EXHIBIT 2.1
SHARE PURCHASE AGREEMENT
by and among
NEBRASKA BOOK COMPANY, INC.
(as "Buyer"),
COLLEGE BOOKSTORES OF AMERICA, INC.
(as the "Company")
and
THE SHAREHOLDERS
OF COLLEGE BOOKSTORES OF AMERICA, INC.
(collectively, the "Sellers")
April 2, 2006
TABLE OF CONTENTS
Definitions....................................................................1
Sale and Purchase of the Closing Shares; Purchase Price........................9
Sale and Purchase of the Closing Shares................................9
Purchase Price.........................................................9
Closing Balance Sheet.................................................10
Closing; Termination..........................................................11
Location; Date........................................................11
Deliveries and Actions at Closing.....................................11
Termination...........................................................12
Representations and Warranties................................................12
Organization and Standing.............................................13
Capitalization; Ownership of Shares; Subsidiaries and Investments.....13
Intentionally Omitted.................................................13
Authorization by Company..............................................13
Validity of the Transactions; Consents................................14
Restrictions..........................................................14
Third-Party Options...................................................14
Financial Statements; Books of Account................................14
Taxes.................................................................15
Liabilities and Obligations...........................................17
Accounts Receivable...................................................17
Tangible Assets.......................................................18
Inventory.............................................................18
Affiliate Transactions................................................18
Real Property.........................................................18
Intellectual Property Rights..........................................19
Contracts; Customers and Suppliers....................................20
Environmental Matters.................................................21
Books and Records.....................................................22
Compliance with Law and Court Orders..................................22
Claims................................................................23
Insurance.............................................................23
Labor Matters.........................................................23
Employee Benefit Plans................................................24
Employees/Independent Contractors.....................................25
Absence of Certain Changes............................................26
Additional Information................................................27
Broker's or Finder's Fee..............................................27
Competing Interests...................................................27
Exclusivity...........................................................27
Regulated Payments....................................................28
No Misrepresentations.................................................28
Availability of Documents.............................................28
Representations and Warranties of Each Seller.................................28
Capitalization; Ownership of Shares...................................28
Authority and Binding Effect..........................................29
Validity of Transactions; Consents....................................29
Restrictions..........................................................29
Broker's or Finder's Fee..............................................29
Competing Interests...................................................29
Regulated Payments....................................................30
No Misrepresentations.................................................30
Representations and Warranties of Buyer.......................................30
Organization..........................................................30
Authority and Binding Effect..........................................30
Validity of Contemplated Transactions.................................30
Absence of Proceedings................................................30
Broker's or Finder's Fees.............................................31
No Misrepresentations.................................................31
Securities Compliance.................................................31
Pre-Closing Covenants.........................................................31
Access................................................................31
No Solicitation, Etc..................................................31
Operation of the Business.............................................31
Certain Pre-Closing Actions of Sellers and Buyer......................32
Consents and Notices..................................................33
Update of Schedules...................................................33
Notification of Certain Matters.......................................34
Fulfillment of Conditions by Sellers..................................34
Fulfillment of Obligations by Buyer...................................34
Publicity.............................................................35
Certain Benefit Plans.................................................35
Sale to ▇▇▇▇▇▇▇▇; Secondary Transaction...............................35
Medical Plan..........................................................36
Payment to ▇▇▇▇ and ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇..................................36
Other Agreements..............................................................37
Tax Matters...........................................................37
Further Assurances....................................................38
Retention of Employees................................................38
Training of Employees.................................................38
Conditions to Closing.........................................................39
Conditions to the Obligations of Each Party...........................39
Conditions to Obligations of Buyer....................................39
Conditions to Obligations of the Sellers..............................41
Indemnification...............................................................42
By Sellers............................................................42
By Buyer..............................................................43
Indemnification Process...............................................44
Limitations on Claims.................................................46
Exclusivity of Indemnification Remedy.................................47
Characterization of Indemnification Payments..........................48
Deferred Consideration................................................48
Santa Fe Claim........................................................48
Other Provisions Concerning Indemnification...........................48
Miscellaneous.................................................................48
Entire Agreement......................................................48
Amendment, Parties in Interest, Assignment, Etc.......................48
Interpretation........................................................49
Expenses..............................................................49
Notices...............................................................49
Governing Law.........................................................49
Attorneys' Fees and Costs.............................................49
Specific Performance..................................................49
Drafting..............................................................50
Sellers' Representative...............................................50
Counterparts; Facsimile...............................................50
Retention of Records..................................................50
Execution of Agreement................................................50
SHARE PURCHASE AGREEMENT
This Share Purchase Agreement is dated as of April 2, 2006, and is by
and among (i) Nebraska Book Company, Inc., a Kansas corporation ("Buyer"),
(ii)College Bookstores of America, Inc., an Illinois corporation (the "Company")
and (iii) the Persons whose names and addresses are set forth on SCHEDULE I
(those Persons referred to in (iii) above are hereinafter individually referred
to as a "Seller," and collectively, the "Sellers").
WHEREAS, on the Agreement Date, the Sellers, in the aggregate, own all
of the issued and outstanding capital stock of the Company; and
WHEREAS, Buyer wishes to purchase all of the outstanding shares of the
Company, and the Sellers wish for Buyer to purchase such shares, on the terms
and conditions set forth herein.
NOW, THEREFORE, in consideration of the respective covenants,
representations and warranties herein contained, and intending to be legally
bound hereby, the parties hereto agree as follows:
1. DEFINITIONS. As used in this Agreement, the Schedules, and the Recitals
above, the following terms have the following meanings (terms defined in the
singular shall have a comparable meaning when used in the plural, and vice
versa):
"Accounts Receivable" means (a) all trade accounts receivable and other
rights to payment from customers of the Company and the full benefit of all
security for such accounts or rights to payment, including all trade accounts
receivable representing amounts receivable in respect of goods shipped or
products sold or services rendered to customers of the Company, (b) vendor debit
balances, (c) all other accounts or notes receivable of the Company and the full
benefit of all security for such accounts or notes, and (d) any claim, remedy or
other right related to any of the foregoing.
"Affiliate" means, as to any Person, any other Person that, directly or
indirectly, is in control of, is controlled by, or is under common control with,
such Person or that owns more than 50% of the voting stock of such Person. The
term "control" (including, with correlative meanings, the terms "controlled by"
and "under common control with"), as applied to any Person, means the
possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of such Person, whether through the ownership of
voting securities or other ownership interest, by contract or otherwise. In
addition, with respect to any natural person, the term "Affiliate" shall include
such person's immediate family (meaning any child, stepchild, grandchild,
parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including
adoptive relationships) and Persons (other than natural persons) controlled by
them.
"Agreement" means this Share Purchase Agreement, including all Schedules
and exhibits hereto, as the same may be amended from time to time in accordance
with its terms.
"Agreement Date" means the date on the first page of this Agreement.
"Annual Financial Statements" is defined in Section 4.8(a)(i).
"Assets" means all of the Company's assets, properties, goodwill and
rights of every kind and description, real and personal, tangible and
intangible, wherever situated and whether or not reflected on the Annual
Financial Statements.
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"Basket Amount" is defined in Section 10.4(a).
"Benefit Plan" means any bonus, pension, profit sharing, deferred
compensation, incentive compensation, employee stock ownership, stock purchase,
stock option, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, medical, stock appreciation, restricted stock or other
employee benefit plan, policy, agreement, arrangement or understanding (whether
written or oral, qualified or non-qualified, currently effective or terminated),
including, but not limited to, any "employee benefit plan" (as defined in
Section 3(3) of ERISA), which (i) is maintained or contributed to by the
Company, or with respect to which the Company has or may have any liability or
(ii) provides benefits, or describes policies or procedures applicable, to any
director, former director, consultant, former consultant, officer, employee,
former officer, or former employee of the Company, or the dependents of any of
the foregoing, regardless of whether funded.
"Bid" means any written quotation, bid or proposal made by the Company,
that if accepted or awarded would lead to a Leased Store Contract.
"Business Day" means any calendar day which is not a Saturday, Sunday or
a day on which banks in the State of Nebraska and the State of Missouri are
authorized or obligated by law or executive order to close.
"Buyer" means Nebraska Book Company, Inc., a Kansas corporation.
"Claim Notice" is defined in Section 10.3(a).
"Claims" is defined in Section 10.3(a).
"Closing" is defined in Section 3.1.
"Closing Balance Sheet" is defined in Section 2.3.
"Closing Date" is defined in Section 3.1.
"Closing Payment" is defined in Section 2.2(c).
"Closing Shares" is defined in Section 4.2(a).
"Code" means the Internal Revenue Code of 1986, as amended, and the
regulations and interpretations issued thereunder.
"Company" means College Bookstores of America, Inc., an Illinois
corporation.
"Company Insurance" is defined in Section 4.22.
"Company Intellectual Property" means all Intellectual Property Rights
owned, licensed or used by the Company.
"Company Software" means all Software owned, licensed or used by the
Company.
"Competing Transaction" is defined in Section 7.2.
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"Confidentiality Agreement" is defined in Section 11.1.
"Contract" means any written or oral contract, agreement, lease, plan,
instrument or other document, commitment, arrangement, undertaking, including
all amendments thereto that has created a binding obligation on the Company
under local law and which is currently in full force and effect.
"Copyrights" mean all copyrights in both published and unpublished form
and all registrations and applications for registration for copyrights in any
jurisdiction, and any renewals, modifications and extensions thereof.
"Court Order" means any judgment, injunction, order or ruling of any
court or other judicial authority that is binding on any Person or its property
under applicable Law.
"Damages" is defined in Section 10.1(c).
"Default" means (i) a breach, default or violation, (ii) the occurrence
of an event that with or without the passage of time or the giving of notice, or
both, would constitute a breach, default or violation or (iii) with respect to
any Contract, the occurrence of an event that with or without the passage of
time or the giving of notice, or both, would give rise to a right of
termination, renegotiation or acceleration.
"Deferred Consideration" is defined in Section 2.2(b).
"Deferred Consideration Escrow" is defined in Section 2.2(b).
"Direct Claim" is defined in Section 10.3(a).
"Environmental Conditions" means the presence of any pollution,
including, without limitation, any contaminant, irritant, pollutant or Hazardous
Material (whether upon, at or in any premises, property or product and whether
or not such pollution constituted, at the time of its introduction, a violation
of any Environmental Law) as a result of which the Company has or may reasonably
be expected to become liable to any Person or by reason of which any Real
Property occupied by the Company in the operation of its business may reasonably
be expected to suffer or be subjected to any Lien.
"Environmental Laws" means all Laws related to protection of the
environment, natural resources, safety or health or the handling, use,
recycling, generation, treatment, storage, transportation or disposal of
Hazardous Materials, and any common law cause of action relating to the
environment, natural resources, safety, health or the management of or exposure
to Hazardous Materials.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, together with rules and regulations promulgated thereunder.
"ERISA Affiliate" means each business or entity that is a member of a
"controlled group of corporations," under "common control", or an "affiliated
service group" with the Company within the meaning of Sections 414(b), (c) or
(m) of the Code, or is required to be aggregated with the Company under Section
414(o) of the Code, or is under "common control" with the Company, within the
meaning of Section 4001(a)(14) of ERISA.
"Escrow Agent" means ▇▇▇▇▇ Union Bank, or if ▇▇▇▇▇ Union Bank is
unwilling or unable to serve, another bank mutually agreed by Buyer and the
Sellers' Representative, located in St. Louis, Missouri.
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"Escrow Agreements" means the escrow agreements described in Section
2.2(b) which are effective as of the Closing Date by and among Buyer, the
Sellers' Representative, and Escrow Agent substantially in the form of EXHIBIT
A.
"ESOP Loan" means the obligation owed by the ESOP Trust and/or the
Company to Southwest Bank of St. Louis, under the Variable Rate Note dated June
7, 2005, regarding a loan in the original principal amount of $3,450,000.
"ESOP Plan" means the College Bookstores of America, Inc. Employee Stock
Ownership Plan dated effective as of January 1, 2002, as it has been amended
from time to time.
"ESOP Trust" means the College Bookstores of America, Inc. Employee
Stock Ownership Trust dated effective February 28, 2002, as it has been amended
from time to time.
"Existing Shares" is defined in Section 4.2(a).
"Financial Statements" is defined in Section 4.8(a)(ii).
"GAAP" means generally accepted accounting principles in the United
States.
"Governmental Authority" means the United States, any state thereof, any
province, city or municipality of any state, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, including, without limitation, any governmental authority,
agency, department, board, commission, court or instrumentality of the United
States, any State of the United States, or any political subdivision thereof.
"Hazardous Material" means any hazardous, toxic or radioactive
substance, material or waste which is regulated as of the Agreement Date by any
Governmental Authority, including without limitation any material or substance
that is: (A) defined as a "hazardous substance," "regulated substance" or "solid
waste" under applicable Law, (B) petroleum, petroleum products or wastes, or (C)
asbestos.
"Income Statements" is defined in Section 4.8(a)(iii).
"Indebtedness" means (a) any obligation for borrowed money (including
principal, interest, fees and penalties), (b) any obligation owed for all or any
part of the purchase price of Shares, property or other assets or for services
or for the cost of property or other assets constructed or of improvements to
such property or other assets, other than current trade accounts payable
included in current liabilities and incurred in respect of property or services
purchased in the ordinary course of business, (c) any capital lease obligation,
(d) any obligation (whether fixed or contingent) to reimburse any bank or other
Person in respect of amounts paid or payable under a standby letter of credit or
bank guarantee, and (e) any guarantee with respect to Indebtedness of another
Person. For the avoidance of doubt, the term "Indebtedness" does not include
operating leases.
"Indemnified Party" is defined in Section 10.3
"Indemnified Buyer Party" is defined in Section 10.1.
"Indemnified Seller Party" is defined in Section 10.2.
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"Indemnifying Party" is defined in Section 10.3.
"Intellectual Property Rights" means Patents, Trademarks, Copyrights,
Software and other intellectual property rights, including Trade Secrets and
rights in Internet web sites.
"Interim Period" means the period between the Agreement Date and the
Closing Date.
"▇▇▇▇▇ Amendments" is defined in Section 9.2(s).
"Law" means any statute, law, ordinance, code, directive, decree,
regulation, or rule of any Governmental Authority, provided that "Law" shall not
include any term or provision of a Leased Store Contract with a Governmental
Authority.
"Lease" is defined in Section 4.15(b).
"Leased Store Contracts" mean all Contracts that provide for the
performance of services by the Company, or the sale of products by the Company,
to or on behalf of institutions offering post-secondary education with which the
Company does business, or any prime contractor or higher-tier subcontractor.
"Leased Store Projections" is defined in Section 4.8(a)(iii).
"Letter of Intent" means that certain letter from Buyer to Company and
Sellers dated on February 7, 2006, by Buyer and on various other dates by the
Company and Sellers, outlining the proposed terms for this Agreement.
"Liability" means any direct or indirect liability, Indebtedness,
obligation, expense, claim, loss, damage, deficiency, guaranty or endorsement of
or by any Person, absolute or contingent, accrued or unaccrued, due or to become
due, liquidated or unliquidated.
"Licenses" means any permits, licenses, franchises, registrations,
certificates, variances, exemptions, consents, approvals and other
authorizations granted by any Governmental Authority.
"Liens" means any lien, mortgage, security interest, charge, pledge,
liability, obligation, claim, spousal interests (community or otherwise) or
other encumbrance of any nature whatsoever other than post-closing transfer
restrictions under Securities Laws that apply to Buyer.
"Litigation" means any lawsuit, claim, action, governmental enforcement
action, arbitration, administrative or other proceeding, criminal prosecution or
governmental investigation or inquiry.
"Management Group" means E. ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇, all of whom are officers and directors of the
Company.
"Management Groups' Actual Knowledge" means that the information to be
attributed to the Management Group that is actually known to any member of the
Management Group as to a particular date.
"Management Groups' Knowledge" means: (i) as of the Agreement Date, that
the information to be attributed to the Management Group that is actually or
constructively known to any member of the Management Group, and (ii) as of the
Closing Date, that the information to be attributed to the Management Group that
is actually or constructively known to any member of the Management Group or any
5
officer or senior or regional management employee of the Company. A Person has
constructive knowledge of those matters which the individual involved could be
expected to have as a result of undertaking an investigation of such a scope and
extent as a reasonably prudent person would undertake concerning the particular
subject matter.
"Marcus Contracts" means the contracts listed on Schedule 4.17 to which
either or both of ▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ is a party or are parties.
"Marcus Payment Taxes" means the employer's portion of all employment
Taxes arising or resulting from the payment to ▇▇▇▇ and ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ as
described in Section 7.14.
"Material Adverse Change" or "Material Adverse Effect" means any change
or effect that is material and adverse to the Company, its business, operations,
Assets, financial condition, results of operations, liquidity, competitive
position, or customer relations.
"▇▇▇▇▇▇▇▇" means ▇▇▇▇▇▇▇▇ Book Company, a Missouri corporation.
"▇▇▇▇▇▇▇▇ - Buyer Agreement" is defined in Section 9.2(r).
"Medical Plan" means the Group Medical Benefits Plan, jointly sponsored
by Company and ▇▇▇▇▇▇▇▇ (Plan 501), as it has been amended from time to time,
and as it was in effect on the Agreement Date.
"Ordinary course" or "ordinary course of business" or "OCB" means the
ordinary course of business that is consistent with past practices of the
Company, provided that actions involving agreements with or payments to ▇▇▇▇
▇▇▇▇▇▇ that are specifically addressed in this Agreement shall not be deemed to
be a violation of ordinary course of business or otherwise taken into account in
determining whether something is in the OCB.
"Other Claims Escrow" is defined in Section 2.2(c).
"Patents" mean all patents, together with any extensions,
reexaminations, reissues, patents of additions, patent applications, divisions,
continuations, continuations-in-part, improvements and any subsequent filings in
any country of jurisdiction claiming priority therefrom.
"Permitted Liens" means (i) Liens securing the payment of Taxes and
either not delinquent or being contested in good faith by appropriate legal or
administrative proceedings and as to which the Company shall, to the extent
required by GAAP, have set aside on its books adequate reserves; (ii) Liens
imposed by law, such as carriers', warehouseman's, mechanics', materialmen's,
landlords', laborers', suppliers', construction and vendors' liens, incurred in
good faith in the ordinary course of business and securing obligations which are
not yet due or which are being contested in good faith by appropriate
proceedings as to which the Company shall, to the extent required by GAAP, have
set aside on its books adequate reserves; (iii) Liens securing the performance
of Bids, tenders, leases, contracts (other than for the repayment of debt),
Leased Store Contracts, statutory obligations, surety, customs and appeal bonds
and other obligations of like nature, incurred as an incident to and in the
ordinary course of business; (iv) easements, rights of way, claims, objections,
defects, reservations, consents, tenancies, licenses, other encumbrances or
restrictions and the like affecting any real property, including, but not
limited to zoning, building codes, and other land use Laws regulating use or
occupancy of such real property or the activities conducted thereon that are
imposed by any Governmental Authority; (v) Liens securing the ESOP Loan; and
(vi) Liens disclosed on SCHEDULE 4.10.
6
"Person" means any natural person, corporation, partnership, company,
trust, governmental entity or other legal entity.
"Post-Closing Tax Period" means any Tax Period beginning after the
Closing Date and that portion of any Straddle Period beginning after the Closing
Date.
"Post-Secondary Transaction Sellers" are identified on SCHEDULE 4.2(A),
and means the Sellers other than ▇▇▇▇▇▇▇▇.
"Pre-Closing Tax Period" is defined in Section 8.1(a).
"Private Stores" is defined in Section 7.12.
"PRISM Agreement" is defined in Section 7.15.
"Pro Rata Portion" is defined in Section 2.2(a).
"Purchase Price" is defined in Section 2.2.
"Purchase Price Adjustments" is defined in Section 2.3(a).
"Real Property" is defined in Section 4.15(a).
"Reference Balance Sheet" is defined in Section 4.8(a)(ii).
"Reference Balance Sheet Date" is defined in Section 4.8(a)(ii).
"Required Consents" is defined in Section 4.5.
"Schedule 10.8 Indemnification Items" means the items described in
Section 10.8 and listed on Schedule 10.8.
"Scheduled Contracts" is defined in Section 4.17(a).
"Schedules" means the schedules prepared in accordance with and that are
attached to this Agreement.
"Secondary Transaction" is described in Section 7.12.
"Securities Laws" mean the Securities Act of 1933 and any applicable
state securities or "blue sky" laws.
"Seller" and "Sellers" are identified on SCHEDULE 4.2(A).
"Sellers' Representative" is identified in Section 11.10.
"Seller Transaction Costs" is defined in Section 2.2(d).
"Shareholder Agreements" means (i) that certain Shareholders' Agreement
dated May 16, 1996, by and among the Company and some of the Sellers, as it was
amended on September 24, 1996, and (ii) that certain Investors' Agreement dated
December 22, 2003, by and among Company and most of the Sellers.
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"Shares" is defined in Section 4.2.
"Software" means any computer software, of any nature whatsoever,
including all systems software, all applications software, whether for general
business usage (e.g., accounting, finance, word processing, graphics,
spreadsheet analysis, etc.) or specific, unique-to-the-business usage (e.g.,
purchase or service order processing, bookstore operations, etc.), all computer
operating, security and programming software, and all middleware and firmware,
and any and all documentation and object and source code related thereto.
"Straddle Period" means any Tax Period that includes but does not end on
the Closing Date.
"Taxes" means all taxes, duties, charges, fees, levies or other
assessment imposed by any taxing Governmental Authority, including without
limitation income, gross receipts, value-added, excise, withholding, personal
property, real estate, sales, use, ad valorem, license, lease, service,
severance, stamp, transfer, payroll, employment, customs, alternative, add-on,
minimum, estimated and franchise taxes and social security contributions imposed
by any social security administration, including any charges and costs from the
payroll agent, if any (including any interest, penalties or additions
attributable to or imposed on or with respect to any such assessment).
"Tax Liability" is defined in Section 2.2(f).
"Tax Period" is defined in Section 8.1(a).
"Tax Returns" means all reports, returns, statements (including
estimated reports, returns or statements) and other similar filings required to
be filed by a party with respect to any Taxes.
"Third Party Claim" is defined in Section 10.3(a).
"Trademarks" mean trademarks, services marks, trademark and service ▇▇▇▇
applications, brand names, certification marks, trade dress, Internet domain
names and Internet domain name applications, goodwill associated with the
foregoing and all registrations in any jurisdictions of, and all applications in
any jurisdiction to register, the foregoing, including any extension,
modification, renewal of any such registration or application thereof.
"Trade Secrets" means any information of a party that derives economic
value, actual or potential, from not being generally known to the public or to
other Persons who can obtain economic value from its disclosure or use.
"Transaction Documents" means this Agreement and all other agreements
executed and delivered at Closing which are Exhibits, and the certificates
required to be executed and delivered as a condition to Closing.
"Transactions" means the sale of the Closing Shares by the
Post-Secondary Transaction Sellers to Buyer, the Secondary Transaction, and the
other transactions contemplated hereby and by the Transaction Documents.
8
2. SALE AND PURCHASE OF THE CLOSING SHARES; PURCHASE PRICE.
2.1 SALE AND PURCHASE OF THE CLOSING SHARES. Subject to the terms and
conditions of this Agreement and on the basis of and in reliance upon the
representations, warranties, covenants and agreements set forth herein, on the
Closing Date each of the Post-Secondary Transaction Sellers shall sell to Buyer
and Buyer shall purchase from each of the Post-Secondary Transaction Sellers all
of the Closing Shares then issued and outstanding, owned by such Post-Secondary
Transaction Seller, free and clear of any Liens.
2.2 PURCHASE PRICE.
(a) As consideration in full for the acquisition of the Closing
Shares from the Post-Secondary Transaction Sellers, Buyer will pay the
Post-Secondary Transaction Sellers the aggregate consideration of Twenty-one
Million Two Hundred Seventy-five Thousand Dollars ($21,275,000), less an amount
equal to the Marcus Payment Taxes, less the value of any tax deductions for
paying same (the "Purchase Price"). The Purchase Price will be payable ratably
to the Post-Secondary Transaction Sellers in accordance with their ownership
percentage of the Closing Shares as set forth on SCHEDULE 4.2(A), each
percentage amount being such Post-Secondary Transaction Seller's "Pro Rata
Portion", in accordance with this Article 2.
(b) On the Closing Date, Buyer will deposit the sum of Four
Million Two Hundred Fifty-five Thousand Dollars ($4,255,000) into an interest
bearing escrow account described in this Section 2.2(b) (the "Deferred
Consideration Escrow"), with the amount of such escrow deposit being referred to
herein as the "Deferred Consideration." The Deferred Consideration will be held
pursuant to the Escrow Agreement in a form substantially similar to the Escrow
Agreement attached hereto as EXHIBIT A. The Deferred Consideration Escrow will
be held, maintained and disbursed by the Escrow Agent and will serve as security
for any potential claims under Article 10, Seller Transaction Costs or Tax
Liability as more fully described in Section 2.3 below, and any remaining
balance will be paid to the Post-Secondary Transaction Sellers on the date that
is thirty (30) months following the Closing Date in accordance with the Escrow
Agreement.
(c) On the Closing Date, Buyer will deposit the sum of Seven
Hundred Fifty Thousand Dollars ($750,000) into an interest bearing escrow
account described in this Section 2.2(c) (the "Other Claims Escrow"). The Other
Claims Escrow will be held pursuant to the Escrow Agreement in a form to be
agreed upon by the parties, and shall address such other claims as the parties
shall mutually agree as of the Agreement Date. To the extent the amount held in
the Other Claims Escrow is not applied to or subject to any other claims as set
forth in such agreement, it will be paid to the Post-Secondary Transaction
Sellers on the date that is nine (9) months following the Closing Date in
accordance with the Other Claims Escrow Agreement.
(d) On the Closing Date, Buyer will pay the Post-Secondary
Transaction Sellers their Pro Rata Portion of an amount equal to the Purchase
Price less an amount equal to the sum of (i) the Deferred Consideration Escrow,
(ii) the Seller Transaction Costs determinable on the Closing Date with respect
to the Seller or Sellers that incurred the Seller Transaction Costs, (iii) any
Tax Liability determinable as of the Closing Date, and (iv) an amount equal to
the Other Claims Escrow (such net amount payable at Closing being the "Closing
Payment"). As used herein, "Seller Transaction Costs" means the amount of any
legal, accounting, broker, and other professional fees incurred and closing
costs paid or reimbursed by the Company (whether incurred by any Seller or the
Company) specifically in connection with the Transactions, including the
Secondary Transaction, which are in excess of $30,000, but will not include fees
for preparing any Tax Returns or Closing Balance Sheet, or other fees or costs
that would have been incurred without regard to the Transactions; in the event
the payment or reimbursement is less than $30,000, there will be no Seller
Transaction Costs. The Closing Payment will be made in cash, by certified check
or wire transfer of immediately available funds, to the accounts of the
Post-Secondary Transaction Sellers provided to Buyer in writing no less than two
business days prior to Closing.
9
(e) The "Post-Secondary Transaction Sellers" are identified on
SCHEDULE 4.2(A), and means the Sellers other than ▇▇▇▇▇▇▇▇.
(f) The Purchase Price shall be reduced by the amount of Taxes
arising from the Secondary Transaction that exceed $1,600,000 (the amount of
Taxes in excess of $1,600,000, if any, is referred to herein as the "Tax
Liability"). For purposes of determining the existence of a Tax Liability, the
Tax Liability will equal the difference of (i) the liability of the Company for
income Taxes through the Closing Date taking the Secondary Transaction into
account, minus (ii) the liability of the Company for income Taxes through the
Closing Date without taking the Secondary Transaction into account. If such
income Taxes are less than $1,600,000, then there will be no Tax Liability
arising from the Secondary Transaction.
(g) On or before December 31, 2010, or such later date that there
is a final resolution of the issue, Buyer will pay the Post-Secondary
Transaction Sellers an amount equal to the value of the income Tax deductions to
the Company resulting from a payment by the Company of $725,000 of the total
payment to ▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ as described in Section 7.14 with
interest from the Closing Date to payment date at the rate of interest charged
Buyer for its line of credit by its primary lender, taking into account the
extent, if any, by which the Company's federal and/or state income Tax deduction
for the payment so described in Section 7.14 is reduced or disallowed for any
reason after review or audit by any Governmental Authority.
2.3 CLOSING BALANCE SHEET.
(a) Within 120 days after the Closing, Buyer will furnish at
Buyer's sole cost and expense the Sellers' Representative with a balance sheet
for the period ended on the Closing Date prepared by or on behalf of Buyer (the
"Closing Balance Sheet"), which will be in reasonable detail and accompanied by
such other financial information and methods of calculation as may be reasonably
necessary for the Sellers' Representative to evaluate the accuracy thereof. The
Sellers' Representative will have a period of 45 days after receipt of the
Closing Balance Sheet (the "Sellers' Rejection Date") to notify Buyer in writing
of Sellers' election to accept or reject (and in the case of a rejection, there
must be included in such notice the reasons for rejection in reasonable detail)
Buyer's Closing Balance Sheet and Buyer's determination of any Tax Liability or
Seller Transaction Costs paid by the Company which exceed the limits set forth
in Section 2.2(c) (the "Purchase Price Adjustments"). Buyer will permit the
Sellers' Representative and its representatives to have reasonable access to the
Company's relevant books, records and other financial information relating to
the calculation of the Closing Balance Sheet.
(b) If no written notice is received by Buyer prior to the
Sellers' Rejection Date (or if Sellers' Representative provides written notice
to Buyer stating that they have no objections, in which case, the "Sellers'
Rejection Date" shall instead be the date Buyer receives said notice), Buyer's
Closing Balance Sheet and the amount of any Purchase Price Adjustments will be
deemed accepted by the Sellers and final and binding on the parties hereto.
(c) If the Sellers' Representative timely reject Buyer's Closing
Balance Sheet or any Purchase Price Adjustments, Buyer and the Sellers'
Representative will promptly (and in any event within 20 days following the date
upon which the Sellers reject Buyer's Closing Balance Sheet) attempt to make a
10
joint determination of the Closing Balance Sheet and any Purchase Price
Adjustments. If the Sellers' Representative and Buyer are able to jointly
determine the Closing Balance Sheet and the Purchase Price Adjustments, the
joint determination will be final and binding on the parties hereto. In the
event the parties are unable to agree upon the final determination of the
Closing Balance Sheet and the Purchase Price Adjustments within such 20 day
period, then Buyer and the Sellers' Representative will submit the issues in
dispute to an independent certified public accountant from a nationally
recognized firm to be chosen as set forth below. Buyer, on the one hand, and the
Sellers' Representative, on the other, each will choose an accountant, and the
two selected accountants together will select a third accountant from a
nationally recognized firm and the third accountant will act as the sole
arbitrator of the issues in dispute (the "Arbitrator"). The determination of the
Arbitrator will be final and binding upon the parties, absent fraud, bad faith
and as long as determined in accordance with the terms of this Agreement. Each
side will bear their own professional fees and the fees of the Arbitrator will
be divided equally between the sides. Following the decision, the Escrow Amount
shall be released as contemplated by Section 2.3(b) above.
3. CLOSING; TERMINATION.
3.1 LOCATION; DATE. The closing (the "Closing") of the Transactions
will take place at the offices of ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, P.C., ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, at 10:00 a.m. local time on May 1, 2006,
or, subject to Section 3.3 below, at such other date, time and place as is
mutually agreed among the parties or, if all of the conditions to the
obligations of the parties set forth in Article 9 have not been satisfied or
waived and there is no agreement among the parties, on the day which is two
business days following the date on which all such conditions have been
satisfied or waived (such date and time of closing being herein called the
"Closing Date").
3.2 DELIVERIES AND ACTIONS AT CLOSING. At the Closing and subject to
the terms and conditions herein set forth:
(a) Each of the Post-Secondary Transaction Sellers shall deliver
to Buyer the certificates evidencing all of the respective Closing Shares owned
by such Post-Secondary Transaction Seller, duly endorsed for transfer or with
stock powers executed in blank in proper form of transfer, and the Company shall
deliver the original corporate seal, minute book and the stock transfer and
record books of the Company;
(b) Buyer shall deliver the Closing Payment to the Post-Secondary
Transaction Sellers;
(c) Buyer shall deposit the amount of the Deferred Consideration
Escrow and the Other Claims Escrow with the Escrow Agent, and shall make the
payment of the Seller Transaction Costs;
(d) Each director and officer of the Company will deliver to
Buyer his or her written resignation as a director and/or officer, as
applicable;
(e) The Company shall deliver to Buyer a disclosure letter
executed by an executive officer of the Company, similar in form and substance
to the letter contained in SCHEDULE 3.2(E), attached to which are the articles
of incorporation, bylaws, minute books, and ownership records of the Company,
the Benefit Plans, and the Scheduled Contracts including written summaries of
oral Scheduled Contracts, and insurance binders and policy endorsements.
11
(f) The parties shall deliver or cause to be delivered such
certificates, instruments, agreements, evidence or documents as contemplated by
this Agreement, including under Sections 9.1 and 9.2.
3.3 TERMINATION. This Agreement and the transactions contemplated by
this Agreement may be terminated and abandoned:
(a) at any time prior to the Closing by mutual written
consent of Buyer and the Sellers' Representative;
(b) by either Buyer, on the one hand, or the Sellers'
Representative, on the other hand, if a condition to performance by the
terminating party under this Agreement has not been satisfied or waived
by May 1, 2006, and (i) the terminating party provides written notice of
the failed condition to the other party and the other party fails to
satisfy the condition within five (5) business days after receipt of
notice, and (ii) if the condition cannot be satisfied at all or
satisfied within five business (5) days after receipt of notice, but the
terminating party can be made reasonably whole in respect of the failure
to satisfy the condition through a Purchase Price adjustment, if the
other party fails to agree in writing to the Purchase Price adjustment
necessary to make the terminating party whole, within five business (5)
days after receipt of notice; or
(c) by Buyer, on the one hand, or the Sellers'
Representative, on the other hand, at any time, if there is pending or
threatened litigation in any court or any proceeding before or by any
Governmental Authority to restrain or prohibit or obtain damages or
other relief with respect to this Agreement or the consummation of the
Transactions or to comply with any restriction on the manner in which
Buyer or its Affiliates conducts its operations (including any
operations of the Company) but only in the event such disposal or
restriction would have a Material Adverse Effect or Material Adverse
Change on the Company or Buyer;
provided, that, (i) Buyer may not terminate this Agreement if the Closing has
not occurred because of Buyer's failure to perform or observe any of its
material covenants or agreements set forth in this Agreement or if Buyer is, at
such time, in material breach of this Agreement, and (ii) the Sellers may not
terminate this Agreement if the Closing has not occurred because of the Sellers'
failure to perform or observe any of their respective material covenants or
agreements set forth in this Agreement or if any of the Sellers is, at such
time, in material breach of this Agreement. In the event of termination of this
Agreement by any party hereto as provided in this Section 3.3, this Agreement
shall forthwith become void and there shall be no liability or obligation on the
part of any party hereto except (i) under the Confidentiality Agreement, (ii)
with respect to this Section 3.3 or Section 11.4, (iii) with respect to the
PRISM Agreement described in Section 7.15, or (iv) to the extent that such
termination results from breach of this Agreement.
4. REPRESENTATIONS AND WARRANTIES. The Management Group jointly and
severally represents and warrants to Buyer as follows:
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4.1 ORGANIZATION AND STANDING. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Illinois, and has all requisite corporate power and authority to own or hold
under lease its properties and assets and to carry on its business as now
conducted; to execute, deliver and perform its obligations hereunder; and to
consummate the Transactions. The Company is qualified to do business and is in
good standing in every jurisdiction in which a failure to so qualify could have
a Material Adverse Effect. The Company possesses all governmental and other
permits, licenses and approvals necessary to own or lease its properties and
assets and to carry on its business as now conducted, the failure of which could
have a Material Adverse Effect. The states in which the Company is qualified to
do business as a foreign corporation, and a description of substantially all of
such permits, licenses and approvals, are listed on SCHEDULE 4.1.
4.2 CAPITALIZATION; OWNERSHIP OF SHARES; SUBSIDIARIES AND INVESTMENTS.
(a) The authorized equity securities of the Company consist of
Ten Thousand (10,000) shares of common stock without par value (the "Shares"),
of which 1,662.625 shares are issued and outstanding (the "Existing Shares"),
and at the Closing, following the closing of the Secondary Transaction, 1481.655
shares will be issued and outstanding (the "Closing Shares"). The Existing
Shares are owned, and at the Closing the Closing Shares will be owned by the
Sellers as set forth on SCHEDULE 4.2(A). Upon the sale of the Shares to Buyer at
Closing, Buyer will acquire the entire legal and beneficial equity and ownership
interests in the Company free and clear of all Liens. The Existing Shares have
been, and at the Closing the Closing Shares shall have been, duly authorized,
validly issued and fully paid and non-assessable. No Shares have been, and at
the Closing no Shares shall have been, issued in violation of (i) the terms of
any Contract binding upon the Company, (ii) the articles of incorporation or
by-laws of the Company, or (iii) applicable Laws, including without limitation
applicable federal and state securities laws and regulations. There are no, and
at the Closing there will not be any, preemptive rights with respect to the
issuance of the Shares.
(b) Except as set forth on SCHEDULE 4.2(B) and the Secondary
Transaction, there are: (i) no existing Contracts, subscriptions, options,
warrants, calls, commitments or rights of any character to purchase or otherwise
acquire from any Seller or the Company, at any time, or upon the happening of
any stated event, any securities of the Company, whether or not presently issued
or outstanding; (ii) no outstanding securities of the Company that are
convertible into or exchangeable for capital stock or other securities of the
Company; and (iii) no Contracts, subscriptions, options, warrants, calls,
commitments or rights to purchase or otherwise acquire from the Company any such
convertible or exchangeable securities.
(c) The Company has no subsidiaries and does not own, directly or
indirectly, any stocks, bonds (other than performance bonds) or securities or
any other equity or ownership interest (whether controlling or not) in any
Person.
4.3 INTENTIONALLY OMITTED.
4.4 AUTHORIZATION BY COMPANY. The execution and delivery of this
Agreement and the consummation of the Transactions by the Company will not
contravene or violate the articles of incorporation or by-laws of the Company.
The execution and delivery by the Company of this Agreement and each Transaction
Document to which the Company is a party and the performance of its obligations
hereunder and thereunder have been duly authorized and approved by all necessary
corporate action prior to the Agreement Date. This Agreement constitutes, and
the other Transaction Documents to which the Company is a party will constitute,
the legal, valid and binding obligation of the Company enforceable against it in
accordance with its terms, except to the extent limited by applicable
bankruptcy, reorganization, insolvency, moratorium, equitable principles, or
other similar laws of general application relating to or affecting the
enforcement of creditors rights.
13
4.5 VALIDITY OF THE TRANSACTIONS; CONSENTS. Neither the execution and
delivery of this Agreement by the Company, nor the consummation of the
Transactions (i) will to the Management Groups' Knowledge, contravene or violate
any Law or Court Order which is applicable to the Company, (ii) will, subject to
obtaining the consents, giving the notices or making the payments listed on
SCHEDULE 4.5, result in a Default under, or require the consent or approval of
or prior notice to any party to, or require a payment to any party to, any
Contract (including any Leased Store Contract or Lease) to or by which the
Company is a party or otherwise bound or affected, or (iii) subject to obtaining
the consents and giving the notices listed on SCHEDULE 4.5, require the Company
to notify or obtain any License from any Governmental Authority whereby the
failure to notify or obtain could have a Material Adverse Effect. Except as
disclosed in SCHEDULE 4.5, the Company is not a party to any Contract (including
any Leased Store Contract) under which the other party or parties are entitled
to early termination of the Contract in the event of a change in the control of
the Company. The inclusion of any Contract in SCHEDULE 4.5 shall not be deemed
to be an admission or acknowledgment in and of itself that the Contract requires
a consent or notice in connection with this Transaction or that the Contract may
be terminated in the event of a change in control of the Company. The consents
and notices included on SCHEDULE 4.5 that must be given or obtained prior to the
Closing shall be referred to herein and therein as the "Required Consents."
4.6 RESTRICTIONS. The Company is not subject to any Court Order that
affects or restricts the ability of any Seller or of the Company to consummate
the Transactions. The Company is not a party to any Contract in the nature of a
non-competition agreement that restricts the Company's ability to conduct its
business beyond the risk and limitations normally incurred in the ordinary
course of its business except as in SCHEDULE 4.6. In furtherance of the
foregoing and not in limitation thereof, except for standard restrictions
typical in the industry under teaming agreements or subcontracts, the Company is
not restricted by Contract (a) from soliciting or hiring any employee of any
Person, or (b) from competing with any Person.
4.7 THIRD-PARTY OPTIONS. Except as set forth in SCHEDULE 4.7, there
are no existing Contracts, options, commitments or rights with, to or in any
third party to acquire any equity interest in the business of the Company, or a
material portion of its Assets.
4.8 FINANCIAL STATEMENTS; BOOKS OF ACCOUNT.
(a) Attached in SCHEDULE 4.8 are:
(i) the balance sheets of the Company as of June 30, 2005,
2004, and 2003, as reviewed by the independent certified public
accountants for the Company, the related statements of income, changes
in Stockholders' equity and cash flows for the 12-month periods then
ended, and the accompanying independent certified public accountants'
reports (together, the "Annual Financial Statements"),
(ii) the Company-prepared balance sheet of the Company
(the "Reference Balance Sheet") as of January 31, 2006 (the "Reference
Balance Sheet Date"), and
(iii) the Company-prepared Leased Store Projection 6-30-06
(the "Leased Store Projections").
(b) Upon delivery of this Agreement duly executed by the Sellers,
the Company will deliver to Buyer (i) the quarterly income statements (and
year-to-date if prepared with a year-to-date presentation) for each Leased Store
and Private Store operated by the Company for each calendar quarter during the
period from July 1, 2003 (ending September 30, 2003), to December 31, 2005,
respectively, and (ii) Company prepared sales reports for each Leased Store and
Private Store for each month during the same period (which collectively,
together with the sales report for each Leased Store and Private Store to be
delivered to Buyer for March, 2006, are collectively referred to as the "Income
Statements", and the Income Statements and the Annual Financial Statements are
collectively referred to as the "Financial Statements").
14
(c) The Annual Financial Statements fairly present the financial
position, assets, liabilities and results of operations for the periods covered
thereby, and the changes in Stockholders' equity and cash flows of the Company
at the dates and for the periods covered, in conformity with GAAP (except with
respect to the items set forth on SCHEDULE 4.8(C)), consistently applied. The
Income Statements fairly present the income, expense and results of operations
of each such Leased Store and Private Store for the period covered thereby,
consistently applied.
(d) The books of account of the Company fairly reflect (a) all
transactions relating to the Company other than the Secondary Transaction and
(b) all items of income and expense, assets and liabilities relating to the
Company, in all material respects. The Company has not engaged in any material
transaction, maintained any bank account or used any corporate funds except for
transactions, bank accounts and funds that have been and are reflected in the
normally maintained books and records of the Company. The Financial Statements
have been prepared from such books and records and books of account of the
Company. The Annual Financial Statements do not contain any items of a special
or non-recurring nature except as expressly stated in the Annual Financial
Statements.
(e) The Leased Store Projections were prepared in good faith by
the Company and are, and will be, based on accounting principles consistently
applied with past practices of the Company.
4.9 TAXES.
(a) Except as disclosed on SCHEDULE 4.9, the Company has timely
filed all Tax Returns that it was required to file and all such Tax Returns were
true, correct and complete in all material respects. No claim has ever been made
by a Governmental Authority in a jurisdiction where the Company does not file
Tax Returns that it is or may be subject to taxation by that jurisdiction,
whereby the Company failed to file said Tax Returns after such claim was made.
(b) Except as disclosed on SCHEDULE 4.9, Company has paid in full
on a timely basis all Taxes owed by it, whether or not shown on any Tax Return.
(c) Intentionally omitted.
(d) To the Management Groups' Knowledge, there are no ongoing,
notified or announced examinations or claims against the Company for Taxes. No
notice of any audit, examination, request for information or questionnaire or
claim for Taxes, whether pending or threatened, has been received with respect
to any ongoing examination. No audits for Taxes by any Governmental Authority
have been completed in the last six years except as disclosed on SCHEDULE 4.9,
and the Company has not requested or entered into any agreement with any
Governmental Authority to extend the (statutory) limitation period for the
collection or assessment of Taxes.
(e) The Company has timely and correctly withheld and paid over
to the proper authorities all Taxes required to have been withheld and paid
over, and complied with all information reporting and backup withholding
requirements, including maintenance of required records with respect thereto.
15
(f) There are (and as of immediately following the Closing there
will be) no Liens other than Permitted Liens on the Assets of the Company
relating to or attributable to Taxes.
(g) Except as set forth on SCHEDULE 4.9, to the Management
Groups' Knowledge, there is no basis for the assertion of any claim relating to
or attributable to Taxes which, if adversely determined, would result in any
Lien on the Assets of the Company.
(h) Except as set forth in SCHEDULE 4.9 and the specific
indemnification provisions of Section 10.1(a)(v), there are no Contracts, and
during the prior eight (8) years there have been no Contracts, covering any
employee, independent contractor, or director, or any former employee, former
independent contractor or former director of the Company that, individually or
collectively, could give rise to any payment to such Person (or portion thereof)
for which a tax deduction has been claimed or will be claimed that would not be
deductible under the Code.
(i) The Company is not, and has not been at any time, a party to
a Tax sharing, Tax indemnity or Tax allocation agreement, and the Company has
not assumed the Tax liability of any other Person under any Contract, and the
Company is not a party to any joint venture, partnership, contract or other
arrangement which is treated (or is likely to be treated) as a partnership for
U.S. federal income Tax purposes.
(j) The Company (i) has not been a member of an affiliated group
of corporations filing a consolidated income tax return or had 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), and (ii) other than
withholding obligations, has no liability for Taxes of any Person or other
taxpayer under the Code or otherwise (or any similar provision of federal,
state, local or foreign law), as a transferee or successor, or otherwise.
(k) Except as set forth on SCHEDULE 4.9 or any item triggered in
conjunction with Buyer electing to treat the Company as part of a consolidated
group, the Company will not be required to include any item of income in, or
exclude any item of deduction from, taxable income for any taxable period (or
portion thereof) ending after the Closing Date as a result of any (i) change in
method of accounting for a taxable period ending on or prior to the Closing Date
under the Code (or any corresponding or similar provision of state, local or
foreign income Tax law); (ii) installment sale or open transaction disposition
made on or prior to the Closing Date; (iii) prepaid amount received on or prior
to the Closing Date or (iv) position on a Tax Return that could give rise to a
penalty under the Code or otherwise. The Company has not engaged in any act
which could result in the determination that the conformity requirement for the
last-in, first-out inventory method pursuant to Treas. Reg. section 1.472-2(e)
has been violated.
(l) Payment of the Purchase Price is not subject to the tax
withholding provisions of Code section 3406, or of subchapter A of Chapter 3 of
the Code or any other provision of law.
16
(m) Except as set forth on SCHEDULE 4.9(M), there are no Tax
rulings issued to the Company or ESOP, requests for rulings made by the Company
or ESOP or closing agreements with any Governmental Authority with respect to
which the Company or ESOP is a party.
(n) The Company has disclosed on its Federal income Tax Returns
all positions taken that would reasonably be expected to result in any
"substantial understatement of federal income tax" within the meaning of Section
6662 of the Code, failure of which could result in a Material Adverse Effect.
(o) No power of attorney with respect to any matter relating to
Taxes of the Company will be in effect after the Closing Date.
(p) The Company has not distributed the stock of any corporation
in a transaction satisfying the requirements of Section 355 of the Code. The
stock of the Company has not been distributed in a transaction satisfying the
requirements of Section 355 of the Code.
4.10 LIABILITIES AND OBLIGATIONS. The Company has no material
liabilities or obligations of any nature whatsoever, whether arising out of
contract, tort, statute or otherwise, including federal or state Taxes, which
are not reflected, reserved against, or given affect to, in the Annual Financial
Statements except: (i) those disclosed specifically in SCHEDULE 4.10, and (ii)
liabilities and obligations reasonably incurred in the ordinary course of the
business of the Company between June 30, 2005, and the Agreement Date. To the
Management Group's Knowledge, there is no basis for assertion against the
Company of any material liabilities or obligations not reflected, reserved
against or given effect to in the Annual Financial Statements or on SCHEDULE
4.10 except for liabilities and obligations described in clause (ii) of this
Section 4.10, and the Management Group shall disclose all such liabilities or
obligations to Buyer or Buyer's representatives preparing the Closing Balance
Sheet.
4.11 ACCOUNTS RECEIVABLE. Except as set forth on SCHEDULE 4.11, all
Accounts Receivable reflected on the June 30, 2005, Annual Financial Statements
and all Accounts Receivable arising since the June 30, 2005, constitute bona
fide, valid, binding and collectable except to the extent of any allowance or
reserve for doubtful accounts, claims arising in the ordinary course of business
out of arms length transactions with third parties unrelated to the Sellers. To
the Management Group's Knowledge, there is no circumstance or condition
(including the Transactions), which after the Closing would result in an
increase in uncollectable Accounts Receivables or pattern materially
inconsistent with historical experience with regards to cancellations by such
customers or uncollectable or doubtful account expenses.
17
4.12 TANGIBLE ASSETS. The Company has good and marketable title to the
tangible assets reflected as owned in its books and records, including those
shown on the June 30, 2005 Annual Financial Statements or acquired after the
date thereof, free and clear of all Liens other than Permitted Liens, (the
"Tangible Assets"). The Management Group makes no representation or warranty
with respect to the physical condition of the Tangible Assets and all other
tangible assets validly leased by the Company and all such items being "AS-IS
WHERE-IS" for all purposes under this Agreement. The Tangible Assets and other
tangible assets validly leased by the Company are all of the tangible assets
materially necessary to conduct the business of the Company in the same manner
as currently conducted. No Person other than the Company owns any vehicles,
equipment or other tangible assets or properties situated on the Company's
premises or which are necessary to the operation of the Company's business as
currently conducted, except for (i) leased items disclosed on the Schedules
hereto, (ii) items of immaterial value, and (iii) items owned by ▇▇▇▇▇▇▇▇ and
used in conjunction with Affiliate services provided to the Company and
disclosed in the Schedules hereto.
4.13 INVENTORY. The inventory of the Company reflected in the June 30,
2005 Annual Financial Statements and to be reflected in the Closing Balance
Sheet, and the inventory acquired since June 30, 2005, consists of items of
quantity and quality which are usable and salable in the ordinary course of the
business of the Company, as conducted by the Company, in all material respects.
All inventories are valued on the June 30, 2005 Annual Financial Statements at
the lower of cost, applied on a last-in-first-out basis, or market.
4.14 AFFILIATE TRANSACTIONS. SCHEDULE 4.14 lists all material
agreements, arrangements and understandings between the Company on one hand, and
a Seller or Affiliate of a Seller, on the other hand. The Company has delivered
true and correct copies of each such written agreement and a written summary of
each oral agreement, arrangement or understanding.
4.15 REAL PROPERTY.
(a) SCHEDULE 4.15 lists all real property (including improvements
located thereon and appurtenances thereto) (the "Real Property") leased by the
Company, (including the name of the lessor, date of the lease, and term expiry
date) and any other agreements with respect to the occupancy of real property to
which the Company is a party other than Leased Store Contracts. The Company owns
no Real Property.
(b) Except as disclosed on SCHEDULE 4.15, to Management Groups'
Knowledge, the Company has a valid right to use the Real Property leased by the
Company, in accordance with the provisions of the applicable lease, sublease or
Leased Store Contract for such leased real property (each, a "Lease") and free
of all Liens, except for Permitted Liens. All of the Leases to which the Company
is a party are in full force and effect and to Management Group's Knowledge,
grant in all material respects the leasehold estates or rights of occupancy or
use they purport to grant. To the Management Group's Knowledge, the occupancy by
the Company of the Real Property is in compliance with all applicable Laws
relating to such occupancy the failure to comply with which would have a
Material Adverse Effect. There are no pending or, to the Management Group's
Knowledge, threatened, condemnation proceedings or other Litigation with respect
to the Real Property. There are no existing defaults on the part of the Company
or, to the Management Group's Knowledge, any other party under any Lease to
which the Company is a party, and no event has occurred which, with notice,
lapse of time or both, would constitute a default on the part of the Company or,
to the Management Group's Knowledge, any other party under any such Lease. The
Management Group has made available to the Buyer an accurate and complete copy
of every such Lease.
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4.16 INTELLECTUAL PROPERTY RIGHTS.
(a) SCHEDULE 4.16 sets forth a true and complete list of the
material Company Intellectual Property Rights (other than Trade Secrets and
other confidential information), and with respect to each item, whether it is
owned, licensed or used by the Company or a third party.
(b) To Management Groups' Actual Knowledge, all of the Company
common law trademarks and trade names are valid, enforceable and subsisting,
there are no grounds for expiration, nullity or voidability of such Company
Intellectual Property Rights, and the Company is in compliance with all material
formal legal requirements.
(c) Except as set forth in SCHEDULE 4.16, the Company either
directly or indirectly owns, possesses or licenses adequate and enforceable
fully paid licenses or other rights to use, free and clear of any Liens other
than Permitted Liens and obligations to comply with the terms contained in any
such license arrangement, all Company Software. Such Intellectual Property
Rights include all intellectual property rights necessary to carry out the
Company's activities, as currently conducted, without interruption or
disruption. Except as disclosed on SCHEDULE 4.16, the Transactions will not
result in any increase of any royalty, revenue share or license fees or the
payment of any other fee with respect to any Company Intellectual Property
Rights. Except as disclosed on SCHEDULE 4.16, no Company Intellectual Property
Rights terminate or may terminate as a result of the Transactions, and no
Contract relating to Company Intellectual Property Rights requires the approval
of or notice to any third party of the Transactions.
(d) Except as set forth in SCHEDULE 4.16, none of the products or
services sold by the Company and none of the business or activities conducted by
the Company infringes, violates or constitutes a misappropriation of, any
Intellectual Property Rights of any third party, and the Company has not
received any claim alleging such an infringement, violation or misappropriation.
Within the last five years, no claim or notice has been received by the Company
(i) challenging the validity, effectiveness or, other than with respect to the
Company Intellectual Property Rights licensed from a third party, ownership by
the Company of any Company Intellectual Property Rights or (ii) alleging any
infringement, violation or misappropriation by the Company of any Intellectual
Property Rights of any third party, nor to the Management Group's Knowledge, are
there any valid grounds for any bona fide claim of any such kind.
(e) To the Management Group's Knowledge, there is no unauthorized
use, infringement, or misappropriation of any Company Intellectual Property
Rights developed by the Company by any Person.
(f) Intentionally omitted.
(g) To the Management Group's Knowledge, no employee of the
Company is a party to any agreement, other than as contemplated by a Leased
Store Contract disclosed in SCHEDULE 4.16(G) with a third party that restricts
or limits in any way the scope or type of work in which such individuals may be
engaged, or requires the individual to transfer, assign, or disclose information
concerning his or her work to anyone other than the Company.
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4.17 CONTRACTS; CUSTOMERS AND SUPPLIERS.
(a) SCHEDULE 4.17 sets forth an accurate and complete list of all
of the following to which the Company is a party and, except with respect to
clause (ii), which bind the Company or under which the Company has rights (the
"Scheduled Contracts"):
(i) Leased Store Contracts.
(ii) Pending Bids in which the commission payable to the
institution is greater than 12% of gross revenues, or if there are more than two
pending Bids in which the estimated cost of capital improvements/contributions
and payments due to the institution within the first sixty (60) days after the
execution of the Contract exceeds $500,000, exclusive of commission payments,
then such Bids.
(iii) Agreements (or group of related agreements), or
commitments for the future purchase of, or payment for, supplies, products or
services or the use thereof, with a value, or involving payments by the Company
of more than $25,000 per year;
(iv) agreements (or group of related agreements) that
involve making capital expenditures in excess of $25,000;
(v) leases of personal property with an annual base rental
obligation of more than $25,000 or a total remaining rental obligation of more
than $25,000;
(vi) license and/or maintenance agreements for
Intellectual Property Rights, and any other agreements granting or restricting
the right of the Company to use any of the Company Intellectual Property;
(vii) re-sale, co-sale, representative or sales agency
Contracts or other similar agreements;
(viii) agreements establishing an alliance, teaming
agreement, joint venture or partnership;
(ix) notes, mortgages, indentures, guarantees or other
obligations or agreements or other instruments for or relating to Indebtedness,
or other guarantees of the obligations of a third-party;
(x) agreements limiting or restraining the Company from
engaging or competing in any lines of business with any Person;
(xi) agreements that grant exclusive rights or preferred
status with respect to the purchase, supply or distribution of products or
services; and
(xii) other agreements obligating the Company to indemnify
a third-party where the potential Liability is greater than $25,000.
(b) The Company made available and was not prohibited from making
available to Buyer accurate and complete copies of all Scheduled Contracts
unless the Company was prohibited by Law or conditions of confidentiality and
the Company advised Buyer that such an agreement was in existence without a
violation of such confidentiality provisions.
(c) To the Management Group's Knowledge, no party to a Leased
Store Contract or supplier (including subcontractors) contemplates early
termination of its relationship with the Company, and the Company has not
received notice of, nor does the Management Group have Knowledge of, any basis
for, any material complaint by any customer of the Company within the last 12
months.
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(d) Except as set forth on SCHEDULE 4.17, all of the Scheduled
Contracts are in full force and effect and constitute legal and binding
obligations of the Company and the other party thereto, and neither the Company,
nor to the Managing Group's Knowledge, any other party, is in material breach of
or in default under, and, to the Managing Group's Knowledge, no event has
occurred which with notice or lapse of time, or both, would become a material
breach of or a default under such Contract.
(e) As of the Agreement Date, the Marcus Contracts are in full
force and effect and constitute legal and binding obligations of the Company and
to Management Group's Knowledge, either or both of ▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, and neither the Company nor, to Management Groups' Knowledge, ▇▇▇▇▇▇▇▇,
is in breach or in default under, and no event has occurred which with notice or
lapse of time, or both, would become a breach of or a default by the Company, or
to Management Groups' Knowledge, by ▇▇▇▇▇▇▇▇, under such Contract.
4.18 ENVIRONMENTAL MATTERS. Except as set forth on SCHEDULE 4.18, the
Company is in material compliance with all Environmental Laws applicable to it.
The Company has not used, released, transported, treated or disposed of any
Hazardous Material in violation of Environmental Laws, nor has the Company
arranged for the release, storage, transportation, treatment or disposal of any
Hazardous Material, except in such amounts or such a manner that would not
reasonably be expected to trigger the need for investigation and/or remediation
under Environmental Laws. There is no pending, active or, to the Management
Group's Knowledge, threatened Litigation, including but not limited to, notices
of violation, orders or directives for the implementation of environmental
response actions or claims for recovery of environmental response costs, against
the Company arising from or relating to any Environmental Conditions.
21
4.19 BOOKS AND RECORDS. The books and records of the Company are
complete and correct in all material respects and have been maintained in
accordance with sound business practices and the requirements of Section 6001 of
the Code. Complete and accurate copies, as of the date hereof, of the articles
of incorporation and by-laws of the Company, and all minute books and stock
ledgers of the Company, have been made available to Buyer for review. To
Management Group's Knowledge, the minute books of the Company contain accurate
and complete records of all annual meetings held of, and corporate action taken
by, the shareholders, board of directors and committees of the board of
directors of the Company in all material respects.
4.20 COMPLIANCE WITH LAW AND COURT ORDERS.
(a) To Management Groups' Knowledge, the Company is, and at all
times has been, in compliance in all material respects with all Laws applicable
to its business or to the conduct or operation of its business or the ownership
or use of any of its Assets whereby a failure to comply would have a Material
Adverse Effect. To the Management Group's Knowledge, no event has occurred or
circumstance exists that (with or without notice or lapse of time) (i) may
constitute or result in a violation by the Company of, or a failure on the part
of the Company to comply with, any Law or (ii) may give rise to any obligation
on the part of the Company to undertake, or to bear all or any portion of the
cost of, any remedial action of any nature. Other than as disclosed in SCHEDULE
4.20, the Company has not received, at any time since July 1, 2002, any written
notice or other communication (whether oral or written) from any Governmental
Authority or any other Person regarding (i) any actual, alleged, possible or
potential violation of, or failure to comply with, any Law or (ii) any actual,
alleged, possible or potential obligation on the part of the Company to
undertake, or to bear all or any portion of the cost of, any remedial action of
any nature.
(b) To Management Groups' Knowledge, the Company holds, owns or
possesses all Licenses that are required to conduct its business as currently
conducted and which are set forth on SCHEDULE 4.20, the failure to hold, own or
possess might cause a Material Adverse Effect. The Licenses are valid and in
full force and effect, and the Company is in compliance in all material respects
with its obligations under such Licenses. The Company has not received any
written notice of any breach of such Licenses and to the Management Group's
Knowledge, no circumstances exist whereby any such notice may be served. The
Company is not subject to any Court Orders, the terms of which have not
previously been satisfied.
(c) To Management Groups' Knowledge, the Company is, and has
been, in compliance with all of the material terms and requirements of each
License identified or required to be identified in SCHEDULE 4.20. No event has
occurred or circumstance exists that is likely to (with or without notice or
lapse of time) (i) constitute or result in a violation of or a failure to comply
with any material term or requirement of any License listed or required to be
listed in SCHEDULE 4.20 or (ii) result in the revocation, withdrawal,
suspension, cancellation or termination of, or any materially adverse
modification to, any License listed or required to be listed in SCHEDULE 4.20.
The Company has not received, at any time since July 1, 2002, any written notice
from any Governmental Authority regarding (i) any actual, alleged, possible or
potential material violation of or material failure to comply with any term or
requirement of any License or (ii) any actual, proposed, possible or potential
revocation, withdrawal, suspension, cancellation, termination of or materially
adverse modification to any License. All applications required to have been
filed for the renewal of the Licenses listed or required to be listed in
SCHEDULE 4.20 have been duly filed on a timely basis with the appropriate
Governmental Authorities, and all other filings required to have been made with
respect to such Licenses have been duly made on a timely basis with the
appropriate Governmental Authorities.
22
4.21. CLAIMS. Except as set forth on SCHEDULE 4.21, there is no
Litigation pending or, to the Management Group's Knowledge, threatened against
the Company or the Assets; there is no dispute or disagreement pending or
threatened in writing between the Company and any of its customers (including
prime contractors and any higher-tier subcontractors) or suppliers (including
subcontractors); and to the Management Group's Knowledge, no event has occurred,
and no claim has been asserted, that is likely to result in Litigation against
the Company or the Assets.
4.22 INSURANCE. SCHEDULE 4.22 contains a complete and accurate list of
all existing insurance policies maintained by or for the benefit of the Company
(the "Company Insurance"). Correct and complete copies of all of the Company
Insurance have been made available to Buyer. The Company Insurance is in full
force and effect, in commercially reasonable amounts, is underwritten with
creditworthy insurance companies, and provides coverage currently required by
applicable Laws and by any Contracts to which the Company is a party. The
Company is not in default under any Company Insurance nor has the Company failed
to give notice or present any material claim under any such coverage in a due
and timely fashion. There are no outstanding unpaid premiums except in the
ordinary course of business and no notice of cancellation or non-renewal of any
such coverage has been received with respect to any Company Insurance.
4.23 LABOR MATTERS.
(a) The Company has not agreed to recognize any union or other
collective bargaining unit, nor has any union or other collective bargaining
unit been certified as representing any of the Company's employees with respect
to their employment by the Company. To the Managing Group's Knowledge, no
organizational effort is currently being made or threatened by or on behalf of
any labor union with respect to employees of the Company. There is no labor
strike, slowdown, work stoppage or lockout actually pending or, to the
Management Group's Knowledge, threatened against the Company. No labor agreement
restricts the Company from relocating, closing or terminating any of its
operations or facilities or any portion thereof.
(b) Except as disclosed on SCHEDULE 4.23, the Company (i) is and
has been in compliance in all material respects with all applicable Laws
regarding employment and employment practices and those laws relating to terms
and conditions of employment, wages and hours, occupational safety and health
and workers' compensation and is not engaged in any unfair labor practices, (ii)
has no unfair labor practice charges or complaints or other charges pending or,
to the Management Group's Knowledge, threatened against it before any
Governmental Authority, (iii) has no employment grievances or claims relating to
termination of employment pending or any other employment related matter, to the
Management Group's Knowledge, threatened against it, and (iv) has no charges
pending before agencies of any province or locality responsible for the
prevention of unlawful employment practices.
(c) All agreements and settlements with former employees have
been prepared and performed in accordance with all applicable Laws and those
agreements and/or settlements have been executed properly. Except as disclosed
on SCHEDULE 4.23, no former employee is entitled to any further or additional
compensation other than the amounts and/or benefits as mentioned in the
agreement and/or settlement. The Company has provided Buyer with correct and
complete copies of all such agreements and settlement documents, which have not
yet been entirely executed.
23
4.24 EMPLOYEE BENEFIT PLANS.
(a) SCHEDULE 4.24 contains a list of all Benefit Plans of the
Company. The Company has not adopted or amended in any material respect any
Benefit Plan since the June 30, 2005 Annual Financial Statement. The Company has
no liability with respect to any benefit plans or arrangements to provide any
type of employee benefit or compensation or perquisite (other than ongoing
liability payable in the ordinary course of business) other than under the
Benefit Plans.
(b) With respect to each Benefit Plan, the Company has made
available to Buyer true, complete and correct copies, where applicable and to
the extent that they exist as of the date of this Agreement, of (i) the current
plan document or agreement, (ii) the two most recent annual reports on Form 5500
filed with the Department of Labor, (iii) the most recent actuarial reports,
(iv) the most recent summary plan description, (v) the most recent determination
letter issued by the Internal Revenue Service, if applicable, (vi) the two most
recent audited financial reports concerning such Benefit Plans, if applicable,
and any trusts related thereto, and (vii) the appraisals conducted for the ESOP
with respect to the value of the Company and the Shares.
(c) With respect to each Benefit Plan, there has occurred no
transaction or breach of any fiduciary duty that will likely result in any
material liability, direct or indirect, for the Company or any shareholder,
officer, director or employee of the Company or for the Benefit Plan or any
fiduciary, agent or representative of such Benefit Plan. There are no ERISA
Affiliates, other than as disclosed in SCHEDULE 4.24. The Company has not at any
time during the five-year period preceding the date hereof contributed to any
Benefit Plan that is a "multiemployer plan" (as defined in Section 3(37) of
ERISA) or maintained any Benefit Plan that is subject to Title IV of ERISA or
Section 412 of the Code.
(d) There is no pending dispute, arbitration, claim, suit or
grievance involving a Benefit Plan (other than routine claims for benefits
payable under any such Benefit Plan). No Benefit Plan is currently under audit
or examination (nor has notice been received of a potential audit or
examination) by any tax authority, social security administration or other
Governmental Authority. The Company has not incurred any Liability for any
excise, income or other taxes or penalties with respect to any Benefit Plan,
other than those incurred in the ordinary operation of such Plans and, to the
Managing Group's Knowledge, no event has occurred and no circumstance exists or
has existed that is likely to give rise to any such Liability.
(e) Except as set forth on SCHEDULE 4.24, each Benefit Plan has
been established and maintained in all material respects in accordance with its
terms and in compliance with all applicable Laws, including without limiting the
foregoing, the timely filing of all required reports, documents and notices. All
contributions required to be made by the Company to, or under the terms of any
Benefit Plan have been timely made or, if not yet due, the Company has made
adequate reserves for such contributions.
(f) Except as disclosed on SCHEDULE 4.24, the Company does not
(i) maintain or contribute to any Benefit Plan which provides, or has any
liability to provide, life insurance, medical, severance or other employee
welfare benefits to any current or former employee of the Company upon or after
his or her retirement or termination of employment, except as may be required by
Section 4980B of the Code or Title I, subtitle B, part 6 of ERISA; and (ii) has
never represented, promised or contracted (whether in oral or written form) to
any current or former employee (either individually or to employees as a group)
that such employee(s) would be provided with life insurance, medical, severance
or other employee welfare benefits upon or after their retirement or termination
of employment, except to the extent required by Section 4980B of the Code or
Title I, subtitle B, part 6 of ERISA.
24
(g) Except for the actions contemplated by Section 7.11 of this
Agreement, the execution of, and performance of the transactions contemplated
in, this Agreement will not (either alone or upon occurrence of any additional
or subsequent events) (i) constitute any event under any Benefit Plan, trust or
loan that will or may result in any payment (whether of severance pay or
otherwise), acceleration, forgiveness of indebtedness, vesting, distribution,
increase in benefits or obligation to fund benefits with respect to any current
or former employee, or (ii) result in the triggering or imposition of any
restrictions or limitations on the right of the Company to amend or terminate
any Benefit Plan. No payment or benefit agreed to by the Company that has been,
will be or may be made by the Company with respect to any current or former
employee is an "excess parachute payment," within the meaning of Section
280G(b)(1) of the Code.
(h) Except for the actions contemplated by Section 7.11, the
Company (i) has withheld all amounts required by Law or by agreement to be
withheld from the wages, salaries and other payments to its employees; (ii) is
not liable for any arrears of wages or any Taxes or any penalty for failure to
comply with any of the foregoing other than as a result of normal payroll
cycles; and (iii) is not liable for any payment to any trust or other fund or to
any governmental or administrative authority, with respect to unemployment
compensation benefits, social security or other benefits for its current or
former employees.
4.25 EMPLOYEES/INDEPENDENT CONTRACTORS.
(a) After the Agreement Date, the Company agrees to provide to
Buyer a complete and accurate list of all of the employees of the Company with
relevant details concerning their employment with the Company, as the case may
be, including their full names, function or job titles, hire dates, full or
part-time status, details of any current leave of absence, current annual
salaries, incentive compensation, most recent bonuses and other compensation,
and the location(s) at which the employee provides services.
(b) The Company has made available to Buyer complete and accurate
copies of all standard documents relating to employees such as noncompetition,
nonsolicitation and no hire agreements, confidentiality agreements, and Company
manuals and handbooks.
(c) To the Management Group's Knowledge, all independent
contractors of the Company (and any other independent contractor or consultant
who previously rendered services for the Company within the last 3 years) have
been, and currently are, properly classified by the Company, as the case may be,
as independent contractors and such classifications satisfy and have at all
times satisfied the requirements of applicable Law, and all such independent
contractors have been and currently are legally, properly and appropriately
treated as non-employees for all Tax purposes, the Company has fully and
accurately reported their compensation on the Tax forms when required to do so,
and the Company has not and never has had any obligation to provide benefits
with respect to such Persons under the Benefit Plans or otherwise who was not an
employee of the Company at such time. Other than as disclosed in SCHEDULE 4.25,
there has been no determination, inquiry or audit by any Governmental Authority
that any such independent contractor constitutes an employee of the Company or
that could otherwise result in the Company incurring a Liability arising from
such a determination.
(d) The Company has not paid nor is obligated to pay any
retention or change in control bonuses.
25
4.26 ABSENCE OF CERTAIN CHANGES. Except as set forth on SCHEDULE 4.26,
since June 30, 2005, the Company has conducted its business only in the ordinary
course consistent with past practices and there has not been:
(a) any matter that has resulted in or is reasonably likely to
result in a Material Adverse Change;
(b) the imposition of any Lien other than Permitted Liens on any
Assets;
(c) any change in any method of accounting or accounting practice
used by the Company, other than changes required by GAAP;
(d) any increase in the compensation payable or to become payable
to any employee, or any compensation bonuses paid or agreed to be paid to any
employee, in either case except in the ordinary course of business, or entry
into any employment, severance or similar contract with any of its employees,
other than in the ordinary course of business;
(e) adoption of, amendment to, or increase in the payments to or
benefits under, any Benefit Plan;
(f) any sale, assignment, transfer or other disposition of
Assets, or any additions to or transactions involving any Assets, other than
sales of inventory made in the ordinary course of business consistent with past
practices, and any other such transactions in the ordinary course of business;
(g) entry into, termination of or receipt of notice of
termination of (i) any license, distributorship, dealer, sales representative,
joint venture, credit or similar Contract to which the Company is a party, or
(ii) any Contract or transaction involving a total remaining commitment by the
Company of at least $25,000;
(h) any waiver or release of any claim or right or
cancellation of any debt held;
(i) any declaration or payment of any dividend or other
distribution on its share capital;
(j) any capital expenditures incurred or capital leases entered
into which would be booked in excess of $75,000 per location; or
(k) any incurrence of any Indebtedness outside the OCB or any
loans made to any third party.
26
4.27 ADDITIONAL INFORMATION. SCHEDULE 4.27 contains accurate lists
and summary descriptions of the following:
(a) the names of all present directors and officers of the
Company; none of said directors or officers, and no former director or officer
of the Company, has any claim whatsoever against the Company, all for the period
after January 1, 2000, other than as described in a schedule to this Agreement.
(b) the names and addresses of every bank and other financial
institution in which the Company maintains an account (whether checking, savings
or otherwise), lock box or safe deposit box, and the account numbers and names
of Persons having signing authority or other access thereto;
(c) the names of all Persons authorized to borrow money or incur
or guarantee indebtedness on behalf of the Company;
(d) the names of all Persons holding powers of attorney from the
Company, and the nature of such powers; and
(e) all names under which the Company has conducted any business
or which it has otherwise used in the past 5 years.
4.28 BROKER'S OR FINDER'S FEE. No agent, broker, person or firm acting
on behalf of the Company, is or will be entitled to any commission or broker's
or finder's fees the cost of which would be borne in whole or in part by the
Company, in connection with this Agreement or any of the Transactions.
4.29 COMPETING INTERESTS. Except as set forth on SCHEDULE 4.29 and for
the ownership of less than one percent (1%) of the capital stock or other
securities of one or more public companies, to the Management Groups' Knowledge,
neither the Company nor any Seller nor any director or officer of the Company,
nor any Senior Regional Manager or Regional Manager or immediate family member
of any of the foregoing (a) owns, directly or indirectly, an interest in any
Person that is a competitor or supplier of the Company or that otherwise has
material business dealings with the Company or (b) is a party to, or otherwise
has any direct or indirect interest opposed to the Company under, any Scheduled
Contract or other business relationship or arrangement. For the purposes of this
Section 4.29, any Person who owns an interest in the Company solely through
participation in the ESOP, and the immediate family members of such Person,
shall not be considered to be a "Seller".
4.30 EXCLUSIVITY. Since February 7, 2006, neither the Company, nor to
the Management Group's Knowledge, any Seller, has initiated, solicited, or
encouraged (including by way of furnishing information or assistance), or taken
any other action to facilitate, any inquiries or the making of any proposal
relating to, or that may reasonably be expected to lead to, any Competing
Transaction, or entered into discussions or negotiated with any Person in
furtherance of such inquiries, or endorsed or agreed to endorse any Competing
Transaction, or authorized or permitted any of the officers, directors, managers
or employees of the Company or any investment banker, financial advisor,
attorney, accountant, or other representative retained by a Seller or the
Company, or any of its Affiliates, or, to the Management Group's Knowledge, a
Seller, or their Affiliates, to take any such action.
27
4.31 REGULATED PAYMENTS. No director, officer, agent, or employee of
the Company, nor, to Management Groups' Knowledge, any Affiliate of any of the
foregoing has:
(a) in connection with any business obtained or retained by the
Company, and in violation of any Law, directly or indirectly offered, paid or
promised to pay, or authorized the payment of, any money or other thing of value
(including any fee, gift, sample, travel expense or entertainment with a value
in excess of one hundred dollars ($100.00) in the aggregate to any one
individual in any year) to:
(i) any person who is an official, officer, agent,
employee or representative of any Governmental Authority or of any existing or
prospective customer (whether government owned or non-government owned);
(ii) any political party or official thereof;
(iii) any candidate for political or political party
office; or
(iv) any other individual or entity;
while knowing or having reason to believe that all or any portion of such money
or thing of value would be offered, given, or promised, directly or indirectly,
to any such official, officer, agent, employee, representative, political party,
political party official, candidate, individual, or any entity affiliated with
such customer, political party or official or political office.
(b) The Company maintains a system of internal accounting
controls adequate to insure that the Company maintains no off-the-books accounts
and that the Assets are used only in accordance with the Company's management
directives.
4.32 NO MISREPRESENTATIONS. No representation or warranty in this
Article 4 or in any Schedule attached hereto or in any certificate or
Transaction Document delivered by or on behalf of the Company hereunder contains
any untrue statement or omission of a material fact which would cause the
general interpretation of the statements to be misleading.
4.33 AVAILABILITY OF DOCUMENTS. Except as set forth on SCHEDULE 4.33,
copies of all Company-related documents referred to on the Schedules have been
delivered or made available to Buyer or its representatives, are true, correct
and complete copies thereof, and include all amendments, supplements or
modifications thereto or waivers thereunder. All representations and warranties
by the Management Group hereunder are made from knowledge acquired in their
capacities as an individual, shareholder, officer, director, employee and any
other relationship of such individual to the Company.
5. REPRESENTATIONS AND WARRANTIES OF EACH SELLER. Each Seller as to
himself, herself, or itself represents and warrants to Buyer as follows:
5.1 CAPITALIZATION; OWNERSHIP OF SHARES.
(a) Such Seller owns the Existing Shares, and at the Closing will
own the Closing Shares, free and clear of any Liens except as set forth on
SCHEDULE 4.2(B). Upon the sale of the Shares to Buyer at the Closing, Buyer will
acquire the entire legal and beneficial interest to such Seller's Closing Shares
free and clear of all Liens.
28
(b) Except as listed in SCHEDULE 4.2(B) and except for the
Secondary Transaction, (i) no existing Contracts, subscriptions, options,
warrants, calls, commitments or rights of any character exist to purchase or
otherwise acquire from such Seller, at any time, or upon the happening of any
stated event, any securities of the Company, whether or not presently issued or
outstanding; and (ii) no Contracts, subscriptions, options, warrants, calls,
commitments or rights exist to purchase or otherwise acquire from such Seller
any securities convertible or exchangeable into or for capital stock or other
securities of the Company.
5.2 AUTHORITY AND BINDING EFFECT. Such Seller has the full capacity,
power and authority to execute, deliver and perform this Agreement and the other
Transaction Documents to be executed by him, her or it, to consummate the
Transactions, and subject to EXHIBIT B, has taken all actions necessary to
secure all approvals applicable to such Seller required in connection therewith.
The execution and delivery of this Agreement and the consummation of the
Transactions by such Seller will not contravene or violate the articles of
incorporation or by-laws, partnership agreement, or the indenture of trust of
any such Seller, as applicable. This Agreement constitutes, and the other
Transaction Documents will constitute, the legal, valid and binding obligation
of each such Seller who is party thereto, enforceable against such Seller in
accordance with their respective terms, except to the extent limited by
applicable bankruptcy, reorganization, insolvency, moratorium, equitable
principles, or other similar laws of general application relating to or
affecting the enforcement of creditor's rights.
5.3 VALIDITY OF TRANSACTIONS; CONSENTS. Neither the execution and
delivery of this Agreement by such Seller, nor the consummation of the
Transactions (i) will, to the knowledge of such Seller, contravene or violate
any Law or Court Order which is applicable to such Seller, (ii) will, subject to
obtaining the consents, giving the notices or making the payments listed on
SCHEDULE 5.3 or referred to in EXHIBIT B, result in a Default under, or require
the consent or approval of or prior notice to any party to, or require a payment
to any party to, any Contract to or by which such Seller is a party or otherwise
bound or affected.
5.4 RESTRICTIONS. Such Seller is not subject to any Court Order that
affects or restricts the ability of such Seller to consummate the Transactions.
5.5 BROKER'S OR FINDER'S FEE. No agent, broker, person or firm acting
on behalf of such Seller is or will be entitled to any commission or broker's or
finder's fees the cost of which would be borne in whole or in part by the
Company in connection with this Agreement or any of the Transactions.
5.6 COMPETING INTERESTS. Except as set forth on SCHEDULE 5.6 and for
the ownership of less than one percent (1%) of the capital stock or other
securities of one or more public companies, neither such Seller nor, to such
Seller's Knowledge, any of his or her immediate family members, or Affiliates,
(a) owns, directly or indirectly, an interest in any Person that is a competitor
or supplier of the Company or that otherwise has material business dealings with
the Company or (b) is a party to, or otherwise has any direct or indirect
interest opposed to the Company under, any Scheduled Contract or other business
relationship or arrangement. For the purposes of this Section 5.6, "Seller"
shall not include the ESOP or any Person who owns an interest in the Company
solely through participation in the ESOP, and the immediate family members of
such Person.
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5.7 REGULATED PAYMENTS. Neither such Seller nor to such Sellers'
Knowledge, any Affiliate of such Seller has (a) used any funds of the Company
for unlawful contributions, gifts, entertainment, or other unlawful expenses
relating to political activity, (b) made any unlawful payment to foreign or
domestic government officials or employees or to foreign or domestic political
parties or campaigns or violated provision of Law regulating such payments; or
(c) made any other gift, contribution or payment in connection with the business
of the Company in violation of any Law.
5.8 NO MISREPRESENTATIONS. No representation or warranty of such
Seller made hereunder or in any Schedule attached hereto or in any certificate
or Transaction Document delivered by or on behalf of such Seller hereunder
contains any untrue statement or omission of a material fact which would cause
the general interpretation of the statements to be misleading.
6. REPRESENTATIONS AND WARRANTIES OF BUYER. The Buyer hereby represents and
warrants to the Sellers as follows:
6.1 ORGANIZATION. The Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Kansas, and has all
requisite corporate power and authority to own or hold under lease its
properties and assets and to carry on its business as now conducted; to execute,
deliver and perform its obligations hereunder; and to consummate the
Transactions. The Buyer is qualified to do business in Nebraska and is in good
standing in Nebraska.
6.2 AUTHORITY AND BINDING EFFECT. The execution and delivery of this
Agreement and the consummation of the Transactions by the Buyer will not
contravene or violate the articles of incorporation or by-laws of the Buyer. The
execution and delivery by the Buyer of this Agreement and each Transaction
Document to which the Buyer is a party and the performance of its obligations
hereunder and thereunder have been duly authorized and approved by all necessary
corporate action prior to the date of this Agreement. This Agreement
constitutes, and the other Transaction Documents to which the Buyer is a party
will constitute the legal, valid and binding obligation of the Buyer enforceable
against it in accordance with its terms, except to the extent limited by
applicable bankruptcy, reorganization, insolvency, moratorium, equitable
principles, or other similar laws of general application relating to or
affecting the enforcement of creditors' rights.
6.3 VALIDITY OF CONTEMPLATED TRANSACTIONS. Neither the execution and
delivery of this Agreement by the Buyer, nor the consummation of the
Transactions (i) will, to the knowledge of the Buyer, contravene or violate any
Law or Court Order which is applicable to Buyer, (ii) will result in a Default
under, or require the consent or approval of or prior notice to any party to,
any Contract to or by which the Buyer is a party or otherwise bound or affected,
or (iii) require the Buyer to notify or obtain any License from any Governmental
Authority whereby the failure to notify or obtain could have a Material Adverse
Effect (substituting the word "Buyer" in the Definition of "Material Adverse
Effect" for "Company").
6.4 ABSENCE OF PROCEEDINGS. There is no Litigation or other
proceedings pending nor, to the knowledge of Buyer, are any such proceedings
threatened or any investigation of any Governmental Authority pending, against
Buyer that could impair Buyer's ability to effect the Closing. The Buyer is not
subject to any Court Order that affects or restricts the ability of the Buyer to
consummate the Transactions.
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6.5 BROKER'S OR FINDER'S FEES. No agent, broker, person or firm
acting on behalf of the Buyer is or will be entitled to any commission or
broker's or finder's fees the cost of which would be borne in whole or in part
by the Buyer, in connection with this Agreement or any of the Transactions.
6.6 NO MISREPRESENTATIONS. No representation or warranty of Buyer
made hereunder or in any Schedule attached hereto or in any certificate,
statement, or other document delivered by or on behalf of Buyer hereunder
contains any untrue statement or omission of a material fact which would cause
the general interpretation of the statements to be misleading. Copies of all
Buyer-related documents referred to on the Schedules have been delivered or made
available to the Sellers, are true, correct and complete copies thereof, and
include all amendments, supplements or modifications thereto or waivers
thereunder.
6.7 SECURITIES COMPLIANCE. Buyer is not acquiring the Post-Closing
Shares with a view to distribution or for sale in connection with any
distribution thereof within the meaning of the Securities Laws.
7. PRE- AND POST-CLOSING COVENANTS.
7.1 ACCESS. From the date of this Agreement to the Closing Date, the
Management Group (on behalf of the Company and the ESOP) shall cause the Company
to give Buyer and its counsel, accountants and other representatives reasonable
access during normal business hours to its premises, and to its employees and
representatives at times pre-approved by a representative of the Managment
Group, and to furnish to Buyer and its representatives all such additional
documents and information as Buyer may from time to time reasonably request,
other than any information which would be a violation of Law or a violation of
any conditions of confidentiality identified to Buyer.
7.2 NO SOLICITATION, ETC. From the Agreement Date until the earlier
of the Closing or May 31, 2006:
(a) Except with respect to the Secondary Transaction, each
Seller, as to himself, herself or itself and respective Affiliates, directly or
indirectly, shall not make, solicit, initiate, consider or encourage submission
of proposals or offers from any Persons relating to any liquidation,
dissolution, recapitalization, merger, consolidation or acquisition or purchase
of such Seller's Shares, or any merger or business combination each, a
"Competing Transaction". The Management Group shall, and shall cause the Company
and its respective Affiliates to, cease immediately and cause to be terminated
all contracts, negotiations and communications with third parties other than
▇▇▇▇▇▇▇▇ with respect to the foregoing, if any, existing on the Agreement Date
and shall promptly notify Buyer of each such termination;
(b) Except with respect to the Secondary Transaction, the
Management Group shall cause the Company to avoid, directly or indirectly,
making, soliciting, initiating, considering or encouraging submission of
proposals or offers from any Persons related to any liquidation, dissolution,
recapitalization, merger, consolidation or sale of all or substantially all of
the assets of the Company, or the issuance of any equity interest in the Company
or any other similar transaction or business combination. The Management Group
shall cause the Company to cease immediately and cause to be terminated all
contracts, negotiations and communications with third parties other than
▇▇▇▇▇▇▇▇ with respect to the foregoing, if any, existing on the Agreement Date
and shall promptly notify Buyer of each such termination.
(c) Each of the Sellers, with respect to himself, herself or
itself, and the Management Group, with respect to the Company, shall cause their
respective Affiliates financial and other advisors and representatives to comply
with each of the covenants contained in this Section 7.2.
7.3 OPERATION OF THE BUSINESS. Except as Buyer shall otherwise
consent in writing, such consent to not be unreasonably withheld, conditioned or
delayed, between the Agreement Date and the Closing Date, the Management Group
shall cause the Company:
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(a) to conduct its business only in the ordinary course
consistent with past practice;
(b) except with respect to the Secondary Transaction, to use
commercially reasonable efforts ("CRE") to preserve intact its current business
organization, to keep available the services of its current contractors,
employees, and agents and to use CRE to maintain its relations and good will
with suppliers, customers, landlords, employees, agents, and others with whom it
has business relationships;
(c) to use CRE to comply with all applicable Laws, perform all of
its obligations and liabilities without default, maintain its corporate
existence in good standing in Illinois and its due qualification in good
standing in all jurisdictions in which it is so qualified, and maintain all of
its books and records in the usual, regular and ordinary manner on a basis
consistent with past practices other than due to the short fiscal year arising
due to the Transactions;
(d) except for the actions described on SCHEDULE 7.4 and the
Secondary Transaction, not to make any changes to its organizational documents
or authorized, issued or outstanding capital stock, (ii) not to grant any
options or other rights to acquire, whether directly or contingently, any of its
capital stock, (iii) not to declare, set aside or pay any dividend or make any
other distribution in respect of its capital stock or directly or indirectly
redeem, retire, purchase or otherwise reacquire any of its shares of capital
stock, (iv) not to make any distribution to any of the Sellers, and (v) not to
sell, rent, lease or otherwise dispose of any of its assets, except in the
ordinary course of business consistent with past practice;
(e) not to (i) incur any Indebtedness except borrowing on the
line of credit and trade credit, (ii) modify the terms of the ESOP Loan, (iii)
make any capital expenditures or commitments for capital expenditures or enter
into any capital leases in excess of $25,000 in the aggregate, unless in the
ordinary course of business or required pursuant to any Leased Store Contract,
or (iv) create or suffer to exist any Liens, other than Permitted Liens;
(f) except with respect to the Secondary Transaction, to use CRE
to maintain (i) all of the properties used or useful in its business in good
operating condition and repair, ordinary wear and tear excepted and (ii) all
insurance covering the Company, its employees and Assets in full force and
effect with responsible companies, comparable in amount, scope and coverage to
that in effect on the Agreement Date;
(g) to confer with Buyer concerning operational matters of a
material nature, with the exception of any Bids for Leased Store Contracts or
pertaining to any Contract or License subject to confidentiality provisions as
referred to in Section 4.17(b);
(h) to otherwise report to Buyer on a regular basis concerning
the status of the business, operations, finances, and any compensation increases
to any salaried employee of the Company;
(i) except with respect to the Secondary Transaction, not to (i)
hire or terminate any employee earning over $60,000 per year, except in the
ordinary course of business consistent with past practice ("OCB"), (ii) enter
into or amend any employment contract except in the OCB, (iii) increase the rate
of compensation payable or to become payable by it to any employee (except for
increases in the OCB), (iv) except in the OCB, accrue or pay to or agree to pay
to any of its employees any bonus, profit-sharing, retirement pay, insurance,
death benefit, fringe benefit or other compensation or (v) amend the terms of
any Benefit Plan, except as expressly required by applicable Law and Section
7.11;
(j) not to amend, terminate, cancel or compromise any material
claim of or against the Company, or waive any other rights of substantial value;
and
(k) not to take any affirmative action, or fail to take any
reasonable action within its control, as a result of which any of the changes or
events listed in Section 4.26 would be likely to occur.
7.4 CERTAIN PRE-CLOSING ACTIONS OF SELLERS AND BUYER. The Management
Group and Buyer will each use CRE to complete or cause to be completed the
actions described on SCHEDULE 7.4 prior to the Closing, as applicable.
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7.5 CONSENTS AND NOTICES. Upon the terms and subject to the
conditions of this Agreement, each of the Sellers, as to himself, herself or
itself, and Buyer will cooperate and use CRE to cause the Transactions to occur,
and to cause all conditions to the performance of the parties hereto that are
within his, her, or its respective control to be satisfied, and the Management
Group shall use CRE to cause the Company to give, make or obtain all Required
Consents prior to the Closing unless both the Company and Buyer otherwise agree
in writing; provided, that neither party shall be required to make any
commercially unreasonable payment to any third party to secure any such Required
Consents.
7.6 UPDATE OF SCHEDULES. Prior to the Closing, each Seller, as to
himself, herself or itself, and the Management Group, with respect to the
Company, respectively, shall promptly inform Buyer in writing if any of such
Seller's or Company's representations herein or any information provided by such
Seller or Company, as applicable, set forth in the Schedules hereto was or has
become inaccurate. Prior to the Closing, Buyer shall promptly inform the Sellers
and the Management Group in writing if any of Buyer's representations herein was
or has become inaccurate; provided that, for purposes of determining whether a
breach exists with respect to any of the representations and warranties set
forth in this Agreement, any such disclosure will be deemed not to have been
disclosed to the other party unless other party otherwise expressly consents in
writing.
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7.7 NOTIFICATION OF CERTAIN MATTERS. Each Seller, as to himself,
herself or itself will give prompt notice to Buyer of (a) the occurrence, or
failure to occur, of any event that such Seller believes could cause any of such
Seller's representations or warranties, covenants, conditions and agreements set
forth in this Agreement to be untrue or inaccurate at any time during the
Interim Period, and (b) any failure of such Seller to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by such Seller
hereunder; provided that, for purposes of determining whether a breach or
failure to comply with or satisfy exists with respect to any of the
representations, warranties, covenants, conditions and agreement set forth in
this Agreement, any such disclosure will be deemed not to have been disclosed to
Buyer unless Buyer otherwise expressly consents in writing. Buyer will give
prompt notice to the Sellers of (a) the occurrence, or failure to occur, of any
event that Buyer believes could cause any of Buyer's representations or
warranties, covenants, conditions and agreements set forth in this Agreement, to
be untrue or inaccurate at any time during the Interim Period, and (b) any
failure of Buyer to comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by Buyer hereunder; provided that, for purposes
of determining whether a breach or failure to comply with or satisfy exists with
respect to any of the representations, warranties, covenants, conditions and
agreement set forth in this Agreement, any such disclosure will be deemed not to
have been disclosed to Sellers unless Sellers otherwise expressly consent in
writing.
7.8 FULFILLMENT OF CONDITIONS BY SELLERS. Except for making a press
release of the Transaction, each Seller agrees, as to himself, herself or
itself, not to take any action that would cause the conditions or the
obligations of such Seller or the Company to effect the Transactions and the
Transaction Documents not to be fulfilled, including without limitation, by
taking or causing to be taken any action that would cause the representations
and warranties made by such Seller or the Company in this Agreement not to be
true and correct as of the Closing. Each Seller, as to himself, herself or
itself will take all reasonable steps within such Seller's power to cause to be
fulfilled the conditions precedent to Buyer's obligations to consummate the
Transactions that are dependent on the actions of such Seller; provided,
however, that no such Seller, or his, her or its Affiliates, or Company will be
required to make any material monetary expenditure, commence or be a plaintiff
in any litigation or offer or grant any material accommodation (financial or
otherwise) to any third Person, including, without limitation, the offer for
sale of any business or assets to any Person.
7.9 FULFILLMENT OF OBLIGATIONS BY BUYER. Except for making a press
release of the Transaction, Buyer agrees not to take any action that would cause
the conditions or the obligations of the Buyer to effect the Transactions and
the Transaction Documents not to be fulfilled, including without limitation, by
taking or causing to be taken any action that would cause the representations
and warranties made by Buyer in this Agreement not to be true and correct as of
the Closing. Buyer will take all reasonable steps within its power to cause to
be fulfilled the conditions precedent to the obligations of the Sellers and/or
the Company to consummate the Transactions that are dependent on the actions of
Buyer; provided, however, that neither Buyer nor any of its Affiliates will be
required to make any material monetary expenditure, commence or be a plaintiff
in any litigation or offer or grant any material accommodation (financial or
otherwise) to any third Person, including, without limitation, the offer for
sale of any business or assets to any Person.
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7.10 PUBLICITY. Buyer is subject to regulatory requirements which may
require Buyer to disclose this transaction and provide a copy of this Agreement
to the United States Securities and Exchange Commission or other federal
agencies. Sellers consent that such actions may be taken by Buyer and that such
actions will not violate the Confidentiality Agreement or the terms of this
Agreement. Buyer and the Management Group will cooperate with each other in the
development and distribution of all news releases and other public disclosures
relating to the announcement promptly after the Agreement Date. Neither Buyer
nor the Sellers will issue or make, or allow to have issued or made, any press
release or public announcement concerning the announcement of the Transactions
without giving the other party a reasonable opportunity to comment on such
release or announcement in advance, and any such public announcement will be
consistent with applicable Law.
7.11 CERTAIN BENEFIT PLANS.
(a) ESOP. On the Closing Date, the ESOP debt to Southwest Bank of St.
Louis will be paid in full from the ESOP's Pro Rata Portion of the Closing
Payment.
(b) SPLIT DOLLAR PLANS. The split dollar insurance plans for the members
of the Management Group shall be terminated pursuant to the terms of the
Employment Agreements attached hereto as EXHIBIT C-1.
7.12 SALE TO ▇▇▇▇▇▇▇▇; SECONDARY TRANSACTION.
(a) Subject to EXHIBIT B, prior to Closing (intended to be consummated
in the short fiscal year ending on or prior to the Closing Date) and without any
adjustment to the Purchase Price, the Company will sell, transfer or distribute
the assets, obligations and operations of the three (3) private stores operated
by the Company that are identified on SCHEDULE 7.12 (the "Private Stores") to
▇▇▇▇▇▇▇▇, and ▇▇▇▇▇▇▇▇ shall assume the liabilities and obligations associated
with the Private Stores, and all employees at the Private Stores shall be
transferred to employment with ▇▇▇▇▇▇▇▇ (the "Secondary Transaction").
(b) Certain of the terms of the Secondary Transaction are set forth on
EXHIBIT B, and the documents associated with the Secondary Transaction shall
include a legal opinion with respect to matters similar to the opinions set
forth on EXHIBIT D for Article 5 representations and warranties applicable to
the ▇▇▇▇▇▇▇▇ Existing Shares, and shall be subject to the prior approval by
Buyer, with such approval not to be unreasonably withheld, conditioned or
delayed, provided that subject to EXHIBIT B the Company is generally released
from liabilities and obligations associated with the Private Stores and the
Company is not subject to unreasonable liabilities or obligations after
consummation of the Secondary Transaction as determined in the reasonable
judgment of Buyer.
(c) The consideration for the Private Stores shall consist of the
Existing Shares owned by ▇▇▇▇▇▇▇▇ being redeemed by the Company, and cash for
the unpaid balance of the sale price for the Private Stores.
(d) Prior to Closing, the Company shall be permitted to distribute the
cash proceeds of such sale as a dividend to the Post-Secondary Transaction
Sellers.
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(e) Notwithstanding any other provision in this Agreement to the
contrary, from and after the closing of the Secondary Transaction, the defined
terms in Article 1 which may otherwise include the assets, obligations and
operations of the Private Stores, including, without limitation, "Assets,"
"Liabilities," "Contracts," and "Indebtedness," shall be deemed to be amended to
exclude the assets, obligations and operations of the Private Stores which are
transferred to and/or assumed by ▇▇▇▇▇▇▇▇ in the Secondary Transaction.
(f) Anything contained in this Agreement to the contrary
notwithstanding, in the event the Secondary Transaction is not consummated prior
to the Closing Date, no party to this Agreement will have any liability
whatsoever to any other party, or to any other Person for or relating to the
failure of the Company or ▇▇▇▇▇▇▇▇ to consummate Secondary Transaction,
including but not limited to any liability arising under Article 10 of this
Agreement. The parties covenant and agree not to pursue any claim or cause of
action whatsoever against any other party in connection with or arising out of
such failure to consummate the Secondary Transaction. In such case, the
Transactions will not occur and this Agreement will terminate without liability
to any party.
7.13 MEDICAL PLAN.
(a) At least one day prior to Closing, the Company and/or Buyer
(as indicated below) shall take the following actions, contingent upon the
Closing occurring and contingent upon employees of the Company and their covered
dependants being eligible for the medical plan sponsored by Buyer as set forth
herein:
(i) The Company will cause to be adopted, resolutions to transfer
sole sponsorship of the Medical Plan to ▇▇▇▇▇▇▇▇;
(ii) The Company shall take steps necessary to adopt a plan
identical to the medical plan, solely for the purpose of administering
claims incurred prior to Closing, but unpaid as of the Closing;
(iii) The Company and Buyer shall take steps necessary to adopt
the Buyer's medical plan for claims incurred after the Closing; and
(iv) the Company will cause HIPAA Certificates of Creditable
Coverage to be prepared based on coverage ceasing on Closing for each
current participant and eligible beneficiary and for each participant
who terminated coverage if not previously provided. The Company shall
provide copies of such HIPAA Certificates of Creditable Coverage to
Buyer at Closing, in addition to providing such certificates to
participants and eligible beneficiaries.
(b) Buyer shall reduce any deductibles for such employees of the
Company and their covered dependents by the amount of deductibles that were
incurred under the Medical Plan prior to Closing; provided, the employees of the
Company provide such information to the plan administrator of Buyer's medical
plan within a reasonable period of time in the form of an explanation of
benefits (EOB) from the current administrator of the Medical Plan.
(c) Full-time and three-quarter-time employees of the Company who
are regularly scheduled to work an average of 30 hours per week and their
covered dependants are immediately eligible to participate in the Buyer's
medical plan to the extent that such employee has completed thirty (30) days of
consecutive employment with the Company.
(d) Anything contained in this Section 7.13 to the contrary
notwithstanding, Buyer and the Company agree that (i) the Company will remain
liable for its obligations under the Medical Plan through the Closing Date with
regard to the Company's employees; and (ii) ▇▇▇▇▇▇▇▇ will have no liabilities or
obligations with respect to any medical or health care claim, expense or cost
incurred or accrued by employees of the Company following the Closing Date.
▇▇▇▇▇▇▇▇ will assist in the transition to the new plan at the expense of the
Company. If requested, ▇▇▇▇▇▇▇▇ will use CRE to provide an accounting of the
financial obligations of the Company as of a date certain prior to Closing.
7.14 PAYMENT TO ▇▇▇▇ AND ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇. Post-Secondary Transaction
Sellers will cause the Company to pay ▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ the sum
of $875,000, less any required withholding of Taxes that must be paid by the
Company to the appropriate Governmental Authority, and will also pay all Marcus
Payment Taxes, upon Closing and contingent on execution and delivery of EXHIBIT
F by all parties to Exhibit F.
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7.15 PRISM AGREEMENT. Prior to Closing, Buyer will commence the
installation of its PRISM software system and related equipment in the Private
Stores and the Leased Contract Stores. If the Transaction is not consummated for
any reason, the Company will permit Buyer to remove the PRISM System and
equipment from such installations between November 1 and December 15, 2006, and
neither party shall have any further liability or obligation to the other with
respect thereto.
7.16 QUALIFIED PLAN CONTRIBUTIONS. The Company shall be permitted to
contribute the sum of $300,000 to the ESOP, and to contribute the customary
amount of the employer's portion to the Company's Profit Sharing and Savings
Plan, and such payments shall be considered to be in the OCB.
7.17 SHAREHOLDER AGREEMENTS. The Shareholder Agreements will be
terminated at Closing.
8. OTHER AGREEMENTS.
8.1 TAX MATTERS. The following provisions shall govern the allocation
of responsibility as between Buyer and the Sellers, and other rights and
obligations for certain tax matters:
(a) APPORTIONMENT OF TAXES BETWEEN PRE-CLOSING AND POST-CLOSING
TAX Periods. In order to appropriately apportion any Tax relating to any taxable
year or any other period that is treated as a taxable year (a "Tax Period") that
includes (but that would not, but for this Section, close on) the Closing Date,
the parties hereto will, unless specifically prohibited by applicable Law, elect
or cause the Company to elect with the relevant taxing authority to treat for
all purposes the Closing Date as the last day of a taxable period of the
Company, and such Tax Period shall be referred to herein as a "Pre-Closing Tax
Period" for purposes of this Agreement. In furtherance of the foregoing, Buyer
and Sellers agree to calculate the tax liability for the Pre-Closing Tax Period
as if the tax year had ended or changed, including having a short tax year and
applying short tax year rules, including short year depreciation, to the
calculation and allocation of tax to the Pre-Closing Tax Period.
(b) PREPARATION AND FILING OF TAX RETURNS. The Company shall be
responsible for the preparation and filing of all of the Company's Federal,
state and local income Tax Returns due following the Closing, as of the Closing
Date. Such returns shall be prepared by the Buyer's public accounting firm, and
submitted for review and approval by the Post-Secondary Transaction Sellers, not
to be unreasonably withheld, conditioned or delayed. Notwithstanding the
foregoing, Buyer has the right to timely file the returns with or without the
consent or approval of Post-Secondary Transaction Sellers. Tax professional fees
to prepare the Tax Returns and any Tax Liability, subject to Sellers'
obligations with respect to any Tax Liability in excess of $1,600,000, with
respect thereto will be paid solely by the Company post-Closing, and such fees
will not be considered a Seller Transaction Cost or otherwise create any Closing
adjustment or Purchase Price Adjustment or other obligation for the Sellers
other than expressly provided to the contrary in this Agreement.
(c) COOPERATION. To the extent capable, the Management Group (so
long as reimbursed by Company for any out-of-pocket costs and expense) and the
Buyer shall, and shall cause the Company to, provide each other, as promptly as
practicable, with such assistance as may reasonably be requested by them in
connection with the preparation of any Tax Return, any Tax audit or other
examination by any Governmental Authority, or any judicial or administrative
proceedings related to liability for Taxes. The Management Group (so long as
reimbursed by Company for any out-of-pocket costs and expense) and Buyer shall,
and shall cause the Company to, retain and provide each other with any records
or information which may be relevant to such preparation, refund claim, audit,
examination, proceeding or determination. Such assistance shall include
providing copies of any relevant Tax Returns and supporting work schedules. The
Management Group (so long as reimbursed by Company for any out-of-pocket costs
and expense) and the Sellers, upon request, shall each use their best efforts to
obtain any certificate or other document from any taxing authority, or customer
of the Company or any other Person as may be necessary to properly mitigate,
reduce or eliminate any Taxes (including related interest and penalties) that
would otherwise be imposed with respect to the Company or the Transactions.
(d) TAX SHARING AGREEMENTS. Any and all Tax (or similar)
agreements, arrangements or undertaking among the Sellers or their Affiliates
and the Company that relate to any liability of the Company for the Taxes of the
Sellers shall terminate as of the Closing Date and any rights or obligations
resulting from such agreements shall be eliminated as of the Closing Date.
(e) NOTICE OF AUDIT. If, in connection with any examination,
investigation, audit or other proceeding concerning any Tax Return covering the
operations of the Company for any Pre-Closing Tax Period, any Governmental
Authority issues to any of the parties hereto or the Company a notice of
deficiency, a proposed adjustment, an assertion of claim or a demand concerning
the Tax Period covered by such Tax Return, the recipient shall notify the other
party that it has received the same within 10 calendar days of its receipt.
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(f) AUDITS CONTROLLED BY BUYER. The Buyer shall have the sole and
exclusive right, power and authority to negotiate, resolve, settle or contest
any such notice of deficiency, proposed adjustment or assertion of claim or
demand in connection with any such examination, investigation, audit or other
proceeding of any Tax Return of the Buyer or the Company for Post-Closing Tax
Periods at Buyer's sole cost and expense; provided, however, Buyer shall not
have any right to any indemnification under Article 10 or other recovery against
Sellers with respect to such Tax matter unless Buyer complies with the terms of
Article 10. With respect to any such activities relating to any Pre-Closing Tax
Periods of the Company, the Sellers shall be given the opportunity to
participate, and no resolution or settlement of any such claim or demand shall
be made without the consent of the Sellers' Representative as provided in
Article 10.
(g) WITHHOLDING. The Sellers shall each provide a certification
of non-foreign status containing the information required in Regulation Section
1.1445-2(b)(2) promulgated under the Code and any other forms, certificates or
other documents necessary to avoid withholding on any portion of the Purchase
Price.
(h) CERTAIN TAXES. All transfer, documentary, sales, use, stamp,
registration and other such Taxes (including any penalties and interest)
incurred in connection with this Agreement shall be paid by the Buyer when due,
and the Buyer will, at its own expense, file all necessary Tax Returns and other
documentation with respect to all such transfer, documentary, sales, use, stamp,
registration and other Taxes and fees, and, if required by applicable Law,
Sellers will join in the execution of any such Tax Returns and other
documentation.
(i) AUDIT PROCEDURES. In the case of any proceeding referenced in
subparagraph (f) above with respect to any Pre-Closing Tax Periods of the
Company, for which one or more of the Post-Secondary Transaction Sellers is or
may be liable pursuant to this Agreement, Buyer shall promptly inform the
Post-Secondary Transaction Sellers and shall afford such Sellers, at each such
Seller's expense, the opportunity to control the conduct of such proceedings as
provided in Article 10. Buyer shall (and shall cause Company and its successors
to) execute or cause to be executed powers of attorney or other documents
necessary to enable such Sellers to take all actions with respect to such
proceedings to the extent such proceedings may affect the amount of Damages (as
defined in Article 10) for which such Seller(s) is (are) liable pursuant to this
Agreement.
(j) BUYER ACTIONS. Notwithstanding any other provision of this
Agreement to the contrary, no Seller shall have any liability under this
Agreement to Buyer or any other Indemnified Buyer Party, for or in connection
with any Tax liability incurred by the Company, or any successor of the Company,
which results from the Transactions, any election made by Buyer, the Company or
any successor in interest under Code Section 338, or any other action taken by
Buyer, or by the Company or any successor in interest to Company, after the
Closing, including, but not limited to Buyer's election to have the Company
included in its consolidated group. Buyer agrees that it shall not permit or
cause the filing of any amended Tax Return, or the agreement to any adjustment
or assessment with any taxing Governmental Authority with respect to the
Company, or any successor, for any Pre-Closing Tax Period or other period which
includes any period of time on or prior to the Closing Date, if any Seller may
have any liability with respect thereto, either under this Agreement or by
operation of Law, without the prior written consent of such Sellers, which
consent shall not be unreasonably withheld, conditioned or delayed.
8.2 FURTHER ASSURANCES. Subject to EXHIBIT B, consistent with the
terms and conditions hereof, each party hereto will use its commercially
reasonable efforts to execute and deliver such other documents and take such
other actions as reasonably requested by the other party to fulfill the
conditions precedent to the obligation of the other party to consummate the
Closing, or as the other party hereto may reasonably request in order to carry
out this Agreement and the transactions contemplated hereby. In addition, the
parties shall cooperate reasonably with each other in connection with any
litigation brought by a third party, audit, inquiry, investigation or similar
proceeding with respect to the Company or the Leased Store Contracts and Bids.
8.3 RETENTION OF EMPLOYEES. Buyer agrees to cause the Company to
initially retain substantially all of the employees of the Company following the
Closing and to make no material reductions in compensation. This provision is
not intended to be a contract or assurance of employment for any employee for
any period of time, and there are no third party beneficiaries with respect to
this provision. This provision does not apply to the Sellers who execute
Employment Agreements in connection with the Transactions.
8.4 TRAINING OF EMPLOYEES. The parties acknowledge that it may be
necessary for Buyer to train Company's employees on various computer systems
after the Agreement Date but before Closing in order to ensure a successful
transition post-Closing. Buyer has agreed to pay for any and all costs
associated with training those employees (or classes of employees) Buyer feels
are required to obtain the necessary knowledge, including, but not limited to,
airfare, hotel rooms and other reasonable travel expenses incurred in accordance
with Company's policies on such expenses; provided, however, that Buyer shall
not be responsible for paying any salaries incurred during any training period.
Training will only occur on prior notice to the Management Group and at times
and places and involving employees agreed to by the Management Group, so as to
not unreasonably interfere with the operation of the Company's business.
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8.5 POST-CLOSING RETIREMENT PLANS ACTIONS. Subject to Law and the
applicable Benefit Plan documents, Buyer agrees to the following: (i) to cause
the Company to appoint a successor trustee or trustees of the ESOP Trust and the
Profit Sharing and Savings Plan upon the resignation of the present trustees;
(ii) to cause the Company to take appropriate actions to amend the ESOP Trust
and Plan to prohibit distributions in the form of employer stock; (iii) to cause
the Company to promptly terminate the ESOP Trust and Plan and apply for a
determination letter with regard to such termination; (iv) to cause the ESOP
Trust and Plan to promptly allow distributions of any assets in the
participants' accounts that are not subject to Deferred Consideration Escrow as
soon as administratively feasible after receipt of the determination letter with
regard to such termination that approves the terminating distributions in more
than one installment and over a period of time consistent with payment and
distributions under this Agreement; (v) to cause the ESOP Trust and Plan to
promptly allow distributions of any assets in the participants' accounts that
have not previously been distributed upon receipt by the Trustees of the ESOP
Trust of any funds distributed from the Deferred Consideration Escrow, Other
Claims Escrow, or otherwise distributed under this Agreement and; (vi) to permit
the ESOP action described in Section 11.10. Buyer agrees to cause the Company to
pay the costs involved in termination of the ESOP Trust and Plan which would
constitute a prohibited transaction under Section 406 of ERISA if paid by the
ESOP Trust.
9. CONDITIONS TO CLOSING.
9.1 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The obligations of
the parties hereto to consummate the transactions contemplated by this Agreement
shall be subject to the satisfaction or written waiver by Buyer and the Sellers,
at or prior to the Closing, of the condition that no statute, rule, regulation,
executive order, decree, preliminary or permanent injunction or restraining
order shall have been enacted, entered, promulgated or enforced by any
Governmental Authority which prohibits or restricts the consummation of the
Transactions.
9.2 CONDITIONS TO OBLIGATIONS OF BUYER. Subject to anything contained in
Section 3.3 to the contrary, the obligations of Buyer to consummate the
Transactions shall be subject to the satisfaction or written waiver by Buyer, at
or prior to the Closing, of each of the following conditions:
39
(a) The Sellers and the Company shall have performed and complied
in all material respects with all agreements and covenants required to be
performed and complied with by them under this Agreement at or prior to the
Closing.
(b) The representations and warranties of the Management Group
and Sellers in Articles 4 and 5 of this Agreement that are qualified as to
materiality shall be true and correct, and those that are not so qualified shall
be true and correct in all material respects, in each case, at and as of the
Agreement Date and at and as of the Closing Date as though restated on and as of
such date (except in the case of any representation or warranty that by its
terms is made as of a date specified therein, in which case such representation
or warranty that is qualified as to materiality shall be true and correct as of
the date specified, and any representation or warranty not so qualified shall be
true and correct in all material respects, as of such date).
(c) Buyer shall have received from the Management Group and each
of the Post-Secondary Transaction Sellers, severally and not jointly, a
certificate signed by the Management Group, or such Post-Secondary Transaction
Seller, respectively, as to the Management Group's and such Post-Secondary
Transaction Seller's compliance with the conditions set forth in paragraphs (a)
and (b) of this Section 9.2, as to the Management Group and such Post-Secondary
Transaction Seller, as applicable.
(d) For each creditor identified on any UCC or other Lien search
performed by Buyer and provided to the Management Group and/or SCHEDULE 4.10,
either a release of the Lien or a payoff letter from such creditor indicating
that upon receipt of payment of a sum certain, it will terminate and release its
Lien. All Liens on the Assets or the Shares, other than Liens on Assets
identified on SCHEDULE 9.2(D) to remain after Closing and the Permitted Liens,
will have been released and the Management Group will have delivered to Buyer
UCC-3 termination statements or other releases reasonably satisfactory to Buyer
to evidence such releases.
(e) The Company shall not have any material Indebtedness other
than the ESOP Loan and any Indebtedness reflected or footnoted on the Reference
Balance Sheet or as identified on SCHEDULE 9.2(E), and since February 8, 2006,
the Company shall not have incurred any Indebtedness, other than accounts
payable incurred in the ordinary course of business and operating line of credit
transactions with respect to the Company's business, without the approval of
Buyer.
(f) All Indebtedness of any Seller and the employees to the
Company shall have been fully paid prior to the Closing, and all related party
accounts involving the Company and its Affiliates that are set forth on SCHEDULE
9.2(F) shall have been settled and satisfied. For purposes of clarification,
borrowing on Company's line of credit to pay outstanding amounts owed to
Company's Affiliates shall not be considered as Material Adverse Change.
(g) Between June 30, 2005, and the Closing, no Material Adverse
Change shall have occurred with respect to the business taken as a whole;
provided that the following shall not be considered a Material Adverse Change
with respect to the business taken as a whole: (i) Leased Store Contracts that
were not extended or renewed in the OCB since June 30, 2005, and (ii) Leased
Store Contracts that are cancelled or terminated by any party other than the
Company pursuant to the announcement of the Transactions.
(h) At the Closing, each of the Sellers and the Company shall
have delivered the items required to be delivered by such Seller or Company, as
applicable, pursuant to Section 3.2.
(i) Sellers shall cause the Company to update its corporate
minute book to be reasonably complete and to address all material Board or
Shareholder corporate actions since January 2004, if not presently included in
such records.
(j) Buyer shall have received the Employment Agreements and
Covenant Not to Compete, substantially in the form of EXHIBIT C-1, executed by
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and Exhibit C-2 for E.
▇▇▇▇▇ ▇▇▇▇▇.
(k) Buyer shall have received the Noncompetition Agreement,
substantially in the form of EXHIBIT C-3, executed by ▇▇▇▇▇▇▇▇.
(l) Buyer shall have received from legal counsel on behalf of
each of the Post-Secondary Transaction Sellers a legal opinion in the form and
substance of EXHIBIT D-1 and EXHIBIT D-2.
(m) The Post-Secondary Transaction Sellers, Buyer and the Escrow
Agent shall have executed and delivered the Escrow Agreement and the Other
Claims Escrow Agreement, and such agreements shall remain in full force and
effect.
(n) Except for the specific obligations identified on EXHIBIT E
with respect to ▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, each of the Post-Secondary
Transaction Sellers, for himself, herself, or itself and his, her or its heirs,
personal representatives, administrators, successors and assigns, shall deliver
a general release of all claims against the Company, in form and content
reasonably satisfactory to Buyer, for circumstances occurring or existing or
related to the period of time prior to the Closing, provided, however, that the
release will not affect any obligations of Buyer to the Sellers under this
Agreement or any other Transaction Document, nor COBRA rights or other rights
required by Law.
40
(o) The ESOP's trustees shall have delivered an accounting of all
trust assets and such other ESOP documents and records as may be reasonably
requested by Buyer, their written resignation as ESOP trustees, and if
requested, transfer of retirement accounts to representatives of Buyer in
compliance with applicable plan documents.
(p) The Management Group shall have delivered all Required
Consents unless the delivery of one or more of such Required Consents is waived
in writing by Buyer. Buyer acknowledges that it does not require delivery of any
of the Required Consents set forth on the Schedule 4.5; provided that Buyer
reserves the right to require delivery any Required Consents that may be
included in any updates to Schedule 4.5.
(r) At Closing, Buyer and ▇▇▇▇▇▇▇▇ will enter into a five (5)
year agreement with customary prices and terms whereby:
1. As soon as the arrangement contemplated under
Paragraph (r) 2. below begins for at least one of the Private Stores,
Buyer and the Company will purchase, on an exclusive basis, products
distributed by ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ Health Science Supply as long as terms
are competitive and supply is sufficient, or as otherwise terminable in
such Agreement. If ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ terms are not competitive, in
Buyer's sole discretion, Buyer and the Company agree to notify ▇▇▇▇▇▇▇▇
and give them a reasonable opportunity to match terms and conditions of
competitors' offers.
2. Upon expiration or earlier termination of its
agreements and restrictions involving MBS Textbook Supply, as determined
by ▇▇▇▇▇▇▇▇, the Private Stores owned by ▇▇▇▇▇▇▇▇ will buy and sell
non-medical used textbooks on an exclusive basis with Buyer as long as
terms are competitive and supply is sufficient.
a. As soon as reasonably possible after such time,
▇▇▇▇▇▇▇▇ will change to PRISM with respect to such
stores.
b. Buyer agrees to allow ▇▇▇▇▇▇▇▇ to utilize the
Advantage Dollars Program with this arrangement to
buy Prism systems for its stores.
(s) Buyer and E. ▇▇▇▇▇ ▇▇▇▇▇ enter into the Employment Agreement
attached hereto as EXHIBIT C-1 that includes language related to ▇▇▇▇▇▇▇▇ (the
"▇▇▇▇▇ Amendments").
(t) The Company, ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ enter
into an amendment of the Health Care Retiree Benefits Agreement set forth in
EXHIBIT F, including a ratification of the non-compete covenants of ▇▇▇▇ ▇▇▇▇▇▇
and his Affiliates.
(u) Sellers shall cause the exceptions noted in Section 4.7 to be
terminated and the restrictions set forth to be released.
(v) Buyer shall have obtained reasonably satisfactory commitments
to finance the Transactions and waivers or consents of any restrictions with
respect to its credit facility; provided that if Buyer terminates this Agreement
because of a failure of this condition, Buyer and the Company will mutually
agree to prepare a press release that states, in substance, that the transaction
could not close due to issues related to Buyer's financial covenants, and Buyer
will not unreasonably withhold or delay its consent to such press release.
(x) The Secondary Transaction shall have been consummated in
accordance with the terms of this Agreement.
(y) Upon execution of this Agreement by the parties, Sellers will
cause the Company to deliver the Income Statements to Buyer as described in
Section 4.8(b), if not previously delivered, and the unredacted Leased Store
Contracts. Buyer shall have the right to terminate this Agreement by written
notice to Sellers' Representative (i) at any time prior to April 21, 2006 if
such deliveries are either not made or are not timely made, in which event such
termination will not result in liability or obligation of any party hereto, or
(ii) if Buyer determines in its sole and absolute discretion that the financial
information and results of operations set forth thereon indicates a Material
Adverse Change in the financial condition or operations of the Company, provided
that Buyer shall pay the Company a cancellation fee of $300,000 if such
termination is on or prior to April 17, 2006, and provided further, that the
cancellation fee shall be $500,000 if such termination is on or after April 18,
2006.
(z) The Company and ▇▇▇▇▇▇▇▇ will enter into a mutually
acceptable agreement to describe shared resources and obligations, and to
allocate the obligations between them, the terms of which will be subject to
reasonable approval by the Buyer.
9.3 CONDITIONS TO OBLIGATIONS OF THE SELLERS. The obligations of the
Sellers to consummate the transactions contemplated by this Agreement shall be
subject to the satisfaction or written waiver by all affected Post-Secondary
Transaction Sellers, at or prior to the Closing, of each of the following
conditions:
41
(a) Buyer shall have performed and complied in all material
respects with all agreements and covenants required to be performed and complied
with by Buyer under this Agreement at or prior to the Closing.
(b) The representations and warranties of Buyer in Article 6 of
this Agreement that are qualified as to materiality shall be true and correct,
and those that are not so qualified shall be true and correct in all material
respects, in each case, at and as of the Agreement Date and at and as of the
Closing Date as though restated on and as of such date (except in the case of
any representation or warranty that by its terms is made as of a date specified
therein, in which case such representation or warranty that is qualified as to
materiality shall be true and correct as of such specified date and any
representation or warranty not so qualified shall be true and correct in all
material respects, as of such date).
(c) The Sellers shall have received from Buyer a certificate
signed by an appropriate officer of Buyer as to Buyer's compliance with the
conditions set forth in paragraphs (a) and (b) of this Section 9.3.
(d) The Sellers shall have received the Closing Payments (less
any amounts withheld or otherwise paid pursuant to Section 2.2(c)).
(e) The Sellers, Buyer and the Escrow Agent shall have executed
and delivered the Escrow Agreement, and such agreement shall remain in full
force and effect, and Escrow Agent shall have received the Deferred
Consideration.
(f) The Company shall have executed employment agreements with E.
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ on terms mutually
satisfactory to be effective after Closing.
(g) The ESOP trustees shall have approved the Transaction, and if
requested, the ESOP trustees shall have received a fairness opinion.
(h) Buyer and ▇▇▇▇▇▇▇▇ enter into the ▇▇▇▇▇▇▇▇ - Buyer Agreement
as described in Section 9.2(r).
(i) Buyer and E. ▇▇▇▇▇ ▇▇▇▇▇ enter into an employment agreement
which contain the ▇▇▇▇▇ Amendments.
(j) The Secondary Transaction shall have been consummated, and
the Company shall have paid the dividend referred to in Section 7.12(d) to the
Post-Secondary Transaction Sellers.
(k) Buyer shall have delivered Required Consents to be delivered
by Buyer, if any.
(l) The Post-Secondary Transaction Sellers, Buyer and the Escrow
Agent shall have executed and delivered the Escrow Agreement and the Other
Claims Escrow Agreement, and such agreements shall remain in full force and
effect.
(m) The Company, ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ enter
into an amendment of the terms of their agreements in the form set forth in
EXHIBIT F, including a ratification of the non-compete covenants of ▇▇▇▇ ▇▇▇▇▇▇
and his Affiliates.
10. INDEMNIFICATION.
10.1 BY SELLERS.
42
(a) From and after the Closing Date, to the extent provided in
this Article 10, each Post-Secondary Transaction Seller shall jointly and
severally indemnify and hold harmless Buyer and the Company, and their
respective Affiliates, officers, directors, employees and agents, and their
respective heirs, successors and assigns (each, an "Indemnified Buyer Party")
from and against, and shall promptly pay or reimburse each such Person for, any
and all Liabilities, obligations, deficiencies, demands, claims, suits, actions,
or causes of action, assessments, losses, costs, expenses, interest, fines,
penalties, damages or costs or expenses of any and all investigations,
proceedings, judgments, settlements and compromises (including reasonable
attorneys' fees and other reasonable disbursements of every kind, nature and
description incurred by such Indemnified Buyer Party in connection therewith)
(collectively, "Damages") that such Indemnified Buyer Party sustains and that
results from or arises out of:
(i) any inaccuracy or breach of any representation or
warranty of the Management Group in Article 4 of this Agreement, the Schedules
or the closing certificate, or any allegation by any third party that, if true,
would constitute such a breach;
(ii) any non-compliance with or breach or inaccuracy of
any covenant or agreement of the Management Group arising under this Agreement
or any allegation by any third party that, if true, would constitute such a
breach;
(iii) any Liability, lawsuit, claim or proceeding existing
at or prior to the Closing or arising out of any act or transaction of the
Company occurring prior to the Closing, or arising out of facts or circumstances
that existed at or prior to the Closing that in each case, is related to the
Company, the Assets or the operation or conduct of the Company's business prior
to Closing, to the extent not reflected as a Liability on the June 30, 2005
Annual Financial Statements or the Schedules, or which has not occurred in the
OCB, except for the Excluded Schedule 10.8 Items;
(iv) any Liability and claims related to the Secondary
Transaction, including, without limitation, any claims by employees of the
Private Stores and any Liabilities and claims associated with the operation of
the Private Stores prior to Closing; or
(v) any liability for Taxes incurred by the Company or
Buyer in excess of $725,000 as a result of the disallowance of all or a portion
of the income tax deduction claimed by the Company for the payment to ▇▇▇▇
▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ that is described in Section 7.14, provided that the
Post-Secondary Transaction Sellers shall have no obligation to indemnify for the
first $725,000.
(b) From and after the Closing Date, to the extent provided in
this Article 10, each Seller shall severally, and not jointly, indemnify and
hold harmless each Indemnified Buyer Party from and against any Damages that
such Indemnified Buyer Party sustains and that results from or arises out of:
(i) any inaccuracy or breach of any representation or
warranty of such Seller in Article 5 of this Agreement or the certificate
delivered under Section 9.2(c) or any allegation by any third party that, if
true, would constitute such a breach; or
(ii) any non-compliance with or breach or inaccuracy of
any covenant or agreement of such Seller arising under this Agreement, other
than a breach by the Management Group, or any allegation by any third party
that, if true, would constitute such a breach;
(c) The term "Damages" as used herein is not limited to matters
asserted by third parties against an Indemnified Buyer Party or Indemnified
Seller Party, but also includes actual Damages incurred or sustained by an
Indemnified Buyer Party or Indemnified Seller Party in the absence of third
party claims.
(d) The right to indemnification set forth in Section 10.1 will
not be affected by the due diligence investigation conducted by Buyer.
10.2 BY BUYER. From and after the Closing Date, to the extent provided
in this Article 10, Buyer shall indemnify and hold harmless the Post-Secondary
Transaction Sellers, their Affiliates, and their respective heirs, successors
and assigns (each, an "Indemnified Seller Party") from and against any Damages
that such Indemnified Seller Party may sustain, suffer or incur and that results
from or arises out of:
43
(i) any inaccuracy or breach of any representation or
warranty of Buyer in this Agreement or the Schedules or the certificate
delivered under Section 9.2(c) or any allegation by any third party that, if
true, would constitute such a breach; or
(ii) any non-compliance with or breach or inaccuracy of
any covenant or agreement of any Buyer arising under this Agreement, or any
allegation by any third party that, if true, would constitute such a breach; or
(iii) the operation of the Company or its business after
the Closing, other than for Claims against such Seller arising from any default
by such Seller to perform any obligation under this Agreement or any Transaction
Documents to which such Seller is a party.
10.3 INDEMNIFICATION PROCESS. The party or parties making a claim for
indemnification under this Article 10 shall be, for the purposes of this
Agreement, referred to as the "Indemnified Party" and the party or parties
against whom such claims are asserted under this Article 10 shall be, for the
purposes of this Agreement, referred to as the "Indemnifying Party". All claims
by any Indemnified Party under this Article 10 shall be asserted and resolved as
follows:
44
(a) In the event that (i) any demand or Litigation is asserted or
instituted by any Person other than the parties to this Agreement or their
Affiliates which could give rise to Damages for which an Indemnifying Party
could be liable to an Indemnified Party under this Agreement (such demand or
Litigation, a "Third Party Claim") or (ii) any Indemnified Party under this
Agreement shall have a claim to be indemnified by any Indemnifying Party under
this Agreement which does not involve a Third Party Claim (such claim, a "Direct
Claim" and, together with Third Party Claims, "Claims"), the Indemnified Party
shall promptly, and in any event no more than 15 days following receipt of
notice of such demand or Litigation, send to the Indemnifying Party a written
notice specifying the nature of such demand or Litigation and the amount or
estimated amount thereof (which amount or estimated amount shall not be
conclusive of the final amount, if any, of such demand or Litigation) (a "Claim
Notice"), PROVIDED that a delay in notifying the Indemnifying Party shall not
relieve the Indemnifying Party of its obligations under this Agreement except to
the extent, if at all, that the Indemnifying Party shall have been prejudiced
thereby.
(b) In the event of a Third Party Claim, the Indemnifying Party
shall be entitled to, subject to the limitations set forth in Section 10.3(d)
below, appoint and control counsel of the Indemnifying Party's choice at the
expense of the Indemnifying Party to represent the Indemnified Party (in which
case the Indemnifying Party shall not thereafter be responsible for the fees and
expenses of any separate counsel retained by any Indemnified Party except as set
forth below); PROVIDED that such counsel is reasonably acceptable to the
Indemnified Party. The Indemnifying Party shall keep the Indemnified Party
informed of any material developments with respect to such Third Party Claim and
shall consult with the Indemnified Party as to the proper course of action with
due regard to the latter's business interests. Notwithstanding an Indemnifying
Party's election to appoint counsel to represent an Indemnified Party in
connection with a Third Party Claim, an Indemnified Party shall have the right
to employ another separate counsel, and the Indemnifying Party shall bear the
reasonable fees, costs and expenses of such other separate counsel if (i) the
use of counsel selected by the Indemnifying Party to represent the Indemnified
Party would present such counsel with a conflict of interest in the subject
matter of the Third Party Claim that would make it inappropriate for the same
counsel to represent both the Indemnified Party and the Indemnifying Party or
(ii) the Indemnifying Party shall not have retained counsel to represent the
Indemnified Party within a reasonable time after notice of the institution of
such Third Party Claim.
(c) If the Indemnifying Party shall assume the control of the
defense of any Third Party Claim in accordance with the provisions of Section
10.3(b), the Indemnifying Party shall obtain the prior written consent of the
Indemnified Party (which shall not be unreasonably withheld) before entering
into any settlement of such Third Party Claim. If an Indemnified Party refuses
to consent to a bona fide offer of settlement which the Indemnifying Party
wishes to accept that provides solely for a monetary payment, imposes no
injunctive or other equitable relief against the Indemnified Party and expressly
unconditionally releases the Indemnified Party from all liabilities and
obligations with respect to such Third Party Claim, the Indemnified Party may
continue to pursue such matter, free of any participation by the Indemnifying
Party, at the sole expense of the Indemnified Party. In such event, the
obligation of the Indemnifying Party, if any such obligation is eventually
established, shall be limited to the amount of the offer of settlement that the
Indemnified Party refused to accept plus the costs and reasonable expenses of
the Indemnified Party for which indemnification otherwise applies prior to the
date the Indemnifying Party notified the Indemnified Party of the offer of
settlement.
(d) The Indemnifying Party shall not be entitled to assume or
maintain control of the defense of any Third Party Claim and shall pay the
reasonable fees and expenses of counsel retained by the Indemnified Party if the
Third Party Claim (i) relates to or arises in connection with any criminal
proceeding, action, indictment, allegation or investigation, or (ii) seeks a
suspension, a debarment, an injunction or equitable relief against the
Indemnified Party.
45
(e) No Indemnifying Party will be subject to any liability for
any settlement made without its consent (but such consent shall not be
unreasonably withheld or delayed).
(f) If requested by the Indemnifying Party, the Indemnified Party
shall cooperate with the Indemnifying Party and its counsel in contesting any
demand or Litigation which the Indemnifying Party defends, or, if appropriate
and related to the demand or Litigation in question, in making any counterclaim
against the person asserting the Third Party Claim, or any cross-complaint
against any Person.
(g) In the event of a Direct Claim, the Indemnifying Party shall
notify the Indemnified Party within 15 days of receipt of a Claim Notice whether
or not the Indemnifying Party disputes such claim.
(h) From and after the delivery of a Claim Notice under this
Agreement, at the reasonable request of the Indemnifying Party, each Indemnified
Party shall grant the Indemnifying Party and its representatives all necessary
access to the employees, books, records and properties of such Indemnified Party
to the extent reasonably related to the matters to which the Claim Notice
relates. All such access shall be granted under conditions that will not
unreasonably interfere with the business and operations of such Indemnified
Party. The Indemnifying Party will not, and shall require that its
representatives do not, use (except in connection with such Claim Notice) or
disclose to any third person other than the Indemnifying Party's representatives
(except as may be required by applicable Law) any information obtained pursuant
to this Section 10.3(h) which is designated as confidential by an Indemnified
Party.
10.4 LIMITATIONS ON CLAIMS.
(a) LIABILITY THRESHOLDS. Notwithstanding anything in this
Article 10 to the contrary, Buyer shall not assert a claim under Section 10.1(a)
unless the amount of such claim exceeds $100,000, or the total amount of all
claims Buyer has under Section 10.1(a) exceeds $350,000 (the "Basket Amount");
provided, however, that this limitation shall not apply to claims for breaches
under Section 4.2 (Capitalization, etc.), Section 4.4 (Authorization by
Company), Section 4.9 (Taxes) with respect to federal and state Taxes only, or
Section 4.25 (Employees and Independent Contractors). All Taxes other than
federal and state Taxes will be applied first against the Basket Amount.
(b) LIABILITY CAP.
(i) CLAIMS UNDER SECTION 10.1(A). Notwithstanding anything
to the contrary contained in this Agreement, the maximum aggregate amount to
which the Indemnified Buyer Parties may be entitled with respect to claims under
Section 10.1(a) shall be the amount of the Deferred Consideration, provided,
however, that the limits set forth in this Section 10.4(b) shall not apply to
any Seller for claims that result from or arise out of fraud or bad faith of
such Seller.
(ii) CLAIMS UNDER SECTION 10.1(B). Notwithstanding
anything to the contrary contained in this Agreement, the maximum aggregate
amount to which the Indemnified Buyer Parties may be entitled with respect to
claims under Section 10.1(b) from each Seller shall be the Pro Rata Portion of
the Purchase Price paid to such Seller with respect to his, her or its Shares,
provided that the amount recovered by the Indemnified Buyer Parties from any
Seller under this entire Agreement, including amounts recovered from the Escrow,
shall not exceed such Seller's Pro Rata Portion of the Purchase Price.
46
(c) SURVIVAL. The representations and warranties of the
Management Group contained in Article 4 of this Agreement and Claims for
indemnification under Section 10.1(a) shall survive the Closing for the
applicable period set forth in this Section 10.4(c), and any and all claims and
causes of action for indemnification under this Article 10 must be made prior to
the termination of the applicable survival period.
(i) All of the representations and warranties of the
Post-Secondary Transaction Sellers contained in Article 5 of this Agreement or
in the certificate referred to in Section 9.2(c) and any and all claims and
causes of action for indemnification under Article 10(b) shall survive until 60
days following expiration of the applicable statue or similar period of
limitations;
(ii) The representations and warranties of the Management
Group contained in Section 4.7 (Third-Party Options), Section 4.9 (Taxes), and
any nature of claim under Section 4.24 with respect to the ESOP and the Claims
for indemnification related thereto shall survive until 60 days following
expiration of the applicable statue or similar period of limitations; and
(iii) All other representations and warranties of the
Management Group and Claims for indemnification under this Article 10 shall
survive until the date that is the thirty (30) months following the Closing
Date.
In the event an Indemnified Party delivers notice of any claim as provided under
this Article 10 within the applicable survival period, the representations and
warranties that are the subject of such indemnification claim shall survive with
respect to such claim until such time as such claim is finally resolved.
(d) SEVERAL LIABILITY. After the release of the Deferred Consideration
from the Escrow, the Post-Secondary Transaction Sellers other than the ESOP
shall be severally (and not jointly and severally) liable for Damages incurred
by Buyer for Claims described in Section 10.4(c)(ii), provided that the maximum
amount of such Damages that Buyer may recover after such release from any Seller
shall not exceed such Seller's Pro Rata Portion based on such Seller's Closing
Shares, and from all such Sellers shall not exceed $500,000; and provided
further that the aggregate recovery by Buyer for all indemnification claims
under this Article 10 shall not exceed the amount of the Deferred Consideration.
(e) CLAIMS UNDER SECTION 4.2(A). In the event that any Seller breaches
such Sellers' representations and warranties in Section 5.1(a) or 5.1(b), and
such breach causes a breach of either the second or third sentence of Section
4.2(a), Buyer agrees to pursue its remedies against such Seller before it
pursues its Claim against the Post-Secondary Transaction Sellers for breach of
Section 4.1(a); provided, that Buyer shall have the right to assert a Claim to
the Escrow Agent for indemnification in accordance with Section 10.3, and the
amount of Damages or threatened Damages shall be held pursuant to the terms of
this Article 10 until the Claim is resolved with respect to the breaching
Seller.
10.5 EXCLUSIVITY OF INDEMNIFICATION REMEDY. Except for any equitable
relief, including injunctive relief or specific performance, to which any party
hereto may be entitled, from and after the Closing, the indemnification for
Damages provided in this Article 10 shall be the sole and exclusive remedy of
any party hereto with respect to this Agreement, and no party shall be entitled
to rescission of the Agreement except that the foregoing will in no way limit
the rights of an Indemnified Party for any fraud or intentional misconduct by a
party in connection with this Agreement, the documents executed in connection
herewith or the transactions contemplated hereby. Additionally, Buyer agrees
that in the event the Closing does not occur as a result of any Seller's or the
Company's failure to satisfy a pre-closing condition under Section 9.2,
including but not limited to any inaccuracy in any representation or warranty or
breach of any covenant or condition, the Company shall pay Buyer the sum of
$200,000 as liquidated damages, which shall be the sole and exclusive remedy of
Buyer, for any and all Buyer claims arising out of, caused by or relating to
termination of the Agreement prior to Closing.
47
10.6 CHARACTERIZATION OF INDEMNIFICATION PAYMENTS. Buyer and the
Post-Secondary Transaction Sellers agree to treat any payment made under this
Article 10 in respect of a breach of a representation or warranty as an
adjustment to the Purchase Price.
10.7 DEFERRED CONSIDERATION. All finally determined due and owing
Damages for Claims Buyer has under Section 10.1(a) will first be applied against
the Basket Amount in Section 10.4(a), then any amount which exceeds the Basket
Amount shall be deducted from the balance of the Escrow established in Section
2.2(b) and distributed to Buyer in accordance with the Escrow Agreement. Buyer
cannot recover Damages from any Seller except out of the Deferred Consideration
Escrow, the Other Claims Escrow (to the extent provided in the relevant escrow
agreements) and except as provided in Section 10.4(d) and Section 10.1(b).
10.8 SCHEDULE 10.8 INDEMNIFICATION ITEMS. The Post-Secondary
Transaction Sellers shall indemnify and hold harmless the Buyer Indemnified
Parties on the matters set forth on SCHEDULE 10.8, and resulting Damages that
relate to specific disclosures by the Management Group on Schedules 10.8, and
Buyer shall not be obligated to provide notice of such Claim under Section 10.3.
Damages incurred by Buyer Indemnified Parties from the Schedule 10.8
Indemnification Items shall be included in the Basket Amount, and shall be
subject to the liability cap of Section 10.4(b)(i), the survival period of
Section 10.4(c)(iii), and the other provisions of Article 10 which apply to
indemnification claims in general.
10.9 OTHER PROVISIONS CONCERNING INDEMNIFICATION. In no event shall
any party be liable for indirect consequential, special or punitive damages in
connection with this Agreement. In the event that a Seller has any liability
under this Agreement, such Seller shall be entitled to a credit against such
liability in an amount equal to the sum of any insurance recovery of any
indemnitee in connection with such liability. In no case shall an indemnifying
party be responsible for the payment of the fees of more than a single law firm
for all indemnified parties in respect of a matter to which the indemnification
applies.
11. MISCELLANEOUS.
11.1 ENTIRE AGREEMENT. This Agreement, together with the other
Transaction Documents, sets forth the entire understanding of the parties hereto
with respect to the Transactions and supersedes all prior written or oral and
all contemporaneous oral agreements or understandings including the Letter of
Intent among the parties regarding those matters, except for the Mutual
Non-Disclosure Agreement between Buyer and the Company dated November 30, 2005
(the "Confidentiality Agreement"), the terms of which are incorporated herein by
this reference. The representations and warranties contained in this Agreement
constitute all of the representations and warranties (written or oral) being
relied upon by the parties.
11.2 AMENDMENT, PARTIES IN INTEREST, ASSIGNMENT, ETC. This Agreement
may be amended, modified or supplemented only by a written instrument duly
executed by each of the parties hereto. If any provision of this Agreement shall
for any reason be held to be invalid, illegal, or unenforceable in any respect,
such invalidity, illegality, or unenforceability shall not affect any other
provision hereof, and this Agreement shall be construed as if such invalid,
illegal or unenforceable provision had never been contained herein. This
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the respective heirs, legal representatives, successors and permitted assigns
of the parties hereto. No party hereto shall assign this Agreement or any right,
benefit or obligation hereunder without the prior written consent of the other
parties, except that Buyer may assign its rights but not be relieved of any
obligation or liability under this Agreement to any direct or indirect
subsidiary of Buyer. Any term or provision of this Agreement may be waived at
any time by the party entitled to the benefit thereof by a written instrument
duly executed by such party. This Agreement is intended to be solely for the
benefit of the parties to this Agreement and is not intended to confer any
benefits upon, or create any rights in favor of, any person other than the
parties to this Agreement.
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11.3 INTERPRETATION. Unless the context of this Agreement clearly
requires otherwise, (a) references to the plural include the singular, the
singular the plural, the part the whole, (b) references to any gender include
all genders, (c) "or" has the inclusive meaning frequently identified with the
phrase "and/or," (d) "including" has the inclusive meaning frequently identified
with the phrase "but not limited to," and (e) references to "hereunder" or
"herein" relate to this Agreement. The section and other headings contained in
this Agreement are for reference purposes only and shall not control or affect
the construction of this Agreement or the interpretation thereof in any respect.
Section, subsection, schedule and exhibit references are to this Agreement
unless otherwise specified. The inclusion of any Liability on a schedule to this
Agreement or the disclosure of any Liability to Buyer during its due diligence
investigation of the Company shall not be deemed to be an admission or
acknowledgment in and of itself of a Liability.
11.4 EXPENSES. Except the first $30,000 of Seller Transaction Costs
which will be paid by the Company as provided in Section 2.2(d), the parties
hereto shall pay their own expenses incidental to the preparation of this
Agreement, the carrying out of the provisions of this Agreement and the
consummation of the Transactions. Except such $30,000, no expenses of the
Sellers, including, without limitation, legal, accounting and appraisal fees and
expenses, or any finder's fees, shall be paid by or out of any of the assets or
properties of the Company. Notwithstanding the foregoing, Buyer shall pay the
Company the sum of $200,000 as liquidated damages if Buyer terminates this
Agreement because of a failure to satisfy the financing condition set forth in
Section 9.2(u), which shall be the sole and exclusive remedy of the Company and
Sellers in such case.
11.5 NOTICES. Any notices or other communications required or
permitted under, or otherwise in connection with, this Agreement shall be in
writing and shall be deemed to have been duly given when delivered in person,
upon confirmation of receipt when transmitted by facsimile transmission or on
receipt after dispatch by a reputable courier or registered or certified mail,
postage prepaid, addressed, sent or delivered as follows:
If to Buyer:
Nebraska Book Company, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ Major
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
and with a required copy to:
Rembolt ▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Facsimile: 402-475-5087
If to any of the Sellers or Sellers' Representative, to the address provided in
SCHEDULE I, and with a required copy to:
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ Suelthaus P.C.
▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇▇ ▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇, Esq.
Facsimile: 314-231-1776
Gallop, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, ▇.▇.
Interco Corporate Tower
▇▇▇ ▇. ▇▇▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
or such other address furnished in writing by one party to the other in
accordance with these notice provisions.
11.6 GOVERNING LAW. This Agreement shall be exclusively construed and
interpreted in accordance with the laws of the State of Missouri without giving
effect to its conflict of law principles or rules that might require the
application of the laws of another jurisdiction.
11.7 ATTORNEYS' FEES AND COSTS. Except with respect to the allocations
under Article 10 and Section 11.8 hereof, if attorneys' fees or other costs are
incurred to secure performance of any obligations under this Agreement, or to
establish damages for the breach thereof or to obtain any other appropriate
relief, whether by way of prosecution or defense, each side shall bear its or
their own attorneys' fees and costs incurred in connection therewith.
11.8 SPECIFIC PERFORMANCE. The parties hereby acknowledge and agree
that the failure of any party to perform its agreements and covenants under this
Agreement, including its failure to take all required actions on its part
necessary to consummate the Transactions, will cause irreparable injury to the
other parties for which damages, even if available, will not be an adequate
remedy. Accordingly, each party hereby consents to the issuance of injunctive
relief by any court of competent jurisdiction restraining such other party from
violating the terms of this Agreement without showing or proving any actual
damages and without bond; and to recover all costs, including, but not by way of
limitation, reasonable attorneys' fees incurred in pursuing its rights under
this Agreement.
49
11.9 DRAFTING. Neither this Agreement nor any provision contained in
this Agreement will be interpreted in favor of or against any party hereto
because such party or its legal counsel drafted this Agreement or such
provision.
11.10 SELLERS' REPRESENTATIVE. Seller hereby appoint E. ▇▇▇▇▇ ▇▇▇▇▇ as
the representative for the Sellers in connection with the Transactions (in such
capacity, the "Sellers' Representative"). The Sellers' Representative shall
represent the Sellers with respect to all matters under this Agreement
(including, without limitation, any claims for indemnification pursuant to
Article 10) other than Claims against individual Sellers for several liability,
until all of the Sellers' duties under this Agreement are discharged. The
Sellers' Representative shall have full and irrevocable power and authority to
act for and in the name of and as agent for the Sellers under this Agreement,
absent any Law which makes such representation unenforceable, and all of the
Sellers shall be bound by the Sellers Representative's agreements and decisions
hereunder. The Sellers' Representative shall provide Buyer with a true, correct
and complete list of the Sellers and their respective addresses and account
information (the "Sellers' List") and shall update the Sellers' List in writing
as necessary to keep the Sellers' List current, complete and accurate. Buyer may
rely on any document signed or presented by the Sellers' Representative. In the
event the Sellers' Representative resigns, dies or becomes incapacitated, a
successor Sellers' Representative shall be the Person chosen by the Sellers
based on their Pro Rata Portion of their interest in the Escrow. The Sellers'
Representative will give Buyer written notice of any change in the Sellers'
Representative and until such written notice is received by Buyer, such change
in the Sellers' Representative will not be effective or binding on Buyer.
Notwithstanding any other provision in this Agreement to the contrary, no
action, waiver, or notice by any Seller (other than involving the several
liability of a Seller), shall be valid or effective unless or until such action
is approved in a written instrument executed by the Sellers' Representative and
delivered to Buyer. Buyer shall have no duty or obligation to comply with any
demand or direction by any Seller other than the Sellers' Representative (other
than involving the several liability of a Seller) unless executed as provided in
the preceding sentence, and Buyer shall be indemnified against any Damages
resulting from inconsistent actions or claims asserted by any Sellers other than
the Sellers' Representative (other than involving the several liability of a
Seller). Notwithstanding any contrary provision in this Agreement, the ESOP Plan
and ESOP Trust will be amended to the extent necessary to authorize the ESOP
Plan and ESOP Trust to comply with this Section 11.10.
11.11 COUNTERPARTS; FACSIMILE. This Agreement may be executed in any
number of counterparts, each of which shall have the same force and effect as an
original, but all of which together shall constitute a single instrument.
Facsimile signatures on this Agreement shall be deemed to be originals for all
purposes.
11.12 RETENTION OF RECORDS. Buyer agrees to, and shall cause Company
and all successors of Company to, retain all files, books, and records of
Company for at least six (6) years following the Closing Date and to permit each
Seller and his, her or its respective representatives to inspect and photocopy
such files, books, and records for all reasonable business purposes, including,
but not limited to, the defense of any claims made under this Agreement, any Tax
audit or any litigation.
11.13 EXECUTION OF AGREEMENT. This Agreement shall not be binding upon
the parties hereto unless and until is fully executed by Buyer and all Sellers
set forth on the signature page(s) following this page.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.
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IN WITNESS WHEREOF, this Share Purchase Agreement has been executed by
the parties hereto as of the day and year first written above.
COLLEGE BOOKSTORES OF AMERICA, INC. NEBRASKA BOOK COMPANY, INC.
By: /S/ E. ▇▇▇▇▇ ▇▇▇▇▇ By: /S/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------- -----------------------------
E. ▇▇▇▇▇ ▇▇▇▇▇, President ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, President
SELLERS:
/S/ E. ▇▇▇▇▇ ▇▇▇▇▇ /S/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------ ------------------------------------
E. ▇▇▇▇▇ ▇▇▇▇▇, Revocable Trust dated ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Stockholder
November 23, 1993, Stockholder
Hooverton, L.P., Stockholder ▇▇▇▇▇▇▇▇ Book Company, a Missouri
corporation, Stockholder
By: /S/ ▇▇▇▇ ▇▇▇▇▇▇ By: /S/ ▇▇▇▇▇ ▇. ▇▇▇▇
---------------------------- -----------------------------
▇▇▇▇ ▇▇▇▇▇▇, Its General Partner ▇▇▇▇▇ ▇. ▇▇▇▇, Its President
/S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ /S/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------------------- ------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, as co-Trustee of the ▇▇▇▇ ▇▇▇▇▇▇▇▇, Stockholder
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Trust, Stockholder
/S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ /S/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
---------------------------------------- ------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, as co-Trustee of the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Stockholder
▇▇▇▇▇▇ ▇. and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Trust, Stockholder
College Book Stores of America, Inc.,
Employee Stock Ownership Trust, Stockholder
By: /S/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /S/ ▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------- -----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, co-Trustee ▇▇▇▇▇▇ ▇▇▇▇▇, co-Trustee
By: /S/ E. ▇▇▇▇▇ ▇▇▇▇▇
---------------------------------
E. ▇▇▇▇▇ ▇▇▇▇▇, co-Trustee
51
/S/ ▇▇▇▇▇▇ ▇▇▇▇▇ /S/ ▇▇▇▇ ▇▇▇▇▇▇
----------------------------------- ------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇, Stockholder ▇▇▇▇ ▇▇▇▇▇▇, Stockholder
/S/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ /S/ ▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------ ------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Stockholder ▇▇▇▇ ▇▇▇▇▇▇▇, Stockholder
/S/ ▇▇▇▇▇ ▇. ▇▇▇▇ /S/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------ ------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇, Stockholder ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Stockholder
52
LIST OF EXHIBITS:
Exhibit A Form of Escrow Agreement
Exhibit B Secondary Transaction Term Sheet
Exhibit C-1 Form of Employment and Noncompetition Agreement - Wiersma,
Viner, and ▇▇▇▇▇▇▇▇▇
Exhibit C-2 Form of Employment and Noncompetition Agreement - E. ▇▇▇▇▇
▇▇▇▇▇
Exhibit C-3 Form of ▇▇▇▇▇▇▇▇ Book Company Noncompetition Agreement
Exhibit D Form of Opinion of Counsel
Exhibit E Ratified Obligations of the Company to Marcus
Exhibit F Amendment of Marcus Agreement
LIST OF SCHEDULES:
Schedule I The Sellers
Schedule 3.2(e) Form of Disclosure Letter
Schedule 4.1 Foreign Qualification
Schedule 4.2 Ownership of Shares and Stock Options
Schedule 4.5 Required Consents
Schedule 4.6 Restrictions
Schedule 4.7 Third Party Options
Schedule 4.8 Financial Statements
Schedule 4.9 Taxes
Schedule 4.10 Undisclosed Liabilities
Schedule 4.11 Accounts Receivable
Schedule 4.14 Affiliate Transactions
Schedule 4.15 Real Property
Schedule 4.16 Intellectual Property
Schedule 4.17 Contracts
Schedule 4.18 Environmental
Schedule 4.20 Licenses
Schedule 4.21 Litigation
Schedule 4.22 Insurance
Schedule 4.23 Labor Matters
Schedule 4.24 Employee Benefit Plans
Schedule 4.25 Employment/Independent Contractors
Schedule 4.26 Absence of Certain Changes
Schedule 4.27 Additional Information
Schedule 4.29 Competing Interests
Schedule 4.33 Documents Not Made Available
Schedule 5.3 Consents
Schedule 5.6 Competing Interests
Schedule 7.4 Pre-Closing Actions of Seller and Buyer
Schedule 7.12 Private Stores to be Sold to MBC
Schedule 9.2(d) Remaining Liens
Schedule 9.2(e) Indebtedness
Schedule 9.2(f) Related Party Accounts
Schedule 10.8 Excluded Section 10.8 Items
G:\WDOX\clients\24285\131\00064038.WPD
31 March 2006
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