EXHIBIT 2.1
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Execution Copy
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SECURITIES PURCHASE AGREEMENT
by and among
INTERLINE BRANDS, INC.,
AMERICAN SANITARY INCORPORATED,
GOLDER, THOMA, XXXXXXX, XXXXXX FUND V, L.P.,
GTCR ASSOCIATES V,
GTCR CAPITAL PARTNERS, L.P.
and
AMSAN, LLC
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Dated May 23, 2006
TABLE OF CONTENTS
PAGE
ARTICLE I THE TRANSACTION.....................................................1
1.1. Purchase of Securities..........................................1
1.2. Closing Calculations............................................2
1.3. Closing Balance Sheet Calculation...............................3
1.4. Post-Closing Adjustment Payment.................................5
1.5. Excluded Assets and Excluded Liabilities........................5
ARTICLE II CLOSING ...........................................................8
2.1. The Closing.....................................................8
2.2. Closing Deliveries..............................................8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE COMPANY......9
3.1. Organization...................................................10
3.2. Authority......................................................10
3.3. No Conflict....................................................11
3.4. Capitalization.................................................11
3.5. Subsidiaries...................................................12
3.6. Financial Statements; Undisclosed Liabilities..................12
3.7. Absence of Certain Changes or Events...........................13
3.8. Title; Condition of Assets.....................................13
3.9. Real Property..................................................14
3.10. Leases; Leased Real Property...................................14
3.11. Intellectual Property..........................................15
3.12. Contracts......................................................16
3.13. Litigation.....................................................16
3.14. Compliance with Laws; Permits..................................17
3.15. Environmental Matters..........................................17
3.16. Employee Benefit Matters.......................................19
3.17. Taxes..........................................................21
3.18. Consents.......................................................22
3.19. Employee Relations.............................................22
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3.20. Transactions with Related Parties..............................23
3.21. Insurance......................................................24
3.22. Brokers........................................................24
3.23. Compensation Arrangements; Bank Accounts;
Officers and Directors.........................................24
3.24. Relationship with Significant Customers........................24
3.25. Relationship with Suppliers....................................25
3.26. Products Liability.............................................25
3.27. WARN Act.......................................................25
3.28. ABM Contract...................................................26
3.29. Disclosure.....................................................26
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE LENDERS.....................26
4.1. Organization...................................................26
4.2. Ownership of Stock of the Parent and Indebtedness..............26
4.3. Authority; Effect of Agreement.................................26
4.4. No Conflict....................................................26
4.5. Brokers........................................................27
4.6. Litigation.....................................................27
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE BUYER........................27
5.1. Organization...................................................27
5.2. Corporate Power and Authority..................................27
5.3. No Conflict....................................................28
5.4. Consents.......................................................28
5.5. Litigation.....................................................28
5.6. Brokers........................................................28
5.7. Investment Representation......................................28
5.8. Financing......................................................29
ARTICLE VI COVENANTS.........................................................29
6.1. HSR Act........................................................29
6.2. Cooperation by the Lenders, the Parent, the Buyer
and the Company................................................29
6.3. Conduct of the Business Pending Closing........................30
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(continued)
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6.4. Cooperation re Financial Statements............................31
6.5. Access.........................................................32
6.6. Waivers and Releases by the Lenders, the Parent
and Limited Liability Company Managers.........................32
6.7. Resignations...................................................32
6.8. Notification...................................................33
6.9. Insurance......................................................33
6.10. Exclusivity....................................................33
6.11. Confidentiality................................................33
6.12. Non-Compete....................................................34
6.13. Access to Books and Records....................................36
6.14. Further Assurances.............................................36
6.15. Employment and Benefit Arrangements............................36
6.16. Conditions.....................................................36
6.17. Contact with Customers and Suppliers...........................37
6.18. Commitment Letter..............................................37
6.19. Buyer Confidentiality..........................................38
6.20. Delivery of Amendment(s) to Disclosure Schedules...............38
6.21. Excluded Assets and Excluded Liabilities.......................38
6.22. Stockholder Approval...........................................38
6.23. Confidentiality Agreements.....................................38
6.24. Lease Consents.................................................38
ARTICLE VII CONDITIONS TO THE BUYER'S OBLIGATIONS............................39
7.1. Representations and Warranties True and Correct................39
7.2. Covenants and Agreements Performed.............................39
7.3. Seller Closing Certificate.....................................39
7.4. No Prohibition or Proceedings..................................39
7.5. Consents.......................................................40
7.6. Opinion........................................................40
7.7. FIRPTA Certificate.............................................40
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PAGE
7.8. Material Adverse Effect........................................40
7.9. Financing......................................................40
7.10. Excluded Assets................................................40
7.11. Escrow Agreement...............................................40
7.12. Waivers and Releases...........................................40
7.13. Organizational Materials.......................................40
7.14. Stockholder Approval...........................................41
7.15. Confidentiality Agreements.....................................41
ARTICLE VIII CONDITIONS TO THE LENDERS', THE PARENT'S AND
THE COMPANY'S OBLIGATIONS.......................................41
8.1. Representations and Warranties True and Correct................41
8.2. Covenants and Agreements Performed.............................41
8.3. Buyer Closing Certificate......................................41
8.4. No Prohibition or Proceedings..................................41
8.5. Governmental Consents..........................................41
8.6. Escrow Agreement...............................................42
8.7. Inventory Purchase Agreement...................................42
8.8. Organizational Materials.......................................42
ARTICLE IX TERMINATION PRIOR TO CLOSING......................................42
9.1. Termination....................................................42
9.2. Effect of Termination..........................................43
ARTICLE X TAX MATTERS........................................................43
10.1. Tax Treatment of Transaction...................................43
10.2. Tax Indemnification............................................44
10.3. Assistance and Records.........................................45
10.4. Transfer Taxes.................................................45
ARTICLE XI SURVIVAL AND INDEMNIFICATION......................................45
11.1. Survival.......................................................45
11.2. General Indemnification........................................46
11.3. Insurance and Taxes............................................50
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TABLE OF CONTENTS
(continued)
PAGE
11.4. Sole Remedy....................................................51
11.5. Treatment of Indemnity Payments................................51
11.6. Acknowledgment of the Buyer....................................51
11.7. Disclosure Generally...........................................51
ARTICLE XII MISCELLANEOUS....................................................52
12.1. Interpretive Provisions........................................52
12.2. Successors and Assigns.........................................52
12.3. Headings.......................................................53
12.4. Modification and Waiver........................................53
12.5. Expenses.......................................................53
12.6. Notices........................................................53
12.7. Governing Law; Consent to Jurisdiction.........................54
12.8. Public Announcements...........................................55
12.9. No Third Party Beneficiaries...................................55
12.10. Counterparts...................................................55
12.11. Delivery by Facsimile..........................................55
12.12. Construction...................................................55
12.13. Buyer Deliveries...............................................56
12.14. Entire Agreement...............................................56
ARTICLE XIII CERTAIN DEFINITIONS.............................................56
13.1. "Agent"........................................................56
13.2. "Ancillary Agreements".........................................56
13.3. A "business day"...............................................56
13.4. "Cash".........................................................56
13.5. "Closing Date Incentive Award Payments"........................56
13.6. "Code".........................................................56
13.7. "Contracts"....................................................56
13.8. The term "control" (including the terms "controlled by" and
"under common control wi57")
13.9. "Designated Governmental Proceeding"...........................57
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13.10. "Employee".....................................................57
13.11. "Former Employee"..............................................57
13.12. "Encumbrances".................................................57
13.13. "Environmental Laws"...........................................57
13.14. "GAAP" ........................................................58
13.15. "Hazardous Substances".........................................58
13.16. "Indebtedness".................................................58
13.17. The terms "knowledge," "to the knowledge" or "known"...........58
13.18. "Law"..........................................................58
13.19. "Lease Escrow Amount"..........................................58
13.20. "Losses" ......................................................58
13.21. "Material Adverse Effect"......................................59
13.22. "Net Working Capital"..........................................59
13.23. "Permitted Encumbrances".......................................59
13.24. "Person" ......................................................60
13.25. "Significant Customer".........................................60
13.26. "Transaction Expenses".........................................60
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TABLE OF CONTENTS
PAGE
EXHIBITS
A. Form of Inventory Purchase Agreement
B. Form of Escrow Agreement
C. Commitment Letter
D. Form of Waiver by the Lenders
E. Form of Waiver by the Parent
F-1. Form of Xxxxxxxx & Xxxxx LLP's Opinion
F-2. Form of Xxxxxxxxxx Xxxxxxxx LLP's Opinion
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DISCLOSURE SCHEDULES
1.2 Closing Calculations
1.5 Excluded Assets and Excluded Liabilities
2.2(b) Releases
3.1(a) Organization
3.1(b) Organization
3.1(c) Organization
3.3 No Conflict
3.4 Capitalization
3.5 Subsidiaries
3.6(a) Financial Statements; Undisclosed Liabilities
3.6(b) Financial Statements; Undisclosed Liabilities
3.6(c) Financial Statements; Undisclosed Liabilities
3.7 Absence of Changes or Events
3.8(a) Title; Condition of Assets
3.10 Leases; Leased Real Property
3.11 Intellectual Property
3.12.1 Contracts
3.13 Litigation
3.14.1 Compliance with Laws; Permits
3.14.2 Compliance with Laws; Permits
3.15.1 Environmental Matters
3.15.3 Environmental Matters
3.16.1 Employee Benefit Matters
3.16.2 Employee Benefit Matters
3.18 Consents
3.19.1 Employee Relations Matters
3.19.2 Employee Relations Matters
3.20 Transactions with Related Parties
3.21.1 Insurance
3.21.2 Insurance
3.23 Compensation Arrangements; Bank Accounts; Officers and Directors
3.24 Relationship with Significant Customers
3.25.1 Relationship with Suppliers
3.26.1 Products Liability
3.26.2 Products Liability
4.2 Ownership of Stock of the Parent and Indebtedness
5.3 No Conflict
5.4 Consents
6.12(c)(i) Certain Employees
6.12(c)(ii) Certain Employees
6.12(c)(iii) Certain Employees
6.12(c)(iv) Certain Employee
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6.12(c)(v) Certain Employee
6.23 Confidentiality Agreements
6.24 Certain Consents
10.1 Tax Treatment of Transaction
11.2.2 General Indemnification
ix
DEFINED TERMS
Page
2005 Balance Sheet............................................................3
280G Shareholder Vote........................................................21
ABM Contract.................................................................26
Agent........................................................................56
Agreement.....................................................................1
Allocation Principles........................................................43
Ancillary Agreements.........................................................56
Annual Reg. S-X Financial Statements.........................................31
Associates V..................................................................1
Audited Financial Statements.................................................12
Base Consideration............................................................2
Benefit Plans................................................................19
Business.....................................................................34
business day.................................................................56
Buyer.........................................................................1
Buyer Closing Certificate....................................................41
Buyer Covenants..............................................................47
Buyer Indemnified Parties....................................................46
Cap..........................................................................47
Capital Partners..............................................................1
Cash.........................................................................56
Closing.......................................................................8
Closing Balance Sheet.........................................................3
Closing Date..................................................................8
Closing Date Incentive Award Payments........................................56
Closing Payment...............................................................2
Closing Statement.............................................................2
Code.........................................................................56
Commitment Letter............................................................29
Company.......................................................................1
Company and Parent Pre-Closing Covenants.....................................46
Company Unaudited Financial Statements.......................................12
Confidential Information.....................................................33
Confidentiality Agreements...................................................38
Contracts....................................................................56
control......................................................................57
controlled by................................................................57
Debt Financing...............................................................29
Deductible...................................................................47
Designated Governmental Proceeding...........................................57
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Designated Industry..........................................................35
DGCL.........................................................................11
Disclosure Schedules.........................................................10
Dispute Resolution Auditor....................................................4
DOJ..........................................................................29
Dollar Limited Claims........................................................47
Employee.....................................................................57
Encumbrances.................................................................57
Environmental Laws...........................................................57
Environmental Permits........................................................17
ERISA........................................................................19
ERISA Affiliate..............................................................19
Escrow Account................................................................8
Escrow Agent..................................................................8
Escrow Agreement..............................................................8
Escrow Amount.................................................................8
Estimated Cash................................................................2
Estimated Closing Date Incentive Award Payments...............................2
Estimated Indebtedness........................................................2
Estimated Net Working Capital.................................................2
Estimated Net Working Capital Adjustment......................................2
Estimated Transaction Expenses................................................2
Excluded Assets...............................................................5
Excluded Assets Transaction...................................................5
Excluded Assets Transaction Liabilities.......................................7
Excluded Facilities...........................................................5
Excluded Leases...............................................................6
Excluded Liabilities..........................................................5
Fee Letter...................................................................29
Fictitious Names.............................................................10
Final Purchase Price..........................................................5
Financial Statements.........................................................12
Former Employee..............................................................57
FTC..........................................................................29
Fund V........................................................................1
GAAP.........................................................................58
Hazardous Substances.........................................................58
HSR Act......................................................................29
Incremental Tax Cost.........................................................44
Indebtedness.................................................................58
Indemnitee...................................................................49
Indemnitor...................................................................49
Intellectual Property........................................................15
Inventory Purchase Agreement..................................................7
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IRS..........................................................................19
knowledge,...................................................................58
known........................................................................58
Landlords.....................................................................6
Latest Balance Sheet.........................................................12
Law..........................................................................58
Lease Escrow Account..........................................................8
Lease Escrow Agreement........................................................8
Lease Escrow Amount..........................................................58
Leased Real Property.........................................................14
Leases.......................................................................14
Lender Indemnified Parties...................................................47
Lenders.......................................................................1
Lenders Pre-Closing Covenants................................................47
Litigation...................................................................16
LLC Agreement.................................................................1
LLC Interests................................................................11
Losses.......................................................................58
Management...................................................................17
Material Adverse Effect......................................................59
Money Rates...................................................................5
Net Adjustment Amount.........................................................4
Net Adjustment Interest Amount................................................5
Net Working Capital..........................................................59
Net Working Capital Adjustment................................................2
Non-Compete Period...........................................................34
Not-For-Profit Subsidiary....................................................33
Objections Statement..........................................................4
Offering Material............................................................32
Parent........................................................................1
Payoff Letters................................................................2
Pension Plan.................................................................19
Permitted Encumbrances...................................................59, 60
person.......................................................................60
Person.......................................................................60
Portfolio Companies..........................................................33
Preliminary Statement.........................................................3
Proprietary Software.........................................................16
Purchase Price Cap...........................................................48
Reg. S-X Financial Statements................................................31
Release,.....................................................................18
Released.....................................................................18
Remediation..................................................................18
Restricted Commitment Letter Amendments......................................37
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Schedule.....................................................................10
SEC..........................................................................31
Securities Act...............................................................29
Securities Exchange Act......................................................31
Seller Closing Certificate...................................................39
Significant Customer.........................................................60
Significant Supplier.........................................................25
Special Pre-Closing Covenants................................................48
Special Representations and Warranties.......................................48
Stockholder Approval.........................................................38
Supplier.....................................................................25
Survival Period..............................................................46
Target Net Working Capital Amount.............................................2
Tax..........................................................................21
Tax Return...................................................................21
Taxes........................................................................21
Taxing Authority.............................................................21
Third Party Claim............................................................49
to the knowledge.............................................................58
Transaction Expenses.........................................................60
under common control with....................................................57
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SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of May
23, 2006, is made by and among American Sanitary Incorporated, a Delaware
corporation (the "PARENT"), Golder, Thoma, Xxxxxxx, Xxxxxx Fund V, L.P., a
Delaware limited partnership ("FUND V"), GTCR Associates V, a Delaware
partnership ("ASSOCIATES V"), GTCR Capital Partners, L.P., a Delaware limited
partnership ("CAPITAL PARTNERS" and together with Fund V and Associates V, the
"LENDERS"), AmSan, LLC, a Delaware limited liability company and wholly owned
subsidiary of the Parent (the "COMPANY"), and Interline Brands, Inc., a New
Jersey corporation (the "BUYER"). Capitalized terms used and not otherwise
defined herein have the meanings set forth in ARTICLE XIII below.
RECITALS
A. The Company is engaged on the date hereof in the business of
selling and distributing janitorial and sanitation products, including cleaning
chemicals, cleaning equipment, consumables and janitorial paper products, and
the repair of janitorial and sanitation equipment.
B. The Parent owns, beneficially and of record, all of the LLC
Interests (as defined in this Agreement), having the rights, preferences and
obligations specified in the Amended and Restated Operating Agreement of the
Company, dated as of June, 2005, by and among the Company and the Parent (the
"LLC AGREEMENT").
C. As a condition to the Buyer's obligation to consummate the
transactions contemplated hereby, on or prior to the Closing Date the Company
and the Parent will have consummated the Excluded Assets Transaction.
D. The Buyer desires to acquire, and the Parent desires to sell,
all of the LLC Interests on the terms and subject to the conditions set forth
in this Agreement.
E. The board of directors of the Parent has approved this
Agreement and the related transactions contemplated by this Agreement in
accordance with the DGCL (as defined below).
AGREEMENTS
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements contained herein and for other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, and upon the terms and subject to the conditions hereinafter set
forth, the parties hereto, intending to be legally bound hereby, agree as
follows:
ARTICLE I
THE TRANSACTION
1.1. PURCHASE OF SECURITIES. Subject to the terms and subject to
the conditions hereof, at the Closing, the Buyer shall purchase from the
Parent, and the Parent shall sell to the Buyer, the LLC Interests, free and
clear of all Encumbrances, and, in exchange therefor, the Buyer shall, in
accordance with the terms of this Agreement, pay the Closing Payment set forth
in SECTION 1.1.2 of this Agreement by wire transfer of immediately available
funds to the Parent in the manner described in SECTION 2.2(a)(III) of this
Agreement.
1.1.1. For purposes of this Agreement, (a) the term "TARGET
NET WORKING CAPITAL AMOUNT" means $31,000,000, and (b) the term "NET WORKING
CAPITAL ADJUSTMENT" means the number (positive or negative) calculated on the
basis of Net Working Capital as follows: (i) if the Net Working Capital exceeds
the Target Net Working Capital Amount by more than $1,000,000, then the Net
Working Capital Adjustment is a positive number equal to the amount by which
the Net Working Capital exceeds $32,000,000; (ii) if the Net Working Capital
exceeds the Target Net Working Capital Amount by $1,000,000 or less, if the
Target Net Working Capital Amount exceeds the Net Working Capital by $1,000,000
or less, or if the Net Working Capital is equal to the Target Net Working
Capital Amount, then the Net Working Capital Adjustment is zero (0); and (iii)
if the Target Net Working Capital Amount exceeds the Net Working Capital by
more than $1,000,000, then the Net Working Capital Adjustment is a negative
number equal to the amount by which $30,000,000 exceeds the Net Working
Capital.
1.1.2. For purposes of this Agreement, the term "CLOSING
PAYMENT" means (a) $127,500,000.00 (the "BASE CONSIDERATION"), MINUS (b) the
amount of the Estimated Indebtedness, PLUS (c) the Estimated Net Working
Capital Adjustment based on Estimated Net Working Capital (it being understood
that if the Estimated Net Working Capital Adjustment is a negative number, its
net effect shall be for it to be subtracted from the Base Consideration in the
calculation of the Closing Payment, i.e., the addition of a negative number),
MINUS (d) the Escrow Amount, PLUS (e) the amount of the Estimated Cash in
excess of zero, MINUS (f) the amount of Estimated Cash less than zero, MINUS
(g) the amount of the Estimated Transaction Expenses, MINUS (h) the aggregate
amount of the Estimated Closing Date Incentive Award Payments, MINUS (i) the
aggregate amount of the Lease Escrow Amount.
1.2. CLOSING CALCULATIONS. Not less than three (3) business days
prior to the anticipated Closing Date, the Company shall deliver to the Buyer
its good faith calculation (the "CLOSING STATEMENT") of its estimate of (a)
Cash (the "ESTIMATED CASH"), (b) Indebtedness (the "ESTIMATED INDEBTEDNESS"),
(c) Net Working Capital (the "ESTIMATED NET WORKING CAPITAL") and the estimated
Net Working Capital Adjustment (the "ESTIMATED NET WORKING CAPITAL
ADJUSTMENT"), (d) Transaction Expenses ("ESTIMATED TRANSACTION EXPENSES"), (e)
Closing Date Incentive Award Payments ("ESTIMATED CLOSING DATE INCENTIVE AWARD
PAYMENTS"), and (f) its estimate of the Lease Escrow Amount. The Parties shall
negotiate in good faith any disagreement with respect to all of the items set
forth on the Closing Statement, provided that if the Company and the Buyer
cannot agree on Estimated Cash, Estimated Indebtedness or Estimated Net Working
Capital, such estimates shall be deemed to be equal to the amount thereof set
forth on the Latest Balance Sheet, or if approved by the Company and the Buyer,
the latest balance sheet then available; PROVIDED FURTHER that the Company's
estimate of the Lease Escrow Amount shall be reasonably acceptable to the
Buyer. In connection therewith, the Company shall deliver to the Buyer payoff
letters for the Indebtedness reflected on SCHEDULE 1.2 of the Disclosure
Schedules (with it being understood that such payoff letters shall release any
rights a holder of Indebtedness may have with respect to the equity interests
of the Company (including with respect to amending the limited liability
company agreement of the Company)) (the "PAYOFF LETTERS"), and wire transfer
instructions for the payment of the Estimated Indebtedness, Estimated
2
Transaction Expenses and Estimated Closing Date Incentive Award Payments set
forth in the Closing Statement.
1.3. CLOSING BALANCE SHEET CALCULATION.
1.3.1. Within ninety (90) days after the Closing Date, the
Buyer will deliver to the Parent an unaudited balance sheet of the Company as
of the Closing (the "CLOSING BALANCE SHEET") and a statement showing a
calculation of Cash, Net Working Capital, Net Working Capital Adjustment,
Indebtedness, Transaction Expenses and Closing Date Incentive Award Payments,
all reflecting consummation of the Excluded Assets Transaction (such
calculations together with the Closing Balance Sheet, the "PRELIMINARY
STATEMENT"). The Closing Balance Sheet shall be prepared and Cash, Net Working
Capital and Net Working Capital Adjustment shall be determined (including,
without limitation, for purposes of SECTION 1.2) in accordance with GAAP using
the same accounting methods, policies, principles, practices and procedures,
with consistent classifications, judgments and estimation methodology as were
used in preparation of the audited consolidated balance sheet of the Company
and the Parent as of the fiscal year ended December 31, 2005 (the "2005 BALANCE
SHEET") or, to the extent applicable, in accordance with any changes to such
accounting methods, policies, principles, practices and procedures that are
documented in the Company's and the Parent's books and records as of December
31, 2005 (and disclosed to the Buyer in SCHEDULE 3.7 of the Disclosure
Schedules), and shall not include any changes in assets or liabilities as a
result of purchase accounting adjustments or other changes arising from or
resulting as a consequence of the transactions contemplated by this Agreement
(other than the Excluded Assets Transaction); and the calculation of
Indebtedness, Transaction Expenses and Closing Date Incentive Award Payments
shall be prepared in accordance with this Agreement. The parties agree that the
purpose of preparing the Closing Balance Sheet and determining the Cash, Net
Working Capital and Net Working Capital Adjustment and the related purchase
price adjustment contemplated by this SECTION 1.3 is to measure the amounts of
Cash, Net Working Capital and Net Working Capital Adjustment, and such
processes are not intended to permit the introduction of different judgments,
accounting methods, policies, principles, practices, procedures,
classifications or estimation methodologies for the purpose of preparing the
Closing Balance Sheet or determining Cash, Net Working Capital and Net Working
Capital Adjustment. After delivery of the Preliminary Statement, the Parent and
its accountants shall be permitted reasonable access during normal business
hours of the Company and upon reasonable notice to appropriate Company
personnel and to review the Company's books and records and work papers related
to the preparation of the Preliminary Statement; PROVIDED, HOWEVER, that the
Parent shall not use or permit to be used such information other than for
purposes of this SECTION 1.3 and shall not disclose or permit to be disclosed
such information (other than to its Agents for purposes of this SECTION 1.3)
except as required by law or legal process, and it shall be a condition to the
granting of such access to any work papers, that the Parent and its
representatives execute any releases and indemnity agreements customarily
required by the Buyer's accountants for such access. The Parent and its
accountants may reasonably make inquiries of the Buyer and the Company and
their respective accountants or other Agents regarding questions concerning or
disagreements with the Preliminary Statement arising in the course of their
review thereof, and the Buyer shall use its, and shall cause the Company to use
its, commercially reasonable efforts to cause any such accountants to cooperate
with and respond to such inquiries. If the Parent has any objections to the
Preliminary Statement, the Parent shall deliver to the Buyer a statement
3
setting forth in reasonable detail its objections thereto (an "OBJECTIONS
STATEMENT"). If an Objections Statement is not delivered to the Buyer within
forty-five (45) days after delivery of the Preliminary Statement, the
Preliminary Statement shall be final, binding and non-appealable by the parties
hereto. The Parent and the Buyer shall negotiate to resolve any such
objections, but if they do not reach a final resolution within thirty (30) days
after the delivery of the Objections Statement, the Parent and the Buyer shall
submit such dispute to a mutually agreeable third party that is not a public
accounting firm (the "DISPUTE RESOLUTION AUDITOR"). Any further communications
with the Dispute Resolution Auditor must be written and delivered to each party
to the dispute. The Dispute Resolution Auditor shall consider only those items
and amounts that are identified in the Objections Statement as being items that
the Parent and the Buyer are unable to resolve. The Dispute Resolution
Auditor's determination will be based solely on the definitions of Cash, Net
Working Capital, Net Working Capital Adjustment, Indebtedness, Transaction
Expenses and Closing Date Incentive Award Payments contained herein and the
provisions of this SECTION 1.3.1. The Parent and the Buyer shall use their
commercially reasonable efforts to cause the Dispute Resolution Auditor to
resolve all disagreements as soon as practicable. Further, the Dispute
Resolution Auditor's determination shall be based solely on the presentations
by the Buyer and the Parent that are in accordance with the terms and
procedures set forth in this Agreement (i.e., not on the basis of an
independent review). The resolution of the dispute by the Dispute Resolution
Auditor shall be final, binding and non-appealable on the parties hereto, and
judgment may be entered upon the determination of the Arbiter in any court
having jurisdiction over the party against which such determination is to be
enforced. The costs and expenses of the Dispute Resolution Auditor shall be
allocated between the Buyer, on the one hand, and the Lenders and the Parent,
on the other hand, based upon the percentage which the portion of the contested
amount not awarded to each party bears to the amount actually contested by such
party. For example, if the Parent claims the Net Adjustment Amount is $1,000
greater than the amount determined by the Buyer's accountants, and the Buyer
contests only $500 of the amount claimed by the Parent, and if the Dispute
Resolution Auditor ultimately resolves the dispute by awarding to the Parent
$300 of the $500 contested, then the costs and expenses of arbitration will be
allocated 60% (i.e., 300 / 500) to the Buyer and 40% (i.e., 200 / 500) to the
Lenders and the Parent.
1.3.2. "NET ADJUSTMENT AMOUNT" means an amount equal to zero
MINUS (a) the amount by which the Estimated Cash exceeds the Cash as finally
determined pursuant to SECTION 1.3.1, PLUS (b) the amount by which the Cash as
finally determined pursuant to SECTION 1.3.1 exceeds the Estimated Cash, PLUS
(c) the amount by which the Estimated Indebtedness exceeds the Indebtedness as
finally determined pursuant to SECTION 1.3.1, MINUS (d) the amount by which the
Indebtedness as finally determined pursuant to SECTION 1.3.1 exceeds the
Estimated Indebtedness, MINUS (e) the amount by which the Estimated Net Working
Capital Adjustment exceeds the Net Working Capital Adjustment as finally
determined pursuant to SECTION 1.3.1, PLUS (f) the amount by which the Net
Working Capital Adjustment as finally determined pursuant to SECTION 1.3.1
exceeds the Estimated Net Working Capital Adjustment, PLUS (g) the amount by
which the Estimated Transaction Expenses exceeds the Transaction Expenses as
finally determined pursuant to SECTION 1.3.1, MINUS (h) the amount by which the
Transaction Expenses as finally determined pursuant to SECTION 1.3.1 exceeds
the Estimated Transaction Expenses, PLUS (i) the amount by which the Estimated
Closing Date Incentive Award Payments exceeds the Closing Date Incentive Award
Payments as finally determined pursuant to SECTION 1.3.1, MINUS (j) the amount
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by which the Closing Date Incentive Award Payments as finally determined
pursuant to SECTION 1.3.1 exceeds the Estimated Closing Date Incentive Award
Payments.
1.4. POST-CLOSING ADJUSTMENT PAYMENT.
1.4.1. If the Net Adjustment Amount as finally determined
pursuant to SECTION 1.3 above is a positive number, then the Buyer shall
promptly (but in any event within five (5) business days) deliver to the Parent
the Net Adjustment Amount by wire transfer of immediately available funds to an
account or accounts designated by the Parent, together with interest thereon
from the Closing Date to the date of actual payment at a variable rate equal to
the prime rate (as reported in the WALL STREET JOURNAL "MONEY RATES") from and
including the Closing Date to, but not including, the date of payment (the "NET
ADJUSTMENT INTEREST AMOUNT"). If the Net Adjustment Amount as finally
determined pursuant to SECTION 1.3 above is a negative number, then the Buyer,
at its option, shall be entitled to cash contained in the Escrow Account to the
extent of the absolute value of the Net Adjustment Amount (or any portion
thereof), together with the Net Adjustment Interest Amount. In the event the
Buyer elects to have only a portion or none of the absolute value of the Net
Adjustment Amount, together with the Net Adjustment Interest Amount, satisfied
by the Escrow Account or if the absolute value of the Net Adjustment Amount,
together with the Net Adjustment Interest Amount, exceeds the amount in the
Escrow Fund, then the Parent shall, and the Lenders shall cause the Parent to,
promptly (but in any event within five (5) business days) pay to the Buyer, to
the extent of any amounts that the Buyer does not elect to have paid from the
Escrow Account, the absolute value of the Net Adjustment Amount by wire
transfer of immediately available funds to one or more accounts designated by
the Buyer, together with the Net Adjustment Interest Amount, to the extent of
any amounts that the Buyer does not elect to have paid from the Escrow Account.
1.4.2. The Closing Payment as adjusted, if at all, by this
SECTION 1.4 shall be referred to herein as the "FINAL PURCHASE PRICE. "
1.5. EXCLUDED ASSETS AND EXCLUDED LIABILITIES.
(a) The assets and liabilities specifically related to
the Company's operations at its Carson, California, Sacramento, California,
Union City, California and Portland, Oregon facilities (the "EXCLUDED
FACILITIES") are set forth on SCHEDULE 1.5 of the Disclosure Schedules (the
"EXCLUDED ASSETS" and the "EXCLUDED LIABILITIES"). Prior to the Closing, the
Company will, and the Parent will cause the Company to, either (i) complete the
full or partial sale of the Excluded Facilities and Excluded Assets to (and
cause the Excluded Liabilities to be assumed by (to the extent such sale
contemplates such assumption)) an unaffiliated third party, or (ii) to the
extent not sold pursuant to clause (i), close the Excluded Facilities and
terminate the employment of all employees employed at the Excluded Facilities
(the "EXCLUDED ASSETS TRANSACTION"). Any sale of such facilities shall be
effected pursuant to an Asset Purchase Agreement (or other documents) in a form
reasonably acceptable to the Buyer. Prior to the Closing, the Company will (i)
notify the collective bargaining representatives of any employees of the
Excluded Facilities of the sale or closure of such facilities; (ii) fulfill any
obligations to bargain with any unions over the sale or closure of such
facilities (including by bargaining in good faith with such unions); and (iii)
negotiate any severance or other obligations and any resolution of grievances
or unfair labor practice charges.
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(b) The following provisions of this SECTION 1.5(B)
shall apply if and to the extent the Company does not complete the sale of all
of the Excluded Facilities and Excluded Assets (as contemplated by Section
1.5(a)(i)) and novation of the Excluded Liabilities prior to the Closing.
(i) ACCOUNTS RECEIVABLE. With respect to any
accounts receivable included in the Excluded Assets, for a period not to exceed
120 days after the Closing, the Company will use its commercially reasonable
efforts to collect such receivables in the manner regularly pursued by the
Company with respect to the collection of its other accounts receivable in the
ordinary course of business. Any amounts so collected (net of out-of-pocket
costs of collection and net of any amounts otherwise owed to the Company or the
Buyer pursuant to this SECTION 1.5) will be remitted to the Parent reasonably
promptly following receipt. The Company will use commercially reasonable
efforts to share any notice of a dispute as to the validity or enforceability
of any accounts receivable received from the debtor of such accounts receivable
with a single member of the Company's management designated by the Parent or
the Parent to the extent any such notices involve disputes for amounts in the
aggregate in excess of $1,000 per customer. The Company shall not agree to any
settlement, discount or reduction of the accounts receivable without the prior
written consent of the Parent (not to be unreasonably withheld or delayed) to
the extent any such written notices involve disputes for amounts in the
aggregate in excess of $1,000 per customer. The Company's collection obligation
shall not include any obligation to bring suit, engage a collection agent or
take any other legal action, or otherwise incur any costs to third parties, for
the collection or sale (as the case may be) of the accounts receivable. On the
120th day after the Closing (or earlier, if requested by the Parent), the
Company shall assign the accounts receivable to the Parent. Following such
assignment, the Company shall have no further responsibilities under this
SECTION 1.5(b)(I).
(ii) LEASES. With respect to any Leases included in
the Excluded Assets ("EXCLUDED LEASES"), the Company will use its commercially
reasonable efforts to terminate such Excluded Leases without further liability
to the Company and settle any claims with the landlords or counterparties
thereunder (the "LANDLORDS") in respect of such termination; PROVIDED, HOWEVER,
that if, notwithstanding such efforts, such Excluded Leases have not been
terminated and settlements with Landlords completed as of the Closing, if
requested by the Parent, the Company will following the Closing use its
commercially reasonable efforts to (i) negotiate termination liabilities with
the Landlords and (ii) negotiate subleases with prospective sub tenants (it
being understood that the Company will not be required to provide more than one
member of management in respect of either of these activities) and (iii) will
provide necessary personnel to leave the premises demised under the Excluded
Leases in broom clean condition for return to the Landlord; PROVIDED FURTHER,
HOWEVER, that the Company will have no further obligation to undertake such
activities after the date that is 120 days after the Closing Date. The Company
will not enter into any sublease relating to the Excluded Leases (whether
before or after Closing) or make any settlement with any Landlord (whether
before or after Closing) without the prior written consent of the Buyer;
PROVIDED that the Buyer will not unreasonably withhold its consent to the
extent any such sublease effects a novation and complete release of the
Company's liability under the related Excluded Lease. In addition, for a period
of 120 days following the Closing, the Company will not enter into any sublease
relating to the Excluded Leases (whether before or after Closing) or make any
settlement with any Landlord (whether before or after Closing) without the
prior written consent of the Parent. With respect to any claims of Landlords
6
under Excluded Leases, for a period of 120 days following the Closing, the
Parent will have the right to approve any settlement of such claims by the
Company. After the 120th day following the Closing, the Company may terminate
the Excluded Leases and settle claims with Landlords on such terms as the
Company determines in its sole discretion, except, as to any Excluded Lease, to
the extent that such settlement exceeds 105% of the remaining lease payments
plus the outstanding amount of any associated operating expenses for such
Excluded Lease, in which case the consent of the Parent will be required (not
to be unreasonably withheld) for settlement of such claim. Any amounts paid in
settlement in respect of such claims will be paid by the Company; PROVIDED,
HOWEVER, that to the extent such settlement amounts exceed the Lease Escrow
Amount, such excess shall be an Excluded Assets Transaction Liability pursuant
to SECTION 1.5(c). To the extent a sublease is entered into with respect to any
Excluded Facility, the Company will remit to the Parent any amounts received
from the subtenant as rent payments or operating expense reimbursement promptly
following the Company's receipt thereof.
(iii) OTHER LIABILITIES. Any accounts payable or
accrued expenses included in the Excluded Liabilities will be paid by the
Company prior to the Closing.
(iv) OTHER ASSETS; SERVICES. Any trademarks or
tradenames or other intellectual property associated with the Excluded
Facilities or the Excluded Assets will be retained by the Company after the
Closing. With respect to fixed assets included in the Excluded Assets, the
Company will use commercially reasonable efforts prior to Closing to sell or
liquidate such assets; PROVIDED, HOWEVER, that if as of the Closing the Company
has been unable to sell or liquidate such assets notwithstanding such efforts,
if requested by the Parent, the Company will use its reasonable efforts to sell
or liquidate such fixed assets for a period not to exceed 60 days after the
Closing (it being understood that the Company will not be required to provide
more than one member of management in respect of these activities). The Buyer
may purchase any racking included in the fixed assets (to the extent the
Company does not otherwise sell or transfer such racking to Landlords in
connection with the termination of the Excluded Leases) for no consideration,
except the Buyer will pay for any costs of removing and/or shipping such
racking. With respect to any inventory included in the Excluded Assets (not
otherwise sold to an unaffiliated third party under SECTION 1.5(a)(i)), the
Buyer will purchase any such inventory at the Closing subject to the terms and
conditions of the Inventory Purchase Agreement substantially in the form of
EXHIBIT A hereto (the "INVENTORY PURCHASE AGREEMENT"). On or prior to the fifth
(5th) business day preceding the Closing, the Company will conduct a physical
count of the inventory at the Excluded Facilities and will permit the Buyer and
its representatives to observe and participate in such physical count. The
inventory to be purchased pursuant to the Inventory Purchase Agreement will be
adjusted to reflect the results of such physical count.
(c) Notwithstanding the foregoing and anything to the
contrary in this Agreement, any obligations or liabilities, and any costs or
expenses, associated with the Excluded Assets Transaction will be considered
"EXCLUDED ASSETS TRANSACTION LIABILITIES" for which all Buyer Indemnified
Parties (as defined in SECTION 11.2), including, after the Closing, the
Company, shall be indemnified by the Lenders and the Parent. For the avoidance
of doubt, the term "EXCLUDED ASSETS TRANSACTION LIABILITIES" will include any
claims made by an account debtor in respect of the accounts receivable referred
to in SECTION 1.5(b)(i), the amount of any severance payable to employees
terminated as a result of the Excluded Assets Transaction, any Losses (as
7
defined in SECTION 13.19) associated with labor grievances, unfair labor
practices or other claims arising out of the Excluded Assets Transaction,
liabilities arising under the Leases relating to the Excluded Facilities, any
Losses, including withdrawal liabilities, arising from any "multiemployer
plans," as defined in Section 3(37) of ERISA, contributed to or required to be
contributed to by the Company and any out-of-pocket costs and expenses incurred
by the Company or the Buyer in taking any actions after the Closing to complete
the closure of the Excluded Facilities or the sale, or liquidation or
satisfaction, of the Excluded Assets and Excluded Liabilities; PROVIDED,
HOWEVER, that any liabilities to Landlords under the Excluded Leases in respect
of the closing of the Excluded Facilities and termination of the Excluded
Leases will be Excluded Assets Transaction Liabilities only to the extent that
the amount of such liabilities exceeds the Lease Escrow Amount.
ARTICLE II
CLOSING
2.1. THE CLOSING. The closing of the transactions contemplated by
this Agreement (the "CLOSING") shall take place at the offices of Dechert LLP,
00 Xxxxxxxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, at 9:30 a.m. Eastern Time on
the first business day following the satisfaction or due waiver of all of the
conditions set forth in ARTICLE VII and ARTICLE VIII (other than those to be
satisfied at the Closing itself), or at such other place, time or date as the
Buyer, the Lenders and the Parent may agree in writing; PROVIDED, HOWEVER,
that, unless the Buyer consents in writing, in no event shall the Closing occur
before July 3, 2006 (such time and date as the Closing occurs being referred to
herein as the "CLOSING DATE").
2.2. CLOSING DELIVERIES. Subject to the terms and conditions set
forth in this Agreement, the parties hereto shall consummate the following
transactions on the Closing Date:
(a) DELIVERIES BY THE BUYER. At the Closing, the Buyer
shall effect the following:
(i) the Buyer shall deposit $11,500,000 (the "ESCROW
AMOUNT") into an escrow account (the "ESCROW ACCOUNT") established pursuant to
the terms and conditions of an escrow agreement (the "ESCROW AGREEMENT") by and
among the Buyer, the Parent, the Lenders and an escrow agent mutually agreeable
to the Buyer and the Parent (the "ESCROW AGENT"), substantially in the form of
EXHIBIT B;
(ii) the Buyer shall deposit the Lease Escrow Amount
into an escrow account (the "LEASE ESCROW ACCOUNT") established pursuant to the
terms and conditions of an escrow agreement (the "LEASE ESCROW AGREEMENT")
mutually agreeable to the Buyer and the Parent (it being understood, however,
that (A) the funds held under the Lease Escrow Account will be held to fund
lease payments and operating expenses under the Excluded Leases, and (B)the
Lease Escrow Agreement shall provide that that Buyer shall have the unilateral
right to cause a disbursement from the Lease Escrow Account to the Company at
any time on or after the 120th day following the Closing upon presentation of
reasonable evidence of the settlement of any claims of the Landlords under the
Excluded Leases);
8
(iii) the Buyer shall repay, or cause to be repaid,
on behalf of the Company, all amounts necessary to pay the then outstanding
balance of all Indebtedness listed on SCHEDULE 1.2 of the Disclosure Schedules
in the amounts set forth on the Payoff Letters, by wire transfer of immediately
available funds to the account(s) set forth on the Closing Statement;
(iv) the Buyer shall deliver to the Parent the
Closing Payment, by wire transfer of immediately available funds to the account
designated by the Parent;
(v) the Buyer shall pay, or cause to be paid, on
behalf of the Lender, the Parent and the Company (as applicable), the Estimated
Transaction Expenses as reflected in the Closing Statement by wire transfer of
immediately available funds as directed by the Parent;
(vi) the Buyer shall deliver, on behalf of the
Company and the Parent, to each participant thereof, the Estimated Closing Date
Incentive Award Payments, less applicable Taxes which are required to be
withheld; provided that the Buyer shall cause the Company to make timely
payment to the appropriate taxing authority or authorities of any amounts
withheld from such payments; and
(vii) the Buyer shall make such other deliveries as
required by ARTICLE VIII hereof.
(b) DELIVERIES BY THE PARENT. At the Closing, the Parent
shall deliver or cause to be delivered the following to the Buyer:
(i) a certificate representing the LLC Interests,
duly endorsed for transfer by the Parent or accompanied by duly executed
limited liability company unit transfer powers of the Parent, free and clear of
all Encumbrances;
(ii) the Payoff Letters and the Parent shall make
arrangements reasonably satisfactory to the Buyer for the holders of such
Indebtedness to deliver all related Encumbrance releases to the Buyer at the
Closing to the extent such releases are noted on SCHEDULE 2.2(B) of the
Disclosure Schedules or are required by the Buyer's lenders; and
(iii) such instruments or agreements, duly executed
by the Parent and any other appropriate parties, necessary to assign and
transfer any assets, properties or rights (including contract rights) of the
Parent (other than the LLC Interests) that are used in the Business to the
Company, free and clear of Encumbrances (other than Permitted Encumbrances),
all in a form as reasonably requested by the Buyer.
(c) the Parent shall make such other deliveries as are
required by ARTICLE VII hereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE PARENT AND THE COMPANY
The Parent and the Company jointly and severally represent and warrant
to the Buyer that the statements in this ARTICLE III are correct and complete
9
as of the date of this Agreement, except as set forth in the schedules
accompanying this Agreement and delivered by the Parent to the Buyer in
connection herewith (each, a "SCHEDULE" and, collectively, the "DISCLOSURE
SCHEDULES").
3.1. ORGANIZATION.
(a) The Parent is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware. The
Parent has all requisite corporate power and authority to carry on its business
as it now is being conducted and to execute, deliver and perform this Agreement
and the Ancillary Agreements to which it is a party and to consummate the
transactions contemplated hereby and thereby. The Parent is duly qualified to
do business and is in good standing as a foreign corporation in all
jurisdictions listed opposite the Parent's name on SCHEDULE 3.1(a) of the
Disclosure Schedules, which are the only jurisdictions where the nature of the
property owned or leased by it or the nature of the business conducted by it
makes such qualification necessary, except where the failure to be so qualified
or in good standing would not have a Material Adverse Effect. True and complete
copies of the certificate of incorporation, bylaws or other similar
organizational documents of the Parent, all as amended to date, are attached as
SCHEDULE 3.1(a) of the Disclosure Schedules.
(b) The Company is a limited liability company duly
organized, validly existing, and in good standing under the laws of the State
of Delaware. The Company has all requisite limited liability company power and
authority to carry on its business as it now is being conducted and to execute,
deliver and perform this Agreement and the Ancillary Agreements to which it is
a party and to consummate the transactions contemplated hereby and thereby. The
Company is duly qualified to do business and is in good standing as a foreign
limited liability company in all jurisdictions listed opposite the Company's
name on SCHEDULE 3.1(b) of the Disclosure Schedules, which are the only
jurisdictions where the nature of the property owned or leased by it or the
nature of the business conducted by it makes such qualification necessary,
except where the failure to be so qualified or in good standing would not have
a Material Adverse Effect. True and complete copies of the certificate of
formation, limited liability company agreement or other similar organizational
documents of the Company, all as amended to date, are attached as SCHEDULE
3.1(b) of the Disclosure Schedules.
(c) Set forth on SCHEDULE 3.1(c) of the Disclosure
Schedules is a correct and complete list of all assumed, trade, "doing business
as" or other fictitious names used by the Company within the five year period
prior to the date hereof (the "FICTITIOUS NAMES"). The Company has registered
the Fictitious Names set forth on SCHEDULE 3.1(c) of the Disclosure Schedules
with the appropriate state or local governmental authorities in the
jurisdictions noted on SCHEDULE 3.1(c) of the Disclosure Schedules, which
constitute all the jurisdictions where such a registration is required to be
made, except where the failure to make such registration would not reasonably
be expected to result in a Material Adverse Effect.
3.2. AUTHORITY.
(a) The Parent has the corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance by the Parent of
this Agreement and the Ancillary Agreements to which the Parent is a party and
the consummation by the Parent of the transactions contemplated hereby and
10
thereby have been duly authorized by all necessary corporate action on the part
of the Parent, and no other corporate proceedings on the part of the Company
are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby other than approval of this Agreement and such transactions
by the Lenders, as stockholders of the Parent, under Section 271 of the
Delaware General Corporation Law ("DGCL") (and the consent contemplated by
SECTION 6.22, if and when executed, will constitute such due approval). The
Parent's board of directors has authorized and approved this Agreement and the
transactions contemplated hereby in accordance with the DGCL. This Agreement
has been, and each Ancillary Agreement to which the Parent is a party will be,
duly and validly executed and delivered by the Parent, to the extent a party
thereto, and constitutes, and will constitute, the valid and binding obligation
of the Parent, enforceable against the Parent in accordance with its respective
terms.
(b) The Company has the limited liability company power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance by
the Company of this Agreement and the Ancillary Agreements to which the Company
is a party and the consummation by the Company of the transactions contemplated
hereby and thereby have been duly authorized by all necessary limited liability
company action on the part of the Company. This Agreement has been, and each
Ancillary Agreement to which the Company is a party will be, duly and validly
executed and delivered by the Company, to the extent a party thereto, and
constitutes, and will constitute, the valid and binding obligation of the
Company, enforceable against the Company in accordance with its respective
terms.
3.3. NO CONFLICT. The execution, delivery and performance by the
Company and the Parent of this Agreement and the Ancillary Agreements to which
the Company or the Parent are a party, and the consummation by the Company and
the Parent of the transactions contemplated hereby and thereby, does not and
will not, with or without the giving of notice or the lapse of time, or both,
(w) violate any provision of law, rule, or regulation to which the Company or
the Parent is subject, (x) violate any order, judgment, or decree applicable to
the Company or the Parent, (y) violate any provision of the certificate of
incorporation or bylaws of the Parent or the Amended and Restated Operating
Agreement of the Company, or (z) except as disclosed on SCHEDULE 3.3 of the
Disclosure Schedules, violate or result in a breach of or constitute a default
(or an event that, with the passage of time or the giving of notice, or both,
will constitute a default) under, or require the consent of any third party
under, or result in or permit the termination or amendment of any provision of,
or result in or permit the acceleration of the maturity or cancellation of
performance of any obligation under, or result in the creation or imposition of
any Encumbrance upon any assets or property or give to others any interests or
rights therein under, any Contract to which the Company or the Parent is a
party.
3.4. CAPITALIZATION.
(a) The authorized and outstanding limited liability
company interests ("LLC INTERESTS") of the Company are set forth on SCHEDULE
3.4 of the Disclosure Schedules. As of the date hereof, such LLC Interests
represent all of the issued and outstanding equity interests of the Company,
and all of the outstanding LLC Interests are duly authorized, validly issued,
were not issued in violation of the terms of any agreement or other
understanding binding upon the Company, and were issued in compliance with all
applicable federal and state securities or "blue-sky" laws and regulations.
11
There are outstanding no securities convertible into, exchangeable for or
carrying the right to acquire equity securities of the Company, or
subscriptions, warrants, options, phantom stock interests, rights (including
preemptive rights or limited liability company unit appreciation rights), or
other arrangements or commitments obligating the Company to issue or dispose of
any of its respective equity securities or any ownership interest therein. The
consummation of the transactions contemplated by this Agreement will not cause
any Encumbrances to be created or suffered on the LLC Interests, other than
Encumbrances created by the Buyer.
(b) All of the LLC Interests are owned beneficially and
of record by the Parent, free and clear of any Encumbrances.
3.5. SUBSIDIARIES. Except as set forth in SCHEDULE 3.5 of the
Disclosure Schedules, the Company does not (a) directly or indirectly own any
stock or other equity securities of, equity interest in, or other investment in
any other corporation, joint venture, partnership, limited liability company,
trust or other Person or (b) have any subsidiaries or any predecessors in
interest by merger, liquidation, reorganization, acquisition or similar
transaction.
3.6. FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES.
(a) Attached hereto as SCHEDULE 3.6(a) of the Disclosure
Schedules are the consolidated audited balance sheets of the Parent for the
years ended December 31, 2005, 2004 and 2003, the related consolidated audited
statements of income and retained earnings and cash flows for the years ended
December 31, 2005, 2004 and 2003 (collectively, the "AUDITED FINANCIAL
STATEMENTS"), and the consolidated unaudited balance sheet of the Parent as of
March 31, 2006 (the "LATEST BALANCE SHEET") and the related statements of
income and retained earnings and cash flows for the three-month period ended
March 31, 2006 (together with the Audited Financial Statements, the "FINANCIAL
STATEMENTS"). The Financial Statements (i) were prepared in accordance with
GAAP (except, in the case of unaudited financial statements, for the absence of
footnote disclosures and other presentation items and changes resulting from
normal year-end adjustments, which are not material), and (ii) present fairly,
in all material respects, the financial position, results of operations and
cash flows of the Parent on a consolidated basis as of such dates and for the
periods then ended. Except as disclosed on SCHEDULE 3.6(a) of the Disclosure
Schedules, the value of the inventory reflected on the 2005 Balance Sheet would
not materially differ from that value reflected on the 2005 Balance Sheet were
the cost of such inventory calculated using the average cost method.
(b) Attached hereto as SCHEDULE 3.6(b) of the Disclosure
Schedules are (i) the unaudited balance sheets, and related statements of
income, of the Company (excluding the Excluded Assets) as of, and for the years
ended, December 31, 2005 and 2004, and the unaudited balance sheet, and related
statement of income, of the Company (excluding the Excluded Assets) as of, and
for the three-month period ended, March 31, 2006 (collectively, the "COMPANY
UNAUDITED FINANCIAL STATEMENTS"), and (ii) the unaudited balance sheets, and
related statements of income, of the Excluded Facilities, the Excluded Assets
and the Excluded Liabilities as of, and for the years ended, December 31, 2005
and 2004, and the unaudited balance sheet, and related statement of income, of
the Excluded Facilities, the Excluded Assets and the Excluded Liabilities as
of, and for the three-month period ended, March 31, 2006 (the "EXCLUDED ASSETS
12
UNAUDITED FINANCIAL STATEMENTS" and together with the Company Unaudited
Financial Statements, the "COMPANY AND EXCLUDED ASSETS FINANCIAL STATEMENTS").
The Company and Excluded Assets Financial Statements were prepared in good
faith in accordance with GAAP (except for the absence of footnote disclosures
and other presentation items and changes resulting from normal year-end
adjustments, which are not material) and were prepared in a manner that is
consistent with the Schedule of Excluded Assets and Excluded Liabilities set
forth in SCHEDULE 1.5 of the Disclosure Schedules.
(c) Except as set forth in SCHEDULE 3.6(c) of the
Disclosure Schedules, the Company has no material liability or obligation of
any nature, whether due or to become due, absolute, contingent or otherwise,
except (i) to the extent reflected on the Financial Statements, (ii)
liabilities incurred in the ordinary course of business after December 31, 2005
that would not reasonably be expected to have a Material Adverse Effect and
(iii) any other liabilities that would not reasonably be expected to have a
Material Adverse Effect. There are no obligations or liabilities of the Company
relating to the Excluded Facilities other than the Excluded Liabilities.
(d) The Parent is a "holding company" that neither owns,
licenses, leases or otherwise has rights to any assets or properties or other
rights, except its ownership of the LLC Interests.
3.7. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth on
SCHEDULE 3.7 of the Disclosure Schedules, since December 31, 2005, the Company
has conducted its business only in the ordinary course consistent with past
practice and there has not been any events, changes, conditions, developments
or occurrences that, individually or in the aggregate, have had or would
reasonably be expected to have a Material Adverse Effect. Without limiting the
foregoing, except as set forth on SCHEDULE 3.7 of the Disclosure Schedules or
as reflected in the Financial Statements, since December 31, 2005, the Company
has not taken any action that, if taken after the date hereof, would constitute
a breach of clauses (a)-(u) of SECTION 6.3.
3.8. TITLE; CONDITION OF ASSETS.
(a) The Company has good and marketable title to all of
the assets and properties that it purports to own (including those reflected on
the Financial Statements, but excluding the Excluded Assets and any such assets
and properties sold, consumed, or otherwise disposed of in the ordinary course
of business since December 31, 2005) free and clear of all Encumbrances, except
for Permitted Encumbrances and except as set forth on SCHEDULE 3.8(a) of the
Disclosure Schedules.
(b) Except for the Excluded Assets, the assets and
properties owned, leased or licensed by the Company comprise all of the assets
and properties which are currently used for the operation of the Business as
currently conducted. None of the Excluded Assets are necessary to operate the
business of the Company as such business is currently conducted after the
Excluded Assets Transaction. All of the properties and assets owned or leased
by the Company, including those that are reflected on the Financial Statements,
that are necessary for the operation of the Company's business, are usable in a
manner consistent with their respective current use, except as would not
reasonably be expected to have a Material Adverse Effect. To the knowledge of
the Parent and the Company, there is no defect, individually or in the
13
aggregate, in the condition of the Company's buildings, fixtures or equipment
that would reasonably be expected to have a Material Adverse Effect, and no
material capital expenditures are necessary to operate in the ordinary course
of business any of such buildings, fixtures or equipment.
3.9. REAL PROPERTY. The Company owns no real property.
3.10. LEASES; LEASED REAL PROPERTY.
(a) SCHEDULE 3.10 of the Disclosure Schedules sets forth
a true, correct and complete list of all leases and subleases (the "LEASES") of
real property to which the Company is a party (collectively, the "LEASED REAL
Property"). The Company does not operate its business at any location other
than those listed as Leased Real Properties on SCHEDULE 3.10 of the Disclosure
Schedules. True, correct and complete copies of all Leases and all amendments,
modifications and supplemental agreements thereto have previously been
delivered to the Buyer. The Leases are in full force and effect and are binding
and enforceable against the Company and, to the knowledge of the Company, each
of the other parties thereto, in accordance with their respective terms and,
except as set forth on SCHEDULE 3.10 of the Disclosure Schedules, have not been
modified or amended since the date delivered to the Buyer. No party to any
Lease has sent written notice to the other claiming that such party is in
default thereunder and that such default remains uncured. Except as set forth
on SCHEDULE 3.10 of the Disclosure Schedules, there has not occurred any event
that would constitute a breach of or default in the performance of any
covenant, agreement or condition contained in any Lease, nor has there occurred
any event that with the passage of time or the giving of notice or both would
constitute such a breach or default, except for breaches or defaults that are
not material. There is no current or pending event or circumstance that would
permit the termination of any of the Leases or the increase of any obligations,
liabilities or restrictions of the Company under the Leases. The Company is not
obligated to pay any leasing or brokerage commission relating to any Lease that
is now due and payable. Except as set forth on SCHEDULE 3.10 of the Disclosure
Schedules, no construction, alteration or other leasehold improvement work with
respect to any of the Leases remains to be paid for or to be performed by the
Company.
(b) The Company presently enjoys undisturbed possession
of its Leased Real Property sufficient for current use and operations. None of
the Company or the Parent have received written notice of any material eminent
domain, condemnation or other similar proceedings pending or threatened against
the Company or landlord with respect to, or otherwise affecting any portion of,
the Leased Real Property. The current use of the Leased Real Property in the
conduct of the business of the Company does not violate any Lease. Except as
set forth on SCHEDULE 3.10 of the Disclosure Schedules, there is no violation
of any covenant, condition, restriction, easement or order of any governmental
authority having jurisdiction over the Leased Real Property or the use or
occupancy thereof, except for such violations as would not materially interfere
with the continued use and operations of the property to which they relate or
materially adversely affect the value thereof for its current use. Except as
set forth on SCHEDULE 3.10 of the Disclosure Schedules, the Leased Real
Property is in compliance in all material respects with all applicable
building, zoning, subdivision, health and safety and other land use and similar
applicable laws, rules and regulations, permits, licenses and certificates of
occupancy affecting the Leased Real Property, and none of the Company or the
Parent have received any notice of any violation or claimed violation by the
14
Company of any such laws, rules and regulations with respect to the Leased Real
Property that have not been resolved or for which any obligation of the Company
remains to be fulfilled, including but not limited to payments of monetary
damages, fines or penalties, or completion of any remedial or corrective
measures. Except as set forth on SCHEDULE 3.10 of the Disclosure Schedules, the
Leased Real Property is adequately served by proper utilities and other
building services necessary for its current use and for compliance with all
applicable laws, rules, regulations, permits, licenses and certificates of
occupancy.
3.11. INTELLECTUAL PROPERTY.
(a) SCHEDULE 3.11 of the Disclosure Schedules sets forth
a complete and accurate list of all United States or foreign issued patents,
patent applications, registered trademarks, trademark applications, material
unregistered trademarks, domain names, registered copyrights, and copyright
applications, owned by the Company, specifying as to each such item, as
applicable (i) the jurisdiction in which the item is issued or registered or in
which any application for issuance or registration has been filed, including
the respective issuance, registration or application number, and (ii) the date
of application and issuance or registration of the item. (I) the Company owns
or possesses valid and enforceable, written licenses or other valid rights to
use all United States or foreign patents, trademarks, service marks, trade
names, domain names, copyrights, and all know-how, trade secrets (including all
results of research and development), product formulas, inventions and other
intellectual property rights ("INTELLECTUAL PROPERTY") used or held for use in
its business, (II) the conduct of the business of the Company as now being
conducted as of the Closing, and the use and exploitation of the Company's
Intellectual Property as of the Closing, do not infringe, dilute,
misappropriate, or otherwise violate the Intellectual Property of others, (III)
no current or former director, limited liability company manager, officer or
employee of the Company or the Parent and no other person owns, in whole or in
part, or has any rights to royalties or other compensation with respect to
Intellectual Property owned by the Company, (IV) there is no agreement
restricting the use by the Company of any of the Intellectual Property owned by
the Company, and the Company has not given any indemnification to any Person
against infringement, dilution, misappropriation, or any other violation of the
Intellectual Property of others, (V) the registered Intellectual Property owned
by the Company is valid and in full force and effect, held of record in the
Company's name and is not subject to any cancellation or reexamination
proceeding or any other proceeding challenging its validity and such registered
Intellectual Property is now and immediately following the Closing shall be
valid and in full force and effect, (VI) the Company is the applicant of record
in all patent applications and applications for trademarks owned by the
Company, and no opposition, extension of time to oppose, interference,
rejection, or refusal to register has been received in connection with any such
applications, (VII) none of the trade secrets, confidential know-how or other
confidential or proprietary information of the Company has been disclosed to
any Person unless such disclosure was necessary and made pursuant to an
appropriate confidentiality agreement, or was made pursuant to a subpoena or
similar legal process, (VIII) none of the Company or the Parent are aware of
any present infringement, dilution, misappropriation, or other violation of any
of the Intellectual Property owned by the Company by any person, and none of
the Company or the Parent have asserted or threatened any claim or objection
against any person for any such infringement, dilution, misappropriation, or
other violation, nor is there any basis in fact for any such objection or
15
claim, except for the foregoing clauses (I) through (VIII) for events or
circumstances that, individually or in the aggregate, would not be reasonably
expected to have a Material Adverse Effect.
(b) The Company owns or possesses enforceable rights to
use all computer software owned or created by the Company (the "PROPRIETARY
SOFTWARE") used in its businesses. To the knowledge of the Company and the
Parent, the Company has not, directly or indirectly, delivered, transferred,
promised or otherwise disclosed to any third party the source code for any
Proprietary Software, except in connection with a standard commercial source
code escrow agreement executed in the normal course of business, and to the
knowledge of the Company and the Parent, no such delivery or disclosure to a
third party has been made. The Company has taken commercially reasonable steps
to ensure that the computer software owned, licensed or used by them does not
contain any viruses, "worms," cancelbots, disabling or malicious code, or other
anomalies that would materially impair the functionality of the computer
software.
(c) Since January 1, 2002, there have been no written
claims received by the Company or the Parent asserting against the Company the
invalidity, misuse or unenforceability of any Intellectual Property owned by
the Company or asserting that the conduct by the Company of its business has
infringed, diluted, misappropriated, or otherwise violated any Intellectual
Property rights of any other Person.
3.12. CONTRACTS. SCHEDULE 3.12.1 of the Disclosure Schedules
contains a complete and accurate list of all outstanding Contracts (classified
(a) through (l), as applicable, based on the definition of Contracts set forth
in SECTION 13.7 hereof). True, correct and complete copies of all Contracts
(and all amendments thereto) have been delivered to the Buyer. Each such
Contract is valid, binding and enforceable against the Company and the other
parties thereto in accordance with its terms and is in full force and effect.
The Company is not in default under any of such Contracts, no event has
occurred that, with notice or lapse of time, or both, would constitute such a
default and, to the Company's and the Parent's knowledge, no other party is in
default under any of such Contracts. None of the Company or the Parent has
received any written claim from any other party to any Contract that the
Company has breached any obligations to be performed by it thereunder, or is
otherwise in default or delinquent in performance thereunder. SCHEDULE 3.12.1
of the Disclosure Schedules shall be deemed to include a Contract entered into
after the date hereof that does not violate SECTION 6.3 hereof.
3.13. LITIGATION. Except as set forth in SCHEDULE 3.13 of the
Disclosure Schedules, there is no action, claim, suit, review, proceeding or
investigation in any court or before any governmental agency or authority or
arbitrator ("LITIGATION") pending or, to the Company's or the Parent's
knowledge, threatened against the Company, any of its properties or assets or
(to the extent the Company may have an obligation to provide indemnification or
may otherwise become liable) any of its officers, directors or employees.
Except as set forth in Schedule 3.13 of the Disclosure Schedules, the Company
is not a party to or bound by any outstanding orders, rulings, judgments,
settlements, arbitration awards or decrees (or agreement entered into or any
administrative, judicial or arbitration award with any governmental authority)
with respect to or affecting its properties, assets, personnel or business. The
Company has provided the Buyer with a list setting forth a general description
of settlements occurring since January 1, 2003 regarding actual or threatened
lawsuits (excluding worker's compensation claims) binding on the Company.
16
3.14. COMPLIANCE WITH LAWS; PERMITS. The Company has been since
January 1, 2002, and is, in compliance in all material respects with all
applicable federal, state, local, foreign or industry laws, rules and
regulations currently in effect (including the rules and regulations of the
Department of Transportation and the American Bureau of Shipping). Set forth on
SCHEDULE 3.14.1 of the Disclosure Schedules are all governmental or other
industry permits, registrations, certificates, certifications, exemptions
(including U.S. Department of Transportation Exemptions) licenses, approvals
and authorizations necessary for the conduct of the business of the Company and
the Parent as presently conducted, each of which the Company possesses and will
possess immediately after the Closing and each of which is and will be
immediately after the Closing in full force and effect in favor of the Company,
except for failures to so possess or be in effect set forth on SCHEDULE 3.14.2
of the Disclosure Schedules. Except as set forth in SCHEDULE 3.14.2 of the
Disclosure Schedules, no notice, citation, summons or order has been issued, no
complaint has been filed and served, no penalty has been assessed and notice
thereof given, and no investigation or review is pending or, to the knowledge
of the Company and the Parent, threatened with respect to the Company, by any
governmental authority with respect to any alleged (a) violation by the Company
of any law, ordinance, rule, regulation or order, or (b) failure by the Company
to have any permit, registration, certificate, certification, exemption,
license, approval or authorization required in connection with the conduct of
or otherwise applicable to the business conducted by it. Without limiting the
foregoing, the Company complies in all material respects with any escheat or
similar laws, and the Company has no material liability to any governmental
authority in respect of any such escheat or similar laws.
3.15. ENVIRONMENTAL MATTERS. Except as disclosed on SCHEDULE 3.15.1
of the Disclosure Schedules:
(a) The Company has, since January 1, 2002, conducted
and is now conducting its operations in compliance in all material respects
with all Environmental Laws. The Company holds, and has been, since January 1,
2002, and is in compliance in all material respects with, all permits,
certificates, licenses, approvals, registrations and authorizations required
under Environmental Laws for the conduct of the business of the Company as
currently conducted ("ENVIRONMENTAL PERMITS"), all such Environmental Permits
are in full force and effect and will remain in full force and effect as of the
Closing.
(b) Except with respect to matters that have been fully
settled or resolved with no further material obligations or conditions, none of
the Company or the Parent have received any notice, citation, summons, order or
complaint, no penalty has been assessed or is pending or, to the knowledge of
the Company or the Parent, threatened by any third party (including any
governmental agency) with respect to (i) the use, possession, generation,
treatment, manufacture, processing, management, handling, storage, recycling,
transportation or disposal ("MANAGEMENT"), Release or threatened Release of
Hazardous Substances by or on behalf of the Company or any of its predecessors
or in relation to its past or present operations or with respect to exposure to
Hazardous Substances, (ii) non-compliance with Environmental Laws or (iii)
failure to hold or comply with Environmental Permits. Except with respect to
matters that have been fully settled or resolved with no further material
obligations or conditions, none of the Company or the Parent has received, and
to the knowledge of the Company and the Parent, no one else has received, any
request for information, notice of claims, demand or other notification that
17
the Company (or any of its predecessors) is or may be potentially responsible
with respect to any investigation, cleanup, remedial action or other response
action ("REMEDIATION") of Hazardous Substances.
(c) To the Knowledge of the Parent and the Company, none
of the Leased Real Properties is listed or proposed for listing on any list
maintained by any governmental agency of sites requiring Remediation, and no
Hazardous Substances generated by or on behalf of the Company or any of its
predecessors has come to be located at any site identified on such list or
otherwise requiring Remediation.
(d) There are no underground storage tanks or regulated
above ground storage tanks owned or operated by the Company, or asbestos
containing materials or PCB-containing equipment which require labeling,
assessment, abatement or retrofitting by the Company pursuant to Environmental
Laws, located at, on or under the Leased Real Property.
(e) No Hazardous Materials have been or threaten to be
released, spilled, leaked, discharged, disposed of, pumped, poured, emitted,
emptied, injected, leached, dumped or allowed to escape ("RELEASED" or
"RELEASE, " as the context requires) or are present in an uncontained state at,
on, about, under or from the Leased Real Properties or, during or prior to the
Company's ownership, operation or lease, any property formerly owned, operated
or leased by the Company or any of its predecessors, or in connection with
operation of the business of the Company, in violation of applicable
Environmental Laws or which require investigation, remediation or other
response actions pursuant to applicable Environmental Laws.
(f) All environmental inspections, investigations,
studies, audits, tests, reviews or other analyses conducted in relation to the
Company, the Leased Real Properties or any property formerly owned, operated or
leased by the Company or any of its predecessors or the operation of its
business in the possession or in the reasonable control of the Company or the
Parent have been provided to the Buyer, were included in the materials in the
electronic data room made available to the Buyer or were reviewed by the
Buyer's environmental consultant during the performance of Phase I
Environmental Site Assessments and all such environmental audits and analyses
are listed on SCHEDULE 3.15.3 of the Disclosure Schedules.
(g) The Company does not know of any facts or
circumstances related to environmental matters concerning Leased Real
Properties or any property formerly owned, operated or the leased by the
Company or any of its predecessors or the operation of the business of the
Company that would reasonably be expected to result in any material future
environmental claims, liabilities, expenses or responsibilities against the
Buyer or the Company, and the Company has not retained or assumed, by contract
or by operation of law, any liability or responsibility of any other Person for
any material environmental claims or conditions, including, but not limited to,
in connection with a Release or Remediation of Hazardous Substances.
(h) This SECTION 3.15 contains the sole and exclusive
representations and warranties of the Company relating to environmental
matters, Environmental Laws or Hazardous Substances and no claim for breach of
representation or warranty made with respect to environmental matters,
18
Environmental Law or Hazardous Substances may be made under any other provision
of this Agreement.
3.16. EMPLOYEE BENEFIT MATTERS.
(a) SCHEDULE 3.16.1 of the Disclosure Schedules lists
all "employee benefit plans," as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") and all pension,
retirement, supplemental retirement, stock, stock option, basic and
supplemental accidental death and dismemberment, basic and supplemental life
and health insurance, dental, vision, savings, bonus, deferred compensation,
incentive compensation, business travel and accident, holiday, vacation,
severance pay, salary continuation, short and long term disability, and other
material fringe benefit and employee benefit or employment arrangements, plans,
contracts, policies, or practices maintained, contributed to, or required to be
contributed to by the Company or any ERISA Affiliate (as hereinafter defined)
for the benefit of any Employee, Former Employee (but only with respect to
service for the Company), director or officer of the Company or with respect to
which the Company or any ERISA Affiliate has liability exceeding $5,000 on an
annual basis with respect to the Employees, Former Employees (but only with
respect to service for the Company), directors or officers of the Company (but
in each case excluding any multiemployer plan as defined in Section 3(37) of
ERISA) (the "BENEFIT PLANS"). None of the Benefit Plans are maintained,
contributed to or required to be contributed to outside the United States. For
purposes of this Agreement, the term "ERISA AFFILIATE" means any person or
entity included with the Company in a controlled group or under common control
with the Company within the meaning of Section 414 of the Code.
(b) As applicable, with respect to each of the Benefit
Plans, true and complete copies of (i) all current plan documents (including
all amendments and modifications thereof) and the current trust agreements and
amendments thereto, and any related insurance contracts; (ii) the last three
filed Form 5500 series reports and all schedules thereto, as applicable; (iii)
the current summary plan descriptions and all material modifications thereto;
and (iv) copies of any private letter rulings or applications for determination
letters and determination letters issued by the IRS with respect to the Benefit
Plans within the past five years have been delivered to the Buyer.
(c) The Company is in compliance in all material
respects with the provisions of ERISA and the Code applicable to the Benefit
Plans. Each Benefit Plan has been maintained, operated and administered in
compliance in all material respects with its terms and with all applicable Laws
including ERISA and the Code.
(d) No Benefit Plan is (or at any time has been) subject
to Title IV of ERISA, and no liability under Title IV of ERISA has been
incurred or is expected to be incurred by the Company or any ERISA Affiliate
that could reasonably be expected to result in liability to the Buyer.
(e) All Benefit Plans that are "employee pension benefit
plans" within the meaning of Section 3(2) of ERISA and that are intended to
meet the qualification requirements of Section 401(a) of the Code (each a
"PENSION Plan") have received favorable determination letters from the Internal
Revenue Service ("IRS") and no determination letter with respect to any Pension
19
Plan has been revoked, nor, to the knowledge of the Company, is there any
reason for such revocation. Each Pension Plan now meets the requirements for
qualification under Section 401(a) of the Code, and the related trusts are now
exempt from taxation under Section 501(a) of the Code.
(f) There are no material filings or applications to the
IRS, the Department of Labor or other governmental authority or agency that are
currently outstanding or being prepared by the Company or any ERISA Affiliate
with respect to any Benefit Plan, including but not limited to filings under
the Employee Plans Compliance Resolution System, the Voluntary Fiduciary
Correction Program or Delinquent Filer Voluntary Compliance programs.
(g) There are no pending audits or investigations by any
governmental agency involving any Benefit Plan, and, to the knowledge of the
Company, no threatened or pending claims (except for individual claims for
benefits payable in the normal operation of the Benefit Plans), suits or
proceedings involving any Benefit Plan, any fiduciary thereof or service
provider thereto, nor to the knowledge of the Company is there any reasonable
basis for any such claim, suit or proceeding.
(h) With respect to any Benefit Plan, neither the
Company nor, to the knowledge of the Company, any ERISA Affiliate or any
employee of the Company has engaged in a "prohibited transaction" within the
meaning of Section 406 of ERISA or Section 4975 of the Code, nor, to the
knowledge of the Company, has any such Person breached any duty imposed by
Title I of ERISA, with respect to any Benefit Plan. To the knowledge of the
Company, no other Person has engaged in such a prohibited transaction or
breach.
(i) Any insurance premium under any insurance policy
related to a Benefit Plan for any period up to and including the Closing Date
that is due has been paid and, with respect to any such insurance policy or
premium payment obligation, to the knowledge of the Company, none of the
Company or any ERISA Affiliate is subject to a retroactive rate adjustment,
loss sharing arrangement or other actual or contingent liability.
(j) With respect to each Benefit Plan that is a "group
health plan" within the meaning of Section 607 of ERISA and that is subject to
Section 4980B of the Code, the Company and each ERISA Affiliate complies in all
material respects with the notice and continuation coverage requirements of the
Code and ERISA. With respect to each Benefit Plan, the Company is in compliance
in all material respects with the applicable provisions of the Health Insurance
Portability and Accountability Act of 1996 and the regulations issued
thereunder.
(k) Except as set forth in SCHEDULE 3.16.2 of the
Disclosure Schedules, no Benefit Plan provides benefits, including death or
medical benefits, beyond termination of service or retirement other than (i)
coverage mandated by law or (ii) death or retirement benefits under a Benefit
Plan qualified under Section 401(a) of the Code.
(l) To the knowledge of the Company, the Company has
properly classified for purposes of determining eligibility to participate in
any Benefit Plan all employees, leased employees, consultants and independent
contractors.
20
(m) Prior to Closing, the Company shall use its
reasonable best efforts to take all actions necessary to comply with the
shareholder vote requirements needed to avail itself of the exemption contained
in Section 280G(b)(5) of the Code and the applicable regulations promulgated
thereunder (the "280G SHAREHOLDER Vote"), and shall use its reasonable best
efforts to cause its executives to waive any payments in respect of the
transactions contemplated by this Agreement that would not be deductible
pursuant to Section 280G of the Code if the 280G Shareholder Vote fails to
achieve the requisite approval. If the 280G Shareholder Vote fails to achieve
the requisite approval in respect of any executive, the Company shall provide
to the Buyer the name of such executives and amounts waived, and no amount so
waived shall be paid to any such executive.
3.17. TAXES.
(a) (i) Each of the Company and the Parent has filed or
caused to be filed with the appropriate federal, state, local, and foreign
governmental entity or other authority (individually or collectively, "TAXING
Authority") all Tax Returns (as defined in SECTION 3.17(b) hereof) required to
be filed with respect to the Company and the Parent and has paid or caused to
be paid all Taxes (as defined in SECTION 3.17(b) hereof) due and owing with
respect to the Company and the Parent and (ii) there are no liens for Taxes
upon the Company or the Parent or their assets, except liens for Taxes not yet
due and payable. Neither the Company nor the Parent has granted any waiver of
any statute of limitations with respect to, or any extension of a period for
the assessment of, any Taxes.
(b) As used in this Agreement: (i) "TAX" means any of
the Taxes, where "TAXES" means all income taxes (including any tax on or based
upon net income, or gross income, or income as specially defined, or earnings,
or profits, or selected items of income, earnings, or profits) and all gross
receipts, estimated, sales, use, ad valorem, transfer, franchise, license,
withholding, payroll, employment, excise, severance, stamp, occupation,
premium, property, or windfall profit taxes, environment, alternative, or
add-on minimum taxes, custom duties or other taxes of any kind whatsoever,
together with any interest and any penalties, additions to tax or additional
amounts imposed by any Taxing Authority on or with respect to the Company or
the Parent or their properties or assets, and (ii) "TAX RETURN" means any
return, report, information return or other document (including any related or
supporting information or any amended return) filed or required to be filed
with any Taxing Authority or other authority in connection with the
determination, assessment, or collection of any Tax paid or payable by or with
respect to the Company or the Parent or their properties or assets or the
administration of any laws, regulations, or administrative requirements
relating to any such Tax.
(c) There is no action, suit, proceeding, investigation,
audit, claim, assessment or judgment now pending against the Company or the
Parent in respect of any Tax, and to the knowledge of the Company, no written
notification of an intention to examine, request for information related to Tax
matters or notice of deficiency or proposed adjustment for any amount of Tax
has been received by the Company or the Parent from any Taxing Authority. The
Company has not received written notification from a Taxing Authority with
which the Company or the Parent does not file Tax Returns asserting that the
Company or the Parent is or may be subject to taxation by that Taxing
Authority.
21
(d) There is no agreement or arrangement with any person
or entity pursuant to which the Company or the Parent would have an obligation
with respect to Taxes of another person or entity following the Closing.
(e) Neither the Company nor the Parent has ever been a
member of an affiliated group of corporations (as that term is defined in
Section 1504(a)(1) of the Code) other than any group of which the common parent
is the Company or the Parent, or has any liability for the Taxes of any person
under Treasury Regulation Section 1.1502-6 (or any similar provision of state,
local, or foreign law), as a transferee or successor, by contract, or
otherwise.
(f) Each of the Company and the Parent has withheld and
paid all Taxes that it was required to withhold and pay, and has timely filed
all information returns or reports, including Forms 1099 and W-2, that were
required to be filed and has accurately reported all information required to be
included on such returns or reports.
(g) Neither the Company nor the Parent has ever (i) been
the subject of a Tax ruling that would have continuing effect after the
Closing, (ii) been the subject of a closing agreement with any Taxing Authority
that would have continuing effect after the Closing, or (iii) granted a power
of attorney with respect to any Tax matters that would have continuing effect
after the Closing.
(h) Neither the Company nor the Parent (i) has agreed to
or is required to make any adjustment pursuant to Section 481 of the Code (or
any similar provision of state, local or foreign Tax law) or to change any
accounting method; (ii) has any knowledge that any Taxing Authority has
proposed any such adjustment or change in accounting method with respect to the
Company or the Parent; or (iii) has an application pending with any Taxing
Authority requesting permission for a change in accounting method.
(i) Neither the Company nor the Parent has been the
"distributing corporation" or the "controlled corporation" in a transaction
intended to be tax-free pursuant to Section 355(a) of the Code.
(j) The Company is treated for federal tax purposes as
disregarded as an entity separate from the Parent, in accordance with Treasury
Regulation Section 301.7701-3(b).
3.18. CONSENTS. Except as set forth on SCHEDULE 3.18 of the
Disclosure Schedules, no consent, approval, or authorization of, or exemption
by, or filing with, any governmental authority is required to be obtained or
made by the Company or the Parent in connection with the execution, delivery,
and performance by the Company or the Parent of this Agreement or any Ancillary
Agreement to which the Company or the Parent is a party, or the taking by the
Company or the Parent of any other action contemplated hereby or thereby.
3.19. EMPLOYEE RELATIONS.
(a) Except as disclosed in SCHEDULE 3.19.1 of the
Disclosure Schedules, the Company is not: (i) a party to or otherwise bound by
any collective bargaining or similar type of union agreement, (ii) a party to,
involved in or, to the knowledge of the Company or the Parent, threatened by,
any labor grievance (i.e., as referred to under the applicable collective
22
bargaining agreement), labor dispute or unfair labor practice charge from any
current or former employee, any strike, dispute, slow down or stoppage, or
(iii) currently negotiating any collective bargaining agreement, and the
Company has not experienced any work stoppage or organizational activity during
the last five years. Except as disclosed on SCHEDULE 3.19.1 of the Disclosure
Schedules, no employee is or was a party to any employment agreement with
Company and no employee is entitled to advance written notice of his or her
termination.
(b) The Company has been and is in compliance in all
material respects with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, unemployment
insurance, worker's compensation, equal employment opportunity, employment
discrimination and immigration control, and the Company has not been nor is
engaged in any unfair labor practice. Except as disclosed on SCHEDULE 3.19.2 of
the Disclosure Schedules, there are no outstanding claims against the Company
(whether under regulation, contract, policy or otherwise) asserted by or on
behalf of any present or former employee or job applicant of the Company on
account of or for (i) overtime pay, other than overtime pay for work done in
the current payroll period, (ii) wages or salary for a period other than the
current payroll period, (iii) any amount of vacation pay or pay in lieu of
vacation time off, other than vacation time off or pay in lieu thereof earned
in or in respect of the current fiscal year, (iv) any amount of severance pay
or similar benefits, (v) unemployment insurance benefits, (vi) worker's
compensation or disability benefits, (vii) any violation of any statute,
ordinance, order, rule or regulation relating to employment terminations or
layoffs, (viii) any violation of any statute, ordinance, order, rule or
regulation relating to employee "whistleblower" or "right-to-know" rights and
protections, (ix) any violation of any statute, ordinance, order, rule or
regulations relating to the employment obligations of federal contractors or
subcontractors or (x) any violation of any regulation relating to minimum wages
or maximum hours of work, and neither the Company nor the Parent are aware of
any such claims that have not been asserted. No person (including any
governmental body) has asserted or to the knowledge of the Company threatened
any claims against the Company under or arising out of any regulation relating
to discrimination or occupational safety in employment or employment practices.
3.20. TRANSACTIONS WITH RELATED PARTIES. Except as described in
SCHEDULE 3.20 of the Disclosure Schedules, since January 1, 2002, none of the
Lenders or the Parent, nor any officer, director, general partner or limited
liability company manager of the Company, the Parent or the Lenders, nor any
affiliate or associate (as such term is defined in Rule 405 promulgated under
the Securities Act) of any such person, has had or, has:
(a) any contractual or other claims, express or implied,
of any kind whatsoever against the Company;
(b) any interest in any property or assets used by the
Company;
(c) to the Company's knowledge, any direct or indirect
ownership or other interest in any competitor of the Company; or
(d) engaged in any other transaction with the Company
(other than ordinary course employment relationships).
23
At the Closing, none of the Lenders nor the Parent nor any affiliate
of the Lenders or the Parent, nor any associate (as such term is defined in
Rule 405 promulgated under the Securities Act) of any of the foregoing, will
have outstanding any loan, guarantee or other obligation of borrowed money made
to or from the Company.
3.21. INSURANCE. SCHEDULE 3.21.1 of the Disclosure Schedules
contains a complete and correct list of all policies and contracts for
insurance (including coverage amounts and expiration dates) of which the
Company is the owner, insured or beneficiary, or covering its respective
properties or assets. All such policies are outstanding and in full force and
effect. There is no default with respect to any provision contained in any such
policy, nor has there been any failure to give any notice or present any claim
under any such policy in a timely fashion or in the manner or detail required
by the policy. Except as set forth on SCHEDULE 3.21.2 of the Disclosure
Schedules, there are no outstanding claims under such policies. There are no
premiums or claims due under such policies that remain unpaid beyond the date
required for payment thereof. In the past five years, no notice of cancellation
or non-renewal with respect to, or disallowance (other than reservation of
rights by the insurer) of any material claim under, any such policy has been
received. Since January 1, 2002, the Company has not been refused any
insurance, nor have any of its coverages been limited by any insurance carrier
to which it has applied for insurance or which has carried insurance during the
last three years.
3.22. BROKERS. Other than Xxxxxx X. Xxxxx & Co., neither the
Company nor the Parent has retained any broker, finder or investment banking
firm to act on their behalf in connection with the transactions contemplated by
this Agreement or the Ancillary Agreements and, to the knowledge of the Company
and the Parent, no other person is entitled to receive any brokerage
commission, finder's fee or other similar compensation in connection with the
transactions contemplated by this Agreement. The Parent will indemnify the
Buyer for any fees, costs or other amounts due to, or obligations to, Xxxxxx X.
Xxxxx & Co. arising out of the transactions contemplated hereby.
3.23. COMPENSATION ARRANGEMENTS; BANK ACCOUNTS; OFFICERS AND
DIRECTORS. SCHEDULE 3.23 of the Disclosure Schedules sets forth (a) the names,
titles and current annual salary and any bonus, if applicable, of all present
directors, limited liability company managers, officers, employees, consultants
and agents of the Company whose rate of annual compensation, including any
promised, expected or customary bonus, equals or exceeds $100,000, (b) the name
of each bank in which the Company has an account, letter of credit, security
and other deposits or bank accounts, or safe deposit box, and (c) the names and
titles of all directors, limited liability company managers and officers of the
Company. Except as set forth on SCHEDULE 3.23 of the Disclosure Schedules, the
Company has not granted any powers of attorney.
3.24. RELATIONSHIP WITH SIGNIFICANT CUSTOMERS. SCHEDULE 3.24 of the
Disclosure Schedules contains a true and complete list of all Significant
Customers of the Company. Neither the Company nor the Parent has received any
written communication or notice from any Significant Customer or otherwise has
knowledge that such Significant Customer (a) has ceased, or will cease, to use
the products or services of the Company or (b) has substantially reduced, or
will substantially reduce, the use of such products or services at any time.
24
3.25. RELATIONSHIP WITH SUPPLIERS. SCHEDULE 3.25.1 of the
Disclosure Schedules contains a true and complete list as of the Closing Date
of all Suppliers of the Company. Since December 31, 2005, neither the Company
nor the Parent has received any written communication or notice from any
Supplier identified on SCHEDULE 3.25.1 of the Disclosure Schedules or otherwise
has knowledge that it (a) has ceased, or will cease, selling or providing
products or services to the Company or (b) has substantially reduced, or will
substantially reduce, selling or providing products or services at any time.
Since December 31, 2005, neither the Company nor the Parent has received
written notice or otherwise has knowledge of any actual or prospective price
increase from any Significant Supplier or has agreed to accept any such price
increase other than any such price increase that is either immaterial or is
consistent with the historical price increases imposed by such Significant
Supplier. Since January 1, 2002, no Supplier has notified the Company or the
Parent in writing, and neither the Company nor the Parent otherwise has
knowledge, of any recall or other warning (other than warnings included as part
of the product literature at the time of sale) with respect to any products
distributed or sold by the Company. "SUPPLIER" shall mean any supplier, or
group of affiliated suppliers, to the Company of products, materials, services
or items where the aggregate purchase price as of the last day of the month
preceding the date hereof, for such products, materials, services or items in
the immediately preceding 12-month period is in excess of $500,000.
"SIGNIFICANT SUPPLIER" shall mean the largest 20 Suppliers to the Company for
the year ended December 31, 2005 (based on the dollar amount of purchases made
by the Company).
3.26. PRODUCTS LIABILITY. Except as disclosed on SCHEDULE 3.26.1 of
the Disclosure Schedules, there are no: (a) liabilities of the Company, fixed
or contingent, asserted or, to the knowledge of the Company or the Parent,
unasserted, with respect to any injury to individuals or property that relate
to any product manufactured, licensed or sold by the Company on or prior to the
Closing Date; or (b) liabilities of the Company, fixed or contingent, asserted
or, to the knowledge of the Company or the Parent, unasserted, with respect to
any claim for the breach of any express or implied product warranty with
respect to any product manufactured, licensed or sold by the Company, or
services provided by the Company, on or prior to the Closing Date, other than
standard warranty obligations (to replace, repair or refund) in the ordinary
course of the conduct of the business of the Company. Attached as SCHEDULE
3.26.2 of the Disclosure Schedules is a correct and complete list of all
products liability claims against the Company or the Parent asserted at any
time after January 1, 2002 and a correct and complete list of all payments of
any type made at any time after January 1, 2002 as a result of any products
liability claims against the Company or the Parent, whether such payments were
made by the Company, the Parent or any third party.
3.27. WARN ACT. Since January 1, 2002, not including the Excluded
Assets Transaction, the Company has not effectuated (a) a "plant closing" (as
defined in the WARN Act) affecting any site of employment or one or more
facilities or operating units within any site of employment or facility of the
Company; or (b) a "mass layoff" (as defined in the WARN Act) affecting any site
of employment or one or more facilities or operating units within any site of
employment or facility of the Company; nor has the Company triggered
application of any similar foreign, state or local law. None of the Company's
employees who are employed in connection with the Business has suffered an
"employment loss" (as defined in the WARN Act) within ninety (90) days prior to
the date hereof.
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3.28. ABM CONTRACT. The Master Distribution Contract dated as of
April 30, 2001 by and between ABM Janitorial Services and AmSan West, Inc., as
amended (the "ABM CONTRACT") has expired as of April 30, 2006, in accordance
with its terms and has not been renewed. Prior to such expiration, the Company
had not violated or breached the terms of the ABM Contract in any material
respect.
3.29. DISCLOSURE. No representation or warranty by the Company, the
Parent or the Lenders in this Agreement or in the Disclosure Schedules contains
or will contain any untrue statement of a material fact or fails to state a
fact necessary to make the statements made therein correct in all material
respects.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE LENDERS
The Lenders hereby represent and warrant, on a joint and several
basis, to the Buyer as follows:
4.1. ORGANIZATION. Each of the Lenders is a limited partnership
duly organized, validly existing, and in good standing under the laws of the
State of Delaware. Each of the Lenders has all requisite limited partnership
power and authority to carry on its business as it now is being conducted and
to execute, deliver and perform this Agreement and the Ancillary Agreements to
which it is a party and to consummate the transactions contemplated hereby and
thereby.
4.2. OWNERSHIP OF STOCK OF THE PARENT AND INDEBTEDNESS. Each
Lender is the sole beneficial and record owner of the shares of stock of the
Parent set forth opposite the Lender's name on SCHEDULE 4.2 attached hereto and
is the sole beneficial and record holder of the Indebtedness set forth on
SCHEDULE 4.2 attached hereto. Each Lender has the requisite legal right, power
and authority to vote all the shares of the stock of the Parent set forth on
SCHEDULE 4.2 hereto without the need for consent of any other Person. Upon
approval of this Agreement and the transactions contemplated hereby by the
Lenders (as contemplated by SECTION 6.22), the execution and delivery of this
Agreement by the Parent, and performance by the Parent of its obligations
hereunder will be authorized by all necessary corporate action on the part of
the Parent.
4.3. AUTHORITY; EFFECT OF AGREEMENT. The execution, delivery and
performance by the Lenders of this Agreement and the Ancillary Agreements to
which the Lenders are a party and the consummation by the Lenders of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary partnership action on the part of each Lender. This Agreement has
been, and each Ancillary Agreement to which each Lender is a party will be,
duly and validly executed and delivered by each Lender, to the extent a party
thereto, and constitutes, and will constitute, the valid and binding obligation
of each Lender, enforceable against each Lender in accordance with its
respective terms.
4.4. NO CONFLICT. The execution, delivery and performance by each
Lender of this Agreement and each Ancillary Agreement to which such Lender is
party, and the consummation by each Lender of the transactions contemplated
hereby and thereby does not and will not, with or without the giving of notice
or the lapse of time, or both, (a) violate any provision of law, rule, or
26
regulation to which such Lender is subject, (b) violate any order, judgment, or
decree applicable to the Lender, (c) violate the limited partnership agreement
or other corporate governance documents of such Lender or (d) violate or result
in a breach of or constitute a default (or an event that might, with the
passage of time or the giving of notice, or both, constitute a default) under,
or require the consent of any third party under, or result in or permit the
termination or amendment of any provision of, or result in or permit the
acceleration of the maturity or cancellation of performance of any obligation
under, or result in the creation or imposition of any Encumbrance upon any
assets or property or give to others any interests or rights therein under any
indenture, deed of trust, mortgage, loan or credit agreement, license, permit,
contract, lease, or other agreement, instrument or commitment to which such
Lender is a party or by which such Lender may be bound or affected, except for
any such violations, breaches, defaults, required consents, terminations,
accelerations, Encumbrances or rights that in the aggregate would not
materially hinder or impair the ability of such Lender to perform its
obligations hereunder or the consummation of the transactions contemplated by
this Agreement.
4.5. BROKERS. No Lender has retained any broker, finder or
investment banking firm to act on its behalf in connection with the
transactions contemplated by this Agreement or the Ancillary Agreements and, to
the knowledge of the Lenders, other than Xxxxxx X. Xxxxx & Co., no other person
is entitled to receive any brokerage commission, finder's fee or other similar
compensation in connection with the transactions contemplated by this
Agreement.
4.6. LITIGATION. There is no Litigation pending or, to the
Lenders' knowledge, threatened against any Lender or any of its properties,
assets, officers, directors or employees that would affect the Lenders' ability
to consummate the transactions contemplated by this Agreement. No Lender is a
party to or bound by any outstanding orders, rulings, judgments, settlements,
arbitration awards or decrees (or agreement entered into or any administrative,
judicial or arbitration award with any governmental authority) with respect to
or affecting its properties or its ability to consummate the transactions
contemplated by this Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby represents and warrants to the Lenders and the Parent
as follows:
5.1. ORGANIZATION. The Buyer is a corporation duly organized,
validly existing, and in good standing under the laws of the State of New
Jersey. The Buyer has all requisite corporate power and authority to carry on
its business as it is now being conducted, to execute, deliver, and perform
this Agreement and each Ancillary Agreement to which it is a party, and to
consummate the transactions contemplated hereby and thereby.
5.2. CORPORATE POWER AND AUTHORITY. The execution, delivery, and
performance by the Buyer of this Agreement, and each Ancillary Agreement to
which the Buyer is a party, and the consummation by the Buyer of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of the Buyer. This Agreement has been,
and each Ancillary Agreement to which the Buyer is a party will be, duly and
validly executed and delivered by the Buyer and constitutes, or will
constitute, the valid and binding obligation of the Buyer, enforceable against
the Buyer in accordance with its terms.
27
5.3. NO CONFLICT. The execution, delivery, and performance by the
Buyer of this Agreement and each Ancillary Agreement to which the Buyer is a
party, and the consummation by the Buyer of the transactions contemplated
hereby and thereby, does not and will not, with or without the giving of notice
or the lapse of time, or both, (a) violate any provision of law, rule, or
regulation to which the Buyer is subject, (b) violate any order, judgment, or
decree applicable to the Buyer, (c) violate any provision of the certificate of
incorporation, bylaws or other corporate governance documents of the Buyer or
(d) except as set forth on SCHEDULE 5.3 of the Disclosure Schedules, violate or
result in a breach of or constitute a default (or an event that might, with the
passage of time or the giving of notice, or both, constitute a default) under,
or require the consent of any third party under, or result in or permit the
termination or amendment of any provision of, or result in or permit the
acceleration of the maturity or cancellation of performance of any obligation
under, or result in the creation or imposition of any Encumbrance upon any
assets or property or give to others any interests or rights therein under any
indenture, deed of trust, mortgage, loan or credit agreement, license, permit,
contract, lease, or other agreement, instrument or commitment to which the
Buyer is a party or by which it may be bound or affected, except, in each case,
for violations, breaches, defaults, required consents, terminations,
accelerations, Encumbrances or rights that in the aggregate would not
materially hinder or impair the ability of the Buyer to perform its obligations
hereunder or the consummation of the transactions contemplated this Agreement.
5.4. CONSENTS. Except as set forth on SCHEDULE 5.4 of the
Disclosure Schedules, no consent, approval, or authorization of, or exemption
by, or filing with, any governmental authority is required to be obtained or
made by the Buyer in connection with the execution, delivery and performance by
the Buyer of this Agreement or any Ancillary Agreement to which the Buyer is a
party or the taking by the Buyer of any other action contemplated hereby or
thereby.
5.5. LITIGATION. There are no actions, suits or proceedings
pending or, to the Buyer's knowledge, overtly threatened against the Buyer at
law or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, that would adversely affect the Buyer's performance under
this Agreement or the consummation of the transactions contemplated hereby. The
Buyer is not subject to any material outstanding judgment, order or decree of
any court or governmental body that would adversely affect the Buyer's
performance under this Agreement or the consummation of the transactions
contemplated hereby.
5.6. BROKERS. Other than Xxxxxx Brothers, the Buyer has retained
no broker, finder or investment banking firm to act on its behalf in connection
with the transactions contemplated by this Agreement. The Buyer will indemnify
the Parent and the Lenders for any fees, costs or other amounts due to, or
obligations to, Xxxxxx Brothers arising out of the transactions contemplated by
this Agreement.
5.7. INVESTMENT REPRESENTATION. The Buyer is acquiring the LLC
Interests for its own account with the present intention of holding such
securities for investment purposes and not with a view to, or for sale in
connection with, any distribution of such securities in violation of any
federal or state securities laws. The Buyer is an "accredited investor" as
defined in Regulation D promulgated by the Securities and Exchange Commission
28
under the Securities Act of 1933, as amended (the "SECURITIES ACT"). The Buyer
acknowledges that the LLC Interests have not been registered under the
Securities Act, or any state or foreign securities laws and that the LLC
Interests may not be sold, transferred, offered for sale, pledged, hypothecated
or otherwise disposed of unless such transfer, sale, assignment, pledge,
hypothecation or other disposition is pursuant to the terms of an effective
registration statement under the Securities Act and the LLC Interests are
registered under any applicable state or foreign securities laws or sold
pursuant to an exemption from registration under the Securities Act and any
applicable state or foreign securities laws.
5.8. FINANCING. Attached hereto as EXHIBIT C is a true, correct
and complete copy of a commitment letter (the "COMMITMENT LETTER") for debt
financing (the "DEBT FINANCING") which contemplates a fee letter (the "FEE
LETTER"), which, together with cash on hand or available under existing credit
facilities, will provide the Buyer with the cash sufficient to pay the full
consideration payable hereunder, to make all other necessary payments by it in
connection with the transactions contemplated hereby (including payment of any
purchase price adjustment pursuant to ARTICLE I and payment of all of the
Buyer's related fees and expenses). The Buyer and each other party thereto have
executed the Commitment Letter, and, as of the date hereof, the Commitment
Letter is in full force and effect. The Buyer is not in Default (as defined
under the Amended and Restated Credit Agreement, dated as of December 21, 2004,
among the Buyer and the lenders (and their agents) named therein) under such
Credit Agreement.
ARTICLE VI
COVENANTS
6.1. HSR ACT. The Company and the Buyer shall, as promptly as
possible, but in no event later than five (5) business days following the
execution and delivery of this Agreement, file with the United States Federal
Trade Commission ("FTC") and the United States Department of Justice ("DOJ")
the notification and report form required for the transaction contemplated by
this Agreement and any supplemental information requested in connection
therewith pursuant to the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements act of 1976,
as amended (the "HSR ACT"), which forms shall specifically request early
termination of the waiting period prescribed by the HSR Act. The parties shall
use their commercially reasonable efforts to resolve diligently and
expeditiously any objections that may be asserted by the United States Federal
Trade Commission and the United States Department of Justice with respect to
the transactions contemplated by this Agreement and shall cooperate fully and
in good faith in connection with overcoming any such objections and fulfilling
any requests for additional information or documentation with respect to the
filing; PROVIDED, HOWEVER, in no event shall the Company, the Buyer or any of
their respective affiliates be required to dispose of any of their assets or
make any change in their business or operations. The Buyer shall be responsible
for all filing fees payable in connection with the HSR Act filing.
6.2. COOPERATION BY THE LENDERS, THE PARENT, THE BUYER AND THE
COMPANY. Subject to SECTION 6.3(M) below, from the date hereof and prior to the
Closing, the Lenders, the Company and the Parent will use all commercially
reasonable efforts, and will cooperate with the Buyer, to secure all necessary
consents, approvals, authorizations, exemptions, and waivers from third parties
or governmental authorities as shall be required in order to enable the parties
to effect the transactions contemplated by this Agreement.
29
6.3. CONDUCT OF THE BUSINESS PENDING CLOSING. From and after the
date hereof until the Closing Date, unless the Buyer shall otherwise consent in
writing, the Company shall, and the Parent shall cause the Company to, operate
its businesses in the ordinary course and consistent with past practice and
shall not: (a) issue, sell or deliver any equity securities or issue or sell
any securities convertible into, or options with respect to, or warrants to
purchase or rights to subscribe for, any equity securities, or become a party
to other agreements or commitments of any character relating to the Company's
issued or unissued equity securities, or grant any phantom stock, stock
appreciation or similar rights; (b) effect any recapitalization,
reclassification, stock dividend, stock split or like change in its
capitalization; (c) amend its certificate of formation or limited liability
company agreement; (d) declare, pay or set aside for payment any dividend or
other distribution (whether in cash, stock or property) (other than any such
dividends or other distributions, not to exceed $1,000,000 in the aggregate,
for the payment of taxes, debt repayment and other costs incurred in the
ordinary course of business) or make any redemption or purchase of any equity
interests; (e) sell, assign or transfer any assets, properties or rights,
except inventory sold, and obsolete assets disposed of, in the ordinary course
of business consistent with past practice, and except for the Excluded Assets
Transaction; (f) make any capital investment in, or any loan to, any other
Person, except in the ordinary course of business; (g) make, authorize or
commit to make any single capital expenditure in excess of $50,000, or capital
expenditures in excess if $150,000 in the aggregate, except for such capital
expenditures or commitments therefor that are reflected in the Company's budget
for the fiscal year ending December 31, 2006 previously delivered to the Buyer;
(h) make, other than in accordance with past practice, or change or revoke any
Tax elections or change any accounting methods for Tax purposes; (i) make any
loan to, or enter into any other transaction outside the ordinary course of
business and consistent with past practice with, any of its limited liability
company managers, officers, or employees, the Lenders, or other affiliate of
the Company, the Parent or the Lenders or any "associates" (as defined in Rule
405 under the rules and regulations of the Securities and Exchange Commission
promulgated under the Securities Act of any of the foregoing; (j) borrow any
amount or incur or become subject to any material liabilities (other than
liabilities incurred in the ordinary course of business, liabilities under
contracts entered into in the ordinary course of business and borrowings from
banks (or similar financial institutions) necessary to meet ordinary course
working capital requirements and which (other than borrowings in the ordinary
course of business under revolving credit facilities) are not individually or
in the aggregate in excess of $500,000); (k) mortgage, pledge or subject to any
lien, charge or other encumbrance, any material portion of its assets, except
Permitted Encumbrances; (l) guarantee, endorse or otherwise incur or assume
liability (whether directly, contingently or otherwise) for the obligations of
any other person, other than in the ordinary course of business consistent with
past practice; (m) enter into any new Contract or modify, amend, terminate or
relinquish any Contract or other material right of the Company or of the Parent
(including any material insurance policy naming it as a beneficiary or a loss
payable payee, or any material contracts with insurance carriers) other than
transactions, commitments, contracts or agreements in the ordinary course of
business consistent with past practice and except for the Excluded Assets
Transaction, it being further understood and agreed that neither the Company
nor the Parent will renew the ABM Contract or enter into any new contract with
ABM Janitorial Services; (n) make any material change in any method of
accounting or accounting principles or practice, except for any such change
required by reason of a change in GAAP; (o) adopt a plan of liquidation or
dissolution, or merge or consolidate with, or purchase substantially all or a
30
material portion of the assets of, or otherwise acquire any business of, any
person; (p) grant any increase in the salaries or other compensation payable or
to become payable to, or any advance (excluding advances for ordinary business
expenses consistent with past practice) or loan to, any officer, director or
employee of the Company or the Parent (other than normal annual increases for
employees made in the ordinary course of business and consistent with past
practice), or any increase in, or any addition to, any benefit plan, program or
arrangement, including the Benefit Plans, to which any of the officers,
directors and employees may be entitled, except benefits provided in the
ordinary course of business and consistent with past practice, or any other
payment of any kind to or on behalf of any officer, director or employee other
than payment of base compensation and reimbursement for reasonable expenses in
the ordinary course of business consistent with past practice; (q) dispose of
or fail to renew any rights in, to or for the use of any Intellectual Property,
franchise, license, permit or certificate material to the business of the
Company; (r) change or modify in any manner its existing credit, collection and
payment policies, procedures and practices with respect to accounts receivable
and accounts payable, respectively, including acceleration of collections of
receivables, failure to make or delay in making collections of receivables
(whether or not past due), acceleration of payment of payables or failure to
pay or delay in payment of payables; (s) maintain the Company's books of
account and records in any manner except its usual, regular and ordinary
manner, consistent with its past practice; (t) change or modify in any manner
the Company's methodology for determining which assets or liabilities of the
Company are Excluded Assets or Excluded Liabilities from the methodology used
to prepare SCHEDULE 3.6(b) (as such schedule is in effect as of the date of
this Agreement); or take any action that has the effect of transferring
(physically, on the books and records of the Company or otherwise in a manner
that has an effect on the calculation of Net Working Capital or the
determination of Excluded Assets and Excluded Liabilities at Closing) any
accounts payable, accounts receivable or inventory (or any other assets or
liabilities) so that such assets or liabilities are treated differently (in
terms of whether or not they are Excluded Assets or Excluded Liabilities) than
they would be under the methodology used to prepare SCHEDULE 3.6(b) (as in
effect on the date of this Agreement); or otherwise take any action outside the
ordinary course of business that has the effect of increasing or decreasing Net
Working Capital or the inventory to be purchased by the Buyer under the
Inventory Purchase Agreement; or (u) commit or agree to do any of the
foregoing.
6.4. COOPERATION RE FINANCIAL STATEMENTS. The Company and the
Parent shall cooperate with the preparation of financial statements of the
Company for (a) the annual periods ending and as of December 31, 2003, December
31, 2004 and December 31, 2005 (collectively, the "ANNUAL REG. S-X FINANCIAL
STATEMENTS") and (b) the three-month periods ending March 31, 2005 and March
31, 2006 (or such other time periods as required by Regulation S-X promulgated
by the Securities and Exchange Commission (the "SEC") for any report prepared
by the Buyer under the Securities Exchange Act of 1934, as amended (the
"SECURITIES EXCHANGE ACT"), and the regulations promulgated thereunder or as
the Buyer may reasonably request) (clauses (a) and (b), collectively, the "REG.
S-X FINANCIAL STATEMENTS"), and each of the Company and the Parent shall
otherwise use its commercially reasonable efforts to provide the Buyer with
information necessary for the Buyer to prepare and make any other reports or
filings under the Securities Exchange Act or stock exchange rules. The Company
and the Parent shall, and shall cause the directors, limited liability company
managers, officers and employees of the Company and the Parent to, provide any
representation letters reasonably requested by Buyer's accountants and
cooperate to permit Buyer's accountants to complete an audit of the Annual Reg.
31
S-X Financial Statements; PROVIDED, HOWEVER, that the Buyer acknowledges and
agrees that the Buyer will pay any fees or expenses of the Buyer's accountants
incurred in connection with the preparation of such financial statements and
the audit of the Annual Reg. S-X Financial Statements. The Company and the
Parent each shall cooperate with the Buyer, and use their commercially
reasonable efforts, to obtain from the Company's and the Parent's accountants
all consents, opinions and letters regarding the Reg. S-X Financial Statements
that are requested by the Buyer's accountants in connection with the
preparation or filing of any reports of the Buyer required to be made under the
Securities Exchange Act or stock exchange rules.
6.4A. COOPERATION RE FINANCING. The Company and the Parent shall
cooperate with and assist the Buyer in the preparation of such information
packages and offering materials as the Buyer and its lenders may reasonably
request (collectively, the "OFFERING MATERIAL") for use in connection the
Buyer's financing contemplated hereunder, including, without limitation, (a)
making senior management and other representatives of the Company and the
Parent available (at mutually agreeable times) to participate in meetings with
prospective investors, participating in "road shows" in connection with any
such offering or other financing and participating in meetings with rating
agencies and causing the independent accountants of the Company and the Parent
to participate in drafting sessions related to the preparation of the Offering
Materials and making work papers available to the Buyer, any underwriters and
their respective representatives; (b) using commercially reasonable efforts to
cause the independent accountants for the Company and the Parent to deliver
"comfort-letters" in customary form in connection with any offering or other
financing, if necessary and deliver consents to the inclusion of financial
statements required in connection with any offering registered under the
Securities Act; and (c) providing such information and assistance as the Buyer
and its lenders may reasonably request in connection therewith.
6.5. ACCESS. From and after the date hereof until the Closing
Date, the Company and the Parent each shall provide the Buyer with such
information as the Buyer from time to time reasonably may request with respect
to the Company and the Parent and shall provide the Buyer and its officers,
consultants, employees, counsel, agents and other representatives full access
during regular business hours and upon reasonable notice (but in a manner not
materially disruptive to the Company's or the Parent's operations) to their
respective properties, personnel and books and records as the Buyer from time
to time reasonably may request.
6.6. WAIVERS AND RELEASES BY THE LENDERS, THE PARENT AND LIMITED
LIABILITY COMPANY MANAGERS.
(a) At the Closing, each of the Lenders shall execute
and deliver a waiver and release of the Company in the form attached hereto as
EXHIBIT D.
(b) At the Closing, the Parent shall execute and deliver
a waiver and release of the Company in the form attached hereto as EXHIBIT E.
6.7. RESIGNATIONS. At the Closing, the Parent shall cause to be
delivered to the Company written resignations of any (a) limited liability
company manager of the Company and (b) director of AmSan Disaster Relief Fund,
Inc., a Delaware not-for-profit corporation and wholly-owned subsidiary of the
32
Company (the "NOT-FOR-PROFIT SUBSIDIARY"), in each case, as to which such
resignation has been requested by the Buyer.
6.8. NOTIFICATION. From the date hereof until the Closing Date,
each Lender, the Parent and the Company, respectively, shall promptly notify
the Buyer of any event or fact coming to the Lenders', the Parent's or the
Company's attention prior to Closing that causes any of the Lenders', the
Parent's or the Company's respective representations, warranties, covenants or
agreements contained under this Agreement to be inaccurate in a manner that
would cause the conditions set forth in SECTION 7.1 or SECTION 7.2 not to be
satisfied.
6.9. INSURANCE. Prior to the Closing, the Company and the Parent
shall maintain in full force and effect the policies of insurance listed on
SCHEDULE 3.21.1 of the Disclosure Schedules, subject only to variations
required by the ordinary operations of its business, or else will obtain, prior
to the lapse of any such policy, substantially similar coverage with insurers
of recognized standing and approved in writing by the Buyer. The Company shall
promptly advise the Buyer in writing of any change of insurer or type of
coverage in respect of the policies listed on SCHEDULE 3.21.1 of the Disclosure
Schedules.
6.10. EXCLUSIVITY. During the period from the date of this
Agreement through the Closing or the earlier termination of this Agreement,
none of the Lenders, the Company nor the Parent, nor any of their respective
officers, directors, limited liability company managers, employees, affiliates,
agents or representatives will, directly or indirectly, encourage, initiate or
solicit offers for, furnish information regarding or engage in any
negotiations, discussions, meetings or other communications with any third
party concerning, or enter into any agreements with respect to, any acquisition
of the Company or the Parent or any business of the Company or the Parent by
any party other than the Buyer, whether by sale of stock, merger, sale of
assets, business combination, reorganization or otherwise, and in the event
that during such period any offer is received, the Lenders, the Parent or the
Company, as the case may be, will promptly communicate to the Buyer the
existence, terms and identity of the party making such offer.
6.11. CONFIDENTIALITY. During the period beginning on the Closing
Date and ending on the third anniversary of the Closing Date, the Lenders and
the Parent shall, and shall cause their affiliates (including any "portfolio
companies" of the Lenders or their affiliated investment funds (hereinafter,
"PORTFOLIO COMPANIES")) and representatives to, keep confidential and not
disclose to any other person or entity or use for his own benefit or the
benefit of any other person or entity any technology, know-how, trade secrets
(including all results of research and development), product formulas,
industrial designs, inventions or other confidential proprietary information
regarding the Company and its business and operation ("CONFIDENTIAL
INFORMATION") in its possession or control. The obligations of the Lenders and
the Parent under this SECTION 6.11 shall not apply to Confidential Information
that (a) is or becomes generally available to the public without breach of the
commitment provided for in this SECTION 6.11; (b) is independently developed by
the Lenders, the Parent or their affiliates without reference to any
Confidential Information; (c) is or becomes available to the Lenders, the
Parent or their affiliates on a non-confidential basis from a source other than
the Company; or (d) is required to be disclosed by law, order or regulation of
a court or tribunal or governmental authority; PROVIDED, HOWEVER, that, in any
such case, the Lenders and the Parent shall notify the Buyer as early as
reasonably practicable prior to disclosure to allow the Buyer or the Company to
33
take appropriate measures to preserve the confidentiality of such Confidential
Information. Notwithstanding this SECTION 6.11, the Lenders and their
affiliates (excluding Portfolio Companies) shall be permitted to disclose at
any time summaries of confidential information (which will not include any
trade secret or other proprietary information (excluding summary financial
information)) of the Company in connection with communications with their
limited partners, financing sources, employees, agents, advisors, partners and
potential partners or to the extent reasonably required in the ordinary course
of their business.
6.12. NON-COMPETE.
(a) During the period beginning on the Closing Date and
ending on the third anniversary of the Closing Date (the "NON-COMPETE PERIOD"),
each of the Lenders and the Parent each covenant and agree not to, and shall
cause their affiliates (including any Portfolio Companies) not to, directly or
indirectly, anywhere in the world, conduct, manage, operate, engage in, control
or participate in the management, operation or control of, have an ownership
interest in (except as a holder of stock in a corporation whose stock is
publicly traded and which is subject to the reporting requirements of the
Securities Exchange Act of 1934 and which is not an affiliate of such party,
and then only to the extent of owning not more than five (5%) percent of the
issued and outstanding stock of such corporation) any business or enterprise
engaged in the business of selling or distributing janitorial or sanitation
products, including cleaning chemicals, cleaning equipment, consumables or
janitorial paper products, or the repair of janitorial or sanitation equipment
(the "BUSINESS").
(b) During the Non-Compete Period, the Lenders and the
Parent each shall not, and shall cause their affiliates (including any
Portfolio Companies) not to, directly or indirectly, call-on, solicit or
induce, or attempt to solicit or induce, any customer, vendor or other business
relation of the Company in any manner for the cessation of any business with
the Company or the provision of products or services to the Company with
respect to the Business.
(c) During the Non-Compete Period, each of the Lenders
and the Parent shall not, and shall cause their affiliates (including any
Portfolio Companies) not to, directly or indirectly, call-on, solicit or
induce, or attempt to solicit or induce, any employee of the Company (or any
employee of the Company who after the Closing becomes an employee of the Buyer)
to leave the employ of the Company or the Buyer for any reason whatsoever, nor
shall any Lender or the Parent or any of their affiliates (including any
Portfolio Company) offer or provide employment (whether such employment is for
any Lender or the Parent any other business or enterprise), either on a
full-time basis or part-time or consulting basis, to any such employees;
PROVIDED, HOWEVER, that (i) with respect to any employee on SCHEDULE 6.12(c)(i)
hereof, a Portfolio Company that is not otherwise in violation of this SECTION
6.12 may offer employment to such employee at any time following a termination
of such employee's employment by the Company or the Buyer subsequent to the
Closing Date; (ii) with respect to any employee on SCHEDULE 6.12(c)(ii) hereof,
a Portfolio Company that is not otherwise in violation of this SECTION 6.12 may
offer employment to any such employee whose employment has terminated
subsequent to the Closing Date, but in no event prior to the expiration of the
12-month period after such employee's termination; (iii) with respect to any
employee on SCHEDULE 6.12(c)(iii) hereof, a Portfolio Company that is not
otherwise in violation of this SECTION 6.12 may offer employment to such
34
employee at any time following termination of such employee's employment, but,
for the avoidance of doubt, only so long as none of the Lenders or their
affiliates solicited the employee to terminate such employee's employment with
the Company or the Buyer, or solicited the Portfolio Company to solicit the
employee to terminate such employee's employment with the Company or the Buyer
or to offer to employ such employee; (iv) with respect to the employee on
SCHEDULE 6.12(c)(iv) hereof, a Portfolio Company that is not otherwise in
violation of this SECTION 6.12 may offer employment to such employee at any
time following the one year anniversary of the Closing Date; and (v) with
respect to the employee on SCHEDULE 6.12(c)(v) hereof, a Portfolio Company that
is not otherwise in violation of this SECTION 6.12 may offer employment to such
employee at any time after the expiration of the 18-month period following the
Closing Date, PROVIDED that the Buyer will not unreasonably withhold its
consent if any Lender requests the reduction of such 18-month period to a
12-month period following the Closing Date.
(d) Each of the Lenders and the Parent acknowledge and
agree that the provisions of this SECTION 6.12 are reasonable and necessary to
protect the legitimate business interests of the Buyer and its investment in
the Company. Neither any Lender nor the Parent shall contest that the Buyer's
or the Company's remedies at law for any breach or threat of breach by a Lender
or the Parent or any of their affiliates of the provisions of this SECTION 6.12
will be inadequate, and that the Buyer and the Company shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of this SECTION
6.12 and to enforce specifically such terms and provisions, in addition to any
other remedy to which the Buyer or the Company may be entitled at law or
equity. The restrictive covenants contained in this SECTION 6.12 are covenants
independent of any other provision of this Agreement or any other agreement
between the parties hereunder and the existence of any claim that the Lenders
or the Parent may allege against the Buyer under any other provision of the
Agreement or any other agreement will not prevent the enforcement of these
covenants.
(e) If any of the provisions contained in this SECTION
6.12 shall for any reason be held to be excessively broad as to duration,
scope, activity or subject, then such provision shall be construed by limiting
and reducing it, so as to be valid and enforceable to the extent compatible
with the applicable law or the determination by a court of competent
jurisdiction.
(f) Notwithstanding the provisions of SECTION 6.12(a)
above, a Portfolio Company may engage in the Business to the extent (i) such
Portfolio Company's primary business is in a Designated Industry or (ii) such
Portfolio Company's engaging in the Business is incidental to such Portfolio
Company's primary business which is not the Business. For this purpose, a
"DESIGNATED INDUSTRY" means any retail or manufacturing business; and a
Portfolio Company's engaging in the Business will be incidental to its primary
business if the aggregate amount of annual revenues the Portfolio Company
derives from the Business are (A) less than 15% of the Portfolio Company's
aggregate revenues and (B) less than $20,000,000; PROVIDED, HOWEVER, that any
company that is in the distribution business that has any business unit,
subsidiary or division specifically focused on the "janitation/sanitation"
business segment will be deemed to be engaging in the Business IPSO FACTO and
regardless of the size of such business unit, subsidiary or division. In
addition, notwithstanding the foregoing and anything to the contrary herein, in
no event will any of the Lenders or their affiliates (including any Portfolio
Companies), directly or indirectly, anywhere in the world, conduct, manage,
operate, engage in, control or participate in the management, operation or
control of, have an ownership interest in (except as a holder of stock in a
corporation whose stock is publicly traded and which is subject to the
reporting requirements of the Securities Exchange Act of 1934 and which is not
an affiliate of such party, and then only to the extent of owning not more than
five (5%) percent of the issued and outstanding stock of such corporation) any
of the entities set forth in SCHEDULE 6.12(f).
6.13. ACCESS TO BOOKS AND RECORDS. From and after the Closing, the
Buyer shall provide the Parent and its authorized Agents with reasonable access
(for the purpose of examining and copying), during normal business hours and
upon reasonable notice, to the books and records of the Company with respect to
periods or occurrences prior to or on the Closing Date in connection with the
preparation of tax returns or responding to tax authorities or the defense of a
Third Party Claim; PROVIDED that the Buyer may condition such access on
execution of a confidentiality agreement in customary form; PROVIDED FURTHER,
HOWEVER, that such confidentiality agreement shall not unreasonably limit in
any way the Parent's ability to disclose any information in the preparation of
tax returns or in responding to tax authorities. Unless otherwise consented to
in writing by the Parent, the Buyer shall not, for a period of seven (7) years
following the Closing Date, destroy, alter or otherwise dispose of any of the
material books and records of the Company for any period prior to the Closing
Date without first giving reasonable prior notice to the Parent and offering to
surrender to the Parent such books and records or any portion thereof which the
Buyer may intend to destroy, alter or dispose of.
6.14. FURTHER ASSURANCES. At any time or from time to time after
the Closing, each party hereto shall, at the request of another party, execute
and deliver any further instruments or documents and take all such further
action as the other party may reasonably request in order to evidence the
consummation of the transactions contemplated by this Agreement. At any time or
from time to time after the Closing, each party hereto shall, at the request of
another party, execute and deliver any further instruments or documents and
take all such further action as the other party may reasonably request in order
to evidence the consummation of the transactions contemplated by this
Agreement.
6.15. EMPLOYMENT AND BENEFIT ARRANGEMENTS. Following the Closing,
the Buyer will cause any employee benefit plans of Buyer in which the Employees
are eligible to participate to take into account for purposes of eligibility
and vesting, but not for purposes of benefit accrual or any early retirement
subsidiary or to the extent it would result in duplication of benefits, service
with the Company, to the same extent such service was credited under a
comparable plan of the Company. To the extent that the Buyer modifies any
coverage or Benefit Plans under which the Employees currently participate, the
Buyer shall waive any applicable waiting periods, pre-existing conditions or
actively-at-work requirements and shall give such Employees credit under the
new coverages or benefit plans for deductibles, co-payments and out-of-pocket
payments that have been paid during the year in which such coverage or plan
modification occurs. This SECTION 6.15 shall survive the Closing Date, is
intended to benefit the Company and shall be binding on all successors and
assigns of the Buyer. Nothing contained in this SECTION 6.15 shall obligate the
Buyer, the Company or any of their Affiliates to (a) maintain any Benefit Plan
or (b) retain the employment of any particular Employee.
36
6.16. CONDITIONS.
(a) Subject to the proviso set forth in SECTION 2.1, the
Buyer shall use commercially reasonable efforts to cause the conditions set
forth in ARTICLE VIII to be satisfied and to consummate the transactions
contemplated herein as soon as reasonably possible after the satisfaction of
the conditions set forth in ARTICLE VII and ARTICLE VIII (other than those to
be satisfied at the Closing itself).
(b) With respect to the condition set forth in SECTION
7.9 (Financing), the Buyer shall (i) prior to July 3, 2006 use its commercially
reasonable efforts to obtain financing sufficient to permit the Buyer to
consummate the transactions contemplated hereby on terms acceptable to the
Buyer in its sole discretion and (ii) on and after July 3, 2006 (so long as the
conditions to the closing of the transactions contemplated hereby set forth in
ARTICLE VII (other than the condition set forth in SECTION 7.9) are capable of
being satisfied by July 31, 2006) use its commercially reasonable efforts to
take such actions as are necessary in respect of the financing contemplated by
the Commitment Letter and the Fee Letter in order to be able to obtain such
financing in accordance with its terms no later than the time the other
conditions to the Closing set forth in ARTICLE VII and ARTICLE VIII are
satisfied. For the avoidance of doubt, prior to July 3, 2006, the Buyer has no
affirmative obligation to pursue the financing contemplated by the Commitment
Letter and the Fee Letter.
(c) The Company and the Parent shall use commercially
reasonable efforts to cause the conditions set forth in ARTICLE VII to be
satisfied and to consummate the transactions contemplated herein as soon as
reasonably possible after the satisfaction of the conditions set forth in
ARTICLE VII and ARTICLE VIII (other than those to be satisfied at the Closing
itself).
6.17. CONTACT WITH CUSTOMERS AND SUPPLIERS. Prior to the Closing,
the Buyer and the Buyer's Agents shall contact and communicate with customers
and suppliers of the Company in connection with the transactions contemplated
hereby (as opposed to in the ordinary course of business) only with the prior
written consent (not to be unreasonably withheld) of the Company; PROVIDED,
HOWEVER, that the Buyer shall participate in meetings or oral communications
with customers or suppliers of the Company in connection with the transactions
contemplated hereby (as opposed to in the ordinary course of business of the
Buyer) only with the participation of a representative of the Company, unless
the Company otherwise consents in writing.
6.18. COMMITMENT LETTER. The Buyer shall promptly notify the
Company of any withdrawal, termination or material change that is adverse to
the Parent in the terms of (including the amount of financing contemplated by)
the Commitment Letter or Fee Letter. In addition, upon the request of the
Company, the Buyer shall advise and update the Company, in a level of detail
reasonably satisfactory to the Company, with respect to the status, proposed
closing date and material terms of the proposed financing. The Buyer shall not
consent to (x) any amendment or modification to the Commitment Letter or Fee
Letter if such amendment or modification would reasonably be expected to change
the conditions precedent set forth therein, the timing of the funding of the
commitments thereunder, or the cash amount of the funding commitments
thereunder, in each case in a manner that is adverse in any material respect to
the Parent (collectively, the "RESTRICTED COMMITMENT LETTER AMENDMENTS") or (y)
early termination of the Commitment Letter or Fee Letter. The Buyer shall, and
shall cause its affiliates to, use commercially reasonable efforts to maintain
the effectiveness of the Commitment Letter and Fee Letter until the Closing or
earlier termination of this Agreement.
37
6.19. BUYER CONFIDENTIALITY. Until the Closing, the Buyer shall
continue to be bound by the terms and conditions of the Confidentiality
Agreement, dated September 14, 2005, by and between the Parent and the Buyer.
Upon the Closing, the Confidentiality Agreement shall terminate.
6.20. DELIVERY OF AMENDMENT(S) TO DISCLOSURE SCHEDULES. The Company
and the Parent shall have the right to deliver to the Buyer updated Disclosure
Schedules that disclose in writing any fact, event or development first
occurring after the execution of this Agreement known to or discovered the
Company or the Parent that would render any representation or warranty of the
Company or the Parent in this Agreement inaccurate or incomplete. Subject to
SECTION 9.1(H), any Disclosure Schedule delivered in compliance with this
SECTION 6.20 subsequent to the execution of this Agreement shall be deemed to
amend and supplement the Company's and the Parent's representations and
warranties hereunder for purposes of the conditions to Closing set forth in
SECTION 7.1 hereof (but not for the purposes of determining any
misrepresentation or breach of or inaccuracy in, a representation or warranty
of the Company or the Parent pursuant to SECTION 11.2(A)(I) (subject to SECTION
11.2(h)).
6.21. EXCLUDED ASSETS AND EXCLUDED LIABILITIES. Prior to the
Closing, the Parent shall deliver updates to the financial statements referred
to in SECTION 3.6(B) as of, and for the interim period ended, the end of the
month most recently completed prior to the Closing for which financial
statements are available. Such financial statements will be prepared in good
faith and in accordance with GAAP and will be prepared on a basis consistent
with the basis for preparing the financial statements referred to in SECTION
3.6(B). The Parent and the Company shall otherwise cooperate prior to the
Closing to permit the Buyer and the Buyer's accountants to complete the Reg.
S-X Financial Statements and obtain financial information in respect of the
Company necessary or appropriate for the Buyer to obtain for its lenders and
financing sources.
6.22. STOCKHOLDER APPROVAL. On the date hereof, the Parent shall
deliver to the Buyer an executed written consent evidencing the stockholder
approval of this Agreement and the related transactions contemplated by this
Agreement all in accordance with DGCL, including Section 271 thereof (the
"STOCKHOLDER APPROVAL"). As soon as practicable after the date hereof, the
Parent shall cause the notice required by Section 228(e) of the DGCL to be
given to those stockholders entitled to such notice thereunder and shall
otherwise comply with any requirements of the DGCL or the Parent's certificate
of incorporation or bylaws to cause such Stockholder Approval to be valid under
the DGCL and the Company's certificate of formation and limited liability
company agreement and the Parent's certificate of incorporation and bylaws.
6.23. CONFIDENTIALITY AGREEMENTS. On or prior to the Closing, the
Parent shall assign, by delivery of an assignment signed by the Parent and not
the counterparties thereto, to the Company the confidentiality agreements
entered into by and among the Parent, Xxxxxx X. Xxxxx & Co. and the parties
listed on SCHEDULE 6.23 to the Disclosure Schedules (the "CONFIDENTIALITY
AGREEMENTS").
6.24. LEASE CONSENTS. The Company and the Parent will prior to
Closing (a) give any required notices to landlords in respect of the
transactions contemplated hereby and (b) use their commercially reasonable
efforts to obtain the consents (and, if and to the extent requested by the
Buyer, estoppels) of the landlords, lessors or counterparties in respect of the
38
transactions contemplated hereby, in each case in respect of the Leases or
other Contracts set forth on SCHEDULE 6.24 hereto. Notwithstanding the
foregoing, neither the Parent nor the Company will agree to or make any
modification in any Lease (or other Contract on SCHEDULE 6.24) or otherwise
agree to incur or incur any liability or obligation in respect of such Lease
(or Contract) or in connection with the obtaining of such consent without the
prior written consent of the Buyer. Neither the Parent nor the Company will
provide any written notice or other written communication with any such
landlord, lessor or counterparty without the prior written approval of the
Buyer. The Parent and the Company will not have any meetings or oral
communications with such landlords, lessors or counterparties without the
participation of representative of the Buyer, unless the Buyer otherwise
consents in writing. The Parent and the Company will keep the Buyer reasonably
apprised of all developments and communications with such landlords, lessors
and counterparties.
Following Closing, the Buyer shall afford the Parent the opportunity
to participate in discussions with the landlords, lessors and counterparties of
the Designated Leases with respect to obtaining their consent with respect to,
or any breach arising out of, the consummation of the transactions contemplated
hereby and shall obtain the Parent's consent (not to be unreasonably withheld)
prior to settlement of such matters.
ARTICLE VII
CONDITIONS TO THE BUYER'S OBLIGATIONS
The obligation of the Buyer to consummate the transactions
contemplated by this Agreement at the Closing shall be subject to the
satisfaction (or waiver) on or prior to the Closing Date of all of the
following conditions:
7.1. REPRESENTATIONS AND WARRANTIES TRUE AND CORRECT. The
representations and warranties set forth in ARTICLE III and ARTICLE IV of this
Agreement shall be true and correct as of the date of this Agreement and shall
be true and correct on and as of the Closing Date as though then made and as
though the Closing Date was substituted for the date of this Agreement
throughout such representations and warranties (without giving effect to
materiality, Material Adverse Effect, or similar phrases in the representations
and warranties), except where the failure to be so true and correct would not,
in the aggregate, have a Material Adverse Effect.
7.2. COVENANTS AND AGREEMENTS PERFORMED. The Lenders, the Company
and the Parent shall have performed or complied with in all material respects
all covenants and agreements required to be performed or complied with by the
Lenders, the Company or the Parent under this Agreement prior to or on the
Closing Date.
7.3. SELLER CLOSING CERTIFICATE. The Buyer shall have been
furnished with a certificate executed by the Lenders and the Parent (the
"SELLER CLOSING CERTIFICATE"), dated the Closing Date, certifying that the
conditions set forth in SECTION 7.1, SECTION 7.2 and SECTION 7.8 hereof have
been fulfilled at or prior to the Closing Date.
7.4. NO PROHIBITION OR PROCEEDINGS. (a) No statute, rule or
regulation, or order of any court or administrative agency shall be in effect
that prohibits the Buyer from consummating the transactions contemplated by
this Agreement; (b) no Designated Governmental Proceeding shall be pending or
39
threatened; and (c) no lawsuit, legal proceeding or claim shall be pending that
would reasonably be expected to succeed, and that, if successful, would prevent
the performance of this Agreement or the consummation of any of the
transactions contemplated hereby, declare unlawful the transactions
contemplated by this Agreement or cause such transactions to be rescinded or
result in an award of damages or compensation in excess of $5,000,000.
7.5. CONSENTS. The waiting period under the HSR Act, if
applicable, shall have expired or been terminated.
7.6. OPINION. The Buyer shall have received a written opinion of
Xxxxxxxx & Xxxxx LLP, dated the Closing Date, substantially in the form set
forth on EXHIBIT F-1 attached hereto and a written opinion of Xxxxxxxxxx
Xxxxxxxx LLP, dated the Closing Date, substantially in the form set forth on
EXHIBIT F-2 attached hereto.
7.7. FIRPTA CERTIFICATE. The Parent shall have delivered to the
Buyer a certificate dated as of the Closing Date certifying that the Parent is
not a foreign person within the meaning of Sections 897 and 1445 of the Code.
7.8. MATERIAL ADVERSE EFFECT. Between the date hereof and the
Closing Date, there shall not have occurred any Material Adverse Effect.
7.9. FINANCING. The Buyer shall have received the proceeds of the
financing contemplated by the Commitment Letter on the terms set forth therein
(but including any changes thereto contemplated by the Fee Letter).
7.10. EXCLUDED ASSETS. The Excluded Assets Transaction shall have
been consummated.
7.11. ESCROW AGREEMENT. The Lenders and the Escrow Agent shall have
executed and delivered the Escrow Agreement and the Lease Escrow Agreement.
7.12. WAIVERS AND RELEASES. The Buyer shall have received the
waivers and releases, dated the Closing Date, referred to in SECTION 6.6 of
this Agreement, in the form set forth on EXHIBIT D and EXHIBIT E attached.
7.13. ORGANIZATIONAL MATERIALS. The Company shall have delivered to
the Buyer each of the following:
7.13.1. certified copies of the certificate of formation of
the Company;
7.13.2. certified copies of resolutions of the requisite
stockholders of the Parent approving the consummation of the transactions
contemplated by this Agreement; and
7.13.3. certified copies of resolutions duly adopted by the
Company's board of managers and the Parent's board of directors authorizing the
execution, delivery and performance of this Agreement and the other agreements
contemplated hereby, and the consummation of all transactions contemplated
hereby and thereby.
40
7.14. STOCKHOLDER APPROVAL. The Parent shall have delivered to the
Company and the Buyer the Stockholder Approval.
7.15. CONFIDENTIALITY AGREEMENTS. The Parent shall have assigned to
the Company the Confidentiality Agreements in accordance with SECTION 6.23.
If the Closing occurs, all closing conditions set forth in this
ARTICLE VII which have not been fully satisfied as of the Closing shall be
deemed to have been waived by the Buyer.
ARTICLE VIII
CONDITIONS TO THE LENDERS', THE PARENT'S
AND THE COMPANY'S OBLIGATIONS
The obligations of the Lenders, the Parent and the Company to
consummate the transactions contemplated by this Agreement at the Closing shall
be subject to the satisfaction (or waiver) on or prior to the Closing Date of
all of the following conditions:
8.1. REPRESENTATIONS AND WARRANTIES TRUE AND CORRECT. The
representations and warranties set forth in ARTICLE V of this Agreement shall
be true and correct in all material respects as of the date of this Agreement
and shall be true and correct on and as of the Closing Date as though then made
and as though the Closing Date was substituted for the date of this Agreement
throughout such representations and warranties (without giving effect to
materiality or similar phrases in such representations and warranties), except
where the failure to be so true and correct would not, in the aggregate, have a
material adverse effect on the ability of the Buyer to consummate the
transactions contemplated hereby.
8.2. COVENANTS AND AGREEMENTS PERFORMED. The Buyer shall have
performed or complied with in all material respects all covenants and
agreements required to be performed or complied with by the Buyer under this
Agreement prior to or on the Closing Date.
8.3. BUYER CLOSING CERTIFICATE. The Parent shall have been
furnished with a certificate executed by an officer of the Buyer (the "BUYER
CLOSING CERTIFICATE"), dated the Closing Date, certifying that the conditions
set forth in SECTION 8.1 and SECTION 8.2 hereof have been fulfilled at or prior
to the Closing Date.
8.4. NO PROHIBITION OR PROCEEDINGS. (a) No statute, rule or
regulation, or order of any court or administrative agency shall be in effect,
that prohibits the Lender, the Company or the Parent from consummating the
transactions contemplated by this Agreement;(b) no Designated Governmental
Proceeding shall be pending or threatened; and (c) no other lawsuit, legal
proceeding or claim shall be pending that would reasonably be expected to
succeed, and that, if successful, would prevent the performance of this
Agreement or the consummation of any of the transactions contemplated hereby,
declare unlawful the transactions contemplated by this Agreement or cause such
transactions to be rescinded or result in an award of damages or compensation
in excess of $5,000,000.
8.5. GOVERNMENTAL CONSENTS. The waiting period under the HSR Act,
if applicable, shall have expired or been terminated.
41
8.6. ESCROW AGREEMENT. The Buyer and the Escrow Agent shall have
executed and delivered the Escrow Agreement and the Lease Escrow Agreement.
8.7. INVENTORY PURCHASE AGREEMENT. If the sale of the Excluded
Facilities has not occurred, the Buyer shall have executed and delivered the
Inventory Purchase Agreement.
8.8. ORGANIZATIONAL MATERIALS. The Buyer shall have delivered to
the Parent certified copies of resolutions duly adopted by the Buyer's board of
directors (or its equivalent governing body) authorizing the execution,
delivery and performance of this Agreement and the other agreements
contemplated hereby, and the consummation of all transactions contemplated
hereby and thereby.
If the Closing occurs, all closing conditions set forth in this
ARTICLE VIII which have not been fully satisfied as of the Closing shall be
deemed to have been waived by the Company, the Parent and the Lender.
ARTICLE IX
TERMINATION PRIOR TO CLOSING
9.1. TERMINATION. This Agreement may be terminated at any time
prior to the Closing:
(a) by the mutual written consent of the Buyer and the
Company;
(b) by the Buyer, upon written notice to the other
parties hereto, if there has been a violation or breach by the Company, the
Parent or any Lender of any covenant, representation or warranty contained in
this Agreement that would give rise to the failure to satisfy any condition to
the obligations of the Buyer at the Closing and such violation or breach has
not been waived by the Buyer or, if curable, cured by the Company, the Parent
or the Lenders within ten (10) business days after receipt by the Company, the
Parent or the Lenders of written notice thereof from the Buyer;
(c) by the Company, the Parent or the Lenders, upon
written notice to the other parties hereto, if there has been a violation or
breach by the Buyer of any covenant, representation or warranty contained in
this Agreement that would give rise to the failure to satisfy the satisfaction
of any condition to the obligations of the Company at the Closing and such
violation or breach has not been waived by the Company or, if curable, cured by
the Buyer within ten (10) business days after receipt by the Buyer of written
notice thereof by the Company, the Parent or the Lender;
(d) by the Buyer, upon written notice to the other
parties hereto, if the transactions contemplated hereby have not been
consummated on or before July 31, 2006;
(e) by the Company, upon written notice to the other
parties hereto, if the transactions contemplated hereby have not been
consummated on or before July 31, 2006;
(f) by the Buyer, upon written notice to the other
parties hereto, if the Stockholder Approval is not delivered in accordance with
SECTION 6.22;
42
(g) by the Company upon written notice to the other
parties hereto, upon the (i) withdrawal or termination of the Commitment Letter
or (ii) the making of a Restricted Commitment Letter Amendment; or
(h) by the Buyer, upon written notice to the other
parties hereto, if updated Disclosure Schedules are delivered under SECTION
6.20 that disclose any event or circumstance that has had or would reasonably
be expected to have a Material Adverse Effect and, if curable, the event or
circumstance that gave rise to, or is giving rise to, such Material Adverse
Effect has not been cured by the Company, the Parent or the Lenders within ten
(10) business days after receipt by the Buyer of such updated Disclosure
Schedules.
9.2. EFFECT OF TERMINATION. In the event this Agreement is
terminated by either the Buyer on the one hand, or the Company, the Parent or
the Lenders on the other hand as provided above, the provisions of this
Agreement shall immediately become void and of no further force and effect
(other than this SECTION 9.2, SECTION 11.6 and ARTICLE XII and ARTICLE XIII
hereof which shall survive the termination of this Agreement), and there shall
be no liability on the part of the Buyer on the one hand or the Parent, the
Company or the Lenders on the other hand, to one another, except for knowing or
willful breaches of this Agreement prior to the time of such termination.
ARTICLE X
TAX MATTERS
10.1. TAX TREATMENT OF TRANSACTION.
(a) The Parent and the Buyer agree to treat the purchase
and sale of the LLC Interests as a purchase and sale of the assets held by the
Company for federal income tax purposes and, where permitted by law, for all
analogous state and local income tax purposes.
(b) The Parent and the Buyer agree that the
consideration deemed paid for the assets of the Company shall be allocated
among the assets of the Company in accordance with the principles set forth on
SCHEDULE 10.1 of the Disclosure Schedules (the "ALLOCATION PRINCIPLES"). Within
30 days following the final determination of the Net Adjustment Amount pursuant
to SECTION 1.3.2 of this Agreement, the Buyer shall deliver to the Parent a
draft allocation of the consideration deemed paid for the assets of the
Company, for federal income tax purposes prepared in accordance with the
Allocation Principles and Section 1060 of the Code. Within 21 days following
receipt of such draft allocation, the Parent shall deliver to the Buyer notice
of any disputed items. The Buyer and the Parent shall attempt to promptly
resolve any such disputed items, provided that if they are unable to resolve
any such disputes within 21 days of the Parent's delivery of notice of any
disputed items, any remaining disputed items shall be submitted to the Dispute
Resolution Auditor for final resolution, with the costs of the Dispute
Resolution Auditor borne equally by the Buyer and the Parent. Neither the Buyer
nor the Parent shall take any position (whether in audit, tax returns, or
otherwise) that is inconsistent with the final determination of the allocation
unless required to do so by applicable law. Within 30 days following the final
43
determination of the allocation of the consideration among the assets for
federal income Tax purposes, the Parent shall prepare a draft allocation of the
consideration for state and local Tax purposes, which shall be consistent with
the final determination of the allocation for federal income Tax purposes, and
the Parent shall deliver to the Buyer such draft allocation. Within 21 days
following receipt of such draft allocation, the Buyer shall deliver to the
Parent notice of any disputed items, PROVIDED that if they are unable to
resolve any such disputes within 21 days of the Buyer's delivery of notice of
any disputed items, any remaining disputed items shall be submitted to the
Dispute Resolution Auditor for final resolution, with the costs of the Dispute
Resolution Auditor borne equally by the Buyer and the Parent. Neither the Buyer
nor the Parent shall take any position (whether in audit, Tax Returns, or
otherwise) that is inconsistent with the final determination of such allocation
unless required to do so by applicable law.
(c) No later than 90 days following the later of the end
of the taxable year of the Parent that includes the Closing Date or the final
determinations of the allocations of the consideration deemed paid for the
assets of the Company pursuant to SECTION 10.1(b) hereof, the Parent shall
deliver to the Buyer a draft calculation, prepared in reasonable detail, of (i)
the federal alternative minimum tax liability payable by the Parent and
attributable to the limitation under Section 56(d)(1)(A)(i)(II) of the Code on
the ability of the Parent to fully deduct the net operating loss deduction
allowable to the Parent under Section 172 of the Code as adjusted pursuant to
Section 56(d)(2) of the Code in the taxable year including the Closing Date,
(ii) any liabilities for Taxes payable by the Parent (including as a result of
the Parent's indemnification obligation pursuant to SECTION 10.2) arising under
similar provisions and similar limitations of state or local Tax law in the
taxable year including the Closing Date, and (iii) any state and local Tax
liability payable by the Parent (including as a result of the Parent's
indemnification obligation pursuant to SECTION 10.2) that is not otherwise
described in clause (ii) of this sentence and that is attributable to the
transactions contemplated under this Agreement (the "INCREMENTAL TAX COST");
PROVIDED, HOWEVER, that the amount of any state and local Tax liability
calculated pursuant to clause (iii) of this sentence and included in the
Incremental Tax Cost shall be limited to $200,000. Within 21 days following
receipt of such calculation, the Buyer shall deliver to the Parent notice of
any disagreement with respect to such calculation. The Buyer and the Parent
shall attempt to promptly resolve any disputes with respect to such
calculations, provided that if they are unable to so resolve such disputes
within 21 days following the Buyer's delivery of notice of any disputed items,
any unresolved disputed items shall then be submitted to the Dispute Resolution
Auditor for final resolution, with the costs of such Dispute Resolution Auditor
borne equally by the Buyer and the Parent. Within 10 days of the final
determination of the Incremental Tax Cost, the Buyer shall pay to the Parent
the amount of the Incremental Tax Cost as so finally determined.
10.2. TAX INDEMNIFICATION. To the extent that such Taxes exceed the
accrual for such Taxes in the Closing Balance Sheet, the Lenders and the Parent
shall indemnify and hold harmless the Buyer and the Company from and against:
(a) all Taxes of the Company and the Parent for all taxable periods ending on
or before the Closing Date and the portion through the end of the Closing Date
for any taxable period that includes (but does not end on) the Closing Date,
(b) each Lender's or the Parent's share of any transfer Taxes payable under
SECTION 10.4, (c) any and all income Taxes of any member of a consolidated
group of which the Company or a predecessor was a member on or prior to the
Closing Date, including pursuant to Section 1.1502-6 of the Treasury
Regulations or any analogous or similar state, local, or foreign law or
regulation, and (d) any and all Taxes of any person (other than the Company)
imposed on the Company as a transferee or successor, by contract or pursuant to
44
any law, rule or regulation, which Taxes relate to an event or transaction
occurring before the Closing. In the event a taxable period includes a period
prior to the Closing Date, Taxes shall, in the case of real and personal
property Taxes, be apportioned ratably to such taxable period on a daily basis
and, in the case of other Taxes, be apportioned to such taxable period based on
a closing of the books on the Closing Date.
10.3. ASSISTANCE AND RECORDS. The parties shall provide each other
with such assistance as each may reasonably request in connection with (a) the
preparation of Tax Returns required to be filed with respect to the Company and
the Parent, (b) any audit or other examination by any Taxing Authority, (c) any
judicial or administrative proceedings relating to liability for Taxes, or (d)
any claim for refund in respect of such Taxes. Such assistance shall include
making employees available to other parties and their counsel, providing
additional information and explanation of any material to be provided, and
retaining, furnishing to, or permitting the copying by, any party or its
counsel of any records, returns, schedules, documents, work papers or other
relevant materials that might reasonably be expected to be used in connection
with any such return, audit, examination, proceeding or claim. The Lenders and
the Parent will retain the right to conduct and resolve any audit,
administrative or judicial proceeding relating to Taxes with respect to any
period ending prior to or on the Closing Date, to the extent the Lenders or the
Parent may be obligated to indemnify the Buyer and the Company pursuant to
SECTION 10.2; PROVIDED, HOWEVER, that no settlement resulting from the
resolution of such proceeding shall be accepted that may have an adverse effect
on the Company or the Buyer without the prior written consent of the Buyer,
which shall not be unreasonably withheld; PROVIDED FURTHER that the Buyer and
the Company may participate in any such audit or proceeding if the resolution
of such audit or proceeding is reasonably expected to have an impact on the Tax
liability of the Buyer or the Company in any period after the Closing Date. The
Lenders and the Parent will have the right to participate in the resolution of
any audit, administrative or judicial proceeding relating to Taxes with respect
to any periods starting on or before the Closing Date and ending after the
Closing Date, to the extent the Lenders or the Parent may be obligated to
indemnify the Buyer and the Company pursuant to SECTION 10.2. The Buyer will
promptly notify the Lenders and the Parent of any such audit, proposed
adjustment or related matter that could affect any Lender's or the Parent's
obligations pursuant to SECTION 10.2. The Buyer will retain and, upon the
reasonable request of the Lenders or the Parent, provide any records or
information that may be relevant to any such return, audit, examination,
proceeding or claim.
10.4. TRANSFER TAXES. The Buyer, the Lenders and the Parent agree
to share any transfer or similar Taxes imposed as a result of the transactions
contemplated by this Agreement, such that 50% of such Taxes shall be borne by
the Buyer and 50% shall be borne by the Lenders and/or the Parent.
ARTICLE XI
SURVIVAL AND INDEMNIFICATION
11.1. SURVIVAL. The representations and warranties of the Company,
the Parent, the Lenders and the Buyer under this Agreement or in any
certificate or Schedule furnished pursuant hereto and the Company and Parent
Pre-Closing Covenants and the Lenders Pre-Closing Covenants (all as defined
below), shall survive the closing of the transactions contemplated by this
Agreement until the expiration of the 18-month period following the Closing
45
Date (the "SURVIVAL PERIOD"), and no action or claim for Losses (as hereinafter
defined) resulting from any such misrepresentation or breach of warranty, or
breach of any Company and Parent Pre-Closing Covenant or Lenders Pre-Closing
Covenant, as the case may be, shall be brought or made after the Survival
Period, except that such time limitation shall not apply to:
(a) claims for misrepresentations or breach of
warranties relating to SECTION 3.1, SECTION 4.1 and SECTION 5.1 hereof
(Organization), SECTION 3.2, SECTION 4.3 and SECTION 5.2 hereof (Authority),
SECTION 3.4 hereof (Capitalization) and SECTION 4.2 (Ownership of Stock of the
Parent and Indebtedness), or any breach of SECTION 6.3(a)-(d) or SECTION
6.3(o), all of which may be asserted at any time;
(b) claims for misrepresentations or breach of
warranties relating to SECTION 3.15 hereof (Environmental Matters), which may
be asserted at any time prior to the fourth anniversary of the Closing Date,
and any claims for misrepresentations or breach of warranties relating to
SECTION 3.16 (Employee Benefit Matters) or Section 3.17 hereof (Taxes), which
may be asserted at any time prior to the expiration of the statute of
limitations applicable to such matters; and
(c) any claims that have been asserted in good faith and
that are the subject of a written notice from the Lenders or the Parent to the
Buyer or from the Buyer to the Lenders or the Parent, as may be applicable,
prior to the expiration of the Survival Period or, in the case of paragraph (b)
above, prior to the applicable date set forth in such paragraph.
It is expressly acknowledged and agreed that the foregoing time
limitations do not apply to any covenants in this Agreement other than Lenders
Pre-Closing Covenants and Company and Parent Pre-Closing Covenants.
11.2. GENERAL INDEMNIFICATION.
(a) Following the Closing, each of the Lenders and the
Parent, on a joint and several basis, shall indemnify and defend the Buyer and
the Company, and each of their respective directors, limited liability company
managers, officers, affiliates, employees, agents and representatives ("BUYER
INDEMNIFIED PARTIES") and shall hold each of them harmless from and against all
Losses that are incurred or suffered by any of them in connection with or
resulting from:
(i) any misrepresentation or breach of, or
inaccuracy in, any representation or warranty made by any Lender, the Parent or
the Company in this Agreement or any Disclosure Schedule (not taking into
account any Updated Schedule) or in the Seller Closing Certificate;
(ii) any breach of any covenants made by the
Company or the Parent in SECTION 6.1, SECTION 6.2, SECTION 6.3, SECTION 6.4,
SECTION 6.5, SECTION 6.6(b), SECTION 6.7, SECTION 6.8, SECTION 6.9, SECTION
6.10, SECTION 6.16, SECTION 6.20, or SECTION 6.21 in this Agreement (the
"COMPANY AND PARENT PRE-CLOSING COVENANTS");
46
(iii) any breach of any covenants made by any
Lender in SECTION 6.2, SECTION 6.6(a), SECTION 6.8, Section 6.10, or SECTION
6.20 in this Agreement (the "LENDERS PRE-CLOSING COVENANTS");
(iv) any breach of any covenants made by the
Company, any Lender or the Parent in this Agreement or any Disclosure Schedule
or any Ancillary Agreement other than the Company and Parent Pre-Closing
Covenants and the Lenders Pre-Closing Covenants; and
(v) any of the matters referred to in SCHEDULE
11.2.2 of the Disclosure Schedules.
(b) Following the Closing, the Buyer shall indemnify the
Lenders, the Parent and their directors, officers, affiliates (other than the
Company or the Not-For-Profit Subsidiary), employees, agents and
representatives ("LENDER INDEMNIFIED PARTIES") and shall hold each of them
harmless from and against all Losses that are incurred or suffered by any of
them in connection with or resulting from:
(i) any misrepresentation or breach of, or
inaccuracy in, any representation or warranty made by the Buyer in this
Agreement or in the Buyer Closing Certificate; and
(ii) any breach of any covenant made by the
Buyer in this Agreement (the "BUYER COVENANTS").
(c) Notwithstanding the foregoing, (i) the Lenders and
the Parent shall not be obligated to provide any such indemnification for
Losses pursuant to claims under SECTION 11.2(a)(i), SECTION 11.2(a)(ii) and
SECTION 11.2(a)(iii) hereof (together, "DOLLAR LIMITED CLAIMS") and (ii) the
Buyer shall not be obligated to provide any such indemnification for Losses
pursuant to claims under SECTION 11.2(b)(i) hereof, unless the aggregate amount
that the Buyer Indemnified Parties or the Lender Indemnified Parties, as
applicable, are entitled to recover in respect of all such claims exceeds
$1,000,000 (the "DEDUCTIBLE"), in which case the Indemnitor (as defined in
SECTION 11.2(M)(I) hereof) will be liable for all Losses in excess of the
Deductible; PROVIDED, HOWEVER, that the Deductible shall not apply to claims
for indemnification for Losses pursuant to SECTION 3.1 (Organization), SECTION
3.2 (Authority), SECTION 3.4 (Capitalization), SECTION 3.22 (Brokers), SECTION
4.1 (Organization), SECTION 4.2 (Ownership of Stock of the Parent and
Indebtedness), SECTION 4.3 (Authority; Effect of Agreement), SECTION 6.3(a)-(d)
or SECTION 6.3(o).
(d) In addition, except as otherwise provided below, the
liability of the Lenders and the Parent under SECTION 11.2(a)(i), SECTION
11.2(a)(ii) and SECTION 11.2(a)(iii) hereof in respect of Dollar Limited Claims
shall not exceed in the aggregate $11,500,000 (the "CAP"); PROVIDED, HOWEVER,
that the Cap shall not apply to any breach of, or inaccuracy in, any of the
representations and warranties set forth in SECTION 3.1 (Organization), SECTION
3.2 (Authority), SECTION 3.4 (Capitalization), SECTION 3.15 (Environmental
Matters), SECTION 3.16 (Employee Benefit Matters), SECTION 3.17 (Taxes),
SECTION 3.22 (Brokers), SECTION 3.26 (Products Liability), SECTION 4.1
(Organization), SECTION 4.2 (Ownership of Stock of the Parent and Indebtedness)
or SECTION 4.3 (Authority; Effect of Agreement) (the "SPECIAL REPRESENTATIONS
47
AND WARRANTIES") or to breaches of SECTION 6.3(a)-(d) or SECTION 6.3(o) (the
"SPECIAL PRE-CLOSING COVENANTS"); PROVIDED FURTHER, HOWEVER, that the Lenders'
and the Parent's aggregate liability in respect of breaches of, or inaccuracies
in, the Special Representations and Warranties and the Special Pre-Closing
Covenants shall not exceed the Purchase Price Cap (as defined below).
(e) Except as provided in SECTION 11.2(j) below, in no
event will the aggregate liability of the Parent and the Lenders hereunder
exceed the aggregate amount of $60,000,000 (the "PURCHASE PRICE CAP").
(f) It is understood and agreed that the parties have
entered into the Escrow Agreement to provide funds for any amounts due to the
Buyer Indemnified Parties under this ARTICLE XI. In the event any Buyer
Indemnified Party is entitled to indemnification hereunder, the Parent and the
Lenders agree to execute written instructions to the Escrow Agent directing
that funds be disbursed under the Escrow Agreement to satisfy such
indemnification obligation. Until the disbursement in full of the Escrow Amount
(upon the termination of the Escrow Agreement or otherwise), making a claim for
the distribution from the Escrow Amount shall be the sole and exclusive remedy
available to the Buyer Indemnified Parties for any claims under SECTION
11.2(a)(i), SECTION 11.2(a)(ii) and SECTION 11.2(a)(iii) hereof. Except for the
Buyer pursuant to SECTION 2.2(a)(i), no Person (including, without limitation,
the Parent or the Lenders and each of their affiliates) shall have any
obligation to fund the Escrow Account.
(g) For purposes of determining (i) the existence of any
misrepresentation or breach of warranty under ARTICLE III or ARTICLE IV hereof
(other than SECTION 3.6(c) (Financial Statements; Undisclosed Liabilities), the
first sentence of SECTION 3.7 (Absence of Certain Changes or Events) and the
third sentence of SECTION 3.25 (Relationship with Suppliers)) and the existence
of any misrepresentation or breach of warranty pursuant to the Seller Closing
Certificate (other than SECTION 3.6(c) (Financial Statements; Undisclosed
Liabilities), the first sentence of SECTION 3.7 (Absence of Certain Changes or
Events) and the third sentence of SECTION 3.25 (Relationship with Suppliers)),
and (ii) calculating the amount of any Losses incurred in connection with any
such misrepresentation or breach of warranty, in each case, all references to
materiality or Material Adverse Effect (or other correlative terms) shall be
disregarded (it being understood that qualifiers expressed as a specific dollar
threshold shall not be considered such a reference).
(h) Notwithstanding SECTION 11.2(a) above, in the event
that between the date of this Agreement and the Closing Date there occurs any
event or circumstance giving rise to a Material Adverse Effect that is
disclosed on the Seller Closing Certificate and the Buyer waives its rights
under SECTION 7.8 and the Closing occurs, the Buyer shall not be entitled to
indemnification under SECTION 11.2(a)(i) in respect of the event or
circumstance giving rise to the Material Adverse Effect.
(i) No right of indemnification hereunder shall be
limited by reason of any investigation or audit conducted before or after the
Closing or the knowledge of any party of any breach of a representation,
warranty, covenant or agreement by the other party at any time, or the decision
of any party to complete the Closing. Notwithstanding anything to the contrary
herein, the Buyer shall have the right, irrespective of any knowledge or
investigation of the Buyer (or its affiliates, agents or representatives), to
48
rely fully on the representations, warranties and covenants of the Lender, the
Parent and the Company contained herein.
(j) Notwithstanding anything contained in this ARTICLE
XI or in ARTICLE X, no limitation or condition of liability provided for in
SECTION 11.1 or this XXXXXXX 00.0 (xxxxxxxxx xxxxxxxxxx (x), (x), (x), (x) or
(h) above) shall apply in the event of fraud.
(k) Notwithstanding anything to the contrary contained
in this Agreement (other than paragraph (j) above), the Buyer shall have no
right to indemnification hereunder with respect to any Loss or alleged Loss (i)
to the extent such Loss or alleged Loss was recovered through the calculation
of Cash, Net Working Capital, Net Working Capital Adjustment, Indebtedness or
Transaction Expenses or (ii) if the Buyer shall have requested a reduction in
the Net Working Capital calculation contained in the Preliminary Statement on
account of any matter forming the basis for such Loss or alleged Loss and the
Parent and the Buyer subsequently agree or the Dispute Resolution Auditor
determines, in each case, that the Buyer is not entitled to such a reduction.
(l) The Lenders and the Parent hereby waive and release
the Company from any common law, equitable or other right of contribution or
other claims the Lenders or the Parent might have against the Company arising
out of or relating to any indemnification of the Buyer or the Company or any
other party referred to in this SECTION 11.2 by the Lenders and the Parent for
a breach by the Company of any of its representations, warranties or covenants
in this Agreement or in any document or instrument executed in connection with
this Agreement.
(m) (i) A party entitled to indemnification hereunder
shall herein be referred to as an "INDEMNITEE." A party obligated to indemnify
an Indemnitee hereunder shall herein be referred to as an "INDEMNITOR." As soon
as is reasonable after an Indemnitee receives notice of any claim or the
commencement of any action by any third party that such Indemnitee reasonably
believes may give rise to a claim for indemnification from an Indemnitor
hereunder (a "THIRD PARTY CLAIM"), such Indemnitee shall, if a claim in respect
thereof is to be made against an Indemnitor under ARTICLE XI hereof, notify
such Indemnitor in writing of such claim, action or Loss, as the case may be;
PROVIDED, HOWEVER, that failure to notify Indemnitor shall not relieve
Indemnitor of its indemnity obligation, except to the extent Indemnitor is
actually prejudiced in its defense of the action by such failure. Any such
notification must be in writing and must state in reasonable detail the nature
and basis of the claim, action or Loss, to the extent known. Except as provided
in this SECTION 11.2 or SECTION 1.5, Indemnitor shall have the right using
counsel reasonably acceptable to the Indemnitee to contest, defend, litigate or
settle any such Third Party Claim that primarily involves monetary damages;
PROVIDED that the Indemnitor shall have notified the Indemnitee in writing of
its intention to do so within thirty (30) days of the Indemnitee having given
notice of the Third Party Claim to the Indemnitor; PROVIDED, FURTHER, that (1)
the Indemnitor confirms in such notice to the Indemnitee that, as between the
Indemnitor and the Indemnitee, the Indemnitor shall be obligated to satisfy and
discharge the Third Party Claim and (2) if reasonably requested to do so by the
Indemnitee, the Indemnitor shall have made reasonably adequate provision to
ensure the Indemnitee of the financial ability of the Indemnitor to satisfy the
full amount of any adverse monetary judgment that may result from such Third
Party Claim. Notwithstanding the foregoing, if the Indemnitee is a Buyer
Indemnified Party, the Indemnitor shall not have the right to assume the
49
defense or control the settlement of any Third Party Claim unless such
Indemnitor would be obligated to provide indemnification hereunder for an
amount in excess of 50% of the damages alleged pursuant to such Third Party
Claim. The Indemnitee shall have the right to participate in and be consulted
in, and to be apprised of all material developments in, and to be represented
by counsel (at its own expense) in, any such contest, defense, litigation or
settlement conducted by the Indemnitor. If the Indemnitor shall control the
defense of any such claim, then the Indemnitor shall be entitled to settle such
claim; PROVIDED, that, the Indemnitor shall obtain the prior written consent of
the Indemnitee before entering into any settlement of a claim or ceasing to
defend such claim if, pursuant to or as a result of such settlement or
cessation, injunctive or other equitable relief will be imposed against the
Indemnitee or if such settlement does not expressly and unconditionally release
the Indemnitee from all liabilities and obligations with respect to such claim.
Notwithstanding the foregoing, if the Indemnitee withholds its consent to any
settlement of a claim or the ceasing of the defense of a claim to which it is
entitled to consent pursuant to this SECTION 11.2(m), and such claim is
ultimately resolved (whether through settlement, judgment or otherwise) for an
amount greater than the amount proposed at the time the Indemnitee's consent
was initially requested, Indemnitor shall not be obligated to indemnify the
Indemnitee for such excess amount; PROVIDED, HOWEVER, that following such
withholding of consent the Indemnitee shall have the right to control the
defense and settlement of such claim (at the Indemnitor's expense) and, if the
Indemnitee succeeds in resolving such claim (whether through settlement,
judgment or otherwise) for an amount less than that proposed by the Indemnitor
(it being understood the Indemnitee may agree to such settlement without the
consent of the Indemnitor), the Indemnitor shall indemnify the Indemnitee for
such difference even if such difference would otherwise not be indemnifiable
under Section 11.2(c) as amounts representing all or part of the Deductible.
All expenses (including attorneys' fees) incurred by the Indemnitor in
connection with the foregoing shall be paid by the Indemnitor. No failure by an
Indemnitor to acknowledge in writing its indemnification obligations under this
ARTICLE XI shall relieve it of such obligations to the extent such obligations
exist.
(ii) If an Indemnitee is entitled to indemnification
in respect of a Third Party Claim, and the Indemnitor fails to (or is not
entitled to) accept a tender of, or assume the defense of, a Third Party Claim
pursuant to this SECTION 11.2, the Indemnitor shall not be entitled, and shall
lose its right, to contest, defend, litigate and settle such a Third Party
Claim, and the Indemnitee shall have the right, without prejudice to its right
of indemnification hereunder, in its discretion exercised in good faith, to
contest, defend and litigate such Third Party Claim, and may settle such Third
Party Claim either before or after the initiation of litigation upon written
consent of the Indemnitor (which consent shall not be unreasonably withheld or
delayed). Notwithstanding the foregoing, the Indemnitor shall have the right to
participate in and be consulted in, and to be represented by counsel (at its
own expense) in, any such contest, defense, litigation or settlement conducted
by the Indemnitee.
11.3. INSURANCE AND TAXES. The amount due as indemnification with
respect to any claim under this ARTICLE XI shall take into account and shall be
reduced by the amount of any insurance or indemnification proceeds actually
received by the Buyer Indemnified Party or Seller Indemnified Party, as
applicable, in respect of the subject matter of such claim (after deducting any
costs of recovery); PROVIDED that the amount of any increase in insurance
premium or retroactive premiums or premium adjustments (and any out of pocket
expenses) resulting from the making of a claim or claims against insurers
shall, for this purpose, be deemed to be deducted from the amount so paid by
50
such insurers. Any amount due as indemnification under this ARTICLE XI or
ARTICLE X shall (a) be increased on account of any Tax detriment actually
incurred by the Indemnified Party upon the receipt or accrual of such
indemnification payment and (b) be reduced on account of any Tax benefit
actually realized on account of the payment or accrual of any loss incurred
with respect to which such indemnification payment is made; PROVIDED that the
treatment of an indemnification payment as an adjustment to the Final Purchase
Price pursuant to SECTION 11.5 or the treatment of an indemnified Loss as an
adjustment to the Final Purchase Price shall not be either a Tax detriment or a
Tax benefit.
11.4. SOLE REMEDY. Except as otherwise provide in SECTION 1.3
(Closing Balance Sheet Calculation), Section 1.4 (Post-Closing Adjustment
Payment) and SECTION 6.12 (Non-Compete), the indemnification provided for in
this ARTICLE XI and ARTICLE X shall be the sole remedy of the parties hereto
and their respective successors or assigns in respect of any claim for damages
arising under or out of this Agreement or any Ancillary Agreement; PROVIDED,
HOWEVER, that this SECTION 11.4 shall not apply to Losses resulting from fraud;
PROVIDED FURTHER, HOWEVER, that the rights of indemnification provided under
this ARTICLE XI and ARTICLE X shall be in addition to any right the Buyer may
have to specific performance under this Agreement or any Ancillary Agreement.
Nothing herein is intended to limit any of the Buyer's rights under the Escrow
Agreement.
11.5. TREATMENT OF INDEMNITY PAYMENTS. Any payments made to a Buyer
Indemnified Party or a Seller Indemnified Party, as applicable, pursuant to
this ARTICLE XI or ARTICLE X shall be treated as an adjustment to the Final
Purchase Price.
11.6. ACKNOWLEDGMENT OF THE BUYER. The Buyer acknowledges that it
has conducted to its satisfaction an independent investigation and verification
of the financial condition, results of operations, assets, liabilities,
properties and projected operations of the Company. In making its determination
to proceed with the transactions contemplated by this Agreement, the Buyer has
relied on the results of its own independent investigation and verification and
the representations and warranties of the Parent, the Lenders and the Company
expressly and specifically set forth in this Agreement, including the
Disclosure Schedules attached hereto. Such representations and warranties by
the Parent, the Lenders and the Company constitute the sole and exclusive
representations and warranties of the Parent, the Lenders and the Company to
the Buyer in connection with the transactions contemplated hereby, and the
Buyer understands, acknowledges and agrees that all other representations and
warranties of any kind or nature express or implied are specifically disclaimed
by the Parent, the Lenders and the Company.
11.7. DISCLOSURE GENERALLY. All Disclosure Schedules attached
hereto are incorporated herein and expressly made a part of this Agreement as
though completely set forth herein. Unless otherwise stated herein, all
references to this Agreement herein or in any of the Disclosure Schedules (and
Updated Schedules) shall be deemed to refer to this entire Agreement, including
all Disclosure Schedules (and Updated Schedules).
51
ARTICLE XII
MISCELLANEOUS
12.1. INTERPRETIVE PROVISIONS.
(a) Whenever used in this Agreement, (i) "INCLUDING" (or
any variation thereof) means including without limitation and (ii) any
reference to gender shall include all genders.
(b) For purposes of this Agreement, the Company shall be
deemed to be an affiliate of the Lenders prior to the Closing and an affiliate
of the Buyer after the Closing.
(c) The parties acknowledge and agree that (i) each
party and its counsel have reviewed the terms and provisions of this Agreement
and have contributed to its drafting, (ii) the normal rule of construction, to
the effect that any ambiguities are resolved against the drafting party, shall
not be employed in the interpretation of it, and (iii) the terms and provisions
of this Agreement shall be construed fairly as to all parties hereto and not in
favor of or against any party, regardless of which party was generally
responsible for the preparation of this Agreement.
(d) Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Agreement.
(e) All references to "$" shall be deemed references to
United States dollars. Unless the context otherwise requires, any reference to
a "Section," "Exhibit," "Disclosure Schedule" or "Schedule" shall be deemed to
refer to a Section of this Agreement, exhibit to this Agreement or a Schedule
to this Agreement, as applicable. The words "hereof," "herein" and "hereunder"
and words of similar import referring to this Agreement refer to this Agreement
as a whole and not to any particular provision of this Agreement. English shall
be the governing language of this Agreement.
(f) Any reference to the Company in ARTICLE III, SECTION
6.3, SECTION 6.5, SECTION 6.10 and SECTION 6.11 of this Agreement shall be
deemed to refer to the Company and any subsidiary of the Company, including the
Not-For-Profit Subsidiary.
12.2. SUCCESSORS AND ASSIGNS. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties hereto; PROVIDED, HOWEVER, that this
Agreement may not be assigned by the Lenders or the Parent without the prior
written consent of the Buyer or be assigned by the Buyer without the prior
written consent of the Lenders or the Parent, except that (a) the Buyer may, at
its election and provided it remains liable for its obligations hereunder,
assign this Agreement to any direct or indirect wholly owned subsidiary of the
Buyer or its parent, and (b) the Company and the Buyer or any such assignee may
make a collateral assignment of its rights (but not its obligations) under this
Agreement to any lender providing financing to the Company or the Buyer in
connection with the Closing.
52
12.3. HEADINGS. The headings of the Articles, Sections, and
paragraphs of this Agreement are inserted for convenience only and shall not be
deemed to constitute part of this Agreement or to affect the construction
hereof.
12.4. MODIFICATION AND WAIVER. No amendment, modification, or
alteration of the terms or provisions of this Agreement shall be binding unless
the same shall be in writing and duly executed by the parties hereto, except
that any of the terms or provisions of this Agreement may be waived in writing
at any time by the party that is entitled to the benefits of such waived terms
or provisions. No single waiver of any of the provisions of this Agreement
shall be deemed to or shall constitute, absent an express statement otherwise,
a continuous waiver of such provision or a waiver of any other provision hereof
(whether or not similar). No delay on the part of any party in exercising any
right, power, or privilege hereunder shall operate as a waiver thereof.
12.5. EXPENSES. Except as otherwise expressly provided herein, each
of the parties hereto shall bear the expenses incurred by that party incident
to this Agreement and the transactions contemplated by this Agreement,
including all fees and disbursements of counsel and accountants retained by
such party, whether or not the transactions contemplated by this Agreement
shall be consummated; PROVIDED, HOWEVER, that the Lenders and the Parent shall
pay all fees and expenses of the Company with respect to this Agreement and the
consummation of the transactions contemplated by this Agreement, except as
otherwise provided in SECTION 10.4.
12.6. NOTICES. Any notice, request, instruction, or other document
to be given hereunder by any party hereto to any other party shall be in
writing and shall be given by delivery in person, by electronic facsimile
transmission, by overnight courier or by registered or certified mail, postage
prepaid (and shall be deemed given when delivered if delivered by hand, when
transmission confirmation is received if delivered by facsimile, three days
after mailing if mailed, and one business day after deposited with an overnight
courier service if delivered by overnight courier), as follows:
if to any of the Lenders or, after the Closing Date, the Parent:
c/o Xxxxxx Xxxxx Xxxxxxx Xxxxxx Fund V, L.P.
0000 Xxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxx
Xxxxxx X. Xxxxxxx
Fax No.: (000) 000-0000
WITH A COPY TO:
Xxxxxxxx & Xxxxx LLP
000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxx, P.C.
Xxxxxxx X. Xxxx
Fax No.: (000) 000-0000
if to the Parent or the Company prior to the Closing Date:
53
American Sanitary Incorporated
Xxxxx Xxxxxxx Xxxxx, Xxxxx 000X
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
Fax No.: (000) 000-0000
WITH A COPY TO:
Xxxxxxxx & Xxxxx LLP
000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxx, P.C.
Xxxxxxx X. Xxxx
Fax No.: (000) 000-0000
if to the Buyer or, after the Closing Date, the Company:
Interline Brands, Inc.
000 Xxxx Xxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxxxxx X. Xxxxxx, Esq.
Fax No.: (000) 000-0000
WITH A COPY TO:
Dechert LLP
Xxxx Centre
0000 Xxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000-0000
Attention: Xxxxx X. Xxxxxxx, Esq.
Fax No.: (000) 000-0000
or at such other address for a party as shall be specified by like notice.
12.7. GOVERNING LAW; CONSENT TO JURISDICTION. This Agreement shall
be construed in accordance with and governed by the laws of the State of New
York applicable to agreements made and to be performed wholly within that
jurisdiction. Each party hereto, for itself and its successors and assigns,
irrevocably agrees that any suit, action or proceeding arising out of or
relating to this Agreement may be instituted only in the United States District
Court for the Southern District of New York, United States of America or in the
absence of jurisdiction, the state courts located in New York County, New York,
and generally and unconditionally accepts and irrevocably submits to the
exclusive jurisdiction of the aforesaid courts and irrevocably agrees to be
bound by any final judgment rendered thereby from which no appeal has been
taken or is available in connection with this Agreement. Each party, for itself
and its successors and assigns, irrevocably waives any objection it may have
now or hereafter to the laying of the venue of any such suit, action or
proceeding, including any objection based on the grounds of forum non
conveniens, in the aforesaid courts. Each of the parties, for itself and its
successors and assigns, irrevocably agrees that all process in any such
54
proceedings in any such court may be effected by mailing a copy thereof by
registered or certified mail (or any substantially similar form of mail),
postage prepaid, to it at its address set forth in SECTION 12.6 hereof or at
such other address of which the other parties shall have been notified in
accordance with the provisions of SECTION 12.6 hereof, such service being
hereby acknowledged by the parties to be effective and binding service in every
respect. Nothing herein shall affect the right to serve process in any other
manner permitted by law.
12.8. PUBLIC ANNOUNCEMENTS. None of the Lenders, the Company, the
Parent or the Buyer shall make any public statements, including any press
releases, with respect to this Agreement and the transactions contemplated by
this Agreement without the prior written consent of all other parties (which
consent shall not be unreasonably withheld) except that the Buyer may make such
public statements (a) as may be required by law or regulation or the rules of
any stock exchange on which the Buyer's (or its affiliates') securities are
traded; (b) in connection with any debt or equity financing related to the
transactions contemplated hereby; or (c) in response to specific questions by
the press, analysts, investors or those attending industry conferences or
financial analyst conference calls. If a public statement is required to be
made by law, the parties shall consult with each other in advance as to the
content and timing thereof.
12.9. NO THIRD PARTY BENEFICIARIES. Except as otherwise provided in
SECTION 11.2 (General Indemnification), this Agreement is intended and agreed
to be solely for the benefit of the parties hereto and their permitted
successors and assigns, and no other party shall be entitled to rely on this
Agreement or accrue any benefit, claim, or right of any kind whatsoever
pursuant to, under, by, or through this Agreement.
12.10. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, any one of which need not contain the signature of more than one
party and each of which shall for all purposes be deemed to be an original and
all of which shall constitute the same instrument.
12.11. DELIVERY BY FACSIMILE. This Agreement and any signed
agreement entered into in connection herewith or contemplated hereby, and any
amendments hereto or thereto, to the extent signed and delivered by means of a
facsimile machine, shall be treated in all manner and respects as an original
contract and shall be considered to have the same binding legal effects as if
it were the original signed version thereof delivered in person. At the request
of any party hereto or to any such contract, each other party hereto or thereto
shall re-execute original forms thereof and deliver them to all other parties.
No party hereto or to any such contract shall raise the use of a facsimile
machine to deliver a signature or the fact that any signature or contract was
transmitted or communicated through the use of facsimile machine as a defense
to the formation of a contract, and each such party forever waives any such
defense.
12.12. CONSTRUCTION. The information contained in this Agreement and
in the Disclosure Schedules and Exhibits hereto is disclosed solely for
purposes of this Agreement, and no information contained herein or therein
shall be deemed to be an admission by any party hereto to any third party of
any matter whatsoever (including any violation of law or breach of contract).
55
12.13. BUYER DELIVERIES. The Buyer agrees and acknowledges that all
documents or other items delivered to the Buyer's counsel shall be deemed to be
delivered to the Buyer for all purposes hereunder.
12.14. ENTIRE AGREEMENT. This Agreement (including the Disclosure
Schedules and the certificates and exhibits attached hereto) together with the
Ancillary Agreements and the Confidentiality Agreement constitute the sole
understanding and agreement of the parties with respect to the subject matter
hereof and supersede any prior understandings, agreements or representations by
or between the parties, written or oral, which may have related to the subject
matter hereof in any way.
ARTICLE XIII
CERTAIN DEFINITIONS
13.1. "AGENT" means, with respect to any Person, such Person's
affiliates, officers, directors, employees, representatives or agents.
13.2. "ANCILLARY AGREEMENTS" means the Escrow Agreement and the
Inventory Purchase Agreement.
13.3. A "BUSINESS DAY" means any day other than a day on which
banks in the State of New York are required or authorized to be closed.
13.4. "CASH" means, with respect to the Company, as of the close of
business on the day immediately preceding the Closing Date, all cash, cash
equivalents and marketable securities held by the Company at such time. For
avoidance of doubt, Cash shall be adjusted to reflect ordinary course and
current reconciling items, including (a) issued but uncleared checks and
drafts, and (b) checks and drafts deposited for the account of the Company.
13.5. "CLOSING DATE INCENTIVE AWARD PAYMENTS" means any payments
that will become due and owing on the Closing Date to any Person entitled to
receive an incentive award payment as a result of the consummation of the
transactions contemplated hereby pursuant to the terms of the Parent's 2003
Employee Incentive Plan under the Incentive Award Agreements by and between the
Parent and each of the participants thereto and pursuant to the terms of those
certain Transaction Bonus Agreements and Releases by and between the Company
and each Company employee thereto.
13.6. "CODE" means the Internal Revenue Code of 1986, as amended.
13.7. "CONTRACTS" means all written or oral agreements, contracts
or commitments of the following types to which the Company is a party: (a) any
real property leases; (b) any employment agreement or profit sharing, deferred
compensation, severance, termination, retention or other similar plan,
agreement or arrangement for the benefit of any employee or former employee;
(c) any joint venture or partnership agreement; (d) mortgages, indentures, loan
or credit agreements, security agreements and other agreements and instruments
relating to the borrowing of money or extension of credit or guaranties of such
obligations or otherwise evidencing Indebtedness; (e) agreements for the sale
of goods or products or performance of services by or with any vendor (or any
group of related vendors) for which the Company has a commitment to pay in
56
excess of $50,000 during the 2006 calendar year; (f) lease agreements for
machinery and equipment, motor vehicles, or furniture and office equipment or
other personal property by or with any vendor (or any group of related vendors)
that had annual aggregate payments exceeding $50,000 during the trailing
twelve-month period ended March 31, 2006; (g) agreements restricting in any
manner the disclosure or use of information (i.e., confidentiality agreements)
or prohibiting or restricting competition, soliciting persons for employment,
soliciting customers for business or agreements restricting the right of the
Company to sell or purchase from any other person; (h) agreements between the
Company and any of its affiliates; (i) guaranties, performance, bid or
completion bonds, surety and appeal bonds, return of money bonds and surety or
indemnification agreements; (j) any license agreement or other agreements
regarding any Intellectual Property (excluding shrink-wrap or click-wrap
software licenses or other licenses of commercially available off-the-shelf
software); (k) any commission, distribution, dealer, representative or sales
agency agreement; and (l) any agreement obligating the Company to make any loan
to or investment in any Person.
13.8. The term "CONTROL" (including the terms "CONTROLLED BY" and
"UNDER COMMON CONTROL WITH") means the possession, directly or indirectly or as
trustee or executor, of the power to direct or cause the direction of the
management or policies of a Person, whether through the ownership of stock, as
trustee or executor, by contract or credit arrangement or otherwise.
13.9. "DESIGNATED GOVERNMENTAL PROCEEDING" means (a) any lawsuit,
legal proceeding or material investigation by a federal or state governmental
authority, (b) any lawsuit, legal proceeding, or material investigation by any
local governmental authority in respect of environmental matters, or (c) any
material lawsuit, material proceeding or material investigation by any
non-federal or non-state governmental authority.
13.10. "EMPLOYEE" shall mean any individual with whom the Company
maintains on the Closing Date an employee-employer relationship, including any
such individuals on lay-off, short-term disability or leave of absence, whether
paid or unpaid.
13.11. "FORMER EMPLOYEE" shall mean any individual as to whom an
employee-employer relationship has existed in the past with the Company but
does not exist on the Closing Date, including any such individual on long-term
disability.
13.12. "ENCUMBRANCES" means any liens, security interests, security
agreements, conditional sale or other title retention agreements, leases,
pledges, equities, proxies, claims, charges, adverse claims, mortgages, rights
of first refusal, preemptive rights, restrictions, encumbrances, easements,
covenants, assessments, attachments, licenses, options or title defects of any
kind whatsoever.
13.13. "ENVIRONMENTAL LAWS" means all foreign, federal, state and
local laws, rules, regulations, ordinances, the common law, judgments, orders,
consent agreements, having the force or effect of Law and relating to (a) the
protection of the environment (including air, surface and subsurface water,
drinking water supplies, surface and subsurface land, the interior of any
building or building component, soil and natural resources) or protection of
human health with respect to environmental conditions or (b) the presence,
Management, Release or threat of Release of or exposure to Hazardous
Substances.
57
13.14. "GAAP" means United States generally accepted accounting
principles applied in a manner consistent with those used in preparing the 2005
Balance Sheet.
13.15. "HAZARDOUS SUBSTANCES" means any and all hazardous or toxic
substances, wastes or materials, any pollutants, contaminants, or dangerous
materials (including polychlorinated biphenyls, friable asbestos, oil,
petroleum products and fractions and radioactive materials) regulated under
Environmental Laws.
13.16. "INDEBTEDNESS" means, as of any particular time, the unpaid
principal amount of, and accrued interest on (a) all indebtedness of the
Company for borrowed money; (b) all obligations of the Company for the deferred
purchase price of property or services (other than trade accounts payable in
the ordinary course of business and consistent with past practice); (c) all
obligations of the Company evidenced by notes, bonds, debentures or other
similar instruments (including any notes or debt relating to truck or other
motor vehicles); (d) all indebtedness created or arising under any conditional
sale or other title retention agreement with respect to property acquired by
the Company; (e) all obligations of the Company as lessee or lessees under
leases that have been or should be, in accordance with GAAP, recorded as
capital leases; (f) all outstanding and funded obligations, contingent or
otherwise, of the Company under bankers acceptances, letters of credit or
similar facilities; (g) all obligations owing pursuant to factoring agreements
for accounts receivable; (h) all Indebtedness of the type referred to in
clauses (a) through (g) above guaranteed directly or indirectly in any manner
by the Company, or in effect guaranteed directly or indirectly by the Company,
PROVIDED, HOWEVER, that such Indebtedness referred to under this clause (h) is
of the type that would be reflected as debt on a balance sheet prepared in
accordance with GAAP; and (i) all accrued but unpaid interest (or interest
equivalent) to the date of determination, and all prepayment premiums or
penalties and breakage costs, related to any items of Indebtedness of the type
referred to in clauses (a) through (h) above. For purposes of ARTICLE I of this
Agreement, Indebtedness shall mean Indebtedness as defined in the prior
sentence outstanding immediately prior to the Closing.
13.17. The terms "KNOWLEDGE," "TO THE KNOWLEDGE" or "KNOWN"and words
of similar import shall mean, as to the Company and/or the Parent, the actual
knowledge of the following persons: Xxxxxxx Xxxx, Xxx Xxxxxx, Xxxxx Eve, Xxxxx
Xxxxxx, Xxxx Xxxxxxxx, Xxxxx Xxxxxxxxxx, Xxxx Xxxxxxx and Xxxxxxx Xxxxxxx and
Xxxxxx Xxxxxxx.
13.18. "LAW" means any law, rule, regulations, judgment, injunction,
order, decree or other restriction of any court or governmental entity.
13.19. "LEASE ESCROW AMOUNT" means the aggregate amount equal to all
lease payments (including rent) that are required to be paid under the Excluded
Leases from and after the Closing Date until the expiration of such Leases
(exclusive of any renewal term), plus an amount estimated in good faith by the
Company equal to the projected operating expenses payable by the Company under
the Excluded Leases from and after the Closing Date until the expiration of
such Leases (exclusive of any renewal term); PROVIDED, HOWEVER, that such
estimate shall be based on the current levels of such operating expenses as
adjusted by an appropriate "CPI" adjustment.
13.20. "LOSSES" shall mean any and all losses, liabilities, damages,
penalties, obligations, awards, fines, deficiencies, demands, interest, Taxes,
58
claims (including third party claims whether or not meritorious), costs and
expenses whatsoever (including reasonable attorneys', consultants' and other
professional fees and disbursements of every kind, nature and description)
resulting from, arising out of or incident to any matter for which
indemnification is provided under this Agreement; PROVIDED that Losses shall
not include punitive or consequential damages except to the extent the Seller
Indemnified Party or Buyer Indemnified Party is liable for the same pursuant to
any Third Party Claim.
13.21. "MATERIAL ADVERSE EFFECT" means any circumstance or event
that, individually or in the aggregate with any other circumstance or event,
(a) is or would be reasonably expected to be material and adverse to the
business, financial condition or results of operations of the Company excluding
the Excluded Assets and the Excluded Liabilities, or (b) that would have a
material adverse effect on the ability of the Company, the Parent or the
Lenders to consummate the transactions contemplated by the Agreement, except,
in the case of clause (a), for any such circumstance or event to the extent
arising from or relating to (i) the United States or the global economy or
securities markets in general (and which is not specific to the Company and
which does not affect its business or operations disproportionately as compared
to other companies that are in the same business as the Company), (ii) the
industry in which the Company operates generally (and which is not specific to
the Company and which does not affect its business or operations
disproportionately as compared to other companies that are in the same business
as the Company), or (iii) any failure of the Company to renew or enter into a
new agreement for services with ABM Janitorial Services.
13.22. "NET WORKING CAPITAL" means (as finally determined under
SECTION 1.3.1) (a) all inventory and accounts receivable (excluding the
Excluded Assets (including any inventory purchased under the Inventory Purchase
Agreement, regardless of its location) and deferred Tax assets) of the Company
as of the opening of business on the Closing Date as reported by the Company
using accounting policies and procedures consistent with the 2005 Balance Sheet
MINUS (b) all accounts payable (excluding the Excluded Liabilities,
Indebtedness, Closing Date Incentive Award Payments, deferred Tax liabilities
and Transaction Expenses (to the extent such items were excluded in determining
the Target Working Capital Amount)) of the Company as of the opening of
business on the Closing Date as reported by the Company using accounting
policies and procedures consistent with the 2005 Balance Sheet.
13.23. "PERMITTED ENCUMBRANCES" means (a) liens imposed by law for
Taxes, fees, assessments and other governmental charges that are not yet due or
are being contested in good faith by appropriate proceedings by the Company and
for which appropriate reserves have been established in accordance with GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's, repairmen's and other
like liens imposed by law, arising in the ordinary course of business and
securing obligations that are not overdue by more than 45 days; (c) pledges and
deposits made in the ordinary course of business in compliance with workers'
compensation, unemployment insurance and other social security laws or
regulations; (d) deposits to secure the performance of bids, trade contracts,
leases, statutory obligations, surety and appeal bonds, performance bonds and
other obligations of a like nature, in each case in the course of ordinary
business; (e) easements, zoning restrictions, right-of-way, minor defects or
irregularities of title and similar encumbrances on real property imposed by
law or arising in the ordinary course of business that do not secure any
monetary obligations and do not materially detract from the value of the
affected property or interfere with the ordinary conduct of business of the
59
Company; and (f) landlords' and lessors' and other like liens in respect of
rent not in default; PROVIDED, HOWEVER, that the term "PERMITTED ENCUMBRANCES"
shall not include any lien securing Indebtedness.
13.24. "PERSON" or "PERSON" means an individual, or a corporation,
partnership, association, limited liability company, trust, unincorporated
organization, or other entity or group (as such term is defined in Section
13(d)(3) of the Exchange Act).
13.25. "SIGNIFICANT CUSTOMER" shall mean any customer, or group of
affiliated customers, to whom the Company has made sales in excess of $250,000
in the trailing twelve-month period ended March 31, 2006.
13.26. "TRANSACTION EXPENSES" shall mean all fees and expenses
incurred or payable by any Lender or the Parent in connection with the
transactions contemplated by this Agreement and all fees and expenses incurred
or payable prior to the Closing by the Company in connection with the
transactions contemplated by this Agreement.
60
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed on its behalf as of the date first above written.
AMERICAN SANITARY INCORPORATED
By: /s/ Xxxxxxx X. Xxxxxxx
-------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Chief Executive Officer
GOLDER, THOMA, XXXXXXX, XXXXXX FUND
V, L.P.
By: GTCR V, L.P.
Its: General Partner
By: Golder, Thoma, Cressey, Rauner, Inc.
Its: General Partner
By: /s/ Xxxxx X. Xxxxxxx
-------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Principal
GTCR ASSOCIATES V
By: Golder, Thoma, Cressey, Rauner, Inc.
Its: Managing Partner
By: /s/ Xxxxx X. Xxxxxxx
-------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Principal
61
GTCR CAPITAL PARTNERS, L.P.
By: GTCR Mezzanine Partners, L.P.
Its: General Partner
By: GTCR Partners VI, L.P.
Its: General Partner
By: GTCR Xxxxxx Xxxxxx, L.L.C.
Its: General Partner
By: /s/ Xxxxx X. Xxxxxxx
-------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Principal
INTERLINE BRANDS, INC.
By: /s/ Xxxxxxx X. Xxxxx
-------------------------------------
Name: Xxxxxxx X. Xxxxx
Title: President and Chief Executive Officer
AMSAN, LLC
By: /s/ Xxxxxxx X. Xxxxxxx
-----------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Chief Executive Officer
62
EXHIBIT A
INVENTORY PURCHASE AGREEMENT
BY AND AMONG
AMERICAN SANITARY INCORPORATED,
AMSAN, LLC
AND
INTERLINE BRANDS, INC.
DATED MAY 23, 2006
A-1
INVENTORY PURCHASE AGREEMENT
This Inventory Purchase Agreement (this "AGREEMENT") is dated May 23,
2006, by and among American Sanitary Incorporated, a Delaware corporation
("SELLER"), AmSan, LLC, a Delaware limited liability company (the "COMPANY"),
and Interline Brands, Inc., a New Jersey corporation (the "BUYER"). All
capitalized terms used herein but not otherwise defined shall have the meanings
given to them in the Purchase Agreement (as defined below).
RECITALS
WHEREAS, Buyer, the Company, Seller, Golder, Thoma, Xxxxxxx, Xxxxxx
Fund V, L.P., a Delaware limited partnership, GTCR Associates V, a Delaware
general partnership, and GTCR Capital Partners L.P., a Delaware limited
partnership are parties to that certain Securities Purchase Agreement, dated as
of May 23, 2006 (the "PURCHASE AGREEMENT"), pursuant to which Buyer has
acquired all of the limited liability company interests of the Company from
Seller;
WHEREAS, in connection with the transactions contemplated by the
Purchase Agreement and as a condition to the Closing under the Purchase
Agreement, Buyer has agreed to, at the request of Seller, purchase the
Inventory (as defined below) from the Company on the terms and subject to the
conditions set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE
1.1 AGREEMENT TO PURCHASE
Subject to the terms and conditions contained in this Agreement, the
Buyer hereby purchases and the Company hereby sells all of the Company's right,
title, and interest in and to all of the Inventory.
On or before the fifth (5th) business day preceding the Closing, the
Buyer and Seller (and their respective Agents) shall jointly conduct a physical
count of the Inventory to confirm each item of Inventory.
For purposes of this Agreement, "INVENTORY" means the inventory of the
Company included in the Excluded Assets and more specifically described on
SCHEDULE 1 attached hereto, reflecting the physical inventory count described
above and which such Schedule the Seller has prepared in good faith, consistent
with the methodologies of the Company normally employed in computing such
amounts to accurately reflect (i) the "cost," "fair market value" and SKU for
each item of Inventory set forth thereon and (ii) the amount reserved, for
financial statement purposes, against such Inventory as of the date hereof (the
"ESTIMATED INVENTORY RESERVE AMOUNT").
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1.2 PURCHASE PRICE
The purchase price for the Inventory will be 90% of the amount
determined by subtracting (ii) from (i), where (i) equals the amount determined
pursuant to Schedule 1 by aggregating the lower of the "cost" or "fair market
value" (each as finally determined below) for each item of Inventory listed
thereon (the "INVENTORY Value"), and (ii) equals the Inventory Reserve Amount
(as defined and finally determined below) (the "INVENTORY PURCHASE PRICE").
1.3 CLOSING
The closing of the transactions contemplated by this Agreement shall
take place on the Closing Date (as defined in the Purchase Agreement).
At the Closing, the Buyer shall out of its own proceeds and not out of
cash of the Company existing on or before the Closing deliver to Seller an
amount equal to 90% of the amount determined by subtracting (ii) from (i),
where (i) equals the amount determined pursuant to Schedule 1 by aggregating
the lower of the "cost" or "fair market value" for each item of Inventory
listed thereon (the "ESTIMATED INVENTORY VALUE") and (ii) equals the Estimated
Inventory Reserve Amount (such amount, the "CLOSING INVENTORY PURCHASE PRICE")
by wire transfer of immediately available funds to an account designated by
Seller.
Within thirty (30) days after the Closing Date, Buyer will deliver to
Seller a statement (the "INVENTORY STATEMENT") illustrating Buyer's calculation
of the Inventory Value and Inventory Reserve Amount. For purposes of this
Agreement, "Inventory Reserve Amount" means the amount of reserve against
Inventory as of the Closing. The Inventory Statement shall be prepared and the
"Inventory Value" and "Inventory Reserve Amount" shall be determined in
accordance with GAAP using the same accounting methods, policies, principles,
practices and procedures, with consistent classifications, judgments and
estimation methodology as were used in preparation of the 2005 Balance Sheet
or, to the extent applicable, in accordance with any changes to such accounting
methods, policies, principles, practices and procedures that are documented in
the Company's and Seller's books and records as of December 31, 2005, not
including any changes in assets or liabilities as a result of purchase
accounting adjustments or other changes arising from or resulting as a
consequence of the transactions contemplated by the Purchase Agreement. The
parties agree that the purpose of preparing the Inventory Statement and
determining the Inventory Value, the Inventory Reserve Amount and the related
purchase price adjustment contemplated by this section is to measure the
Inventory Purchase Price and such processes are not intended to permit the
introduction of different judgments, accounting methods, policies, principles,
practices, procedures, classifications or estimation methodologies for the
purpose of preparing the Inventory Statement or determining the Inventory Value
and the Inventory Reserve Amount (apart from updating to reflect the physical
count referred to above). After delivery of the Inventory Statement, Seller and
its accountants shall be permitted reasonable access during normal business
hours of the Company or the Buyer, as the case may be and upon reasonable
notice to appropriate Buyer personnel and to review the books and records and
work papers related to the preparation of the Inventory Statement; PROVIDED,
HOWEVER, that the Seller shall not use or permit to be used such information
other than for purposes of this SECTION 1.3 and shall not disclose or permit to
be disclosed such information (other than to its Agents for purposes of this
SECTION 1.3), except as required by law or legal process, and it shall be a
condition to the granting of such access to any work papers, that the Seller
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and its representatives execute any releases and indemnity agreements
customarily required by the Buyer's or the Company's accountants, as the case
may be, for such access. The Seller and its accountants may reasonably make
inquiries of the Buyer and the Company and their respective accountants or
other Agents regarding questions concerning or disagreements with the Inventory
Statement arising in the course of their review thereof, and Buyer shall use
its, and shall cause the Company to use its, commercially reasonable efforts to
cause any such accountants to cooperate with and respond to such inquiries. If
the Seller has any objections to the Inventory Statement, the Seller shall
deliver to Buyer a statement setting forth in reasonable detail its objections
thereto (an "OBJECTIONS STATEMENT"). If an Objections Statement is not
delivered to the Buyer within thirty (30) days after delivery of the Inventory
Statement, then the Inventory Statement shall be final, binding and
non-appealable by the parties hereto. The Seller and the Buyer shall negotiate
in good faith to resolve any such objections, but if they do not reach a final
resolution within 30 days after the delivery of the Objections Statement, the
Seller and the Buyer shall submit such dispute to a mutually agreeable third
party that is not a public accounting firm. Any further communications with the
Dispute Resolution Auditor must be written and delivered to each party to the
dispute. The Dispute Resolution Auditor shall consider only those items and
amounts that are identified in the Objections Statement as being items that the
Seller and the Buyer are unable to resolve. The Dispute Resolution Auditor's
determination will be based solely on the definitions of Inventory Value and
Inventory Reserve Amount hereunder. Seller and the Buyer shall use their
commercially reasonable efforts to cause the Dispute Resolution Auditor to
resolve all disagreements as soon as practicable. Further, the Dispute
Resolution Auditor's determination shall be based solely on the presentations
by the Seller and the Buyer that are in accordance with the terms and
procedures set forth in this Agreement (i.e., not on the basis of an
independent review). The resolution of the dispute by the Dispute Resolution
Auditor shall be final, binding and non-appealable on the parties hereto, and
judgment may be entered upon the determination of the Dispute Resolution
Auditor in any court having jurisdiction over the party against which such
determination is to be enforced. The costs and expenses of the Dispute
Resolution Auditor shall be allocated between the Seller and the Buyer based
upon the percentage which the portion of the contested amount not awarded to
each party bears to the amount actually contested by such party. For example,
if the Seller claims the Inventory Reserve Amount is $1,000 less than the
amount determined by the Buyer's accountants, and the Seller contests only $500
of the amount claimed by the Buyer, and if the Dispute Resolution Auditor
ultimately resolves the dispute by awarding to the Buyer $300 of the $500
contested, then the costs and expenses of arbitration will be allocated 60%
(i.e., 300 / 500) to the Seller and 40% (i.e., 200 / 500) to the Buyer.
If the Inventory Purchase Price as finally determined pursuant to this
Section 1.3 is greater than the Closing Inventory Purchase Price, then the
Buyer shall promptly (but in any event within five (5) business days of such
determination) deliver to the Seller the amount of such difference by wire
transfer of immediately available funds to an account or accounts designated by
the Seller, together with interest thereon from the Closing Date to the date of
actual payment at a variable rate equal to the prime rate (as reported in the
WALL STREET JOURNAL "MONEY RATES") from and including the Closing Date to, but
not including, the date of payment. If the Inventory Purchase Price as finally
determined pursuant to this Section 1.3 is less than the Closing Inventory
Purchase Price, then Seller shall promptly (but in any event within five (5)
business days of such determination) pay to the Buyer the amount of such
difference by wire transfer of immediately available funds to one or more
accounts designated by the Buyer, together with interest thereon from the
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Closing Date to the date of actual payment at a variable rate equal to the
prime rate (as reported in the WALL STREET JOURNAL "MONEY RATES") from and
including the Closing Date to, but not including, the date of payment.
The Closing Inventory Purchase Price as adjusted, if at all, by this
section, shall be the Inventory Purchase Price.
1.4 CLOSING OBLIGATIONS
At the Closing:
The Company shall deliver the Inventory to Buyer by making such
Inventory available for Buyer to take possession thereof at facilities of the
Company (other than the Excluded Facilities (as defined in the Purchase
Agreement)) as are reasonably acceptable to Buyer. Such Inventory will be
segregated and held apart from any other inventory of the Company at such
facilities.
Buyer shall deliver the Closing Inventory Purchase Price to Seller, on
behalf of the Company, by wire transfer of immediately available funds to one
or more accounts designated by Seller.
1.5 DISCLAIMER OF REPRESENTATIONS AND WARRANTIES
Except as expressly set forth in this ARTICLE 0, Seller makes no
representation or warranty, express or implied, at law or in equity, in respect
of any of the Inventory, including, with respect to merchantability or fitness
for any particular purpose, and any such other representations or warranties
are hereby expressly disclaimed. The Company and Buyer, as the case may be,
hereby acknowledge and agree that, except to the extent specifically set forth
in this ARTICLE 0, the Company or Buyer, as the case may be, is purchasing the
Inventory on an "as-is, where-is" basis.
2. COVENANTS
2.1 FURTHER ASSURANCES
The parties shall cooperate reasonably with each other and with each
other party's Agents in connection with any steps required to be taken as part
of their respective obligations under this Agreement, and shall (i) furnish
upon request to each other such further information; (ii) execute and deliver
to each other such other documents; and (iii) 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 transactions contemplated hereby.
2.2 WAIVER; REMEDIES CUMULATIVE
Compliance with the provisions of this Agreement may be waived only by
a written instrument specifically referring to this Agreement and signed by the
party waiving such compliance. No course of dealing, nor any failure or delay
in exercising any right, will be construed as a waiver, and no single or
partial exercise of a right will preclude any other or further exercise of that
or any other right.
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2.3 ENTIRE AGREEMENT AND MODIFICATION
Other than the Purchase Agreement (which supplements the terms and
provisions of this Agreement), this Agreement supersedes all prior agreements,
whether written or oral, between or among the parties with respect to its
subject matter and constitutes (along with the relevant provisions of the
Purchase 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, supplemented, or otherwise modified except by a
written agreement executed by the party to be charged with such amendment.
2.4 ASSIGNMENTS AND SUCCESSORS; NO THIRD-PARTY RIGHTS
No party may assign any of its rights or delegate any of its
obligations under this Agreement without the prior written consent of the other
parties. Subject to the preceding sentence, this Agreement will apply to, be
binding in all respects upon and inure to the benefit of the heirs, successors,
and permitted assigns of the parties. 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, except such rights as
shall inure to an heir, successor, or permitted assignee pursuant to this
SECTION 0.
2.5 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.
2.6 CONSTRUCTION
The headings of Articles and Sections in this Agreement are provided
for convenience only and will not affect its construction or interpretation.
2.7 GOVERNING LAW
This Agreement will be governed by and construed under the laws of the
State of Delaware without regard to conflicts-of-laws principles that would
require the application of any other law.
2.8 EXECUTION OF AGREEMENT
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 the same agreement. The
exchange of copies of this Agreement by facsimile or electronic mail
transmission shall constitute effective execution and delivery of this
Agreement as to the parties and may be used in lieu of the original Agreement
for all purposes. Signatures of the parties transmitted by facsimile or
electronic mail shall be deemed to be their original signatures for all
purposes.
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2.9 BULK TRANSFER LAWS
Each of Seller and Buyer acknowledge that Seller will not comply with
the provisions of any bulk transfer laws of any jurisdiction in connection with
the transactions contemplated by this Agreement. Seller will indemnify Buyer
for any such noncompliance.
* * * * * * * * *
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IN WITNESS WHEREOF, the parties have executed this Inventory Purchase
Agreement as of the date first written above.
SELLER:
AMERICAN SANITARY INCORPORATED, A DELAWARE
CORPORATION
By: ______________________________
Name: ______________________________
Title: ______________________________
COMPANY:
AMSAN, LLC, A DELAWARE LIMITED
LIABILITY COMPANY
By: ______________________________
Name: ______________________________
Title: ______________________________
BUYER:
INTERLINE BRANDS, INC., A NEW
JERSEY CORPORATION
By: ______________________________
Name: ______________________________
Title: ______________________________
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EXHIBIT B
ESCROW AGREEMENT
ESCROW AGREEMENT (the "ESCROW AGREEMENT") dated as of the ______ day
of _________, 2006 by and among American Sanitary Incorporated, a Delaware
corporation (the "PARENT"), Interline Brands, Inc., a New Jersey corporation
(the "BUYER"), and ______________________ (the "ESCROW AGENT"), as Escrow
Agent.
BACKGROUND
A. The Parent, Golder, Thoma, Xxxxxxx, Xxxxxx Fund V, L.P., a
Delaware limited partnership, GTCR Associates V, a Delaware general
partnership, GTCR Capital Partners, L.P., a Delaware limited partnership,
AmSan, LLC, a Delaware limited liability company and wholly owned subsidiary of
the Parent, and the Buyer have entered into a Securities Purchase Agreement,
dated as of May 23, 2006 (the "SECURITIES PURCHASE AGREEMENT"), pursuant to
which the Parent has sold to the Buyer, and the Buyer has purchased, all of the
LLC Interests on the terms and subject to the conditions set forth in the
Securities Purchase Agreement.
B. This Escrow Agreement is entered into pursuant to, and is a
condition precedent to the closing ("CLOSING") of the transactions contemplated
by the Securities Purchase Agreement.
C. Section 2.2(a)(i) of the Securities Purchase Agreement
requires the Buyer to deliver the Escrow Amount (as defined below) to the
Escrow Agent to be held in escrow according to the terms and subject to the
conditions set forth herein.
D. Capitalized terms not otherwise defined herein shall be
defined as in the Securities Purchase Agreement.
TERMS
In consideration of the mutual premises and the covenants and
agreements of the parties contained herein and in the Securities Purchase
Agreement, and intending to be bound hereby, the parties hereto agree as
follows:
1. APPOINTMENT OF ESCROW AGENT. The Parent and the Buyer hereby
appoint the Escrow Agent to act in accordance with the terms and subject to the
conditions of this Escrow Agreement, and the Escrow Agent hereby accepts such
appointment on the terms and subject to the conditions of this Escrow
Agreement.
2. ESCROW FUNDS.
a. At the Closing, and only if the Closing occurs,
Buyer shall deposit with the Escrow Agent, by wire transfer of immediately
available funds, Eleven Million Five Hundred Thousand Dollars ($11,5000,000)
(the "ESCROW AMOUNT") in accordance with Section 2.2(a)(i) of the Securities
Purchase Agreement. Amounts deposited with the Escrow Agent as provided by this
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Section 2, including any accretions and reductions therefrom, are referred to
herein and shall constitute, the "ESCROW FUNDS." The Escrow Funds shall be
held, invested and administered in accordance with the terms and provisions of
this Escrow Agreement.
b. The Escrow Amount shall be held by the Escrow Agent
in a separate account (the "ESCROW ACCOUNT") for the benefit of the parties
hereto as provided in this Escrow Agreement.
3. DISBURSEMENT OF ESCROW FUNDS. The Escrow Agent shall release
and disburse the Escrow Amount in accordance with the provisions of this
Section 3.
a. POST-CLOSING PAYMENT ADJUSTMENT DISBURSEMENT. If, at
the Buyer's option, the Buyer shall provide to the Escrow Agent a written
notice (the "POST-CLOSING PAYMENT ADJUSTMENT NOTICE"), in the form of ANNEX A
hereto, pursuant to Section 1.4 of the Securities Purchase Agreement,
certifying (i) that the Preliminary Statement is deemed to be final, binding
and non-appealable (the "FINAL STATEMENT") in accordance with Section 1.3.1 of
the Securities Purchase Agreement, (ii) that attached to the Post-Closing
Payment Adjustment Notice is a true and correct copy of the Final Statement,
(iii) the total amount to be paid to the Buyer from the Escrow Funds with
respect to the reduction, if any, to the Closing Payment determined in
accordance with Section 1.4 of the Securities Purchase Agreement, and (iv) that
the Buyer has contemporaneously delivered a copy of the Post-Closing Payment
Adjustment Notice to the Parent, then five (5) business days after the delivery
to the Escrow Agent of the Post-Closing Payment Adjustment Notice, the Escrow
Agent shall, unless within such five (5) business day period the Escrow Agent
has received a Post-Closing Payment Objection Notice (as defined below),
disburse to the Buyer the amount as specified by the Buyer in the Post-Closing
Payment Adjustment Notice. As used herein, "POST-CLOSING PAYMENT OBJECTION
NOTICE" shall mean a notice from the Parent to the Buyer and the Escrow Agent
that sets forth: (i) an objection to delivery of all or any portion of the
Escrow Funds in accordance with the terms of a Post-Closing Payment Adjustment
Notice; and (ii) a brief description of the facts which constitute the basis
for the objection. If a Post-Closing Payment Objection Notice is so received,
the Escrow Agent thereafter shall not make the delivery requested in the
Post-Closing Payment Adjustment Notice except in accordance with either: (x) a
joint certificate from the Buyer and the Parent to the Escrow Agent in the form
of ANNEX B hereto (a "JOINT CERTIFICATE") or (y) a non-appealable, final
judgment of a court of competent jurisdiction (a "JUDGMENT"), stating that one
or more Buyer Indemnified Parties is entitled to payment under Section 1.4 of
the Securities Purchase Agreement, along with a certificate substantially in
the form of ANNEX C (a "JUDGMENT CERTIFICATE"), signed by the Buyer directing
the Escrow Agent to make such delivery.
b. INDEMNITY CLAIM DISBURSEMENTS. The Buyer shall be
entitled to payments from the Escrow Account for Indemnity Claims (as defined
below) up to a maximum amount of Eleven Million Five Hundred Thousand Dollars
($11,500,000) minus any amounts distributed pursuant to Section 3(a) above, in
accordance with the claim procedures set forth in this Section 3(b). In the
event and to the extent a Buyer Indemnified Party determines that it has an
Indemnity Claim (as defined below) such Buyer Indemnified Party shall issue, or
cause to be issued, a notice in the form of ANNEX D attached hereto (an
"INDEMNITY CLAIM NOTICE") to the Parent and the Escrow Agent which sets forth:
(i) the fact that an Indemnity Matter (as defined below) has occurred; (ii) the
fact that an Indemnity Payment (as defined below) has been made or may be
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required to be made; (iii) a specification of the amount of the Indemnity
Payment; (iv) a brief description of the facts which gave rise to the Indemnity
Matter; and (v) a request that the Escrow Agent deliver to the Buyer from the
Escrow Amount an amount equal to the Indemnity Payment in immediately available
funds. On the date which is five (5) business days after the Escrow Agent has
received an Indemnity Claim Notice, the Escrow Agent shall deliver to the Buyer
Indemnified Party that portion of the Escrow Amount described in, and in
accordance with the terms of, the Indemnity Claim Notice delivered by such
party, unless within such five (5) business day period the Escrow Agent has
received an Indemnity Objection Notice (as hereinafter defined). As used
herein, an "INDEMNITY OBJECTION NOTICE" shall mean a notice from the Parent to
the Buyer and the Escrow Agent that sets forth: (i) an objection to delivery of
all or any portion of the Escrow Amount in accordance with the terms of an
Indemnity Claim Notice; and (ii) a brief description of the facts which
constitute the basis for the objection. If an Indemnity Objection Notice is so
received, the Escrow Agent thereafter shall not make the delivery requested in
the Indemnity Claim Notice except in accordance with either: (x) a Joint
Certificate or (y) a Judgment (in this case stating that the Buyer is entitled
to indemnification under the Securities Purchase Agreement), along with a
Judgment Certificate, signed by the Buyer, in each case, directing the Escrow
Agent to make such delivery.
c. DEFINITIONS.
(i) "INDEMNITY CLAIM" means any claim by a
Buyer Indemnified Party for indemnification under Article XI of the Securities
Purchase Agreement.
(ii) "INDEMNITY MATTER" means any matter for
which a Buyer Indemnified Party is entitled to indemnification under Article XI
of the Securities Purchase Agreement.
(iii) "INDEMNITY PAYMENT" means any Loss for
which a Buyer Indemnified Party is entitled to indemnification as a result of
an Indemnity Matter, in accordance with Article XI of the Securities Purchase
Agreement.
d. JOINT CERTIFICATE; JUDGMENT CERTIFICATE.
Notwithstanding anything to the contrary in this Escrow Agreement, if (i) the
Buyer and Parent deliver a Joint Certificate or (ii) the Buyer or the Parent
delivers a Judgment, along with a Judgment Certificate, then, in each such
case, the Escrow Agent shall disburse to the party identified therein the
amount designated therein not later than five (5) business days after delivery
of the Joint Certificate or the Judgment, along with a Judgment Certificate to
the Escrow Agent, as applicable.
e. MANNER OF DISBURSEMENTS. Any disbursements to be
made by the Escrow Agent pursuant to this Section 3 shall be made in cash by
wire transfer of immediately available funds or by check of the Escrow Agent,
as the recipient may request, payable in United States currency and shall, if
by check, be delivered by certified mail to the party entitled thereto in
accordance with Section 9(a).
4. INITIAL RELEASE DATE; TERMINATION DATE.
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a. INITIAL RELEASE DATE. On ___________________, 2006
[12 months following the Closing Date] (the "INITIAL RELEASE DATE"), the Escrow
Agent shall distribute to the Parent, an amount equal to $5,750,000.00, MINUS
any amounts disbursed in accordance with Section 3, minus any amounts that are,
as of the Initial Release Date, the subject of a Pending Indemnity Claim Notice
(as defined below) (the "INITIAL RELEASE AMOUNT"); PROVIDED, HOWEVER, that in
no event shall the amount of Escrow Funds remaining in the Escrow Account after
the Initial Release Date as a result of the distribution of the Initial Release
Amount be less than Five Million Seven Hundred and Fifty Thousand Dollars
($5,750,000). The Escrow Agent shall deliver any amounts that are the subject
of a Pending Indemnity Claim Notice to the Parent or the Buyer, as the case may
be, only pursuant to (x) either a Joint Certificate or (y) a Judgment stating
that either Buyer or Parent is entitled to the amount that is the subject of
such Pending Indemnity Claim Notice, along with a Judgment Certificate, signed
by Buyer or Parent, as the case may be, directing the Escrow Agent to make such
delivery.
b. TERMINATION DATE. On the Termination Date (as
defined below), this Escrow Agreement shall terminate and the Escrow Agent
shall distribute to the Parent the then remaining balance, if any, of the
Escrow Funds. For purposes of this Escrow Agreement, "TERMINATION DATE" shall
mean the earlier of: (i) the first day on which there are no Escrow Funds
remaining in the Escrow Account and (ii) the later of: (x) the date upon which
the Closing Statement is deemed to be the Final Statement in accordance with
Section 2.3.2 of the Purchase Agreement and any payment due to Buyer under
Section 3(a), if any, has first been made, and (y) ___________________, 2006
[18 months following the Closing Date] or if any portion of the Escrow Amount
is the subject of one or more pending Indemnity Claim Notices ("PENDING
INDEMNITY CLAIM NOTICE") which have been delivered pursuant to Section 3 of
this Escrow Agreement prior to or on ___________________, 2006 [18 months
following the Closing Date], the subsequent date on which there has been a
final disposition of all such Indemnity Claim Notices pursuant to Section 3 of
this Agreement; PROVIDED THAT, notwithstanding any Pending Indemnity Claim
Notices as of ___________________, 2006 [18 months following the Closing Date],
on such date, the Escrow Agent shall pay to Parent all amounts remaining in the
Escrow Account that are not the subject of any Pending Indemnity Claim Notice.
5. INVESTMENT OF ESCROW FUNDS; DISBURSEMENT OF EARNINGS.
a. Pending disbursement of the Escrow Funds, the Escrow
Agent shall invest the Escrow Funds in Permitted Investments (as defined
below). All interest, dividends and other income earned on the Escrow Funds
(the "EARNINGS") shall be retained by the Escrow Agent as part of the Escrow
Funds, subject to Section 5(b) hereof. For purposes of this Escrow Agreement,
"PERMITTED INVESTMENTS" shall mean (i) money market funds consisting of
short-term U.S. Treasury securities, (ii) obligations of or guaranteed by the
United States of America or any agency thereof, either outright or in
connection with repurchase agreements covering such obligations with a maturity
not later than one year from the date of investment, and (iii) such other
investments as may be specified from time to time to the Escrow Agent by joint
written instructions of the Parent and the Buyer.
b. Any such investments shall be held by or under the
control of the Escrow Agent and shall be deemed at all times a part of the
Escrow Funds, and any Earnings from such investment shall be credited to and
held in, and any loss shall be charged to, the Escrow Funds; PROVIDED, that any
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Earnings shall be held solely for the account of Parent; PROVIDED, FURTHER that
any Earnings shall be payable by the Escrow Agent to the Parent on the last
business day of each calendar quarter, commencing on , 2006. If any Earnings
become payable on a day other than a business day, the payment thereof will be
extended to the next succeeding business day. Any disbursements to be made by
the Escrow Agent pursuant to this Section 5(b) shall be made in cash by wire
transfer of immediately available funds or by check of the Escrow Agent, as the
Parent may request, payable in United States currency and shall, if by check,
be delivered by certified mail to the Parent in accordance with Section 9(a).
c. In the event that the Escrow Agent shall not have
received a direction for investment for any moneys in the Escrow Funds, the
Escrow Agent may deposit such moneys into an interest bearing account at the
Escrow Agent (or any other bank acceptable to the Escrow Agent in its
reasonable judgment), such as a money market savings account provided that all
such investments shall mature, and the funds invested immediately available, on
each one month anniversary of the date of each such deposit.
d. As and when any amount is needed for payments under
this Escrow Agreement, the Escrow Agent shall cause a sufficient amount of the
Permitted Investments to be converted into cash.
e. Subject to the provisions of Section 6, the Escrow
Agent shall not be liable for any depreciation in the value of any investment
made pursuant to this Section 5 or for any loss arising from any such
investment.
f. Pursuant to Section 671 of the Internal Revenue Code
of 1986, as amended, the Parent is intended to be, and shall be treated as, the
owner for income tax purposes of the Escrow Funds (and any other corpus and
income held in the Escrow Account) and of all of the items of income,
deductions and credits attributable to the Escrow Funds (and attributable to
all of such other corpus and interest). The provisions of this Escrow Agreement
shall be construed and interpreted accordingly, and all parties hereto shall
file tax returns and statements consistent with such treatment, it being
understood that the Escrow Agent shall not be responsible for any tax reporting
responsibilities of the Parent or the Buyer.
6. WITH ESCROW AGENT. To induce Escrow Agent to act hereunder,
it is agreed by the Parent and the Buyer that:
a. the Escrow Agent may act in reliance upon any
instrument or signature furnished to it hereunder and which it, in good faith,
believed to be genuine and may assume that any person purporting to give any
writing, notice, advice or instruction in connection with the provisions hereof
has been duly authorized to do so.
b. the Escrow Agent may act relative hereto upon advice
of reputable counsel in reference to any matter connected herewith, and shall
not be liable to any of the parties hereto, or their respective legal
representatives, heirs, successors and assigns, for any action taken in good
faith on the advice of reputable counsel or for any mistake of fact or error of
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judgment, or for any acts or omissions of any kind taken or made in good faith
unless caused by its willful misconduct or negligence.
c. This Escrow Agreement sets forth exclusively the
duties of the Escrow Agent with respect to any and all matters pertinent hereto
and no implied duties or obligations shall be read into this Escrow Agreement
against the Escrow Agent. The Escrow Agent shall not be bound by, nor charged
with knowledge of, any other agreement, including the Securities Purchase
Agreement and the Disclosure Schedules thereto.
d. The Escrow Agent does not have and will not have any
interest in the Escrow Funds but is serving only as escrow holder and has only
possession thereof.
The Parent and the Buyer hereby release the Escrow Agent from any act
done or omitted to be done by the Escrow Agent in good faith in the performance
of its duties hereunder, and the Parent and the Buyer, jointly and severally,
hereby agree to indemnify Escrow Agent for, and to hold it harmless against,
any loss, liability or reasonable expense (including reasonable attorneys' fees
and expenses) actually incurred by the Escrow Agent, arising out of or in
connection with its entering into this Escrow Agreement and carrying out its
duties hereunder, including the reasonable costs and expenses of defending
itself from any claim or liability; PROVIDED, HOWEVER, that the Escrow Agent
shall not be entitled to indemnification hereunder for losses, liabilities and
expenses which arise out of the willful misconduct or negligence of the Escrow
Agent. The Parent and the Buyer agree that any payments made to Escrow Agent
under the indemnification obligation in the immediately preceding sentence,
whether made by Parent, on the one hand, or the Buyer, on the other hand, or
both, are to be borne in equal amounts by Parent, on the one hand, or the
Buyer, on the other hand, and hereby grant to each other a right of
contribution to effect the same. The agreements contained in the two
immediately preceding sentences shall survive despite any termination of this
Escrow Agreement or the resignation or removal of the Escrow Agent.
e. The Escrow Agent shall receive reasonable
compensation for the performance of its duties hereunder; PROVIDED, however,
that in no event shall (i) the initial acceptance fee exceed $ __________ and
(ii) the annual administration, transaction and other fees exceed $ _________
per year in the aggregate. The Escrow Agent shall be reimbursed for all
reasonable costs and expenses actually incurred in connection with the
performance of its duties hereunder. Each of Parent and Buyer shall be
responsible for fifty percent (50%) of the fees and costs provided for in this
Section 6(e), which shall be paid [within thirty (30) days after the date
hereof.]
7. RESIGNATION AND REMOVAL OF THE ESCROW AGENT. The Escrow
Agent, and any successor Escrow Agent, may resign at any time as the Escrow
Agent hereunder by giving at least 30 days' written notice to the Parent and
the Buyer; PROVIDED, HOWEVER, that the Escrow Agent's resignation shall not be
effective unless and until a successor Escrow Agent is appointed and the Escrow
Agent delivers the Escrow Funds to such successor. Upon such resignation, the
resigning Escrow Agent shall be absolved from any and all liability in
connection with the exercise of its powers and duties as Escrow Agent hereunder
except for liability arising in connection with its negligence or willful
misconduct. Upon their receipt of notice of resignation from the Escrow Agent,
the Parent and the Buyer shall use reasonable efforts to designate a successor
B-6
Escrow Agent. In the event the Parent and the Buyer do not agree upon a
successor Escrow Agent within 30 days after the receipt of such notice, the
Escrow Agent so resigning may petition any court of competent jurisdiction for
the appointment of a successor Escrow Agent located within the territorial
United States or other appropriate relief and any such resulting appointment
shall be binding upon all parties hereto. By mutual written agreement, the
Parent and the Buyer shall have the right to terminate their appointment of the
Escrow Agent, or successor Escrow Agent, as Escrow Agent. The Escrow Agent or
successor Escrow Agent shall continue to act as Escrow Agent until a successor
is appointed and qualified to act as Escrow Agent.
8. SUBSTITUTION OF THE ESCROW AGENT. In the event any Escrow
Agent ceases to do business in the City of New York, the Buyer shall have the
right to terminate the appointment of the Escrow Agent as Escrow Agent
hereunder by giving written notice to the parties hereto and to appoint a
substitute Escrow Agent, which substitute Escrow Agent shall be reasonably
acceptable to the Parent.
9. MISCELLANEOUS.
a. NOTICES. Any notice, request, instruction, or other
document to be given hereunder by any party hereto to any other party shall be
in writing and shall be given by delivery in person, by electronic facsimile
transmission, by overnight courier or by registered or certified mail, postage
prepaid (and shall be deemed given when delivered if delivered by hand, when
transmission confirmation is received if delivered by facsimile, three days
after mailing if mailed, and one business day after deposited with an overnight
courier service if delivered by overnight courier), as follows:
if to the Escrow Agent:
[Insert Escrow Agent Contact Information]
if to any of the Parent:
c/o Xxxxxx Xxxxx Xxxxxxx Xxxxxx Fund V, L.P.
0000 Xxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxx
Xxxxxx X. Xxxxxxx
Fax No.: (000) 000-0000
WITH A COPY TO:
Xxxxxxxx & Xxxxx LLP
000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxx, P.C.
Xxxxxxx X. Xxxx
Fax No.: (000) 000-0000
B-7
if to the Buyer:
Interline Brands, Inc.
000 Xxxx Xxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxxxxx X. Xxxxxx, Esq.
Fax No.: (000) 000-0000
with a copy to:
Dechert LLP
Xxxx Centre
0000 Xxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000-0000
Attention: Xxxxx X. Xxxxxxx, Esq.
Fax No.: (000) 000-0000
or at such other address for a party as shall be specified by like notice.
b. GOVERNING LAW; CONSENT TO JURISDICTION. This Escrow
Agreement shall be construed in accordance with and governed by the laws of the
State of New York applicable to agreements made and to be performed wholly
within that jurisdiction. Each party hereto, for itself and its successors and
assigns, irrevocably agrees that any suit, action or proceeding arising out of
or relating to this Escrow Agreement may be instituted only in the United
States District Court for the Southern District of New York, United States of
America or in the absence of jurisdiction, the state courts located in New York
County, New York, and generally and unconditionally accepts and irrevocably
submits to the exclusive jurisdiction of the aforesaid courts and irrevocably
agrees to be bound by any final judgment rendered thereby from which no appeal
has been taken or is available in connection with this Escrow Agreement. Each
party, for itself and its successors and assigns, irrevocably waives any
objection it may have now or hereafter to the laying of the venue of any such
suit, action or proceeding, including any objection based on the grounds of
forum non conveniens, in the aforesaid courts. Each of the parties, for itself
and its successors and assigns, irrevocably agrees that all process in any such
proceedings in any such court may be effected by mailing a copy thereof by
registered or certified mail (or any substantially similar form of mail),
postage prepaid, to it at its address set forth in SECTION 9(A) hereof or at
such other address of which the other parties shall have been notified in
accordance with the provisions of SECTION 9(A) hereof, such service being
hereby acknowledged by the parties to be effective and binding service in every
respect. Nothing herein shall affect the right to serve process in any other
manner permitted by law.
c. SUCCESSORS AND ASSIGNS. This Escrow Agreement shall
be binding upon and inure to the benefit of the parties hereto, their heirs,
legal representatives, successors and assigns.
B-8
d. COUNTERPARTS. This Escrow Agreement may be executed
in two or more counterparts, each of which shall be deemed an original, and all
such counterparts shall constitute a single instrument.
e. FURTHER ASSURANCES. The Parent and the Buyer will
cooperate with Escrow Agent and deliver to Escrow Agent such additional
information and documents as the Escrow Agent shall reasonably request in the
performance of its obligations hereunder.
f. ENTIRE AGREEMENT. Subject to Section 6(c), this
Escrow Agreement, the Securities Purchase Agreement and the Disclosure
Schedules and documents referred to herein and therein contain the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior negotiations, agreements and undertakings among the parties
with respect to such subject matter. There are no restrictions, promises,
warranties, covenants or undertakings other than those expressly set forth
herein or therein.
g. AMENDMENT. No amendment of this Escrow Agreement
shall be effective unless in writing and signed by all of the parties hereto.
h. SEVERABILITY. Any provision of this Escrow Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this Escrow
Agreement or affecting the validity or enforceability or such provision in any
other jurisdiction.
i. SURVIVAL. All agreements, representations and
warranties made in this Escrow Agreement or in any document delivered pursuant
to this Escrow Agreement shall survive the execution and delivery of this
Escrow Agreement and the delivery of any of such documents.
j. WAIVER OF OFFSET RIGHTS. The Escrow Agent hereby
waives any all rights to offset that it may have against the Escrow Funds
including, without limitation, claims arising as a result of any claims,
amounts, liabilities, cost, expenses, damages or other losses that the Escrow
Agent may be otherwise entitled to collect from any party to this Escrow
Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
B-9
IN WITNESS WHEREOF, the parties hereto have executed this Escrow
Agreement, by their duly authorized officers, on and as of the date and year
first above written.
[ESCROW AGENT]
By:___________________________
Name:
Title:
AMERICAN SANITARY INCORPORATED
By:___________________________
Name:
Title:
INTERLINE BRANDS, INC.
By:___________________________
Name:
Title:
B-10
ANNEX A
POST-CLOSING PAYMENT ADJUSTMENT NOTICE
[Escrow Agent]
Re: Escrow Agreement dated as of the ___ day of __________, 2006
by and among American Sanitary Incorporated, Interline
Brands, Inc., and [Escrow Agent]
Ladies and Gentlemen:
Pursuant to Section 3(a) of the Escrow Agreement, the undersigned, on
behalf of Interline Brands, Inc., hereby certifies that (i) the Preliminary
Statement has been deemed final, binding and non-appealable (the "FINAL
STATEMENT") in accordance with Section 1.3.1 of the Securities Purchase
Agreement, (ii) attached hereto is a true and correct copy of the Final
Statement, (iii) the total amount to be paid to the Buyer from the Escrow Funds
with respect to the reduction to the Closing Payment determined in accordance
with Section 1.4 of the Securities Purchase Agreement is $________, and (iv)
the Buyer has contemporaneously delivered a copy of this Notice to Parent.
INTERLINE BRANDS, INC.
By:___________________________
Name:
Title:
Dated: _______________
cc: American Sanitary Incorporated
ANNEX B
JOINT CERTIFICATE
[Escrow Agent]
Re: Escrow Agreement dated as of the __ day of __________, 2006
by and among American Sanitary Incorporated, Interline
Brands, Inc., and [Escrow Agent]
Ladies and Gentlemen:
The undersigned, on behalf of Interline Brands, Inc. and
American Sanitary Incorporated, as applicable, pursuant to Section 3 of the
Escrow Agreement, hereby instruct you to pay to _________________________ from
the Escrow Amount $________.
AMERICAN SANITARY INCORPORATED
By: _______________________________
Name:
Title:
INTERLINE BRANDS, INC.
By: _______________________________
Name:
Title:
Dated: _______________
ANNEX C
JUDGMENT CERTIFICATE
[Escrow Agent]
Re: Escrow Agreement dated as of the __ day of __________, 2006
by and among American Sanitary Incorporated, Interline
Brands, Inc., and [Escrow Agent]
Ladies and Gentlemen:
The undersigned, on behalf of Interline Brands,
Inc.//American Sanitary Incorporated, pursuant to Section 3[(a) or (b)] of the
Escrow Agreement, hereby certifies that (i) attached hereto is a judgment of a
court of competent jurisdiction stating that __________________________ is
entitled to [payment under Section 1.4 of the Securities Purchase Agreement]
[indemnification under the Securities Purchase Agreement], and (ii) the total
amount due to ________________________ is $_________.
INTERLINE BRANDS,
INC.//AMERICAN SANITARY
INCORPORATED
By: _____________________
Name:
Title:
Dated: _______________
cc: American Sanitary Incorporated//
Interline Brands, Inc.
ANNEX D
NOTICE OF INDEMNITY CLAIM BY BUYER
[Escrow Agent]
Re: Escrow Agreement dated as of the __ day of ___________, 2006
by and among American Sanitary Incorporated, Interline
Brands, Inc., and [Escrow Agent]
Ladies and Gentlemen:
Pursuant to Section 3(d) of the Escrow Agreement, the undersigned, on
behalf of Interline Brands, Inc., hereby certifies that (i) the following
Indemnity Matter has occurred [PROVIDE DESCRIPTION GIVING RISE TO INDEMNITY
MATTER], (ii) an Indemnitee Payment in the amount of $_________ (the "OWED
AMOUNT") has been made or may be required to be made and (iii) Interline
Brands, Inc. has contemporaneously delivered a copy of this Notice to American
Sanitary Incorporated.
The undersigned, hereby instructs you to pay to Interline Brands, Inc.
from the Escrow Amount the Owed Amount in immediately available funds.
INTERLINE BRANDS, INC.
By: ________________________
Name:
Title:
Dated: _______________
cc: American Sanitary Incorporated
EXHIBIT C
COMMITMENT LETTER
OMITTED
C-1
EXHIBIT D
FORM
OF
RELEASE AND WAIVER
OF
THE PARENT AND EACH LENDER
American Sanitary Incorporated, a Delaware corporation (the "PARENT"),
Golder, Thoma, Xxxxxxx, Xxxxxx Fund V, L.P., a Delaware limited partnership
("FUND V"), GTCR Associates V, a Delaware general partnership ("ASSOCIATES V"),
GTCR Capital Partners, L.P., a Delaware limited partnership ("CAPITAL PARTNERS"
and together with Fund V and Associates V, the "LENDERS"), AmSan, LLC, a
Delaware limited liability company and wholly owned subsidiary of the Parent
(the "COMPANY"), and Interline Brands, Inc., a New Jersey corporation (the
"BUYER"), have entered into a Securities Purchase Agreement, dated as of May
23, 2006 (the "SECURITIES PURCHASE Agreement"). Capitalized terms used and not
otherwise defined herein have the meanings set forth in the Securities Purchase
Agreement.
Pursuant to the Securities Purchase Agreement, and as a material
inducement to the Buyer to enter into the Securities Purchase Agreement,
effective as of the Closing, each of the Parent and the Lenders, on their own
behalf and on behalf of each of their respective managers, directors, officers,
assigns and successors, past and present (collectively, the "RELEASING
PARTIES"), hereby agrees not to xxx and forever waives, releases, discharges
and dismisses any and all claims, rights, causes of action, suits, obligations,
debts, demands, liabilities, controversies, costs, expenses, fees and/or
damages of any kind, at law, equity or otherwise, whether now known or unknown
(collectively, the "CLAIMS"), which the Releasing Parties ever had, now have or
which their successors, assigns, heirs, executors and administrators
hereinafter can, shall or may have against the Company or any of its
subsidiaries or any and all of their managers, directors, officers, assigns and
successors, past and present) (collectively, the "RELEASES PARTIES") arising
contemporaneously with or prior to the Closing Date or on account of or arising
out of any matter, cause or event occurring contemporaneously with or prior to
the Closing Date.
Each Releasing Party further hereby specifically waives any and all
protections afforded by any statute or regulation that would, if enforced, have
the effect of limiting the enforceability or effectiveness of this Release and
Waiver.
Notwithstanding the foregoing, nothing in this Release and Waiver
shall release any Claims of the Releasing Parties against the Released Parties
under the Securities Purchase Agreement, the Escrow Agreement, any other
Ancillary Agreement or any agreements, certificates or instruments in
connection with any of the foregoing.
D-1
IN WITNESS WHEREOF, the parties hereto have executed this Release and
Waiver, by their duly authorized officers, effective as of the Closing.
AMERICAN SANITARY INCORPORATED
By: ____________________________________
Name:
Title:
XXXXXX XXXXX XXXXXXX XXXXXX FUND V, L.P.
By: GTCR V, L.P.
Its: General Partner
By: Xxxxxx Xxxxx Xxxxxxx Xxxxxx, Inc.
Its: General Partner
By: ____________________________________
Name:
Its: Principal
GTCR ASSOCIATES V
By: Xxxxxx Xxxxx Xxxxxxx Xxxxxx, Inc.
Its: Managing Partner
By: ____________________________________
Name:
Its: Principal
GTCR CAPITAL PARTNERS, L.P.
By: GTCR Mezzanine Partners, L.P.
Its: General Partner
By: GTCR Partners VI, L.P.
Its: General Partner
By: GTCR Xxxxxx Xxxxxx, L.L.C.
Its: General Partner
By: ____________________________________
Name:
Its: Principal
D-2
EXHIBIT E
FORM
OF
RELEASE AND WAIVER
OF
THE PARENT AND EACH LENDER
American Sanitary Incorporated, a Delaware corporation (the "PARENT"),
Golder, Thoma, Xxxxxxx, Xxxxxx Fund V, L.P., a Delaware limited partnership
("FUND V"), GTCR Associates V, a Delaware general partnership ("ASSOCIATES V"),
GTCR Capital Partners, L.P., a Delaware limited partnership ("CAPITAL PARTNERS"
and together with Fund V and Associates V, the "LENDERS"), AmSan, LLC, a
Delaware limited liability company and wholly owned subsidiary of the Parent
(the "COMPANY"), and Interline Brands, Inc., a New Jersey corporation (the
"BUYER"), have entered into a Securities Purchase Agreement, dated as of May
23, 2006 (the "SECURITIES PURCHASE Agreement"). Capitalized terms used and not
otherwise defined herein have the meanings set forth in the Securities Purchase
Agreement.
Pursuant to the Securities Purchase Agreement, and as a material
inducement to the Buyer to enter into the Securities Purchase Agreement,
effective as of the Closing, each of the Parent and the Lenders, on their own
behalf and on behalf of each of their respective managers, directors, officers,
assigns and successors, past and present (collectively, the "RELEASING
PARTIES"), hereby agrees not to xxx and forever waives, releases, discharges
and dismisses any and all claims, rights, causes of action, suits, obligations,
debts, demands, liabilities, controversies, costs, expenses, fees and/or
damages of any kind, at law, equity or otherwise, whether now known or unknown
(collectively, the "CLAIMS"), which the Releasing Parties ever had, now have or
which their successors, assigns, heirs, executors and administrators
hereinafter can, shall or may have against the Company or any of its
subsidiaries or any and all of their managers, directors, officers, assigns and
successors, past and present) (collectively, the "RELEASES PARTIES") arising
contemporaneously with or prior to the Closing Date or on account of or arising
out of any matter, cause or event occurring contemporaneously with or prior to
the Closing Date.
Each Releasing Party further hereby specifically waives any and all
protections afforded by any statute or regulation that would, if enforced, have
the effect of limiting the enforceability or effectiveness of this Release and
Waiver.
Notwithstanding the foregoing, nothing in this Release and Waiver
shall release any Claims of the Releasing Parties against the Released Parties
under the Securities Purchase Agreement, the Escrow Agreement, any other
Ancillary Agreement or any agreements, certificates or instruments in
connection with any of the foregoing.
E-1
IN WITNESS WHEREOF, the parties hereto have executed this Release and
Waiver, by their duly authorized officers, effective as of the Closing.
AMERICAN SANITARY INCORPORATED
By: ____________________________________
Name:
Title:
XXXXXX XXXXX XXXXXXX XXXXXX FUND V, L.P.
By: GTCR V, L.P.
Its: General Partner
By: Xxxxxx Xxxxx Xxxxxxx Xxxxxx, Inc.
Its: General Partner
By: _____________________________________
Name:
Its: Principal
GTCR ASSOCIATES V
By: Xxxxxx Xxxxx Xxxxxxx Xxxxxx, Inc.
Its: Managing Partner
By: _____________________________________
Name:
Its: Principal
GTCR CAPITAL PARTNERS, L.P.
By: GTCR Mezzanine Partners, L.P.
Its: General Partner
By: GTCR Partners VI, L.P.
Its: General Partner
By: GTCR Xxxxxx Xxxxxx, L.L.C.
Its: General Partner
By: ____________________________________
Name:
Its: Principal
E-2
EXHIBIT F-1
__________ ___, 2006
Interline Brands, Inc.
000 Xxxx Xxx Xxxxxx THIS OPINION IS SUBJECT TO
Xxxxxxxxxxxx, XX 00000 REVIEW, MODIFICATION, AND
APPROVAL BY
THE XXXXXXXX & XXXXX LLP
OPINION COMMITTEE
Ladies and Gentlemen:
We are issuing this opinion letter in our capacity as special legal
counsel to Golder, Thoma, Xxxxxxx, Xxxxxx Fund V, L.P., a Delaware limited
partnership ("FUND V"), GTCR Associates V, a Delaware general partnership
("ASSOCIATES V"), GTCR Capital Partners, L.P., a Delaware limited partnership
("CAPITAL PARTNERS" and together with Fund V and Associates V, the "LENDERS ")
in response to the requirement in Section 7.6 of the Securities Purchase
Agreement (the "MAIN AGREEMENT") dated as of May ___, 2006, by and among the
Lenders, American Sanitary Incorporated, a Delaware corporation, AmSan, LLC, a
Delaware limited liability company, and Interline Brands, Inc. a New Jersey
corporation (herein called "you"). The term "Transaction Documents" whenever it
is used in this letter means the Main Agreement and the following additional
agreements: the Escrow Agreement and the Inventory Purchase Agreement.
Subject to the assumptions, qualifications, exclusions and other
limitations which are identified in this letter and in the schedules attached
to this letter, we advise you, and, with respect to each legal issue addressed
in this letter, it is our opinion, that:
1. Each of Fund V and Capital Partners is a limited partnership existing
and in good standing under the Delaware Revised Uniform Limited
Partnership Act.
2. Each of Fund V and Capital Partners was duly organized under the
Delaware Revised Uniform Limited Partnership Act.
3. Associates V is a Delaware general partnership existing and in good
standing under the Delaware Revised Uniform Partnership Act.
4. Associates V was duly organized under the Delaware Revised Uniform
Partnership Act.
5. Each of the Lenders has the partnership power to enter into and
perform its respective obligations under the Main Agreement.
6. Each of the Lenders' respective execution, delivery and performance of
the Main Agreement has been duly authorized by all necessary
partnership action of such Lender.
7. Each of the Lenders has duly executed and delivered the Main
Agreement.
F-1-1
8. The Main Agreement is a valid and binding obligation of each of the
Lenders enforceable against each such Lender in accordance with its
terms.
9. Each of the Lenders' execution and delivery of the Main Agreement and
the performance of its agreements therein will not violate such
Lender's partnership agreement.
In preparing this letter, we have relied without any independent
verification upon the assumptions recited in SCHEDULE B to this letter and
upon: (i) information contained in certificates obtained from governmental
authorities; (ii) factual information represented to be true in the Transaction
Documents; (iii) factual information provided to us in a Support Certificate
executed by each of the Lenders; and (iv) factual information we have obtained
from such other sources as we have deemed reasonable. We have assumed without
investigation that there has been no relevant change or development between the
dates as of which the information cited in the preceding sentence was given and
the date of this letter and that the information upon which we have relied is
accurate and does not omit disclosures necessary to prevent such information
from being misleading.
While we have not conducted any independent investigation to determine
facts upon which our opinions are based or to obtain information about which
this letter advises you, we confirm that we do not have any actual knowledge
which has caused us to conclude that our reliance and assumptions cited in the
preceding paragraph are unwarranted or that any information supplied in this
letter is wrong. The terms "ACTUAL KNOWLEDGE", "KNOWLEDGE" and "AWARE" whenever
used in this letter with respect to our firm mean conscious awareness at the
time this letter is delivered on the date it bears by the following Xxxxxxxx &
Xxxxx LLP lawyers who have had significant involvement with negotiation or
preparation of the Transaction Documents (herein called "OUR DESIGNATED
TRANSACTION LAWYERS"): Xxxxxxx X. Xxxxxxx, P.C., Xxxxxxx X. Xxxx and Xxxxx X.
Xxxxxx.
Our advice on every legal issue addressed in this letter
(collectively, "OUR OPINIONS") is based exclusively on such internal law of the
State of New York or such federal law of the United States (except as otherwise
specifically provided in the following sentences of this paragraph) which, in
each case, is in our experience normally applicable to general business
corporations not engaged in regulated business activities and to transactions
of the type contemplated by the Transaction Documents but without our having
made any special investigation as to any other laws, except that we express no
opinion or advice as to any law identified on SCHEDULE C. For purposes of the
opinions in paragraphs 1 and 3, we have relied exclusively upon the
certificates issued by the governmental authorities in the applicable
jurisdictions, and such opinions are not intended to provide any conclusion or
assurance beyond that conveyed by such certificates. The opinions in paragraph
2 are based solely upon the provisions of the Delaware Revised Uniform Limited
Partnership Act and the opinions in paragraph 4 are based solely upon the
provisions of the Delaware Revised Uniform Partnership Act. We advise you that
we are not Delaware attorneys and do not practice law under such partnership
statutes, and, we have rendered the opinions in paragraphs 2 and 4 based
exclusively on our review of the Delaware Revised Uniform Limited Partnership
Act and the Delaware Revised Uniform Partnership Act, respectively. We advise
you that issues addressed by this letter may be governed in whole or in part by
other laws, but we express no opinion as to whether any relevant difference
exists between the laws upon which our opinions are based and any other laws
which may actually govern. Our opinions are subject to all qualifications in
F-1-2
SCHEDULE A and do not cover or otherwise address any law or legal issue which
is identified in the attached SCHEDULE C or any provision in the Transaction
Documents of any type identified in SCHEDULE D. Provisions in the Transaction
Documents which are not excluded by SCHEDULE D or any other part of this letter
or its attachments are called the "RELEVANT AGREEMENT TERMS."
Except to the extent set forth in the preceding paragraph, each of our
opinions represents our opinion as to how the issue addressed in such opinion
would be resolved were it to be considered by the highest court of the
jurisdiction upon whose law our opinion on that issue is based. The manner in
which any particular issue would be treated in any actual court case would
depend in part on facts and circumstances particular to the case, and this
letter is not intended to guarantee the outcome of any legal dispute which may
arise in the future. It is possible that some Relevant Agreement Terms may not
prove enforceable for reasons other than those cited in this letter should an
actual enforcement action be brought.
This letter speaks as of the time of its delivery on the date it
bears. We do not assume any obligation to provide you with any subsequent
opinion or advice by reason of any fact about which our Designated Transaction
Lawyers did not have actual knowledge at that time, by reason of any change
subsequent to that time in any law covered by any of our opinions, or for any
other reason. The attached schedules are an integral part of this letter, and
any term defined in this letter or any schedule has that defined meaning
wherever it is used in this letter or in any schedule to this letter.
You may rely upon this letter only for the purpose served by the
provision in the Main Agreement cited in the initial paragraph of this letter
in response to which it has been delivered. Without our written consent: (i) no
person other than you may rely on this letter for any purpose; (ii) this letter
may not be cited or quoted in any financial statement, prospectus, private
placement memorandum or other similar document; (iii) this letter may not be
cited or quoted in any other document or communication which might encourage
reliance upon this letter by any person or for any purpose excluded by the
restrictions in this paragraph; and (iv) copies of this letter may not be
furnished to anyone for purposes of encouraging such reliance. This letter is
not to be used, circulated, quoted, relied upon or otherwise proffered for any
other purpose, nor quoted or referred to in any public document or filed with
any governmental agency or other person, without our express written consent,
except that it may be disclosed to, but not relied upon by, governmental
agencies having jurisdiction over you.
Sincerely,
Xxxxxxxx & Xxxxx LLP
F-1-3
SCHEDULE A
GENERAL QUALIFICATIONS
All of our opinions ("our opinions") in the letter to which this
Schedule is attached ("OUR LETTER") are subject to each of the qualifications
set forth in this Schedule.
1. BANKRUPTCY AND INSOLVENCY EXCEPTION. Each of our opinions is subject
to the effect of bankruptcy, insolvency, reorganization, receivership,
moratorium and other similar laws. This exception includes:
(a) the Federal Bankruptcy Code and thus comprehends, among
others, matters of turn-over, automatic stay, avoiding powers,
fraudulent transfer, preference, discharge, conversion of a
non-recourse obligation into a recourse claim, limitations on ipso
facto and anti-assignment clauses and the coverage of pre-petition
security agreements applicable to property acquired after a petition
is filed;
(b) all other Federal and state bankruptcy, insolvency,
reorganization, receivership, moratorium, arrangement and assignment
for the benefit of creditors laws that affect the rights of creditors
generally or that have reference to or affect only creditors of
specific types of debtors;
(c) state fraudulent transfer and conveyance laws; and
(d) judicially developed doctrines in this area, such as
substantive consolidation of entities and equitable subordination.
2. EQUITABLE PRINCIPLES LIMITATION. Each of our opinions is subject to
the effect of general principles of equity, whether applied by a court
of law or equity. This limitation includes principles:
(a) governing the availability of specific performance,
injunctive relief or other equitable remedies, which generally place
the award of such remedies, subject to certain guidelines, in the
discretion of the court to which application for such relief is made;
(b) affording equitable defenses (e.g., waiver, laches and
estoppel) against a party seeking enforcement;
(c) requiring good faith and fair dealing in the performance and
enforcement of a contract by the party seeking its enforcement;
(d) requiring reasonableness in the performance and enforcement
of an agreement by the party seeking enforcement of the contract;
(e) requiring consideration of the materiality of (i) a breach
and (ii) the consequences of the breach to the party seeking
enforcement;
F-1-A-1
(f) requiring consideration of the impracticability or
impossibility of performance at the time of attempted enforcement; and
(g) affording defenses based upon the unconscionability of the
enforcing party's conduct after the parties have entered into the
contract.
3. OTHER COMMON QUALIFICATIONS. Each of our opinions is subject to the
effect of rules of law that:
(a) limit or affect the enforcement of provisions of a contract
that purport to waive, or to require waiver of, the obligations of
good faith, fair dealing, diligence and reasonableness;
(b) provide that forum selection clauses in contracts are not
necessarily binding on the court(s) in the forum selected;
(c) limit the availability of a remedy under certain
circumstances where another remedy has been elected;
(d) provide a time limitation after which a remedy may not be
enforced;
(e) limit the right of a creditor to use force or cause a breach
of the peace in enforcing rights;
(f) relate to the sale or disposition of collateral or the
requirements of a commercially reasonable sale;
(g) limit the enforceability of provisions releasing, exculpating
or exempting a party from, or requiring indemnification of a party
for, liability for its own action or inaction, to the extent the
action or inaction involves negligence, recklessness, willful
misconduct, unlawful conduct or violation of public policy, or for
strict product liability or for liabilities arising under the
securities laws, or which limit the enforceability of provisions
requiring indemnification of a party with respect to litigation
between such party and another party from whom indemnification is
sought which is determined adversely to the party seeking
indemnification;
(h) may, where less than all of a contract may be unenforceable,
limit the enforceability of the balance of the contract to
circumstances in which the unenforceable portion is not an essential
part of the agreed exchange;
(i) govern and afford judicial discretion regarding the
determination of damages and entitlement to attorneys' fees and other
costs;
(j) may permit a party that has materially failed to render or
offer performance required by the contract to cure that failure unless
(i) permitting a cure would unreasonably hinder the aggrieved party
from making substitute arrangements for performance, or (ii) it was
important in the circumstances to the aggrieved party that performance
occur by the date stated in the contract; and
F-1-A-2
(k) limit the enforceability requirements in the Transaction
Documents that provisions therein may only be waived or amended in
writing, to the extent that an oral agreement or an implied agreement
by trade practice or course of conduct has been created modifying any
such provision.
4. REFERENCED PROVISION QUALIFICATION. Each opinion regarding the
validity, binding effect or enforceability of a provision (the "FIRST
PROVISION") in any of the Transaction Documents requiring any party to
perform its obligations under, or to cause any other person to perform
its obligations under, any other provision (the "SECOND PROVISION") of
any Transaction Document, or stating that any action will be taken as
provided in or in accordance with any such Second Provision, are
subject to the same qualifications as the corresponding opinion in
this letter relating to the validity, binding effect and
enforceability of such Second Provision. Requirements in the
Transaction Documents that provisions therein may only be waived or
amended in writing may not be enforceable to the extent that an oral
agreement or an implied agreement by trade practice or course of
conduct has been created modifying any such provision.
5. LICENSING. We express no opinion with regard to any licensing or
regulatory requirements relating to the Lenders' lines of business,
including any effects of any failure in any State or States to be
licensed to conduct such business.
F-1-A-3
SCHEDULE B
ASSUMPTIONS
For purposes of our letter, we have relied, without investigation,
upon each of the following assumptions:
1. The Lenders have the requisite title and rights to any property
involved in the transactions effected under the Transaction Documents
(herein called the "Transactions").
2. You are existing and in good standing in your jurisdiction of
organization.
3. The Transaction Documents constitute valid and binding obligations of
yours and are enforceable against you in accordance with their terms
(subject to qualifications, exclusions and other limitations similar
to those applicable to our letter).
4. You have satisfied those legal requirements that are applicable to you
to the extent necessary to make the Transaction Documents enforceable
against you.
5. You have complied with all legal requirements pertaining to your
status as such status relates to your rights to enforce the
Transaction Documents against the Lenders.
6. Each document submitted to us for review is accurate and complete,
each such document that is an original is authentic, each such
document that is a copy conforms to an authentic original, and all
signatures on each such document are genuine.
7. There has not been any mutual mistake of fact or misunderstanding,
fraud, duress or undue influence.
8. The conduct of the parties to the Transaction Documents has complied
with any requirement of good faith, fair dealing and conscionability.
9. You have acted in good faith and without notice of any defense against
the enforcement of any rights created by, or adverse claim to any
property or security interest transferred or created as part of the
Transactions.
10. There are no agreements or understandings among the parties to the
Transaction Documents, written or oral (other than the Transaction
Documents), and there is no usage of trade or course or prior dealing
among the parties that would, in either case, define, supplement or
qualify the terms of the Transaction Documents.
11. The constitutionality or validity of a relevant statute, rule,
regulation or agency action is not in issue.
12. All parties to the Transaction Documents will act in accordance with,
and will refrain from taking any action that is forbidden by, the
terms and conditions of the Transaction Documents.
F-1-B-1
13. All agreements other than the Transaction Documents (if any) with
respect to which we have provided an opinion or advice in our letter
or reviewed in connection with our letter would be enforced as
written.
14. The Lenders will not in the future take any discretionary action
(including a decision not to act) permitted under the Transaction
Documents that would result in a violation of law or constitute a
breach or default under any other agreements or court orders to which
such entities may be subject.
15. The Lenders have obtained (and will in the future obtain) all permits
and governmental approvals required, and have taken (and will in the
future take) all actions required, relevant to the consummation of the
Transactions or the performance of the Transaction Documents.
16. All information required to be disclosed in connection with any
consent or approval by the each of the Lenders' partnership governing
group and all other information required to be disclosed in connection
with any issue relevant to our opinions has in fact been fully and
fairly disclosed to all persons to whom it is required to be
disclosed. The representations made by the Lenders in the Main
Agreement with respect to their respective jurisdictions of
organization are true and correct.
17. Each of the Lenders' respective partnership agreements, all amendments
to such agreements and all actions taken by the Lenders thereunder
have been adopted in accordance with all applicable legal
requirements.
18. Each person who has taken any action relevant to any of our opinions
in the capacity of partner, director, principal or officer was duly
elected to that partner, director, principal or officer position and
held that position when such action was taken.
F-1-B-2
SCHEDULE C
EXCLUDED LAW AND LEGAL ISSUES
None of the opinions or advice contained in our letter covers or
otherwise addresses any of the following laws, regulations or other
governmental requirements or legal issues:
1. Federal securities laws and regulations (including the Investment
Company Act of 1940 and all other laws and regulations administered by
the United States Securities and Exchange Commission), state "Blue
Sky" laws and regulations, and laws and regulations relating to
commodity (and other) futures and indices and other similar
instruments;
2. Federal Reserve Board margin regulations.
3. pension and employee benefit laws and regulations (e.g., ERISA);
4. Federal and state antitrust and unfair competition laws and
regulations;
5. Federal and state laws and regulations concerning filing and notice
requirements (such as the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1986, as amended, and the Exon-Xxxxxx Act, as amended) other than
requirements applicable to charter-related documents such as a
certificate of merger;
6. compliance with fiduciary duty requirements;
7. the statutes and ordinances, the administrative decisions and the
rules and regulations of counties, towns, municipalities and special
political subdivisions (whether created or enabled through legislative
action at the Federal, state or regional level -- e.g., water
agencies, joint power districts, turnpike and tollroad authorities,
rapid transit districts or authorities, and port authorities) and
judicial decisions to the extent that they deal with any of the
foregoing;
8. the characterization of a transaction as one involving the creation of
a lien on real property or a security interest in personal property,
the characterization of a contract as one in a form sufficient to
create a lien or a security interest, the creation, attachment,
perfection, priority or enforcement of a lien on real property or a
security interest in personal property or matters involving ownership
or title to any real or personal property;
9. fraudulent transfer and fraudulent conveyance laws;
10. Federal and state environmental laws and regulations;
11. Federal and state land use and subdivision laws and regulations;
12. Federal and state tax, racketeering, health and safety and labor laws
and regulations;
13. Federal patent, trademark and copyright, state trademark, and other
Federal and state intellectual property laws and regulations;
F-1-C-1
14. Federal and state racketeering laws and regulations (e.g., RICO);
15. Federal and state health and safety laws and regulations (e.g., OSHA);
16. Federal and state labor laws and regulations;
17. Federal and state laws, regulations and policies concerning (i)
national and local emergency, (ii) possible judicial deference to acts
of sovereign states, and (iii) criminal and civil forfeiture laws;
18. other Federal and state statutes of general application to the extent
they provide for criminal prosecution (e.g., mail fraud and wire fraud
statutes);
19. any laws, regulations, directives and executive orders that prohibit
or limit the enforceability of obligations based on attributes of the
party seeking enforcement (e.g., the Trading with the Enemy Act and
the International Emergency Economic Powers Act);
20. the effect of any law, regulation or order which hereafter becomes
effective;
21. the Communications Act and the rules, regulations and policies of the
Federal Communications Commission promulgated thereunder;
22. the Anti-Terrorism Order, as amended, all rules and regulations
promulgated thereunder and all federal, state and local laws,
statutes, ordinances, orders, governmental rules, regulations,
licensing requirements and policies relating to the Anti-Terrorism
Order (including without limitation the Executive order of September
23, 2001 Blocking Property and Prohibiting Transactions with Persons
Who Commit and Threaten to Commit or Support Terrorism) and the
ownership and operation of, or otherwise regulation of, companies
which conduct, operate or otherwise pursue the business or businesses
now and in the future conducted, operated or otherwise pursued by the
Lenders including, without limitation, the importation,
transportation, manufacturing, dealing, purchase, use or storage of
explosive material;
23. the USA Patriot Act of 2001 and the rules, regulations and policies
promulgated thereunder and any foreign assets control regulations of
the United States Treasury Department or any enabling legislation or
orders relating thereto; and
24. federal patent, trademark and copyright, state trademark, and other
federal and state intellectual property laws and regulations.
We have not undertaken any research for purposes of determining
whether any of the Lenders or any of the transactions which may occur in
connection with the Transaction Documents is subject to any law or other
governmental requirement other than to those laws and requirements which in our
experience would generally be recognized as applicable in the absence of
research by lawyers in the State of New York, and none of our opinions covers
any such law or other requirement unless (i) one of our Designated Transaction
Lawyers had actual knowledge of its applicability at the time our letter was
delivered on the date it bears and (ii) it is not excluded from coverage by
other provisions in our letter or in any Schedule to our letter.
F-1-C-2
SCHEDULE D
EXCLUDED PROVISIONS
None of the opinions in the letter to which this Schedule is attached
covers or otherwise addresses any of the following types of provisions which
may be contained in the Transaction Documents:
1. Choice-of-law provisions.
2. Covenants not to compete, including without limitation covenants not
to interfere with business or employee relations, covenants not to
solicit customers, and covenants not to solicit or hire employees.
3. Indemnification for negligence, willful misconduct or other wrongdoing
or strict product liability or any indemnification for liabilities
arising under securities laws.
4. Provisions mandating contribution towards judgments or settlements
among various parties.
5. Waivers of (i) legal or equitable defenses, (ii) rights to damages,
(iii) rights to counter claim or set off, (iv) statutes of
limitations, (v) rights to notice, (vi) the benefits of statutory,
regulatory, or constitutional rights, unless and to the extent the
statute, regulation, or constitution explicitly allows waiver, (vii)
broadly or vaguely stated rights, and (viii) other benefits to the
extent they cannot be waived under applicable law.
6. Provisions providing for forfeitures or the recovery of amounts deemed
to constitute penalties, or for liquidated damages, acceleration of
future amounts due (other than principal) without appropriate discount
to present value, late charges, prepayment charges, interest upon
interest, and increased interest rates upon default.
7. Time-is-of-the-essence clauses.
8. Provisions which provide a time limitation after which a remedy may
not be enforced.
9. Confession of judgment clauses.
10. Agreements to submit to the jurisdiction of any particular court or
other governmental authority (either as to personal jurisdiction or
subject matter jurisdiction); provisions restricting access to courts;
waiver of the right to jury trial; waiver of service of process
requirements which would otherwise be applicable; and provisions
otherwise purporting to affect the jurisdiction and venue of courts.
11. Provisions that attempt to change or waive rules of evidence or fix
the method or quantum of proof to be applied in litigation or similar
proceedings.
12. Provisions appointing one party as an attorney-in-fact for an adverse
party or providing that the decision of any particular person will be
conclusive or binding on others.
F-1-D-1
13. Provisions purporting to limit rights of third parties who have not
consented thereto or purporting to grant rights to third parties.
14. Provisions which purport to award attorneys' fees solely to one party.
15. Arbitration agreements.
16. Provisions purporting to create a trust or constructive trust without
compliance with applicable trust law.
17. Provisions relating to (i) insurance coverage requirements and (ii)
the application of insurance proceeds and condemnation awards.
18. Provisions that provide for the appointment of a receiver.
19. Provisions or agreements regarding proxies, shareholders agreements,
shareholder voting rights, voting trusts, and the like.
20. Confidentiality agreements.
21. Provisions in any of the Transaction Documents requiring any of the
Lenders to perform its obligations under, or to cause any other person
to perform its obligations under, or stating that any action will be
taken as provided in or in accordance with, any agreement or other
document that is not a Transaction Document.
22. Provisions, if any, which are contrary to the public policy of any
jurisdiction.
F-1-D-2
EXHIBIT F-2
__________, 2006
Interline Brands, Inc. THIS OPINION IS SUBJECT TO
000 Xxxx Xxx Xxxxxx REVIEW, MODIFICATION, AND
Xxxxxxxxxxxx, XX 00000 APPROVAL BY
XXXXXXXXXX XXXXXXXX LLP
Ladies and Gentlemen:
We have acted as counsel to American Sanitary Incorporated, a Delaware
corporation ("HOLDINGS") and AmSan, LLC, a Delaware limited liability company
(the "COMPANY," and with Holdings, sometimes collectively referred to as the
"SELLERS") in connection with the transaction contemplated by the Securities
Purchase Agreement, dated as of even date herewith (the "PURCHASE AGREEMENT"),
among Holdings, the Company, Golder, Thoma, Xxxxxxx, Xxxxxx Fund V, L.P., a
Delaware limited partnership, GTCR Associates V, a Delaware general
partnership, GTCR Capital Partners, L.P., a Delaware limited partnership, and
Interline Brands, Inc. ("INTERLINE"). This opinion letter is delivered pursuant
to Section 7.6 of the Purchase Agreement. All capitalized terms used herein and
not otherwise defined herein shall have the same meanings as are ascribed to
them in the Purchase Agreement.
The term "TRANSACTION DOCUMENTS" whenever it is used in this letter
means the Purchase Agreement and the following additional agreements, in each
case in the form executed by the parties thereto on the date hereof:
(i) the Escrow Agreement; and
(ii) the Inventory Purchase Agreement.
We have reviewed such documents and considered such matters of law and
fact as we, in our professional judgment, have deemed appropriate to render the
opinions contained herein. With respect to certain facts, we have considered it
appropriate to rely upon certificates or other comparable documents of public
officials and officers or other appropriate representatives of Holdings or the
Company, without investigation or analysis of any underlying data contained
therein. In addition, we have relied, without verification, on the assumptions
set forth on SCHEDULE A.
F-2-1
The phrases "to our knowledge" and "known to us" mean the conscious
awareness by lawyers in the primary lawyer group of factual matters such
lawyers recognize as being relevant to the opinion or confirmation so
qualified. Where any opinion or confirmation is qualified by the phrase "to our
knowledge" or "known to us," the lawyers in the primary lawyer group are
without knowledge, or conscious awareness, that the opinion or confirmation is
untrue. "Primary lawyer group" means any lawyer in this firm (i) who signs this
opinion letter, (ii) who is actively involved in negotiating or documenting the
transaction or (iii) solely as to information relevant to a particular opinion
or factual confirmation issue, who is primarily responsible for providing the
response concerning the particular opinion or issue.
Based upon and subject to the foregoing and the further assumptions,
limitations and qualifications hereinafter expressed or set forth on the
Schedules, it is our opinion that:
1. Holdings is a corporation existing and in good standing under
the laws of the State of Delaware.
2. Holdings was duly organized under the laws of the State of
Delaware.
3. The Company is a limited liability company existing and in
good standing under the laws of the State of Delaware.
4. The Company was duly formed under the laws of the State of
Delaware.
5. Holdings and the Company each has the corporate or limited
liability company power, as applicable, to execute, deliver
and perform its obligations under the Transaction Documents.
6. Holdings and the Company each has authorized the execution,
delivery and performance of the Transaction Documents to
which it is a party by all necessary corporate or limited
liability company action, as applicable, and has duly
executed and delivered such Transaction Documents.
7. The execution and delivery by Holdings of the Transaction
Documents and the performance by Holdings of its obligations
therein, if it were now to perform its obligations, do not
violate the certificate of incorporation or bylaws of
Holdings or the Delaware General Corporation Law.
8. The execution and delivery by the Company of the Transaction
Documents and the performance by the Company of its
obligations, if it were now to perform its obligations,
therein do not violate the certificate of formation or
operating agreement of the Company or the Delaware Limited
Liability Company Act.
9. The Transaction Documents to which Holdings and the Company
each is a party are valid and binding obligations of Holdings
and the Company, enforceable against Holdings and the Company
in accordance with their terms.
The opinions expressed above in paragraphs numbered 1 and 3 are
subject to the following qualifications and limitations:
F-2-2
(a) In rendering our opinion that Holdings "is a corporation,"
"existing" and "in good standing," we have relied solely upon
a Certificate of Existence regarding Holdings from the
Delaware Secretary of State dated _______________.
(b) In rendering our opinion that the Company "is a limited
liability company," "existing" and "in good standing," we
have relied solely upon a Certificate of Existence regarding
the Company from the Delaware Secretary of State dated
_______________.
Additionally, in rendering our opinion set forth in paragraph numbered
2 above, we limited our review of applicable law to the Delaware General
Corporation Law, and in rendering our opinion set forth in paragraph numbered 4
above, we limited our review of applicable law to the Delaware Limited
Liability Company Law. The opinions set forth herein are otherwise limited to
matters governed by the laws of the State of New York, the Delaware General
Corporation Law and Delaware Limited Liability Company Act. By rendering the
opinions herein set forth, we do not intend to indicate that we are experts on,
or qualified to render opinions on, the laws of any other jurisdiction. We
express no opinion concerning any matter respecting or affected by any laws
other than laws that a lawyer in New York exercising customary professional
diligence would reasonably recognize as being directly applicable to Holdings,
the Company, the Transaction Documents or all of them. Our opinions are subject
to all qualifications in SCHEDULE B and do not cover or otherwise address any
law or legal issue which is identified in the attached SCHEDULE C or any
provision in the Transaction Documents of any type identified in SCHEDULE D.
Each of our opinions represents our opinion as to how the issue
addressed in such opinion would be resolved were it to be considered by the
highest court of the jurisdiction upon whose law our opinion on that issue is
based. The manner in which any particular issue would be treated in any actual
court case would depend in part on facts and circumstances particular to the
case, and this letter is not intended to guarantee the outcome of any legal
dispute which may arise in the future. It is possible that some relevant
Transaction Documents terms may not prove enforceable for reasons other than
those cited in this letter should an actual enforcement action be brought.
This letter speaks as of the time of its delivery on the date it
bears. We do not assume any obligation to provide you with any subsequent
opinion or advice by reason of any fact about which our attorneys did not have
actual knowledge at that time, by reason of any change subsequent to that time
in any law covered by any of our opinions, or for any other reason. The
attached schedules are an integral part of this letter, and any term defined in
this letter has that defined meaning wherever it is used in this letter or in
any schedule to this letter.
This opinion letter is delivered solely for your benefit in connection
with the Transaction and may not be used or relied upon by any other person or
for any other purpose without our prior written consent in each instance.
Very truly yours,
XXXXXXXXXX XXXXXXXX LLP
F-2-3
SCHEDULE A
ASSUMPTIONS
We have relied, without investigation, upon each of the following
assumptions:
1. Each document submitted to us for review is accurate and
complete, each such document that is an original is
authentic, each such document that is a copy conforms to an
authentic original.
2. All signatures on each such document are genuine.
3. Each certificate or other document issued by a public
authority is accurate, complete and authentic, and all
official public records (including their proper indexing and
filing) are accurate and complete.
4. All natural persons acting on behalf of the Sellers have
sufficient legal capacity to take all such actions as may be
required of them as representatives of either Holdings or the
Company.
5. The Sellers hold the requisite title and rights to any
property involved in the transactions effected under the
Transaction Documents.
6. Interline is existing and in good standing in its
jurisdiction of organization.
7. The execution and delivery of the Transaction Documents by,
or on behalf of, Interline has been duly authorized, each
such document has been duly executed and delivered and each
such document is valid, binding enforceable against Interline
in accordance with their terms.
8. Interline has complied with all legal requirements pertaining
to its status as such status relates to its rights to enforce
the Transaction Documents against the Sellers.
9. There has not been any mutual mistake of fact or
misunderstanding, fraud, duress or undue influence.
10. The conduct of the parties to the Transaction Documents has
complied with any requirement of good faith, fair dealing and
conscionability.
11. Interline and any agent acting for it have acted in good
faith and without notice of any defense against the
enforcement of any rights created by, or adverse claim to any
property or security interest transferred or created as part
of the Transactions.
12. There are no agreements or understandings among the parties
to the Transaction Documents, written or oral (other than the
Transaction Documents), and there is no usage of trade or
F-2-A-1
course or prior dealing among the parties that would, in
either case, define, supplement or qualify the terms of the
Transaction Documents.
13. All agreements other than the Transaction Documents (if any)
with respect to which we have provided an opinion or advice,
or reviewed, would be enforced as written.
14. The Sellers will not in the future take any discretionary
action (including a decision not to act) permitted under the
Transaction Documents that would result in a violation of law
or constitute a breach or default under any other agreements
or court orders to which such entities may be subject.
15. The Sellers have obtained (and will in the future obtain) all
permits and governmental approvals required, and have taken
(and will in the future take) all actions required, relevant
to the consummation of the transaction or the performance of
the Transaction Documents.
16. The constitutionality or validity of a relevant statute,
rule, regulation or agency action is not in issue.
17. All parties to the Transaction Documents will act in
accordance with, and will refrain from taking any action that
is forbidden by, the terms and conditions of the Transaction
Documents.
18. All information required to be disclosed in connection with
any consent or approval by the each of the Sellers' governing
group, and all other information required to be disclosed in
connection with any issue relevant to our opinion, has in
fact been fully and fairly disclosed to all persons to whom
it is required to be disclosed. The representations made by
the Sellers in the Purchase Agreement with respect to their
respective jurisdictions of organization are true and
correct.
19. Each of the Lenders' respective partnership agreements, all
amendments to such agreements and all actions taken by the
Lenders thereunder have been adopted in accordance with all
applicable legal requirements.
20. Each person who has taken any action relevant to any of our
opinions in the capacity of partner, director, principal or
officer was duly elected to that partner, director, principal
or officer position and held that position when such action
was taken.
F-2-A-2
SCHEDULE B
GENERAL QUALIFICATIONS
Our opinion in the letter to which this Schedule is attached is
subject to each of the following qualifications:
1. BANKRUPTCY AND INSOLVENCY EXCEPTION. This opinion is subject
to the effect of applicable bankruptcy, insolvency,
reorganization, receivership, fraudulent conveyance,
moratorium and similar state or federal debtor relief laws
from time to time in effect and which affect the enforcement
of creditors' rights generally. This exception includes:
(a) the Federal Bankruptcy Code and thus comprehends, among
others, matters of turn-over, automatic stay, avoiding
powers, fraudulent transfer, preference, discharge,
conversion of a non-recourse obligation into a recourse
claim, limitations on ipso facto and anti-assignment
clauses and the coverage of pre-petition security
agreements applicable to property acquired after a
petition is filed;
(b) all other Federal and state bankruptcy, insolvency,
reorganization, receivership, moratorium, arrangement and
assignment for the benefit of creditors laws that affect
the rights of creditors generally or that have reference
to or affect only creditors of specific types of debtors;
(c) state fraudulent transfer and conveyance laws; and
(d) judicially developed doctrines in this area, such as
substantive consolidation of entities and equitable
subordination.
2. EQUITABLE PRINCIPLES LIMITATION. This opinion is subject both
to general principles of equity and to considerations of
public policy, including the requirement that the parties
thereto act with commercial reasonableness and in good faith
to the extent required by applicable law, the application of
which may deny certain rights and may be applied by a court
of proper jurisdiction, regardless of whether such
enforceability is considered in a proceeding in equity or at
law. For purposes of this paragraph, the terms "general
principles of equity" and "considerations of public policy"
may include, but are not limited to:
(a) issues related to the right to or obligation of the
appointment of a receiver in certain circumstances;
(b) the ability of an entity to appoint an attorney-in-fact;
fiduciary obligations of attorneys-in-fact; the
enforceability of usury savings clauses;
F-2-B-1
(c) waiver of procedural, substantive, or constitutional
rights; disclaimers or limitations of liability;
(d) waiver of defenses;
(e) the exercise of self-help or other remedies without
judicial process;
(f) accounting for rent or sale proceeds;
(g) requirements of mitigation of damages;
(h) excusing a party for liability for its own acts;
(i) authorizing a party to act in its sole discretion;
(j) imposition of liquidated damages; and
(k) enforcement of default interest provisions.
Any provision waiving a right to jury trial is unenforceable
as against public policy pursuant to N.C. Gen. Stat. ss.
22B-10.
3. OTHER COMMON QUALIFICATIONS.
Each of our opinions is subject to the effect of rules of law
that:
(a) limit or affect the enforcement of provisions of a
contract that purport to waive, or to require waiver of,
the obligations of good faith, fair dealing, diligence
and reasonableness;
(b) provide that forum selection clauses (e.g., consent to
venue, jurisdiction or service of process) in contracts
are not necessarily binding on the court(s) in the forum
selected;
(c) affect the enforceability of any provision in the
Transaction Documents that purports to make void any act
done in contravention thereof;
(d) limit the availability of a remedy under certain
circumstances where another remedy has been elected;
(e) limit the enforceability of any provision to the extent
that such provision constitutes a waiver of illegality as
a defense to performance of contract obligations;
(f) provide a time limitation after which a remedy may not be
enforced;
F-2-B-2
(g) limit the right of a creditor to use force or cause a
breach of the peace in enforcing rights;
(h) relate to the sale or disposition of collateral or the
requirements of a commercially reasonable sale;
(i) affect the enforceability of any provision in the
Transaction Documents that purports to authorize a party
to act in its sole discretion, that imposes penalties or
late payment charges, or that relates to evidentiary
standards or other standards by which the Transaction
Documents are to be construed;
(j) limit the enforceability of provisions releasing,
exculpating or exempting a party from, or requiring
indemnification of a party for, liability for its own
action or inaction, to the extent the action or inaction
involves negligence, recklessness, willful misconduct,
unlawful conduct or violation of public policy, or for
strict product liability or for liabilities arising under
the securities laws, or which limit the enforceability of
provisions requiring indemnification of a party with
respect to litigation between such party and another
party from whom indemnification is sought which is
determined adversely to the party seeking
indemnification;
(k) limit the enforcement of any guarantees, and limit the
effectiveness of any waiver by the parties of their
rights;
(l) may, where less than all of a contract may be
unenforceable, limit the enforceability of the balance of
the contract to circumstances in which the unenforceable
portion is not an essential part of the agreed exchange;
(m) govern and afford judicial discretion regarding the
determination of damages and entitlement to attorneys'
fees and other costs;
(n) may permit a party that has materially failed to render
or offer performance required by the contract to cure
that failure unless (i) permitting a cure would
unreasonably hinder the aggrieved party from making
substitute arrangements for performance, or (ii) it was
important in the circumstances to the aggrieved party
that performance occur by the date stated in the
contract;
(o) limit the enforceability of any provisions contained in
the Transaction Documents that require waiver or
amendments to be made only in writing, to the extent that
an oral agreement or an implied agreement by trade
practice or course of conduct has been created modifying
any such provision;
(p) affect provisions, if any, in the Transaction Documents
to the effect that waiver by a party of performance
obligations by another party shall not be deemed a waiver
of such party's right thereafter to cause the applicable
document to be in default may not be enforceable in all
circumstances, unless such party shall (i) first provide
F-2-B-3
written notice to the other party that subsequent
defaults will not be accepted and will result in a
default, and (ii) thereafter, timely and diligently
pursue its default remedies; and
(q) relate to the enforceability of any provisions contained
in the Transaction Documents purporting to require a
party thereto to pay or reimburse attorneys' fees
incurred by another party, or to indemnify another party
therefor, which provisions may be limited by applicable
statutes and decisions relating to the collection and
award of attorneys' fees. North Carolina General Statutes
ss. 6-21.2 sets forth the procedures and limitations
applicable to thE collection of attorneys' fees and,
accordingly, any provisions in the Transaction Documents
related to the ability of any party to collect attorneys'
fees upon default are subject to those limitations.
4. LICENSING. We express no opinion with regard to any licensing
or regulatory requirements relating to the Sellers' lines of
business, including any effects of any failure in any state
to be licensed to conduct such business.
F-2-B-4
SCHEDULE C
EXCLUDED LAW AND LEGAL ISSUES
We express no opinion concerning the following legal issues or the
application of any such laws or regulations to the matters referred to in our
opinions:
1. Federal and state securities laws and regulations, and laws and
regulations relating to commodity (and other) futures and indices and
other similar instruments;
2. Federal Reserve Board margin regulations;
3. Pension and employee benefit laws and regulations (e.g., ERISA);
4. Federal and state antitrust and unfair competition laws and
regulations;
5. Federal and state laws and regulations concerning filing and notice
requirements (such as the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1986, as amended, and the Exon-Xxxxxx Act, as amended) other than
requirements applicable to charter-related documents such as a
certificate of merger;
6. Compliance with fiduciary duty requirements;
7. The statutes and ordinances, the administrative decisions and the
rules and regulations of counties, towns, municipalities and special
political subdivisions (whether created or enabled through legislative
action at the Federal, state or regional level -- e.g., water
agencies, joint power districts, turnpike and tollroad authorities,
rapid transit districts or authorities, and port authorities) and
judicial decisions to the extent that they deal with any of the
foregoing;
8. The characterization of a transaction as one involving the creation of
a lien on real property or a security interest in personal property,
the characterization of a contract as one in a form sufficient to
create a lien or a security interest, the creation, attachment,
perfection, priority or enforcement of a lien on real property or a
security interest in personal property or matters involving ownership
or title to any real or personal property;
9. Fraudulent transfer and fraudulent conveyance laws;
10. Federal and state environmental laws and regulations;
11. Federal and state land use and subdivision laws and regulations;
12. Federal patent, trademark and copyright, state trademark, and other
Federal and state intellectual property laws and regulations;
13. Federal and state tax laws and regulations;
F-2-C-1
14. Federal and state racketeering laws and regulations (e.g., RICO);
15. Federal and state health and safety laws and regulations (e.g., OSHA);
16. Federal and state labor laws and regulations;
17. Federal and state laws, regulations and policies concerning (i)
national and local emergency, (ii) possible judicial deference to acts
of sovereign states, and (iii) criminal and civil forfeiture laws;
18. Other Federal and state statutes of general application to the extent
they provide for criminal prosecution (e.g., mail fraud and wire fraud
statutes);
19. Any laws, regulations, directives and executive orders that prohibit
or limit the enforceability of obligations based on attributes of the
party seeking enforcement (e.g., the Trading with the Enemy Act and
the International Emergency Economic Powers Act);
20. The effect of any law, regulation or order which hereafter becomes
effective;
21. The Communications Act and the rules, regulations and policies of the
Federal Communications Commission promulgated thereunder;
22. The Anti-Terrorism Order, as amended, all rules and regulations
promulgated thereunder and all federal, state and local laws,
statutes, ordinances, orders, governmental rules, regulations,
licensing requirements and policies relating to the Anti-Terrorism
Order (including without limitation the Executive order of September
23, 2001 Blocking Property and Prohibiting Transactions with Persons
Who Commit and Threaten to Commit or Support Terrorism) and the
ownership and operation of, or otherwise regulation of, companies
which conduct, operate or otherwise pursue the business or businesses
now and in the future conducted, operated or otherwise pursued by the
Lenders including, without limitation, the importation,
transportation, manufacturing, dealing, purchase, use or storage of
explosive material; and
23. The USA Patriot Act of 2001 and the rules, regulations and policies
promulgated thereunder and any foreign assets control regulations of
the United States Treasury Department or any enabling legislation or
orders relating thereto.
F-2-C-2
SCHEDULE D
EXCLUDED PROVISIONS
None of the opinions in the letter to which this Schedule is attached
covers or otherwise addresses any of the following types of provisions which
may be contained in the Transaction Documents:
1. Choice-of-law provisions.
2. Covenants not to compete, including without limitation covenants not
to interfere with business or employee relations, covenants not to
solicit customers, and covenants not to solicit or hire employees.
3. Indemnification for negligence, willful misconduct or other wrongdoing
or strict product liability or any indemnification for liabilities
arising under securities laws.
4. Provisions mandating contribution towards judgments or settlements
among various parties.
5. Waivers of (i) legal or equitable defenses, (ii) rights to damages,
(iii) rights to counter claim or set off, (iv) statutes of
limitations, (v) rights to notice, (vi) the benefits of statutory,
regulatory, or constitutional rights, unless and to the extent the
statute, regulation, or constitution explicitly allows waiver, (vii)
broadly or vaguely stated rights, and (viii) other benefits to the
extent they cannot be waived under applicable law.
6. Provisions providing for forfeitures or the recovery of amounts deemed
to constitute penalties, or for liquidated damages, acceleration of
future amounts due (other than principal) without appropriate discount
to present value, late charges, prepayment charges, interest upon
interest, and increased interest rates upon default.
7. Time-is-of-the-essence clauses.
8. Provisions which provide a time limitation after which a remedy may
not be enforced.
9. Confession of judgment clauses.
10. Agreements to submit to the jurisdiction of any particular court or
other governmental authority (either as to personal jurisdiction or
subject matter jurisdiction); provisions restricting access to courts;
waiver of the right to jury trial; waiver of service of process
requirements which would otherwise be applicable; and provisions
otherwise purporting to affect the jurisdiction and venue of courts.
11. Provisions that attempt to change or waive rules of evidence or fix
the method or quantum of proof to be applied in litigation or similar
proceedings.
12. Provisions appointing one party as an attorney-in-fact for an adverse
party or providing that the decision of any particular person will be
conclusive or binding on others.
F-2-D-1
13. Provisions purporting to limit rights of third parties who have not
consented thereto or purporting to grant rights to third parties.
14. Provisions which purport to award attorneys' fees solely to one party.
15. Arbitration agreements.
16. Provisions purporting to create a trust or constructive trust without
compliance with applicable trust law.
17. Provisions relating to (i) insurance coverage requirements and (ii)
the application of insurance proceeds and condemnation awards.
18. Provisions that provide for the appointment of a receiver.
19. Provisions or agreements regarding proxies, shareholders agreements,
shareholder voting rights, voting trusts, and the like.
20. Provisions in any of the Transaction Documents requiring any of the
Lenders to perform its obligations under, or to cause any other person
to perform its obligations under, or stating that any action will be
taken as provided in or in accordance with, any agreement or other
document that is not a Transaction Document.
21. Provisions, if any, which are contrary to the public policy of any
jurisdiction.
F-2-D-2
DISCLOSURE SCHEDULES
Pursuant to Item 601 paragraph (b)(2) of Regulation S-K, Interline
Brands, Inc. hereby omits the schedules contained in the Securities Purchase
Agreement and agrees to furnish supplementally a copy of any omitted schedule
to the Securities and Exchange Commission upon request.
INTERLINE BRANDS, INC.
By: /s/ Xxxxxx X. Xxxxxxxxxxx
-------------------------------
Name: Xxxxxx X. Xxxxxxxxxxx
Title: Chief Financial Officer