EXHIBIT 2.4
UNIT PURCHASE AGREEMENT
This Unit Purchase Agreement (this "AGREEMENT") is made as of March 30,
2006, by and between Source Interlink Companies, Inc., a Delaware corporation
("BUYER"), and Anderson News, LLC, a Delaware limited liability company
("SELLER").
RECITALS
Seller is the sole member of Anderson Mid-Atlantic News, LLC, a Delaware
limited liability company (the "COMPANY"). Brookvale Holdings, LLC, a Delaware
limited liability company, is the sole member of Seller, Anderson Services, LLC,
a Delaware limited liability company ("ANDERSON SERVICES"), and Twin Rivers
Technology Group, LLC, a Delaware limited liability company.
Seller desires to sell, and Buyer desires to purchase, all of the issued
and outstanding membership interests (the "MEMBERSHIP INTERESTS") of the Company
for the consideration and on the terms set forth in this Agreement.
All of the material tangible properties and assets utilized to fulfill the
contractual obligations of the Company were owned by Anderson Services
immediately prior to the closing of the transactions contemplated by this
Agreement and have been conveyed to the Company other than assets located
outside the Restricted Territory used to perform the Services (as defined in the
Transition Services Agreement). Similarly, all of the employees of Anderson
Services utilized to fulfill the contractual obligations of the Company have
been terminated by Anderson Services and hired by the Company.
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 -the Closing Net Worth as shown on the Closing
Balance Sheet, as adjusted upward or downward during the one-year period
following the Closing Date to reflect (a) the gross margin on actual returns of
Product distributed by the Company as of the close of business on the day
immediately preceding the Closing Date 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 gross margin attributable to such returns
reflected on the Closing Balance Sheet, provided the Company undertakes to
retrieve such returns in the Ordinary Course of Business, (b) the amount, if
any, by which the value of the inventory of the Company as of the close of
business on the day immediately preceding the Closing Date differs from the
value of such
inventory shown on the Closing Balance Sheet, and (c) the actual assets or the
actual liabilities of the Company as of the close of business on the day
immediately preceding the Closing Date based on information obtained during the
one year period following the Closing Date (as opposed to any estimates or
reserves reflected on the Closing Balance Sheet or omissions thereon), it being
understood that the Adjusted Closing Net Worth shall not reflect any payments
made or to be made or liabilities that arise on account of or related to the
consummation of the Contemplated Transactions, such as (i) the execution and
delivery of the Transaction Documents, (ii) the capital contribution and
corresponding payment of the Intercompany Debt pursuant to Section 2.4(c), (iii)
the indebtedness evidenced by the Promissory Note and (iv) the Intercompany
Debt. In addition, the Adjusted Closing Net Worth shall not reflect (x) interest
claimed to be owed by the Company to Curtis Circulation Company or (y) disputes
and unreconciled balances with the National Distributors.
ADJUSTMENT AMOUNT - as defined in Section 2.5.
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.
ANDERSON SERVICES - as defined in the Recitals of this Agreement
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 asserted
prior to the expiration of the Survival Period.
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 PERSONS - as defined in Section 5.2.
CASH COLLATERAL - as defined in Section 5.13.
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 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 shall not be considered Company
GAAP irrespective of whether or not such accounting treatment is consistent with
the Company's past practices.
COMPANY PLAN - as defined in Section 3.17.
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 Membership Interests 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.
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).
CURRENT CUSTOMER - Any customer of the Company or Chas. Levy Circulating
Co., LLC, a Delaware limited liability company, as of January 27, 2006 including
those customers of the Company identified on Schedule 3.10(b).
DAMAGES - as defined in Section 5.2.
DESIGNATED ASSETS - as defined in Section 5.13.
DISCLOSURE LETTER - the disclosure letter delivered by Seller to Buyer
concurrently with the execution and delivery of this Agreement.
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.
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ENVIRONMENT - soil, land surface or subsurface strata, sediments, surface
waters (including without limitation 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 or operated 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
through the date hereof ("CERCLA").
ENVIRONMENTAL LAW - any existing 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 Threat of Release of Hazardous Materials.
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 EMPLOYEE - each individual identified on Schedule 3.24 of the
Disclosure Letter.
FACILITIES - any real property leaseholds, or other real property interests
currently owned by the Company and any buildings, plants or structures currently
owned or operated by the Company.
FIXED ASSET LIST - as defined in Section 3.6(b).
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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, township, borough, home rule
municipality, 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,
disposal, discharge, emission, 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.
INCOME TAX - (i) federal, state, local or foreign income taxes or other
taxes measured by income or net worth, 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 (including any information return), report,
declaration, document, filing, statement, schedule, notice, form, or other
document or information (whether consolidated, combined or otherwise), including
any schedule, attachment or amendment thereto, that relates to any Income Taxes
and that is 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 Income Tax or in connection with the
administration, implementation, or enforcement of or compliance with any Legal
Requirement relating to any Income Tax.
INDEPENDENT ACCOUNTANTS - as defined in Section 2.6(c).
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INTELLECTUAL PROPERTY ASSETS - as defined in Section 3.26.
INTERCOMPANY DEBT - as defined in Section 2.4(c).
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 - an individual will be deemed to have "Knowledge" of a
particular fact or other matter if (a) such individual is actually aware of such
fact or other matter or (b) such individual would reasonably be expected to be
aware of such fact or other matter in the ordinary course of performing his or
her duties for the benefit of a Person. "Knowledge" of Seller or the Company
means the Knowledge of Charles C. Anderson, Jr., Frank Stockard, Jay Maier, John
Campbell, Dave Watson and Don Pennington only.
LEGAL REQUIREMENT - any federal, state, local, municipal, foreign,
international, multinational, or other administrative or judicial order,
constitution, law, ordinance, principle of common law, rule, regulation,
guidance, statute, or treaty.
LICENSE AGREEMENT - as defined in Section 2.4(a)(iii).
MARKS - as defined in Section 3.26(a).
MATERIAL ADVERSE EFFECT - any material adverse change in the business,
operations, properties, assets, condition or prospects 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) and (c) the announcement or consummation of the Contemplated
Transactions.
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.
MEMBERSHIP INTERESTS - as defined in the Recitals of this Agreement.
NATIONAL DISTRIBUTORS - Time Warner Retail Sales and Marketing, Inc.,
Curtis 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 in
accordance with Company GAAP.
NET WORTH CALCULATION - as defined in Section 2.6(a).
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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.
ORDINARY COURSE OF BUSINESS - an action taken by a Person will be deemed to
have been taken in the "Ordinary Course of Business" only if (a) such action is
consistent with the past practices of such Person and is taken in the ordinary
course of the normal day-to-day operations of such Person, (b) such action is
not required to be authorized by the board of directors of such Person (or by
any Person or group of Persons exercising similar authority), and (c) such
action is similar in nature and magnitude to actions customarily taken, without
any authorization by the board of directors (or by any Person or group of
Persons exercising similar authority), in the ordinary course of the normal
day-to-day operations of other Persons that are in the same line of business as
such Person.
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.
PATENTS - as defined in Section 3.26(a).
PERMITTED ENCUMBRANCES - (a) statutory liens for current taxes or
assessments not yet due or payable, (b) Encumbrances in favor of lessors of
capital equipment, (c) mechanics' 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 (d) Encumbrances identified on
Schedule 3.6(b) of the Disclosure Letter.
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 PERIODS - any taxable periods beginning after the Closing
Date.
PRE-CLOSING TAX PERIODS - any taxable period ending on or before the
Closing Date.
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PRELIMINARY CLOSING BALANCE SHEET - as defined in Section 3.4.
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, books and similar print products
(including all issues and editions thereof) distributed by the Company in the
Ordinary Course of Business.
PROPRIETARY RIGHTS AGREEMENT - as defined in Section 3.24(c).
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);
(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
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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, migrating, dumping, or other releasing into the Environment.
RELEASED PARTY - as defined in Section 9.
RELEASOR - as defined in Section 9.
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.
RESTRICTED TERRITORY - the territories highlighted with shading on Exhibit
A.
RESTRICTION PERIOD - as defined in Section 6.1(a).
RELEASED PARTY - as defined in Section 9.
RELEASOR - as defined in Section 9.
RIGHTS IN MASK WORKS - as defined in Section 3.26(a).
SALES -the aggregate dollar amount of invoices issued to the Company's
Current Customers during the 52-week period ended January 27, 2006 minus all
rebates, allowances, incentives, discounts, credits (including credits for
returned Product), adjustments and other payments made by the Company to its
Current Customers during that period other than the payments specifically
identified on Schedule 3.10(a).
SALE ELECTION - as defined in Section 5.13.
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 PERSONS - as defined in Section 5.4.
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.
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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, real
or personal property, real estate transfer taxes, 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.
THREAT OF RELEASE - a substantial likelihood of a Release that may require
action 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)(ii).
2. SALE AND TRANSFER OF MEMBERSHIP INTERESTS; CLOSING
2.1. Membership Interests.
Subject to the terms and conditions of this Agreement, at the Closing,
Seller will sell and transfer the Membership Interests to Buyer, and Buyer will
purchase the Membership Interests from Seller.
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2.2. Purchase Price.
The purchase price for the Membership Interests will be $4.0 million, as
reduced by the Adjustment Amount, if any (such amount, as it may be reduced,
being called the "PURCHASE PRICE"). Buyer shall pay the Purchase Price, 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 of the Membership Interests
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
27500 Riverview Center Boulevard, Suite 400, Bonita Springs, FL 34134, 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
Membership Interests to Buyer;
(ii) a Transition Services Agreement in the form of Exhibit
2.4(a)(ii) (the "TRANSITION SERVICES AGREEMENT"), duly executed by
Seller;
(iii) a License Agreement in the form of Exhibit 2.4(a)(iii) (the
"LICENSE AGREEMENT"), duly executed by Seller.
(iv) evidence satisfactory to Buyer that all pledges of the
Membership Interests have been released and satisfied in full;
(v) evidence satisfactory to Buyer that except for Permitted
Encumbrances any and all Encumbrances on any of the Assets have been
released and satisfied in full;
(vi) evidence satisfactory to Buyer that all of the material
tangible properties and assets owned by Anderson Services that are
used in the Company's business, including the properties and assets
identified on the Fixed Asset List, have been transferred to the
Company; and
(vii) a certificate of Seller's Secretary dated the Closing Date
and certifying (A) that correct and complete copies of its certificate
of organization and operating agreement are attached thereto, (B) that
correct and complete copies of each resolution of its managers
approving this Agreement and
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the other Transaction Documents to which it is a party and authorizing
the execution hereof and thereof and the consummation of the
transactions contemplated hereby and thereby are attached thereto and
(C) the incumbency and signatures of the officers of Seller authorized
to execute and deliver this Agreement and the other Transaction
Documents to which Seller is a party on behalf of Seller.
(b) Buyer will deliver to Seller:
(i) the Closing Payment by wire transfer to an account specified
by Seller;
(ii) the Transition Services Agreement, duly executed by the
Company and guaranteed by Buyer;
(iii) the License Agreement, duly executed by the Company and
guaranteed by Buyer;
(iv) a Promissory Note in the form of Exhibit 2.4(b)(iv) duly
executed by the Company and by Buyer as guarantor (the "PROMISSORY
NOTE") in the principal amount of $4,100,000 which shall be secured by
a standby letter of credit in the face amount of $2,050,000 to be
issued to Seller no later than four (4) business days following the
Closing; and
(v) a certificate of Buyer's Secretary dated the Closing Date and
certifying (A) that correct and complete copies of its certificate of
incorporation and bylaws are attached thereto, (B) that correct and
complete copies of each resolution of its board of directors approving
this Agreement and the other Transaction Documents to which it is a
party and authorizing the execution hereof and thereof and the
consummation of the transactions contemplated hereby and thereby are
attached thereto and (C) the incumbency and signatures of the officers
of Buyer authorized to execute and deliver this Agreement and the
other Transaction Documents to which Buyer is a party on behalf of
Buyer.
(c) Concurrently with the Closing, Buyer shall make a capital
contribution to the Company in an amount equal to $9,624,003, which amount
shall then be used to satisfy a portion of the Company's outstanding
repayment obligations to Seller as of the date hereof as reflected on the
books of Seller and the Company (the "INTERCOMPANY DEBT"). The Company
shall satisfy the remaining principal amount of the Intercompany Debt by
delivery of the Promissory Note Immediately prior to the Closing, the
Intercompany Debt equaled $13,724,003.
2.5. Adjustment Amount and Payment.
The "ADJUSTMENT AMOUNT" shall be the amount, if any, by which the Net Worth
as of the close of business on the day immediately preceding the Closing Date
(the "CLOSING NET WORTH") is more negative than negative $16.0 million, as shown
on the Closing Balance Sheet
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prepared in accordance with Section 2.6. In the event the Closing Net Worth is
equal to or less negative than negative $16.0 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 Wells Fargo Bank at its principal office in San Francisco as its
"prime rate", with the understanding that the "prime rate" is one of Wells
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 Company as of the close of business on the
day immediately preceding the Closing Date (the "CLOSING BALANCE SHEET"),
it being understood that the Closing Balance Sheet shall not reflect any
payments made or to be made or liabilities that arise on account of or
related to the consummation of the Contemplated Transactions, such as (i)
the execution and delivery of the Transaction Documents, (ii) the capital
contribution and corresponding payment of the Intercompany Debt pursuant to
Section 2.4(c), (iii) the indebtedness evidenced by the Promissory Note and
(iv) the Intercompany Debt. In addition, the Closing Balance Sheet shall
not reflect (x) interest claimed to be owed by the Company to Curtis
Circulation Company or (y) disputes and unreconciled balances with the
National Distributors. The Closing Balance Sheet shall be prepared in
accordance with Company GAAP. The Closing Balance Sheet shall include all
year-end adjustments that would be included and made if the Closing Balance
Sheet had been prepared at a fiscal year end. Seller shall deliver the
Closing Balance Sheet, 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
Balance Sheet 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 general 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 the Atlanta,
Georgia office of PricewaterhouseCoopers, LLC, 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
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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, each at its own expense, 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;
(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 Section 2.7 or any objections to such calculations or
statements, , each party shall cooperate with and make available to the other
party and its Representatives, without charge, all information, records, data
and working papers, as may be reasonably required in connection with the making
of such calculations, preparation and analysis of such statements, the
resolution of any disputes thereunder. 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 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
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the right to utilize 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 based on Buyer's reasonable estimate of the
relative fair market value of the Assets. 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.
3. REPRESENTATIONS AND WARRANTIES OF SELLER
Except as set forth in this Agreement or in the Disclosure Letter, 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 qualifies the
representations and warranties to which the Schedule 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.
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 and other
jurisdictions in which it is authorized to do business. Seller owns all of
the outstanding Membership Interests. 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.
(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
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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. Except as set forth in
Schedule 3.2 of the Disclosure Letter, 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;
(ii) to the Knowledge of Seller or the Company, contravene,
conflict with, or result in a violation of, any Legal Requirement or
any Order to which the Company or Seller, or any of the assets owned
or used by the Company, may be subject;
(iii) 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 or that
otherwise relates to the business of, or any of the assets owned or
used by, the Company;
(iv) cause Buyer or the Company to become subject to, or to
become liable for the payment of, any Taxes;
(v) contravene, conflict with, or result in a violation or breach
of any provision of, or give any Person the right to declare a default
or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any Material
Applicable Contract; or
(vi) result in the imposition or creation of any Encumbrance upon
or with respect to any of the assets owned or used by the Company.
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(c) Except as set forth in Schedule 3.2 of the Disclosure Letter,
neither Seller nor the Company is or will be required to give any notice to
or obtain any Consent from any Person in connection with the execution and
delivery of this Agreement or the consummation or performance of any of the
Contemplated Transactions.
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 Membership Interests, free and clear of
all Encumbrances other than restrictions on disposition contained in any
applicable federal or state securities laws. The Membership Interests are
uncertificated. All of the outstanding Membership Interests have been duly
authorized by the Company's constituent documents and the capital
contributions required to be made in exchange therefor have been made.
There are no Contracts relating to the issuance, sale, or transfer of any
Membership Interests or other securities of the Company. None of the
outstanding Membership Interests was issued in violation of the Securities
Act or any other applicable 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.
The Company's Sales during the fifty-two week period ended January 27, 2006
were $80,563,648. Seller and the Company have provided to Buyer an unaudited pro
forma balance sheet of the Company as of February 24, 2006 (the "PRELIMINARY
CLOSING BALANCE SHEET"). The Preliminary Closing Balance Sheet was prepared in
accordance with GAAP applied on a consistent basis and fairly presents in all
material respects the financial position of the Company as of February 24, 2006,
except that the Preliminary Closing Balance Sheet does not contain all required
footnotes and is subject to normal period-end adjustments none of which would
have a Material Adverse Effect. Schedule 3.4 of the Disclosure Letter describes
all pro forma adjustments reflected in the Preliminary Closing Balance Sheet.
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, have been maintained in the Ordinary
Course of Business. At the Closing, minute books and other organizational
records and originals or copies of books and records will be in the possession
of the Company or otherwise made available to Buyer and the Company after the
Closing.
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 leased by the Company.
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(b) At or prior to the Closing, Seller shall provide to Buyer a
written list of the Company's material tangible properties and assets (the
"FIXED ASSET List"). To Seller's Knowledge, such list is or will be
complete and accurate. The Company, whether by acquisition of title from
Anderson Services or otherwise, 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, 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 and inventory, supplies, disposables, consumables and
other properties and assets purchased or otherwise acquired in the Ordinary
Course of Business but not meeting the requirements of Seller's
capitalization policies) 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 Permitted
Encumbrances.
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
adequate to account for the actual returns of such Product provided that
Buyer does not, and prohibits the Company's customers from, removing such
Products from public display prior to the generally accepted off-sale date
of such Products.
3.8. Account Reconciliations.
(a) As of February 24, 2006, there are no unreconciled balances with
National Distributors or other vendors 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 February 24, 2006, there are no unreconciled balances with
non-trade vendors for products or services 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 February 24, 2006, there will be no unreconciled balances on
any Accounts Receivable, that were, on such date, more than 90 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.
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3.10. Certain Financial Terms.
(a) The weighted average purchase discount provided by the Company to
its Current Customers for purchases of magazines after giving effect to all
rebates, allowances, incentives, credits (including credits for returned
products), adjustments or other payments (excepting any amount of the type
described in Schedule 3.10(a) of the Disclosure Letter) made by the Company
to customers is not more than 27% off the cover price of such magazines.
(b) Schedule 3.10(b) of the Disclosure Letter sets forth a complete
list of the Company's Current Customers that purchase more than $100 of
Products per week.
3.11. Condition and Sufficiency of Assets.
The equipment of the Company is in reasonably good operating condition and
is adequate for the uses to which it is being put. The equipment of the Company
is sufficient for the continued conduct of the Company's business after the
Closing in substantially the same manner as conducted prior to the Closing,
provided that no representation is made concerning the equipment located outside
the Restricted Territory used to perform the Services (as defined in the
Transition Services Agreement).
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 will be
adequate and calculated consistent with past practice), each of the
Accounts Receivable will be collected, in cash or by credit prior to the
first anniversary of the Closing Date. 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. Schedule 3.12(a) of the Disclosure Letter
contains a complete and accurate list, in all material respects, of all
Accounts Receivable (without naming the obligors) as of March 24, 2006,
which list sets forth the aging of such Accounts Receivable that have aged
by (i) less than 30 days, (ii) between 31 and 60 days, (iii) between 61 and
90 days and (iv) by more than 90 days.
(b) Schedule 3.12(b) identifies (i) 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) as of the date hereof, (ii) all
trade payables to become due during the fifteen (15) day period following
the date hereof, and (iii) all trade payable to become due between the
sixteenth (16th) and thirtieth (30th) day following the date hereof.
(c) Schedule 3.12(c) of the Disclosure Letter identifies (i) all non
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) as
of the date hereof, (ii) all non trade payables to become due during the
fifteen (15) day period following the date
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hereof, and (iii) all non trade payable to become due between the sixteenth
(16th) and thirtieth (30th) day following the date hereof.
(d) The total amount of payments that would have been made by the
Company on or before March 31, 2006 in the Ordinary Course of Business to
National Distributors, Random House, Inc. or HarperCollins Publishers but
for the closing of the transactions contemplated by this Agreement is
$4,100,000.
3.13. Inventory.
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.
The Company has no liabilities or obligations of any nature (whether known
or unknown and whether absolute, accrued, contingent, or otherwise) except for
liabilities or obligations reflected or reserved against in the Closing Balance
Sheet.
3.15. Taxes.
(a) The Company and the Seller (together, the "SELLER PARTIES") have
properly filed, in a timely manner, all income, property, payroll, employment,
sales, use and all other foreign, federal, state and local Tax Returns required
by law to be filed by the Seller Parties with respect to the Company and the
Assets under applicable foreign, federal, state and local laws, and such Tax
Returns and reports are true, complete and accurate in all material respects.
Each of the Seller Parties has paid all Taxes (i) shown to be due on all of
their respective Tax Returns or claimed to be due by any Governmental Body (to
the extent that such Tax Returns pertain or are attributable to the Company or
the Assets), (ii) claimed to be due by any Governmental Body or (iii) which
either of the Seller Parties is liable for or required to withhold on behalf of
any Person. The reserves and provisions for Taxes on the books of the Seller
Parties are, to the extent that such Taxes pertain or are attributable to the
Company or the Assets, adequate for all open years and for their current fiscal
period and properly classify all such Tax obligations as either current or
deferred.
(b) The Seller Parties have no knowledge of any proposed assessment of
any additional Taxes by any governmental entity with respect to the Company or
any of the Assets or of any basis for any such assessment (whether or not
reserved against) against either of the Seller Parties or the Assets, and the
Seller Parties do not have any information concerning or reasonable grounds to
anticipate any such audit within the foreseeable future. The Tax liabilities of
each of the Seller Parties, to the extent that they are attributable to the
Company or the Assets, have been finally determined by the Internal Revenue
Service and all other Tax authorities, or the time for audit has expired, for
all fiscal periods ending on or prior to December 31, 2001. Neither of the
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Seller Parties is currently being audited by any Governmental Body relative to
the Company or the Assets, and no such audit is pending or, to the best of the
Seller Parties' knowledge, Threatened. No Tax liens have been filed against the
Company or any of the Assets.
(c) There are no agreements, waivers, extensions, or other
arrangements providing for extension of time with respect to the assessment or
collection of any Tax against the Company or the Assets. Neither of the Seller
Parties has made any Tax elections with respect to the Company or the Assets
which (i) were in effect in any past year for which the time for audit has not
expired, (ii) are currently in effect or (iii) will be in effect at any future
time. Neither of the Seller Parties is party to any Tax sharing agreement or
similar arrangement.
(d) There exist no past due unpaid federal, state or local Tax
deficiencies by a Governmental Body assessed against either of the Seller
Parties in respect of the Company or the Assets. All Taxes owed by either of the
Seller Parties in respect of the Company or the Assets have been fully paid.
There exist no grounds for the assertion or assessment of any additional past
due Taxes against the Company or the Assets or either of the Seller Parties.
(e) Except as set forth on Schedule 3.15(e), the Company is treated as
a disregarded entity for all Tax purposes, and the Seller is treated as a
disregarded entity for all Tax purposes. Neither of the Seller Parties nor any
of their Affiliates is required to include in income any adjustment under IRC
Section 481(a) by reason of a change in accounting method initiated by the
either of the Seller Parties or any of their respective Affiliates (to the
extent that such change relates to the Company or the Assets), and the IRS has
not proposed any such adjustment or change in accounting method. Neither of the
Seller Parties is a foreign person, and IRC Sections 897, 1445 and 6039C are not
applicable to the transactions provided for herein. Each of the Seller Parties
has disclosed on its Tax Returns (to the extent that such Tax Returns relate to
the Company or the Assets) all positions taken therein that could give rise to
substantial understatement of Tax within the meaning of IRC Section 6662.
(f) The Company maintains resale certificates in all jurisdictions in
which it has sales tax nexus for all customers who receive purchases from the
Company in such jurisdictions as are required by each jurisdiction to properly
document that the sales are for resale and are not subject to sales tax.
3.16. No Material Adverse Effect.
Since January 27, 2006, 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 to provide benefits to any
current or former employee, officer, director or service provider of the
Company or the dependents thereof.
"COMPANY PLAN" means all Plans of which the Company during the last
six (6) years, is or was a Plan Sponsor, or to which 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 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 whose members include employees of the
Company.
"EMPLOYEE PLAN" means:
(i) any Company Plan, Company VEBA and Company Other Benefit
Obligation; and
(ii) any Plan and Other Benefit Obligation of which any ERISA
Affiliate is or was a Plan Sponsor, which is or was maintained by any
ERISA Affiliate, in which any such ERISA Affiliate participates or has
participated, or to which any such ERISA Affiliate contributes, has
contributed or has had an obligation to contribute, which Plan (A)
provides benefits to any current or former employee, officer, director
or service provider of the Company, or any dependents thereof, and (B)
(i) is subject to the funding requirements of IRC Sec. 412 and ERISA
Sec. 302, or (ii) is a Plan to which the requirements of IRC Sec.
4980B apply.
"ERISA AFFILIATE" means, with respect to the Company, any other
corporation or trade or business controlled by, controlling or under common
control with the Company within the meaning of IRC Section 414 or ERISA
Sec. 4001(a)(14) or Sec. 4001(b).
"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, and fringe benefits within
the meaning of IRC Section 132 or IRC Sec. 6039D, other bonus, incentive
compensation, deferred compensation, profit sharing, stock-option, stock
appreciation right, stock bonus, stock purchase,
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employee-stock ownership, savings, change-in-control,
supplemental-employment, layoff, salary continuation, retirement, pension,
health, life insurance, disability, accident, group insurance, vacation,
holiday, sick-leave or welfare plan and any other employee compensation or
benefit plan agreement, policy, practice, commitment, contract or
understanding (whether effective or terminated, written or unwritten).
"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).
"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(b)(i) of the Disclosure Letter contains a
complete and accurate list of all Company Plans, and material 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 defined benefit Pension Plan or a Title
IV Plan.
(ii) The Company has no liability for any ERISA Affiliate
with respect to any Plan.
(iii) Schedule 3.17(b)(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) The Company has no liability for any material future
obligations owed under any Company Plan or Company Other Benefit.
(c) Seller has delivered to Buyer:
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(i) a copy of each Company Plan and a summary plan
description for each Company Plan;
(ii) a copy of the Company's personnel manual;
(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 all collective
bargaining agreements pursuant to which contributions are being made
or obligations are owed by such entities;
(iv) a written description of any Employee Plan that is not
described in the Company's personnel manual;
(v) all insurance policies purchased by or to provide
benefits under any Employee Plan; and
(vi) the Form 5500 filed in each of the most recent three
plan years with respect to each Company Plan which is required to file
Form 5500 for such year, including all schedules thereto and the
opinions of independent accountants;
(d) The Company has received no notices or other correspondence that
were given by the IRS, the PBGC, the Department of Labor, or the Secretary
of Health and Human Services, or with respect to any Company Plan within
the three years preceding January 1, 2006, and through the date of this
Agreement.
(e) The Company has received a determination letter from the IRS for
each Plan of the Company that is a Qualified Plan.
(f) Seller represents and warrants that:
(i) The Company has materially performed all of its
obligations under all Employee Plans. 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 Employee Plan that
was not in accordance with the Company Plan and that could have a
material adverse economic consequence to the Company or to Buyer.
(iii) All Company Plans are, and each Company Plan, is, in
full compliance with all Legal Requirements (and the regulations,
rulings promulgated under all such Legal Requirements) and any
applicable collective bargaining agreement. Each Company Plan has been
operated in accordance with its terms. Furthermore,:
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(A) 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) The Company has no liability to the IRS with respect to
any Employee 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 Employee 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 Employee 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) No amount received by, or any asset of, any Company Plan
is subject to tax as unrelated business taxable income under IRC
Sec. 511.
(F) The Company, Employee Plan or employee, administrator or
agent thereof, is not and has not 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, the Company or
any employee, officer, director, administrator or agent under
HIPAA Sec. 1176 or Sec. 1177.
Except as set forth on Schedule 3.17(f) 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.
(iv) Other than claims for benefits submitted by
participants or beneficiaries, no claim against, or legal proceeding
involving, any Company Plan, is pending or, to Seller's Knowledge, is
Threatened.
(v) 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.
(vi) No Employee Plan has ever been subject to the funding
requirements of ERISA Sec. 302 and IRC Sec. 412.
(vii) 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
-25-
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.
(viii) 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.
(ix) 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.
(x) Except 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.
(xi) Seller and the Company have complied with the
provisions of ERISA Section 601 et seq. and IRC Section 4980B.
(xii) 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 required to "gross up" or
otherwise compensate any such person because of the imposition of any
excise tax on a payment to such person.
(xiii) The Company has no "Nonqualified Deferred
Compensation Plan" (as defined in Section 409A(d)(i) of the IRC).
(xiv) Except as set forth in Section 6.5 below, 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.
Except as set forth in Schedule 3.18 of the Disclosure Letter:
(i) the Company has received no notice that it is not in
material compliance with each 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;
-26-
(ii) to the Knowledge of Seller or the Company, 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 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, 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, 2000, 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 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, 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
material 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) 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.
To the Knowledge of Seller, (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.
(b)
(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
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(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.
3.20. Absence of Certain Changes and Events.
Since January 27, 2006, the Company has conducted its business only in the
Ordinary Course of Business, consistent with past practice and, except as
reflected in Schedule 3.4 of the Disclosure Letter, there has not been any:
(a) change in the Company's issued Membership Interests; grant of any
right to purchase Membership Interests of the Company; issuance of any
security convertible into Membership Interests; grant of any registration
rights; purchase, redemption, retirement, or other acquisition by the
Company of any Membership Interests; or declaration or payment of any
dividend or other distribution or payment in respect of Membership
Interests;
(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 $100,000;
(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 asset or property of the Company, including the
sale, lease, or other disposition of any Intellectual Property Assets of
the Company;
(h) cancellation or waiver of any claims or rights with a value to the
Company in excess of $100,000;
-28-
(i) material change in the accounting methods used by the Company
except as set forth in the footnotes to the Preliminary Closing Balance
Sheet; or
(j) 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 that involves performance of
services or delivery of goods or materials to the Company other than
sales of Products in the Ordinary Course of Business of an amount or
value in excess of $100,000 annually;
(ii) 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 $100,000 annually and which cannot be
terminated on 30 days notice without penalty;
(iii) 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;
(iv) 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);
(v) collective bargaining agreement and other written
Applicable Contract to or with any labor union or other employee
representative of a group of employees;
(vi) 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;
(vii) 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;
(viii) 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;
-29-
(ix) power of attorney that is currently effective and
outstanding;
(x) 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;
(xi) 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
(xii) amendment, supplement, and modification (whether oral
or written) in respect of any of the foregoing;
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 January 27, 2006, 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 Current Customer of the
Company as of January 27, 2006 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.
-30-
(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.
3.22. Insurance.
(a) Seller has delivered to Buyer a schedule 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.
(b) Schedule 3.22(b) of the Disclosure Letter describes, as of
February 24, 2006:
(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
February 24, 2006, 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.
(d) Except as set forth on Schedule 3.22(d) of the Disclosure Letter:
(i) All policies to which the Company is a party or that provide
coverage to the Company, or any director or officer of the Company:
(A) are valid, outstanding, and enforceable;
(B) are issued by an insurer that is financially sound and
reputable;
(C) taken together, provide adequate insurance coverage for
the assets and the operations of the Company for all risks normally
insured against by a Person carrying on the same business or
businesses as the Company;
(D) are sufficient for compliance with all Legal
Requirements and Contracts to which the Company is a party or by which
it is bound;
(E) will continue in full force and effect following the
consummation of the Contemplated Transactions; and
-31-
(F) do not provide for any retrospective premium adjustment
or other experienced-based liability on the part of the Company.
(ii) The Company has not received (A) any refusal of coverage or
any notice that a defense will be afforded with reservation of rights, or
(B) any notice of cancellation or any other indication that any insurance
policy is no longer in full force or effect or will not be renewed or that
the issuer of any policy is not willing or able to perform its obligations
thereunder.
(iii) The Company has paid all premiums due, and have otherwise
performed all of its respective obligations, under each policy to which the
Company is a party or that provides coverage to the Company or director
thereof.
(iv) The Company has given notice to the insurer of all claims of
which Seller or the Company has Knowledge that may be insured thereby.
3.23. Environmental Matters.
(a) To the Knowledge of Seller and the Company, the Company is in
material compliance with, and is not in material violation of or liable
under, any Environmental Law 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. Neither Seller nor the Company has any basis to expect, nor has any
of them received, since January 1, 2000, 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) The Company has not released or discharged, or permitted the
release or discharge, of any Hazardous Materials on any of the Facilities.
(c) 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.
(d) Neither Seller nor the Company has received, since January 1,
2000, 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.
-32-
(e) To the Knowledge of Seller and the Company, 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.
(f) To the Knowledge of Seller and the Company, there are no Hazardous
Materials present at levels greater than applicable action, trigger,
reporting or state Cleanup levels under Environmental Laws 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, or deposited, discharged, released or located in or on land,
surface water, groundwater, ambient air (including indoor air), sumps, or
any other part of the Facilities. Since January 1, 2000, 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.
(g) To the Knowledge of Seller and the Company since January 1, 2000,
there has been no Release or Threat of Release, of any Hazardous Materials
at, from or migrating onto the Facilities or at, from or migrating onto any
other properties in which the Company has or had an interest.
(h) Seller has delivered to Buyer true and complete copies and results
of any reports, studies, investigations, analyses, tests, sampling 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, 2000.
(i) To the Knowledge of Seller and the Company, no underground storage
tanks are located or were formerly located on any Facilities, or any other
properties in which the Company has or had an interest.
3.24. Employees.
(a) Schedule 3.24(a) of the Disclosure Letter contains a complete and
accurate list identifying each employee of the Company (formerly employed
by Anderson Services) and indicating (a) hire date, (b) department, (c)
rate of pay, (d) work state, (e) 2005 bonus paid, (f) personal time off (in
dollars), (g) vacation (in dollars) and (h) accrued vacation (in dollars).
(b) No Existing Employee at any time was or is a party to any
employment, severance or similar agreement with Anderson Services or the
Company, and no Existing Employee is entitled to any bonus payments, and,
except as set forth on Schedule 3.24(b), there are no bonus arrangements or
commitments with any Existing Employee for which the Company has or could
have any obligation or liability.
(c) No Existing Employee is a party to, or is otherwise bound by, any
agreement or arrangement, including any confidentiality, noncompetition, or
proprietary
-33-
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, Anderson Services 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.
(d) The Company has no liabilities to any retired employee or director
of the Company, or their dependents, with respect to any pension benefit,
medical insurance coverage, retiree life insurance coverage, and other
benefits, except to the extent of any vested benefits under Company Plans.
3.25. Labor Relations.
Except as set forth on Schedule 3.25 of the Disclosure Letter:
(a) Since January 1, 2000, 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 is reasonably likely to result in a
liability to the Company in excess of the amount reserved for such claims
on the Preliminary Closing Balance Sheet. 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 leased from another employer, except as would not result in
liability to the Company.
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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") owned by the Company;
(ii) all patents and patent applications (collectively,
"Patents") owned by the Company;
(iii) all copyrights in both published works and unpublished
works (collectively, "Copyrights") owned by the Company;
(iv) all rights in mask works (collectively, "Rights in Mask
Works") owned by the Company; 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 by the Company as licensee or
licensor, in each case which are not part of the public knowledge or
literature.
(b) Agreements. The Company has no 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
agreement relating to Intellectual Property Assets.
(c) Intellectual Property Assets. Except for trade secrets, the
Company owns no Intellectual Property Assets. Neither Seller nor the
Company makes any representation or warranty that the Intellectual Property
Assets include all intangible rights, intellectual properties or trade
secrets used by the Company in the Ordinary Course of Business or that any
such intangible rights, intellectual properties or trade secrets will
continue to be available to the Company following the Closing, except as
specifically provided in the License Agreement or the Transition Services
Agreement.
(d) Patents. The Company owns no material Patents.
(e) Trademarks. The Company owns no material Marks.
(f) Copyrights. The Company owns no material Copyrights.
(g) Trade Secrets. Except as set forth in Schedule 3.26(g) of the
Disclosure Letter:
(i) Seller and the Company have taken reasonable precautions to
protect the secrecy, confidentiality, and value of the Company's Trade
Secrets.
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(ii) No Trade Secret is subject to any adverse claim or has been
challenged or Threatened in any way.
3.27. Certain Payments.
Since January 1, 2000, 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.
(a) No representation or warranty of Seller in this Agreement and no
statement in the Disclosure Letter omits to state a material fact necessary
to make the statements herein or therein, in light of the circumstances in
which they were made, not misleading.
(b) There is no fact known to either Seller that has specific
application to either Seller or the Company (other than general economic or
industry conditions) and that materially adversely affects or, as far as
either Seller can reasonably foresee, materially threatens, the assets,
business, prospects, financial condition, or results of operations of the
Company that has not been set forth in this Agreement or the Disclosure
Letter.
3.29. Relationships With Related Persons.
(a) Neither Seller nor any Related Person of Seller or of the 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, except the rights and properties licensed pursuant to the License
Agreement and the rights and properties used to fulfill Seller's
obligations under the Transition Services Agreement, and other intangible
rights, intellectual properties and trade secrets which belong to Seller
and have been made available to the Company prior to but not after the
Closing.
(b) 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 which will not be terminated at Closing or will not be reflected in
the Transition Services Agreement and/or the License Agreement.
-36-
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.
3.31. Solvency of Anderson Services.
(a) Immediately following the transfer of Assets by Anderson Services
to the Company, Anderson Services was Solvent.
(b) For purposes of this Section 3.31:
"Solvent when used with respect to Anderson Services means that,
immediately following the Closing Date, (x) the amount of the Present
Fair Salable Value of its assets will, as of such date, exceed all of
its liabilities, contingent or otherwise, as of such date, (y)
Anderson Services will not have, as of such date, an unreasonably
small amount of capital for the business in which it is engaged or
will be engaged and (z) Anderson Services will be able to pay its
Debts as they become absolute and mature, taking into account the
timing of and amounts of cash to be received by it and the timing of
and amounts of cash to be payable on or in respect of its
indebtedness;
"Debt" means liability on a "Claim";
"Claim" means (y) any right to payment, whether or not such a
right is reduced to judgment, liquidated, unliqudiated, fixed,
contingent, matured, unmatured, disputed, undisputed, legal,
equitable, secured or unsecured or (z) the right to an equitable
remedy for breach on performance if such breach gives rise to a right
to payment, whether or not such equitable remedy is reduced to
judgment, liquidated, unliqudiated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured or
unsecured; and
"Present Fair Salable Value" means the amount that may be
realized if the aggregate assets of Anderson Services (including
goodwill) are sold as an entirety with reasonable promptness in an
arms-length transaction under present conditions for the sale of
comparable business enterprises.
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.
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(a) This Agreement and the Contemplated Transactions have been duly
authorized by Buyer. 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.
(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 Buyer's Board of Directors
and/or stockholders;
(iii) any Legal Requirement or Order to which Buyer may be
subject; or
(iv) any Contract to which either 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.
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4.3. Investment Intent.
Buyer: (a) is acquiring the Membership Interests 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 Membership Interests, (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 Membership Interests, (d) understands that the Membership
Interests (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 Membership Interests.
4.4. Certain Proceedings.
There is no pending Proceeding that has been commenced against Buyer 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.
Neither Buyer nor any of its officers and agents have incurred any
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement, and Buyer 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.
4.6. Continuation of Company Business.
Buyer has no present intention to close the business of the Company,
relocate the business of the Company or terminate a significant number of
employees of the Company during the sixty (60) day period following the date
hereof.
4.7. Buyer's 401(k) Plan.
Each Qualified Plan of the Buyer into which funds will be transferred
pursuant to Section 6.5 below 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.
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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, the Company and their
respective Affiliates and 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(d), "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 or document
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) 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 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 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 without limitation
costs of Cleanup and reasonable attorneys' and consultants' fees and expenses
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
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Facilities or any other properties in which the Company has or had an
interest after June 30, 1998 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 at any time; 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 after June 30,
1998 and prior to the Closing Date, or (B) any Hazardous Activities that
were conducted after June 30, 1998 and prior to the Closing Date by the
Company or any predecessors 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 Released by the Company
or any predecessor of the Company or Related Person at any time after June
30, 1998 and prior to the Closing Date.
Buyer 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. 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,
Seller 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 Buyer undertakes commercially
reasonable efforts in undertaking any Cleanup or resolving any other proceedings
and does not prejudice the rights or potential liabilities of Seller.
5.4. Indemnification and Payment of Damages by Buyer.
Buyer will indemnify and hold harmless Seller and its Affiliates and
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 or documents delivered by Buyer pursuant to
this Agreement;
(b) any Breach by Buyer of any covenant or obligation of Buyer set
forth in this Agreement;
(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.
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 (Authority; No
Conflict), 3.3 (Capitalization), 3.6 (Title
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to Properties; Encumbrances), 3.15 (Taxes), 3.17 (Employee Benefits), 3.23
(Environmental Matters) and 4.2 (Authority; No Conflict), and a claim for
indemnification or reimbursement pursuant Section 5.2(d), in any such case
unless on or before April 1, 2008 (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.
(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 Sections 3.2
(Authority; No Conflict), 3.3 (Capitalization), or 4.2 (Authority; No
Conflict), or a claim for indemnification or reimbursement pursuant to
Section 5.2(b), 5.2(d), 5.4(b) or 5.4(c) 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 Sections 3.6 (Title to Properties;
Encumbrances), 3.15 (Taxes), 3.17 (Employee Benefits) or 3.23
(Environmental Matters) may be made at any time during the six 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.
As used herein the term "NET WORTH GAP" shall mean the amount by which the
Adjusted Closing Net Worth is less negative than negative $16.0 million. For
example, if the Adjusted Closing Net Worth is negative $14.0 million, the Net
Worth Gap will be $2.0 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 not have any liability (for indemnification or otherwise) with
respect to the matters described in Section 5.4 until the total of all Damages
with respect to such matters exceeds $50,000, but once the $50,000 threshold is
reached, Seller may recover all of its Damages, without regard to the threshold.
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.
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5.8. Maximum Liability.
Notwithstanding anything in this Article 5 to the contrary, 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 the Purchase
Price plus the amount of the Intercompany Debt.
5.9. Additional Limitations of Liability.
Notwithstanding anything in this Article 5 to the contrary:
(a) 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.
(b) 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.
(c) 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.
(d) 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
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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 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 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
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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.
5.13. Payment of Indemnification Claims and Adjustment Amount.
(a) Form and Method of Payment. In the event that Seller shall owe an
Adjustment Amount to Buyer pursuant to Section 2.5 hereof or shall become
liable, whether by mutual agreement or final adjudication by a court of
competent jurisdiction, to any Buyer Indemnified Persons for an
indemnification claim pursuant to Section 5.2 or 5.3 hereof, Seller shall,
at its election, either (a) promptly pay the full amount of such Adjustment
Amount or indemnity claim to the Buyer Indemnified Persons in cash or (b)
sell to Buyer, pursuant to the procedures set forth below, one or more of
the Designated Assets (as defined below) (a "SALE ELECTION"). As used
herein, the term "DESIGNATED ASSETS" means the Products supply business of
Seller and its Affiliates in each of the territories highlighted with
shading on Schedule 5.13(a).
If Seller makes a Sale Election in order to pay all or a portion of
the Adjustment Amount or an indemnification claim, Seller shall so notify
Buyer within three (3) days following the date the amount of the Adjustment
Amount has been finally determined pursuant to Section 2.6 hereof or ten
(10) days following the date such indemnification claim has been mutually
agreed to or finally adjudicated. If Seller makes a Sale Election either or
both of the Designated Assets shall be sold to Buyer on substantially the
same
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terms and conditions as set forth in this Agreement, mutatis mutandis,
including without limitation by using the same methodology utilized in this
Agreement to determine the Purchase Price (i.e., 22% of trailing annual
sales minus the amount of Intercompany Debt to be paid at closing, together
with a purchase price adjustment if negative net worth exceeds an amount
determined in the same manner that $16.0 million was determined for
purposes of Section 2.5 hereof). The purchase price so determined for the
Designated Assets shall be offset against the full amount of such any
indemnification claim. If the Adjustment Amount or the amount of such
indemnification claim is less than the sales price for the Designated
Assets so determined, the difference shall be paid by Buyer to Seller at
the closing of such sale. If the Adjustment Amount or the amount of such
indemnification claim is less than the purchase price for the Designated
Assets so determined, the full amount of such purchase price shall be set
off against such indemnification claim and the remainder of the Adjustment
Amount shall be paid by Seller to Buyer or such indemnification claim shall
be paid by Seller to the Buyer Indemnified Persons in cash, such payment to
be made promptly upon the determination by Seller and Buyer of the amount
of the purchase price for the Designated Assets.
Notwithstanding the foregoing, nothing set forth herein shall obligate
Buyer to purchase any Designated Assets unless the results of its due
diligence investigation and analysis thereof prove satisfactory to it in
its sole determination and unless a definitive agreement with respect to
any such purchase is executed and delivered by Seller and Buyer. In the
event Seller has made a Sale Election but the purchase and sale of the
subject Designated Assets does not occur within ninety (90) days of the
making of such Sale Election, Seller shall promptly pay to Buyer the
Adjustment Amount or to the Buyer Indemnification Persons in cash the full
amount of the corresponding indemnity claim.
(c) Substitution of Collateral. Seller shall be entitled, with the
prior written consent of Buyer, which consent shall not be unreasonably
withheld, to remove the Designated Assets from the obligations and
encumbrances imposed by this Section 5.13 and, in lieu thereof, substitute
cash collateral (consisting of cash and/or cash equivalents) to secure
Seller's indemnification obligations under Sections 2.5, 5.2 and 5.3 in an
aggregate amount of Two Million Dollars ($2,000,000) (the "CASH
COLLATERAL"). In addition, if the Designated Assets as sold to Buyer
pursuant to a Sale Election, Seller shall post the Cash Collateral
simultaneously with the closing of any such sale. The Cash Collateral shall
be in the form of cash, a letter of credit with a bank having assets of at
least $500 million or a negotiable certificate of deposit, and in each case
possession of such cash or instrument shall be obtained by Buyer. In the
event the Cash Collateral is substituted for the Designated Assets pursuant
to this Section 5.13(c), Seller shall execute and deliver such security
agreements and financing statements as Buyer shall reasonably request. In
the event that any of the Cash Collateral is foreclosed upon (whether by
letter of credit draw or otherwise) Seller shall promptly replenish the
Cash Collateral with an identical amount of Cash Collateral as the amount
foreclosed upon.
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5.14. Return of Payments.
In the event Seller or Buyer makes any payment to a Buyer Indemnified
Person or a Seller Indemnified Person, as the case may be, on account of the
indemnification obligations set forth in Section 5.2, 5.3 or 5.4 and such
payment is thereafter annulled, avoided, set aside, rescinded, invalidated,
declared to be fraudulent or preferential or otherwise required to be refunded
or repaid, then to the extent of such payment, the obligations of Seller or
Buyer, as the case may be, shall remain in full force and effect, as fully as if
such payment had never been made.
6. ADDITIONAL AGREEMENTS
6.1. Seller Covenants.
(a) Nonsolicitation and Noncompetition - Current Customers. Seller
agrees for a period beginning on the date hereof and ending on the fourth
(4th) anniversary of the date hereof (the "RESTRICTION PERIOD") (i) not to
directly or indirectly solicit the trade or business of, or trade or do
business with, any Current Customer with respect to Products for sale by
such Current Customers in stores located in the Restricted Territory and
(ii) directly or indirectly not to compete with, or attempt to compete
with, Buyer, the Company or any of their Affiliates with respect to any
Current Customer with respect to Products for sale by such Current
Customers in stores located in the Restricted Territory. Notwithstanding
the foregoing, an Affiliate of Seller may continue to sell books to
Wal-Mart Stores, Inc. in the Restricted Territory; Anderson Press
Incorporated or its subsidiaries, as publisher/manufacturer, may continue
to solicit sales of books relating to numismatic and philatelic books and
sales of children's books, coloring books, stickers and similar children's
products; and Media Solutions may continue to sell Products to
Books-A-Million and Dollar General.
(b) Nonsolicitation - Suppliers and Employees. During the Restriction
Period, Seller shall not directly or indirectly (i) solicit the trade of,
or trade with, any supplier of the Company such that the 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 or her employment or other relationship with the Company;
provided that this Section 6.1(b) shall not apply to any general
advertisements or solicitations for employees.
(c) Equitable Relief. Seller acknowledges and agrees that Buyer or the
Company would be irreparably damaged if any of the provisions of this
Section 6.1 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.
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(d) Severability. It is the intent of the parties that each provision
of this Section 6.1 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 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 6.1 enforceable
in such jurisdiction.
6.2. Company Change of Name.
Simultaneously with the Closing, the name of the Company shall be changed
to eliminate "Anderson" and the use of the word "Anderson" or "ANCO" or any
similar word or variation thereof by the Company following the Closing shall be
limited to the rights and privileges granted in the License Agreement.
6.3. Access to Records.
Each party agrees that the other party 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, to have reasonable access to and to make copies of the
financial and tax business records, distribution records, customer records and
employee records of the Company which are in the other party's custody or
control. Seller shall retain or cause to be retained such records for a period
of five years following the Closing, after which time Seller may destroy or
otherwise dispose of such business records without Buyer's consent but with the
notice set forth in the following sentence. Notwithstanding the foregoing, if
Seller notifies Buyer in writing that it desires to dispose of such business
records, Buyer shall have a period of sixty (60) days following its receipt of
such notice to obtain possession thereof. If and to the extent Buyer does not
elect to obtain such possession, Seller shall be entitled to dispose of such
business records as described in such notice.
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6.4. 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 one year period following the
Closing Date, Buyer shall cause the Company to assign to 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 one year period following
the Closing Date and as to which any Buyer Indemnified Person has made a
claim pursuant to Section 5.2.
6.5. 401(k) Profit Sharing Plan. Effective as of the Closing Date, Seller
shall take, and shall have caused Anderson Services to take, all action
necessary and appropriate to fully vest (notwithstanding the vesting status as
of the date such employees ceased to be employees of Anderson Services) those
employees of the Company immediately prior to the Closing who continue to be
employed by the Company after the Closing who have account balances under the
401(k) Profit Sharing Plan maintained by Seller on the Closing Date or by
Anderson Services prior thereto. As soon as practical after the Closing Date,
Seller shall cause to be transferred from the trustee of Seller's 401(k) Profit
Sharing Plan to the trustee of Buyer's 401(k) 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
401(k) Profit Sharing Plan determined as of the date of transfer in accordance
with the valuation methods of Seller's 401(k) Profit Sharing Plan, and Buyer
shall establish account balances for each of such employees in the amount of the
vested balance transferred. Buyer and Seller shall use their best efforts to
ensure that any loan balances outstanding under Seller's 401(k) Profit Sharing
Plan for any continued employees shall be transferred to Buyer's 401(k) Plan
without acceleration or default.
6.6. Facilities Leases. As promptly as practicable following the Closing,
Seller shall and shall cause its Affiliates to take all commercially reasonable
actions to assign all right, title and interest of the lessee under each of the
real property leases identified on Schedule 6.6 (but only if and to the extent
directed by Buyer) to the Company and obtain each of the landlord's consents to
such assignment and, if required, to the sale of the Membership Units to Buyer.
Buyer will be responsible for any payments required to be made to landlords in
order to obtain any consents to such assignments
6.7 Letter of Credit. No later than ten (10) business days following the
Closing, Buyer shall arrange a substitute letter of credit having a face amount
not in excess of $1.5 million to be issued to AIG as collateral security for the
Applicable W/C Claims, which letter of credit will be renewed as necessary to
secure the Applicable W/C Claims.
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7. TAX COVENANTS
7.1. Seller's Liability.
Seller will be solely responsible for the following Taxes (collectively,
the "PRE-CLOSING TAX LIABILITIES"): (i) all Taxes, including without limitation
Income Taxes, imposed upon the Seller and/or the Company with respect to
Pre-Closing Tax Periods and which are attributable to the operation of the
Company, including without limitation income derived by the Company, on or prior
to the Closing Date, and (ii) with respect to Straddle Periods (if any), all
Taxes, including without limitation, Income Taxes, imposed upon the Company or
the Seller 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, expenses, deductions and credits incurred by the
Company with respect to Pre-Closing Tax Periods and, with respect to Straddle
Periods (if any), the benefit of all Tax losses, expenses, deductions and
credits 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.
7.2. Buyer's Liability.
Buyer will be solely responsible for any and all Taxes (collectively, the
"POST-CLOSING TAX LIABILITIES") of, or payable by, the Company which do not
constitute Pre-Closing Tax Liabilities, including without limitation, 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, expenses,
deductions and credits incurred by the Company to which Seller is not entitled
pursuant to Section 7.1, including, in the case of all Tax losses, expenses,
deductions and credits 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 7.3.
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 laws, elect with the relevant Tax authority or
agency to treat for all purposes the date immediately preceding the Closing Date
(the "PRE-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
Pre-Closing Date will be deemed equal to the amount which would be payable if
the taxable year or period ended on the Pre-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) and the books of the Company will be deemed to be closed
as of the end of the day on the Pre-Closing Date.
7.4. Preparation of Tax Returns.
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
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extensions of the due date for filing any such Income Tax Returns) for any
Pre-Closing Tax 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.
Buyer will prepare and file (or cause to be prepared and filed) in a timely
manner the Income Tax Returns of the Company for any 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 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 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 notice of the disagreement, such disputed items shall be submitted
to the Atlanta, Georgia office of PricewaterhouseCoopers, LLP for final
determination, which determination shall be binding upon Buyer and Seller.
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 Atlanta, Georgia office of
PricewaterhouseCoopers, LLP 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. 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.
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
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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 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.
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 "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.
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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 Membership Interests, 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 Membership Interests 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 and Seller mutually determine. Unless consented to by the
other party in advance or required by Legal Requirements, prior to the Closing
each Party 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.
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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: Anderson News, LLC
6016 Brookvale Lane Suite 151
Knoxville, TN 37919
Attn: Frank Stockard
Fax: 865-583-3927
with copies to: Timothy K. Corley
Timothy K. Corley, P.C.
2815 Darby Drive
Florence, AL 35631
Fax: 256-760-0083
If to Buyer:
Source Interlink Companies, Inc.
27500 Riverview Center Blvd.,
Suite 400
Bonita Springs, Florida 34134
Attention: General Counsel
Facsimile No.: 239 949-7689
with a copy to:
Cohen & Grigsby, P.C.
11 Stanwix Street, 15th Floor
Pittsburgh, Pennsylvania 15222
Attention: Daniel L. Wessels, Esq.
Facsimile No.: 412 209-0672
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 Delaware, County of New Castle, or, if it
has or can acquire jurisdiction, in the United States District Court for
District of Delaware, and each of the parties consents to the jurisdiction of
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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 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 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 forth in the last sentence of
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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 Section 5.4, 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.
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.
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9. 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 obligations to any Releasor on account of claims made by any third parties,
including, without limitation, any claims by any Releasor for indemnification
therefor, (d) 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, (e) the Company's
obligations to pay or provide to any Releasor any accrued but unpaid
compensation or any unpaid reimbursements of business expenses incurred by any
Releasor, or (f) any obligations owed to any Releasor or on behalf of any
Releasor under any employee benefit plan or program maintained by the Company.
10. CONFIDENTIALITY
(a) As used in this Section the "CONFIDENTIAL INFORMATION" of the
Company means all information concerning or related to the business, operations,
financial condition or prospects of the Company, regardless of the form in which
such information appears and whether or not such information has been reduced to
a tangible form, and specifically includes (i) all information regarding the
officers, directors, employees, equity holders, customers, suppliers,
distributors, sales representatives and licensees of the Company in each case
whether present or prospective, (ii) all inventions, discoveries, trade secrets,
processes, techniques, methods, formulae, ideas and know-how of the Company,
(iii) all financial statements, audit reports, budgets and business plans or
forecasts of the Company and (iv) the Transaction Documents and the transactions
contemplated thereby; provided, that the Confidential Information of the Company
does not include (A) information which is or becomes generally known to the
public through no act or omission of Seller and (B) information which has been
or hereafter is lawfully obtained by Seller from a source other than the Company
(or any of its Affiliates or their respective officers, directors, employees,
equity holders or agents) so long as, in the case of information obtained from a
third party, such third party was or is not, directly or indirectly, subject to
an obligation of confidentiality owed to the Company or any of its Affiliates at
the time such Confidential Information was or is disclosed to Seller. From and
after the Closing Date, all Confidential Information of the Company or the
Assets will be deemed to be Confidential Information of Buyer, and Seller will
have no further rights with respect thereto.
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Exhibit 2.4
SIGNATURE PAGE TO UNIT PURCHASE AGREEMENT
(b) Except as otherwise permitted by subsection (c) below, Seller
agrees that it will not, without the prior written consent of Buyer, disclose or
use for its own benefit any Confidential Information of the Company.
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. Leslie Flegel
------------------------------------
Name: S. Leslie Flegel
Title: Chairman & CEO
SELLER
ANDERSON NEWS, LLC
By: /s/ John W. Campbell
------------------------------------
Name: John W. Campbell
Title: Sr. VP Finance