employees' accumulated medical plan deductibles, out-of-pocket medical
expenses and flexible spending accounts as necessary to accomplish the
intent of this Section 6.2(c).
(d) Retiree Medical Benefits. Effective as of the Closing Date, Buyer
agrees to assume all liability and obligations of Seller and the Company to
provide retiree group medical benefits under the terms and conditions
described in the Company Medical Plan as in effect immediately prior to
Closing for those Grandfathered Employees Eligible for Retirement Prior to
January 1, 2005 listed on Schedule 6.2(d) except for those Persons listed
in Schedule 6.2(d) who retired prior to the Closing.
6.3. Directors and Officers Insurance; Indemnification.
From the date hereof until the sixth anniversary of the date hereof, Buyer
shall cause the Company to (a) maintain its obligation pursuant to its operating
agreement to indemnify all past and present Members and officers of the Company,
and their respective officers, directors, members, managers, shareholders,
employees and agents (collectively, the "COMPANY INDEMNIFIED Persons") and shall
indemnify all of the Company Indemnified Persons in all cases to the maximum
extent permitted by Delaware law, and (b) provide and maintain officers' and
directors' liability insurance policy in respect of acts or omissions (including
employment practices) occurring prior to the Closing covering each Person
currently covered by the Seller's officers' and directors' liability insurance
policy in effect as of the date hereof, in an amount, on terms, and with scope
of coverage comparable to those applicable to such policy; provided, however,
that notwithstanding the foregoing, the Company shall not be required to pay an
aggregate premium on such insurance policy for such entire six (6) year period
that is greater than 300% of the annual premium payable under the Seller's
directors' and officers' insurance policy in effect as of the date hereof; and
provided further, however, that notwithstanding the foregoing, Buyer may satisfy
its obligations under this Section 6.3 by purchasing a "tail" policy under the
Seller's existing directors' and officers' insurance policy. If notwithstanding
the use of commercially reasonable efforts to do so, the Company is unable to
maintain or obtain the insurance called for in this Section 6.3, the Company
shall obtain as much comparable insurance as available for the maximum amount
set forth in the preceding sentence.
6.4. Office Location.
For a period of not less than three (3) years following the date hereof,
Buyer agrees to cause the Company to maintain an office in the Lisle, Illinois
area sufficient for (a) the employment of the Existing Employees employed by the
Company immediately after the Closing, (b) adequate staff to support such
Existing Employees, and (c) equipment necessary to support the Persons referred
to in clauses (a) and (b).
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6.5. Seller Covenants.
(a) Noncompetition. Seller and Xxxxxxx Xxxx Xxxxxx agree for a period
beginning on the date hereof and ending on the fifth (5th) anniversary of
the date hereof (the "RESTRICTION PERIOD") (a) not to become involved,
directly or indirectly, in any Competitive Business (as defined below), as
a director, officer, manager, member, employee, consultant, advisor, agent
or representative, partner, proprietor or other participant; and agree not
to acquire, directly or indirectly, a financial interest in any Competitive
Business (other than by virtue of the ownership of less than 5% of the
outstanding stock of an entity registered with the Securities and Exchange
Commission), as a shareholder, partner, member, investor or lender. As used
in this Agreement, the term "COMPETITIVE BUSINESS" means an Enterprise (as
defined below) engaged in the wholesale distribution or sale other than at
retail of magazines in the United States, but does not include the business
currently conducted by LHE. As used herein, the term "ENTERPRISE" means a
sole proprietorship, any for-profit or nonprofit organization, including a
corporation, partnership, limited liability company or other entity.
(b) Nonsolicitation. During the Restriction Period, neither Seller nor
Xxxxxxx Xxxx Kipper shall directly or indirectly (i) solicit the trade of,
or trade with, any customer or supplier of the Company for a Competitive
Business such that any such customer or supplier reduces the amount of
business which it does (or, but for such solicitation, would do) with the
Company or (ii) solicit or induce any employee of the Company to terminate
his, her or its employment or other relationship with the Company; provided
that this Section 6.5(b) shall not apply to any general advertisements or
solicitations for employees and shall not apply to any services performed
by Xxxxx Xxxxxxx, Xxxxx Xxxx, Xxxxx Xxxx or Xxxxxx Xxxx which are permitted
by their respective Employment Agreement being entered into on the date
hereof.
(c) Equitable Relief. Seller and Xxxxxxx Xxxx Kipper acknowledge and
agree that Buyer or the Company would be irreparably damaged if any of the
provisions of this Section 6.5 are not performed in accordance with their
specific terms or are otherwise breached. Accordingly, it is agreed that
Buyer and the Company shall be entitled to seek an injunction or
injunctions to prevent breaches of this Agreement and shall have the right
to seek to specifically enforce this Agreement and the terms and provisions
thereof in addition to any other remedy to which Buyer or the Company may
be entitled hereunder, at law or in equity.
(d) Severability. It is the intent of the parties that each provision
of this Section 6.5 of this Agreement be enforced to the fullest extent
permissible under the laws and public policies of each jurisdiction in
which enforcement of any provision of this Agreement is sought. In
furtherance of the foregoing, each provision of this Agreement shall be
severable from each other provision, and any provision thereof which is
unenforceable in any jurisdiction shall be subject to the following:
(i) if such provision is contrary to or conflicts with any
requirement of any statute, rule or regulation in effect in such
jurisdiction, then such requirement
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shall be incorporated into, or substituted for, such unenforceable
provision to the minimum extent necessary to make such provision
enforceable;
(ii) the court, agency or arbitrator considering the matter is
hereby authorized to (or, if such court, agency or arbitrator is
unwilling or fails to do so, then the parties shall) amend such
provision to the minimum extent necessary to make such provision
enforceable, and the parties hereby consent to the entry of an order
so amending such provisions; and
(iii) if any such provision cannot be or is not reformed and made
enforceable pursuant to subsection (i) or (ii) above, then such
provision shall be ineffective in such jurisdiction to the minimum
extent necessary to make the remainder of this Section 6.5 enforceable
in such jurisdiction.
6.6. Access to Records.
Buyer agrees that Seller shall be entitled, for any lawful purpose,
including (a) preparing tax returns, and (b) preparing and auditing financial
statements, after Closing, upon reasonable notice and during the regular
business hours of the Company, to have reasonable access to and to make copies
of the financial and tax business records of the Company which relate to periods
prior to the Closing. Buyer shall cause the Company to retain such records for a
period of five years following the Closing, after which time Buyer may permit
the Company to destroy or otherwise dispose of such business records without
Seller's consent. Notwithstanding the foregoing, if Buyer or the Company
notifies Seller in writing that it desires to dispose of such business records,
Seller shall have a period of sixty (60) days following its receipt of such
notice to obtain possession thereof. If and to the extent Seller does not elect
to obtain such possession, Buyer or the Company shall be entitled to dispose of
such business records as described in such notice.
6.7. Release of Guarantees.
After Closing, Buyer and Seller shall use their commercially reasonable
efforts to have Seller and any of its Affiliates (other than the Company) who
have guaranteed any liabilities or obligations of the Company released from all
liabilities and obligations pursuant to such guaranties.
6.8. Certain Buyer Obligations.
(a) In the event a petition in bankruptcy is filed by or against any
customer of the Company within the ninety (90) day period following the
Closing Date, all returns of Product distributed prior to the Closing made
by that customer after the filing of such petition shall be credited to the
Account Receivable owed by such customer on the Closing Date, and Buyer
shall cause the Company to assign to Seller, on a non-recourse basis, the
unsatisfied portion of such Accounts Receivable, if any.
(b) Buyer shall cause the Company to use the same diligence to collect
the Accounts Receivable as Buyer and its Subsidiaries use to collect their
own receivables. Promptly following the Survival Period, Buyer shall cause
the Company to assign to
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Seller, on a non-recourse basis, the portion of any Accounts Receivables
which have not been fully collected as of the last day of the Survival
Period and as to which any Buyer Indemnified Person has made a claim
pursuant to Section 5.2.
(c) Buyer shall cause the Company to apply all payments received after
the Closing on account of the Accounts Receivable or credits to be applied
against the Accounts Receivable to the oldest of such invoices first unless
the debtor thereof otherwise specifically indicates in writing, or it is
apparent from the facts relating to a specific invoice, that the payment is
intended to be otherwise applied.
(d) The parties acknowledge that, prior to the Closing, Seller shall
(i) cause each account related to a receivable from or payable to a
customer of the Company, together with any accounts which are reserves or
accruals therefor, and which is specified in Exhibit 2.6 as being one which
may not be commingled, to be specifically identified by a flag in a new
field on the Company's MJ system as being a pre-closing account, and (ii)
create and maintain through the Adjustment Date a tape backup of all of the
data contained on the Company's MJ system as of the close of business on
May 8, 2005.
(e) Until the day (the "ADJUSTMENT DATE") which is the first business
day after the time that the Adjusted Closing Net Worth is finally
determined and binding on the parties, Buyer shall cause the Company not to
alter, change or in any other way disturb the flags in the new field on the
Company's MJ system referred to in Section 6.8(d) or add any new flags to
such new field on the Company's MJ system.
(f) Until the Adjustment Date, if the Company adds to the Company's MJ
system after Closing any customers or titles which were not on the
Company's MJ system prior to Closing, Buyer shall cause the Company not to
transfer into the Company's MJ system any of the following financial data
related to such new customers or titles:
(i) Any data related to any open or historical accounts
receivable;
(ii) Any data related to any open or historical publisher
payables; or
(iii) Any historical financial data of the type contained in the
Company's order and regulation (O&R) system.
7. TAX COVENANTS
7.1. Seller's Liability.
Seller will be solely responsible for all Income Taxes imposed upon the
Company with respect to Pre-Closing Periods, and, with respect to Straddle
Periods, Income Taxes imposed upon the Company which are allocable, pursuant to
Section 7.3, to the portion of such taxable year or period ending on the Closing
Date. Seller shall receive the benefit of all Tax losses incurred by the Company
with respect to Pre-Closing Periods and, with respect to Straddle Periods, the
benefit of all Tax losses incurred by the Company which are allocable, pursuant
to Section 7.3, to the portion of such taxable year or period ending on the
Closing Date.
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7.2. Buyer's Liability.
Buyer will be solely responsible for any and all Taxes of, or payable by,
the Company which the Seller is not responsible for pursuant to Section 7.1,
including, in the case of Income Taxes with respect to a Straddle Period, the
portion of such taxable year or period commencing after the Closing Date as
determined pursuant to Section 7.3. Buyer shall receive the benefit of all Tax
losses incurred by the Company to which Seller is not entitled pursuant to
Section 7.1, including, in the case of all Tax losses incurred by the Company
with respect to a Straddle Period, the portion of such taxable year or period
commencing after the Closing Date as determined pursuant to Section 7.3. In
addition, Buyer will be solely responsible for any and all Taxes (other than
Income Taxes described in Section 7.1 which shall remain the responsibility of
the Seller) applicable to, imposed on or arising out of the Contemplated
Transactions.
7.3. Apportionment of Income Taxes.
In order to apportion appropriately any Income Taxes relating to any
taxable year or period that includes a Straddle Period, the parties will, to the
extent permitted under applicable law, elect with the relevant Tax authority or
agency to treat for all purposes the Closing Date as the last day of the taxable
year or period of the Company. In the case of any Straddle Period, the portion
of any Income Taxes that is allocable to the portion of the Straddle Period
ending on the Closing Date will be deemed equal to the amount which would be
payable if the taxable year or period ended on the Closing Date (except that,
solely for purposes of determining the marginal tax rate applicable to income
during such period in a jurisdiction in which such tax rate depends upon the
level of income, annualized income shall be taken into account, for an equitable
sharing of such Income Taxes).
7.4. Preparation of Tax Returns.
(a) Seller will prepare and file (or cause to be prepared and filed)
in a timely manner the Income Tax Returns required to be filed by the
Company (after giving effect to any valid extensions of the due date for
filing any such Income Tax Returns) for any Pre-Closing Periods. Seller
will timely pay (or cause to be timely paid) all Income Taxes shown as due
and owing on all such Income Tax Returns.
(b) Buyer will prepare and file (or cause to be prepared and filed) in
a timely manner the Income Tax Returns of the Company for the Straddle
Period; provided, however, that Buyer shall submit such Income Tax Returns
to Seller with a proposed allocation of the Income Taxes in which Seller is
responsible pursuant to Section 7.1 with respect to such Straddle Period
(the "SELLER'S STRADDLE PERIOD ALLOCATION"), for review and approval, at
least 45 days prior to the filing date (after giving effect to any valid
extensions). Buyer will be responsible to pay (or cause to be paid) all
Income Taxes shown as due and owing by the Company on all such Income Tax
Returns. Within 15 days after receipt of the Income Tax Returns relating to
a Straddle Period, Seller shall deliver to Buyer written notice of any
disagreement with respect to the Income Tax Returns or the calculation of
the Seller's Straddle Period Allocation. Buyer and Seller shall attempt to
resolve any disputes with respect to such Income Tax Returns or
calculations; provided that if they are unable to do so within 15 days
after delivery of
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notice of the disagreement, such disputed items shall be submitted to the
Independent Accountant for final determination, which determination shall
be binding upon Buyer and Seller. The provisions of Section 2.6(c) shall
apply to any dispute which is submitted to the Independent Accountant
pursuant to this Section 7.4(b). Seller shall pay to Buyer on or before the
date which is the later of three business days before the due date of the
final Income Tax Return for the Straddle Period (after giving effect to any
valid extensions), or five days after the final determination by the
Independent Accountant, the amount of the Income Tax liability for the
Straddle Period that Seller is responsible for as determined in Section 7.1
and this Section 7.4(b). Except as otherwise provided in this Section 7.4,
Buyer will also prepare and file, or cause to be prepared and filed, any
and all other Tax Returns required to be filed by the Company. Buyer will
be responsible to pay (or cause to be paid) all Taxes shown as due and
owing by the Company on all such Tax Returns. All Tax Returns shall be
prepared in a manner consistent with the past practices of the Company and
Seller, unless otherwise required by applicable law.
7.5. Other Covenants.
Buyer and Seller shall not take, nor shall Buyer cause or permit the
Company to take, any action or omit to take any action which could increase the
liability of the other party in connection with any Taxes under this Agreement.
Neither Buyer nor any Affiliate thereof shall amend, refile or otherwise modify,
or cause or permit the Company to amend, refile or otherwise modify, any Tax
election or Tax Return with respect to any Pre-Closing Period or Straddle Period
without the prior written consent of Seller. Seller shall be entitled to all
refunds, if any, attributable to Taxes for any Pre-Closing Period and
attributable to Income Taxes listed in Section 7.1, and Buyer shall deliver such
refunds to Seller as promptly as possible upon receipt. Buyer shall, if Seller
so requests and at Seller's expense, cause the Company to file for and use its
reasonable best efforts to obtain and expedite any claim for (and any receipt
of) refund to which Seller is entitled to under this Section 7.5.
7.6. Contests.
(a) Notice. Buyer will immediately notify Seller in writing of any
proposed assessment or claim or the commencement of any audit or
administrative or judicial or other Proceeding involving Taxes which, if
determined adversely, could result in a liability to Seller under this
Agreement or which could cause an adjustment in the Tax liability of Seller
or its Affiliates. Seller will immediately notify Buyer in writing of any
proposed assessment or claim or the commencement of any audit or
administrative or judicial or other Proceeding involving Taxes which, if
determined adversely, could affect the determination of Taxes to which the
Company may be subject in or for Post-Closing Periods, but only to the
extent that Seller is notified thereof. In each case, such notice shall
contain factual information to the extent known describing the asserted Tax
liability in reasonable detail and shall include copies of any notice or
other document received from any Tax authority in respect of any such
asserted Tax liability.
(b) Pre-Closing Period Contests. In the case of an audit or
administrative or judicial or other Proceeding that relates to any
Pre-Closing Period, Seller will have the right at its own expense to
control the conduct of such audit or Proceeding including
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settling or compromising the issue or matter. If Seller elects to direct
such audit or Proceeding, Seller shall, within thirty (30) days of its
becoming aware of any such audit or Proceeding, notify Buyer of Seller's
intent to do so, and Buyer shall cooperate and shall cause the Company to
fully cooperate, at Seller's expense, in each phase of the audit or
Proceeding. If Seller elects not to direct such audit or Proceeding, Buyer
or the Company, as applicable, may assume control of such audit or
Proceeding (at Buyer's expense); provided, however, in such case, Buyer
shall provide Seller with a timely and reasonably detailed account of each
phase of the audit or Proceeding, and neither Buyer nor the Company may
settle or compromise any asserted liability without the prior written
consent of Seller. In any event, Seller may participate, at its own
expense, in any audit or Proceeding related to any Pre-Closing Period, and
Buyer may participate, at its own expense, in any audit or Proceeding
related to any Taxes which could affect the determination of Taxes to which
the Company may be subject in or for any Post-Closing Period.
(c) Straddle Period Contests. In the case of any audit or
administrative or judicial Proceeding that relates to any Income Tax for
any Straddle Period, Seller may elect to direct and control, through
counsel of its own choosing, any audit or Proceeding. If Seller elects to
direct such audit or Proceeding, Seller shall, within thirty (30) days of
its becoming aware of any such audit or Proceeding, notify Buyer of
Seller's intent to do so, and Buyer shall cooperate and shall cause the
Company to fully cooperate, at Seller's expense, in each phase of the audit
or Proceeding. If Seller elects not to direct such audit or Proceeding,
Buyer or the Company, as applicable, may assume control of such audit or
Proceeding (at Buyer's expense); provided, however, in such case, Buyer
shall provide Seller with a timely and reasonably detailed account of each
phase of the audit or Proceeding, and neither Buyer nor the Company may
settle or compromise any asserted liability without the prior written
consent of Seller. In any event, Seller may participate, at its own
expense, in any audit or Proceeding related to a Straddle Period. Except as
provided otherwise in this Section 7.6, Buyer will control, at its own
expense, any and all audit, administrative and judicial Proceedings related
to the Taxes of the Company.
7.7. Cooperation.
Seller and Buyer shall provide each other, at no charge, with such
cooperation and information as either of them reasonably may request of the
other (and Buyer shall cause the Company to provide such cooperation and
information) in filing any Tax Return, amended Tax Return or claim for refund,
determining a liability for Taxes or a right to a refund of Taxes or
participating in or conducting any audit or other Proceeding with respect to
Taxes. Buyer and Seller shall preserve and cause to be preserved all
information, returns, books, records and documents relating to any liabilities
for Taxes with respect to a taxable period until the later of the expiration of
all applicable statutes of limitation and extensions thereof, or the conclusion
of all litigation with respect to Taxes for such period.
7.8. Payroll Tax.
Buyer and Seller shall, to the extent that the Company is disregarded for
such purposes (with respect to employees of the Company) and to the extent
possible, treat Buyer as a
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"successor employer" and Seller as a "predecessor," within the meaning of IRC
Sections 3121(a)(1) and 3306(b)(1), for purposes of Taxes imposed under the
United States Federal Unemployment Tax Act or the United States Federal
Insurance Contributions Act. Buyer and Seller agree to take all reasonable
actions so as to utilize the "Alternate Procedure" described in Section 5 of
Revenue Procedure 96-60 if applicable for wage reporting purposes. Each of Buyer
and Seller shall cooperate in good faith to adopt similar procedures under
applicable state, municipal, county, local, foreign or other laws.
7.9. Termination of Tax Sharing Agreements.
All Tax sharing agreements, arrangements, policies and guidelines, whether
formal or informal, express or implied, oral or written, to which the Company or
Seller is a party and all obligations of the Company thereunder shall be
terminated with respect to the Company and applicable to all Post-Closing
Periods, and on the Closing Date the Company shall have no further liability or
obligations thereunder with respect to all Post-Closing Periods.
8. GENERAL PROVISIONS
8.1. No Reliance on Other Information.
Except for the representations and warranties contained in this Agreement,
neither Seller nor any Representative or Affiliate or other Person acting for
any of them makes any other representation or warranty, express or implied, with
respect to the Company, its assets, liabilities, business, financial condition
or prospects, the Securities, any forecasts or projections provided to Buyer or
the execution, delivery or performance by Seller of this Agreement or with
respect to the Contemplated Transactions, and Seller hereby disclaims any such
representation or warranty, whether oral or written, whether by Seller or any of
its Representatives or Affiliates or any other Person. Buyer acknowledges that
none of Seller or any other Person has made any representation or warranty,
express or implied, as to the accuracy or completeness of any information
regarding the Company not included in this Agreement or the Disclosure Letter,
and neither Seller nor any other Person will have or be subject to any liability
to Buyer or any other Person resulting from the distribution to Buyer, or
Buyer's use of, any such information (including, without limitation, any
brochures, offering memoranda or other publications distributed in connection
with the sale of the Securities or in any presentation by the management of the
Company and any estimates of anticipated performance of the Company).
8.2. Expenses.
Except as otherwise expressly provided in this Agreement, each party to
this Agreement will bear its respective expenses incurred in connection with the
preparation, execution, and performance of this Agreement and the Contemplated
Transactions, including all fees and expenses of agents, representatives,
counsel, and accountants. Seller will cause the Company not to incur any
out-of-pocket expenses in connection with this Agreement.
8.3. Public Announcements.
Any public announcement or similar publicity with respect to this Agreement
or the Contemplated Transactions will be issued, if at all, at such time and in
such manner as Buyer
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determines. Unless consented to by Buyer in advance or required by Legal
Requirements, prior to the Closing Seller shall, and shall cause the Company to,
keep this Agreement strictly confidential and may not make any disclosure of
this Agreement to any Person. Seller and Buyer will consult with each other
concerning the means by which the Company's employees, customers, and suppliers
and others having dealings with the Company will be informed of the Contemplated
Transactions, and Buyer will have the right to be present for any such
communication.
8.4. Notices.
All notices, consents, waivers, and other communications under this
Agreement must be in writing and will be deemed to have been duly given when (a)
delivered by hand (with written confirmation of receipt), (b) sent by telecopier
(with written confirmation of receipt), provided that a copy is mailed by
registered mail, return receipt requested, or (c) when received or refused by
the addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
If to Seller:
Xxxx. Xxxx Company
0000 Xxxxxx Xxxxxx
Xxxxxxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx
Facsimile No.: 000-000-0000
with copies to:
Xxxx. Levy Company
0000 Xxxxxx Xxxxxx
Xxxxxxx Xxxx, XX 00000
Attention: General Counsel
Facsimile No.: 000-000-0000
and:
Xxxxxxxxxxxx Xxxx & Xxxxxxxxx LLP
0000 Xxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx Xxxxxxx Xxxxxx
Facsimile No.: 000-000-0000
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If to Buyer:
Source Interlink Companies, Inc.
00000 Xxxxxxxxx Xxxxxx Xxxx.,
Xxxxx 000
Xxxxxx Xxxxxxx, Xxxxxxx 00000
Attention: General Counsel
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxx & Xxxxxxx, P.C.
00 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Facsimile No.: (000) 000-0000
8.5. Jurisdiction; Service of Process.
Any action or Proceeding seeking to enforce any provision of, or based on
any right arising out of, this Agreement may be brought against any of the
parties in the courts of the State of Illinois, County of Xxxx, or, if it has or
can acquire jurisdiction, in the United States District Court for the Northern
District of Illinois, and each of the parties consents to the jurisdiction of
such courts (and of the appropriate appellate courts) in any such action or
Proceeding and waives any objection to venue laid therein. Process in any action
or Proceeding referred to in the preceding sentence may be served on any party
anywhere in the world.
8.6. Further Assurances.
The parties agree (a) to furnish upon request to each other such further
information, (b) to execute and deliver to each other such other documents, and
(c) to do such other acts and things, all as the other party may reasonably
request for the purpose of carrying out the intent of this Agreement and the
documents referred to in this Agreement.
8.7. Waiver.
The rights and remedies of the parties to this Agreement are cumulative and
not alternative. Neither the failure nor any delay by any party in exercising
any right, power, or privilege under this Agreement or the documents referred to
in this Agreement will operate as a waiver of such right, power, or privilege,
and no single or partial exercise of any such right, power, or privilege will
preclude any other or further exercise of such right, power, or privilege or the
exercise of any other right, power, or privilege. To the maximum extent
permitted by applicable law, (a) no claim or right arising out of this Agreement
or the documents referred to in this Agreement can be discharged by one party,
in whole or in part, by a waiver or renunciation of the claim or right unless in
writing signed by the other party; (b) no waiver that may be given by a party
will be applicable except in the specific instance for which it is given; and
(c) no notice to or demand on one party will be deemed to be a waiver of any
obligation of such party
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or of the right of the party giving such notice or demand to take further action
without notice or demand as provided in this Agreement or the documents referred
to in this Agreement.
8.8. Entire Agreement and Modification.
This Agreement supersedes all prior agreements between the parties with
respect to its subject matter (including the Letter of Intent between Buyer and
Seller dated March 18, 2005) and constitutes (along with the documents referred
to in this Agreement) a complete and exclusive statement of the terms of the
agreement between the parties with respect to its subject matter. This Agreement
may not be amended except by a written agreement executed by the party to be
charged with the amendment.
8.9. Disclosure Letter.
In the event of any inconsistency between the statements in the body of
this Agreement and those in the Disclosure Letter, the statements in the
Disclosure Letter will control.
8.10. Assignments, Successors and Third-Party Rights.
Neither party may assign any of its rights under this Agreement without the
prior consent of the other parties except that Buyer may assign any of its
rights under this Agreement to any Subsidiary of Buyer, provided that Buyer
shall remain liable for all of its obligations pursuant to this Agreement
notwithstanding any such assignment. Subject to the preceding sentence, this
Agreement will apply to, be binding in all respects upon, and inure to the
benefit of the successors and permitted assigns of the parties. Except as
provided in the last sentence of this Section 8.10, (a) nothing expressed or
referred to in this Agreement will be construed to give any Person other than
the parties to this Agreement any legal or equitable right, remedy, or claim
under or with respect to this Agreement or any provision of this Agreement, and
(b) this Agreement and all of its provisions and conditions are for the sole and
exclusive benefit of the parties to this Agreement and their successors and
assigns. The Seller Indemnified Persons, the Company Indemnified Persons and the
directors, officers, members, managers and Representatives of the Company and
Seller, as appropriate, are intended, vested third party beneficiaries with
respect to the rights arising under Sections 2.4(d), 5.4, 6.1, 6.2, 6.3 and 6.4
and Article 7, and the Buyer Indemnified Persons are intended, vested third
party beneficiaries with respect to the rights arising under Sections 5.2 and
5.3. Anything to the contrary herein notwithstanding, Seller hereby acknowledges
and consents to any collateral assignment of Buyer's rights and interest under
this Agreement and any Transaction Documents to Buyer's secured lenders.
8.11. Severability.
If any provision of this Agreement is held invalid or unenforceable by any
court of competent jurisdiction, the other provisions of this Agreement will
remain in full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
8.12. Section Headings, Construction.
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The headings of Sections in this Agreement are provided for convenience
only and will not affect its construction or interpretation. All references to
"Section" or "Sections" refer to the corresponding Section or Sections of this
Agreement. All words used in this Agreement will be construed to be of such
gender or number as the circumstances require. Unless otherwise expressly
provided, the word "including" does not limit the preceding words or terms. All
references to the directors of the Company or Seller shall be deemed also to be
references to the managers of the Company or Seller, as applicable.
8.13. Time of Essence.
With regard to all dates and time periods set forth or referred to in this
Agreement, time is of the essence.
8.14. Governing Law.
This Agreement will be governed by the laws of the State of Delaware
without regard to conflicts of laws principles.
8.15. Counterparts.
This Agreement may be executed in one or more counterparts, each of which
will be deemed to be an original copy of this Agreement and all of which, when
taken together, will be deemed to constitute one and the same agreement.
9. MISCELLANEOUS
9.1. Release.
By execution and delivery of this Agreement, Seller for itself and on its
behalf and its managers, members, agents, personal representatives, heirs and
assigns (collectively, the "RELEASORS"), hereby irrevocably and unconditionally
remises, releases and forever discharges the Company and its collective current
and former managers, members, directors, officers, shareholders, employees,
agents and representatives, together with their successors and heirs
(collectively the "RELEASED PARTIES") of and from any and all past, present and
future actions, causes of action, suits, debts, charges, complaints, claims,
damages, losses, liabilities, obligations, promises, agreements, damages and
expenses of any nature whatsoever, in law or in equity, whether known or
unknown, actual or potential, arising out of or relating to the activities
engaged in by any of the Released Parties prior to the date of this Agreement
directly or indirectly relating to the Company's business, operations or
management prior to the Closing, except for (a) the Intercompany Debt, (b) any
obligations contained in this Agreement or any of the Transaction Documents, (c)
any payables in the ordinary course of business owed to LHE, (d) any obligations
to any Releasor on account of claims made by any third parties, including,
without limitation, any claims by any Releasor for indemnification therefor, (e)
any claims under any insurance policy or policies maintained or required to be
maintained for the benefit of any Releasor by the Company, including, without
limitation, medical, dental, life, accidental death and dismemberment,
disability, business travel, general liability, directors and officers, errors
and omissions or malpractice insurance, (f) the Company's obligations to pay or
provide to any Releasor any accrued but unpaid compensation or any unpaid
reimbursements of business
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expenses incurred by any Releasor, or (g) any obligations owed to any Releasor
or on behalf of any Releasor under any employee benefit plan or program
maintained by the Company.
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SIGNATURE PAGE TO UNIT PURCHASE AGREEMENT
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first written above.
BUYER
SOURCE INTERLINK COMPANIES, INC.
By: /s/ S. Xxxxxx Xxxxxx
-------------------------------------
Name: S. Xxxxxx Xxxxxx
Title: Chairman & Chief Executive Officer
SELLER
XXXX. XXXX COMPANY LLC
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Chairman
The undersigned, by executing this signature page below, agrees to be bound by
the obligations imposed upon her pursuant to Section 6.5.
/s/ Xxxxxxx X. Xxxxxx
-----------------------------------------
XXXXXXX XXXX XXXXXX
