Exhibit 2.1
ASSET PURCHASE
AGREEMENT
This Asset Purchase Agreement (this
“ Agreement ”) is made as of the 18th day
of October, 2005, by and between The Amusement Factory, L.L.C., an
Arizona limited liability company (“ Seller
” ), Levine Investments Limited Partnership, an
Arizona limited partnership (“ Levine ”),
Adventure Vending Inc., a Washington corporation (the “
Buyer ”), American Coin Merchandising, Inc., a
Delaware corporation (“ ACMI ”), and
Coinstar, Inc., a Delaware corporation (“
Coinstar ”).
RECITALS
A. Seller desires and intends to
sell substantially all of its operating assets and other rights
relating to its vending and amusement machine operations, at the
price and on the terms and conditions herein set forth.
B. Buyer desires and intends to
purchase substantially all of the operating assets and other rights
relating to Seller’s vending and amusement machine operations
and to assume certain of the operating liabilities relating to such
operations, at the price and on the terms and conditions herein set
forth.
C. Levine has a significant
beneficial interest in the Membership Interests and Seller’s
members have determined to sell their respective Membership
Interests to Levine effective at or prior to Closing.
D. Subject to the provisions of
Section 13 of this Agreement, Levine desires and intends to
indemnify Buyer in connection with any Loss in connection with this
Agreement and in connection with any net working capital payment
required under Section 3.2(f).
AGREEMENT
NOW, THEREFORE, in consideration of
the covenants and agreements set forth herein, the parties hereby
agree as follows:
1. Definitions
As used in this Agreement, the
following capitalized terms shall have the meanings set forth
below:
“ 2004 Balance
Sheet ” has the meaning assigned in Section
5.6.
“ Accounting
Arbitrator ” means an independent accounting firm
designated by Levine and Buyer or by either one of them from time
to time as necessary pursuant to Section 3.2(d).
“ Adjusted New Equipment
Amount ” has the meaning assigned in Section
3.3.
“ Affiliate
” of any Person (the “ Subject ”)
means any other Person which, directly or indirectly, controls or
is controlled by or is under common control with the Subject and,
without limiting the generality of the foregoing, includes, in any
event, (a) any Person which beneficially
owns or holds 25% or more of any class of voting
securities of the Subject or 25% or more of the legal or beneficial
interest in the Subject and (b) any Person of which the Subject
beneficially owns or holds 25% or more of any class of voting
securities or 25% or more of the legal or beneficial interest.
“Control” (including, with correlative meanings, the
terms “controlled by” and “under common control
with”), as used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or
otherwise.
“ Aggregate Purchase
Price ” has the meaning assigned in Section
3.1.
“ Agreement
” means this Agreement and all Schedules and Exhibits
hereto.
“ Assets ”
has the meaning assigned in Section 2.1.
“ Assignment and
Assumption Agreement ” has the meaning assigned in
Section 2.6.
“ Assumed
Liabilities ” has the meaning assigned in Section
2.3.
“ Assumed Plans
” has the meaning assigned in Section 2.1(l).
“ Balance Sheet
Date ” has the meaning assigned in Section
5.6.
“ Best Knowledge
” and the words “knowledge,” “known
to” or “is aware of” and words of like import, as
used in this Agreement as to any Person, mean the actual conscious
awareness of such Person of facts or other information without
investigation. “Best Knowledge” with respect to Seller
shall mean the Best Knowledge of Fred Simon, Pam Smith and Bob
Carone. “Best Knowledge” with respect to Buyer shall
include the Best Knowledge of Randall Fagundo.
“ Bill of Sale
” has the meaning assigned in Section 2.5.
“ Business
” means the business, operations and activities of Seller
including but not limited to those relating to the operation of
vending and amusement machines, exclusive of Seller’s
business, operations and activities relating to the Excluded
Assets. Without limiting the foregoing and subject to the foregoing
exception as to Excluded Assets, “Business” shall
include the operation of the Assets and the Facilities.
“ Buyer ”
means American Coin Merchandising, Inc. and any Affiliate of
American Coin Merchandising, Inc. that is assigned the rights and
obligations of American Coin Merchandising, Inc. pursuant to
Section 15.7.
“ Buyer Estimated
NWC ” has the meaning assigned in Section
3.2(c).
“ Claim ”
means any claim, demand, cause of action, suit, proceeding,
arbitration, judicial hearing or investigation.
“ Closing
” means the consummation of the purchase and sale of the
Assets under this Agreement.
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“ Closing Amount
” has the meaning assigned in Section 3.1.
“ Closing Balance
Sheet ” has the meaning assigned in Section
3.2(b).
“ Closing Date
” means the date upon which the Closing becomes
effective.
“ Closing Shares
” has the meaning assigned in Section 3.1(b).
“ Closing
Statement ” has the meaning assigned in Section
3.2(b).
“ Code ”
means the Internal Revenue Code of 1986, as amended, and all
regulations promulgated thereunder, as in effect from time to
time.
“ Coinstar
” has the meaning assigned in the preamble.
“ Coinstar SEC
Documents ” has the meaning assigned in Section
7.8.
“ Coinstar Share
Price ” has the meaning assigned in Section
3.1(b).
“ Common Stock
” has the meaning assigned in Section 3.1(b).
“ Contract
” means any contract, agreement, lease, license, grant of
immunity from suit in regard to intellectual property rights,
commitment, arrangement, purchase or sale order, or undertaking,
whether written or oral.
“ Current Tax
Year ” has the meaning assigned in Section
12.3.
“ Debt
Agreements ” has the meaning assigned in Section
5.6(b).
“ Debt Repayment
Amount ” means the amount required at Closing to pay
in full and otherwise discharge all obligations of Seller under the
Debt Agreements, including but not limited to payment of all
principal, interest and prepayment penalties in connection with
such Debt Agreements.
“ Disclosure
Memorandum ” means that certain Disclosure Memorandum
dated as of the date hereof and delivered by Seller to Buyer on the
date hereof in connection with this Agreement.
“ Domain Names
” has the meaning assigned in Section 5.15(k).
“ Employee Benefit
Plans ” means all employee pension benefit plans, as
defined in Section 3(2) of ERISA, employee welfare benefit plans,
as defined in Section (3)(1) of ERISA, and any deferred
compensation, performance, bonus, incentive, stock option, stock
purchase, other stock compensation, vacation pay, holiday pay,
severance, insurance, retirement, excess benefit, fringe benefit or
other plan, trust or arrangement, whether or not covered by ERISA,
whether written or oral, (i) sponsored, maintained or contributed
to by Seller or any ERISA Affiliate with respect to the Business,
(ii) covering or benefiting any current or former officer,
employee, agent, director or independent contractor of the Business
(or any dependent or beneficiary of any such individual), or (iii)
for which Seller or any ERISA Affiliate has (or could have) any
obligation or liability with respect to the Business.
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“ Encumbrance
” means any security interest, mortgage, lien, charge,
option, license or adverse claim of any kind, including, but not
limited to, any restriction on the use or transfer of the
Assets.
“ Entity ”
means any corporation (including any non-profit corporation),
general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any
company limited by shares, limited liability company or joint stock
company), firm, society or other enterprise, association,
organization or entity (including any Governmental
Body).
“ Environment
” means the air, ground (surface and subsurface) or water
(surface and groundwater).
“ Environmental and
Safety Law ” means any federal, state, local or other
law, statute, rule, ordinance or regulation or any common law
pertaining to public or worker health, welfare or safety or the
Environment, including, but not limited to, the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, 42
U.S.C. § 9601 et seq. , as amended by the Superfund
Amendments and Reauthorization Act of 1986; the Resource
Conservation and Recovery Act of 1976, as amended, 42 U.S.C. §
6901 et seq. ; the Federal Clean Air Act, 42 U.S.C. §
7401-7626; the Federal Water Pollution Control Act and Federal
Clean Water Act of 1977, as amended, 33 U.S.C. § 1251 et
seq. ; the Federal Insecticide, Fungicide and Rodenticide Act,
7 U.S.C. § 135 et seq. ; the Federal Environmental
Pesticide Control Act, the Federal Toxic Substances Control Act, 15
U.S.C. § 2601 et seq. ; the Federal Safe Drinking Water
Act, 42 U.S.C. § 300(f) et seq. ; and the Emergency
Planning and Community Right-To-Know Act of 1986, 42 U.S.C. §
11001 et seq .
“ Equipment
Leases ” has the meaning assigned in Section
5.6(b).
“ ERISA ”
means the Employee Retirement Income Security Act of 1974, as
amended, and all regulations promulgated thereunder, as in effect
from time to time.
“ ERISA
Affiliate ” means any Person which, together with
Seller, is treated as a single entity under Section 414 of the
Code.
“ Escrow ”
has the meaning assigned in Section 3.5.
“ Escrow Agent
” has the meaning assigned in Section 3.5.
“ Escrow Amount
” has the meaning assigned in Section 3.5.
“ Escrow
Agreement ” has the meaning assigned in Section
3.5.
“ Escrow Shares
” has the meaning assigned in Section 3.1(c).
“ Exchange Act
” means the Securities Exchange Act of 1934, as
amended.
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“ Excluded
Assets ” has the meaning assigned in Section
2.2.
“ Excluded
Contracts ” means Seller’s Contracts listed on
Schedule 2.2(b).
“ Excluded
Liabilities ” has the meaning assigned in Section
2.4.
“ Facilities
” means the warehouses located at (i) 600 Telluride St. Unit
D, Aurora, Colorado, (ii) Building 5, 7727 Airport Business
Parkway, Van Nuys, California, (iii) 2411 East Main Street,
Merrill, Wisconsin, (iv) 3715 Northcrest Road, Atlanta, Georgia,
(v) 3020 Malmo Drive, Arlington Heights, Illinois, (vi) Earth City
Industrial Center #9, Earth City, Missouri, (vii) 8727 Northeast
Marx, Portland, Oregon, (viii) 533 Stone Road, Benicia, California,
(ix) 2152 Heller Drive, Beavercreek, Ohio, (x) 7716 220
th
Street, Mountlake
Terrace, Washington and (xi) 7170 West Oakland, Chandler, Arizona,
where Seller conducts the Business, and all plants, buildings,
structures, improvements, machinery and equipment located
thereon.
“ Final NWC
Decrease ” has the meaning assigned in Section
3.2(f).
“ Final NWC
Determination ” has the meaning assigned in Section
3.2(e).
“ Final NWC
Increase ” has the meaning assigned in Section
3.2(e).
“ Financial
Statements ” has the meaning assigned in Section
5.6.
“ Fixed Assets
” has the meaning assigned in Section 3.1(e).
“ FSAs ”
has the meaning assigned in Section 8.12(b).
“ GAAP ”
means United States generally accepted accounting principles, as in
effect as of the relevant date.
“ GCB ”
means GCB Communications, Inc., an Arizona corporation.
“ Governmental
Body ” means any federal, state or other court or
governmental body, any subdivision, agency, commission or authority
thereof, or any quasi-governmental or private body exercising any
regulatory or taxing authority thereunder, domestic or
foreign.
“ Hazardous
Materials ” means any hazardous or toxic substances,
materials and wastes, including, but not limited to, those
substances included in the definitions of “Hazardous
Substances,” “Hazardous Materials,” “Toxic
Substances,” “Hazardous Waste,” “Solid
Waste,” “Pollutant,” or “Contaminant”
in any Environmental and Safety Law and the Hazardous Material
Transportation Act, 49 U.S.C. § 1801 et seq. , and in
the regulations promulgated pursuant to those laws; those
substances listed in the United States Department of Transportation
Table (49 C.F.R. § 172.101 and any amendments thereto); such
other substances, materials and wastes which are regulated or are
classified as hazardous or toxic by any Governmental Body; and
asbestos, polychlorinated biphenyls and oil and petroleum products
or by-products. Notwithstanding the foregoing or any other
provision in this Agreement to the contrary, “Hazardous
Materials” shall not mean or include such of the foregoing
that may be naturally occurring in the soil or groundwater in, at,
under, or about any real property.
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“ indemnified
party ” has the meaning assigned in Section
13.5.
“ indemnifying
party ” has the meaning assigned in Section
13.5.
“ Intellectual
Property ” has the meaning assigned in Section
2.1(d).
“ Inventory
” has the meaning assigned in Section 2.1(c).
“ IP
Registrations ” has the meaning assigned in Section
15.5(e).
“ IP Rights
” has the meaning assigned in Section 15.5(e).
“ Judgment
” means any judgment, order, award, writ, injunction or
decree of any Governmental Body or arbitrator.
“ Lease Assignment and
Assumption ” has the meaning assigned in Section
2.6.
“ Leased Real
Property ” has the meaning assigned in Section
2.1(g).
“ Levine ”
has the meaning assigned in the recitals.
“ Loss ”
means any loss, damage, Judgment, debt, liability, obligation,
fine, penalty, cost or expense (including, but not limited to, any
legal and accounting fee or expense), whether or not relating to
personal injury, property damage, public or worker health, welfare
or safety or the Environment and whether or not relating to
violations of or liability under Environmental and Safety
Law.
“ M&A Qualified
Beneficiaries ” has the meaning assigned in Section
8.5.
“ Marks ”
has the meaning assigned in Section 5.15(d).
“ Material adverse
effect ” with respect to a party or other Person
means an event, violation, change, failure, inaccuracy,
circumstance or other matter that has had, or could reasonably be
expected to have, a material adverse effect on (a) the business,
operations or financial condition of such Person or (b) in the case
of a party to this Agreement, the ability of such party to timely
consummate the transactions contemplated by this Agreement or
perform any of its obligations under this Agreement.
“ Membership
Interests ” has the meaning assigned in Section
5.4.
“ Misrepresentation
Claims ” has the meaning assigned in Section
13.4.
“ MRM Commission
System ” means the property described on Exhibit A of
that certain Assignment of Intellectual Property and License made
by Michael Myers d/b/a Azlan Computer as of October 17, 2005 in
favor of Seller.
“ Net Working
Capital ” has the meaning assigned in Section
3.2(b).
“ New Equipment
Amount ” has the meaning assigned in Section
3.3.
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“ NWC Dispute
Notice ” has the meaning assigned in Section
3.2(d).
“ Permit ”
means any permit, license, approval, certification, authorization,
clearance or rating, and all rights with respect thereto, of any
Governmental Body.
“ Permitted
Encumbrances ” shall mean the following:
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Encumbrances
relating exclusively to an Assumed Liability and set forth in
Schedule 2.3 ;
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Encumbrances
for current Taxes not yet due and payable;
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Encumbrances
which do not, either individually or in the aggregate, materially
detract from the value of, or interfere with the present use of,
the properties subject thereto or affected thereby, or otherwise
impair the operation(s) of the Business or the Assets;
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mechanics’, carriers’,
workers’, repairmen’s, and other similar liens arising
or incurred in the ordinary course of its business for monies not
yet due and payable; and
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the interests
of lessors in the Leased Real Property.
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“ Person ”
means any individual or Entity.
“ Personal
Property ” has the meaning assigned in Section
5.9.
“ Products
” means any and all of the vending machines, vending machine
merchandise and amusement machines that Seller now leases,
licenses, places or sells.
“ Registration
Statement ” has the meaning assigned in Section
8.8.
“ Relevant
Employees ” has the meaning assigned in Section
5.14.
“ Remedial
Action ” means any investigation, site assessment,
monitoring or other evaluation of conditions relating to the
presence of Hazardous Materials in the Environment at a site, or
any clean-up, treatment, containment, removal, restoration,
corrective action or remedial work involving any Hazardous
Materials.
“Schedule”
means a schedule to the Disclosure
Memorandum.
“SEC” means the Securities and Exchange
Commission.
“ Securities Act
” means the Securities Act of 1933, as amended.
“ Seller ”
has the meaning assigned in the preamble.
“ Seller Estimated
NWC ” has the meaning assigned in Section
3.2(b).
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“ Seller
Technology ” has the meaning assigned in Section
5.15(a).
“ Selling Group
” has the meaning assigned in Section 8.5.
“ Shares ”
has the meaning assigned in Section 3.1(c).
“ Tax ” or
“ Taxes ” means any and all (i) taxes,
charges, fees, levies or other assessments, including, without
limitation, income, excise, gross receipts, personal property, real
property, sales, use, ad valorem, transfer, franchise, profits,
license, withholding, payroll, employment, severance, stamp,
occupation, windfall profits, social security and unemployment or
other taxes imposed by the United States or any agency or
instrumentality thereof, any state, county, local or foreign
government, or any agency or instrumentality thereof, and any
interest or fines, and any and all penalties or additions relating
to such taxes, charges, fees, levies or other assessments or the
failure to comply with any requirement imposed with respect to any
Tax Returns, (ii) liability in respect of any items described in
clause (i) payable by reason of being a member of an affiliated,
combined, unitary, consolidated, fiscal unity or similar group for
any period, and (iii) liability in respect of any items described
in clause (i) or (ii) payable as a result of any express or implied
obligation to indemnify any other Person with respect to such
amount by reason of contract, assumption, transferee liability,
operation of law or otherwise, including any liability for Taxes of
a predecessor or transferor entity.
“ Tax Return
” means any report, return, declaration, claim for refund,
information return, statement or other similar document, including
any schedules or attachments thereto, and including any amendment
thereof, with respect to any Taxes.
“ Technology-Related
Assets ” has the meaning assigned in Section
5.15(a).
“ Third-Party
Claim ” has the meaning assigned in Section
13.5.
“ Third Party
Licenses ” has the meaning assigned in Section
5.15(c).
“ Third Party
Technologies ” has the meaning assigned in Section
5.15(c).
“ Threshold
” has the meaning assigned in Section 13.4.
“ Tools ”
has the meaning assigned in Section 5.15(b).
“ Transaction
Documents ” means this Agreement any and all of the
agreements and documents referenced in Sections 9 and
10.
“ transfer
” has the meaning assigned in Section 2.1.
“ Transferred Real
Property ” means the Leased Real Property.
“ warranty costs
” has the meaning assigned in Section 5.20.
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2. Purchase and Sale of Assets
2.1 Purchase and Sale.
Subject to the terms and conditions
of this Agreement, at the Closing, Seller shall sell, transfer,
convey, assign and deliver (collectively, “
transfer ”), or cause to be transferred, to
Buyer, free and clear of all Encumbrances (other than the Permitted
Encumbrances) and Buyer shall purchase and acquire, all of
Seller’s right, title and interest in and to all of the
assets and rights (collectively, the “ Assets
”) of every type and description, used in or relating to the
Business, whether tangible or intangible, real, personal or mixed,
wherever located and whether or not reflected on the books and
records of Seller, including, but not limited to, the following
assets and rights (but excluding the Excluded Assets):
(a) Equipment.
All machinery, equipment, furniture,
computer hardware, fixtures, tooling, leasehold improvements (but
only to the extent not affixed to and part of the Leased Real
Property), motor vehicles and other tangible personal property
owned by Seller and employed primarily or exclusively in
Seller’s operation of the Business as of the close of
business on the Closing Date, including, without limitation, the
machinery and equipment at Seller’s customer locations as of
August 15, 2005 as set forth in Schedule 2.1(a) (subject to
replacement or repair in the ordinary course of business), such
personal property and fixtures as are located on the Leased Real
Property, and all rights to any warranties received from the
manufacturers and distributors of all such personal property and
fixtures and any related claims, credits, rights of recovery and
setoffs with respect to such personal property and
fixtures.
(b) Equipment and Other Personal
Property Leases. All of
Seller’s right, title and interest in, to and under the
leases and rental agreements in respect of equipment or other
tangible personal property employed primarily or exclusively in
Seller’s operation of the Business as of the close of
business on the Closing Date, including, without limitation, those
leases and agreements described in Schedule 2.1(b)
.
(c) Inventory.
All inventory, wherever located,
including packaging, machines, spare parts, shop and production
supplies, and plush and other bulk vending inventory produced by or
employed primarily or exclusively in Seller’s operation of
the Business as of the close of business on the Closing Date
(“ Inventory ”), including, without
limitation, the types of Inventory described in
Schedule 2.1(c) (which Schedule sets forth Inventory in
machines at customer locations and an estimate of the remaining
Inventory in Leased Real Property, each as of June 30, 2005 and
subject to sale in the ordinary course of business) and all rights
of Seller to any transferable warranties received from its
suppliers and distributors of such items and any related claims,
credits, rights of recovery and setoffs with respect to such
Inventory.
(d) Intellectual
Property. All information
(whether or not protectable by patent, copyright or trade secret
rights) and intellectual property rights possessed or owned by
Seller and employed primarily or exclusively in Seller’s
operation of the Business as of the close of business on the
Closing Date, and all right, title and interest of Seller in, to
and under licenses, sublicenses or like agreements providing Seller
any right or concession to use any information or intellectual
property, and, in each case, employed primarily or exclusively in
Seller’s operation of the Business as of the close of
business on the Closing Date, including all trade names, trademarks
(including common-law trademarks), service marks, art work,
packaging, plates, emblems, logos, insignia and copyrights, and
their registrations and applications, and all goodwill associated
therewith, all technology, know-how, show-how, trade
secrets,
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manufacturing processes, formulae, drawings,
designs, systems, forms, technical manuals, data, computer
programs, product information and development work-in-progress and
all documentary evidence of any of the foregoing, including,
without limitation, the trademarks, other assets and related
agreements described in Schedule 2.1(d) (collectively, the
“ Intellectual Property ”).
(e) Permits.
All Permits, if any, relating
primarily or exclusively to Seller’s operation of the
Business as of the close of business on the Closing Date,
including, without limitation, any Permits described in Schedule
2.1(e) .
(f) Contract Rights and Other
Intangible Assets. All of
Seller’s right, title and interest in, to and under all
contracts and agreements, purchase orders, sales orders, sale and
distribution agreements, supply and processing agreements and other
instruments and agreements relating primarily or exclusively to
Seller’s operation of the Business as of the close of
business on the Closing Date, and all goodwill associated with the
Business, including, without limitation, Seller’s right,
title and interest in, to and under the contracts and agreements
described in Schedule 5.12 ; provided, however, that in no
event shall the contracts assigned hereunder include those Excluded
Assets listed in Schedule 2.2(b) .
(g) Leased Real
Property. All real
property, and rights thereto, leased by Seller and used in the
operation of the Business as of the close of business on the
Closing Date as described in Schedule 2.1(g) (the “
Leased Real Property ”).
(h) Securities.
All securities held by or
beneficially owned by Seller, including but not limited to all
shares of capital stock or other equity interests in any other
Person.
(i) Books and Records.
All of Seller’s books and
records (including all discs, tapes and other media-storage data
and information) relating primarily or exclusively to
Seller’s operation of the Business as of the close of
business on the Closing Date or located on the Leased Real
Property, including, without limitation, the books and records
described in Schedule 2.1(i) .
(j) Other Records, Manuals and
Documents. All of
Seller’s mailing lists, customer lists, supplier lists,
vendor data, marketing information and procedures, sales and
customer files, advertising and promotional materials, current
product material, equipment maintenance records, warranty
information, records of plant operations and the source and
disposition of materials used and produced in such plants, standard
forms of documents, manuals of operations or business procedures
and other similar procedures, and all other information of Seller
relating primarily or exclusively to Seller’s operation of
the Business as of the close of business on the Closing Date and,
with respect to the Transferred Real Property, all soil test
reports, building inspection reports, building plans, blueprints,
renderings and surveys.
(k) Insurance
Proceeds. All insurance
proceeds paid or payable to Seller in respect of any damage to or
destruction or loss of any assets of Seller reflected on the
Schedules referred to in this Section 2.1, including any assets of
Seller that, as far as could reasonably be foreseen, would have
been included in the Assets but for such damage, destruction or
loss, but excluding insurance policies and refunds as described in
Section 2.2(f).
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(l) Assumed Plans.
The Employee Benefit Plans listed
on Schedule 2.1(l) hereof (which schedule identifies those
Employee Benefit Plans being assumed by Buyer) (the “
Assumed Plans ”).
2.2 Excluded Assets.
Seller and Buyer expressly
understand and agree that Seller is not transferring to Buyer
pursuant to this Agreement any of the following assets or rights of
Seller (the “ Excluded Assets
”):
(a) Cash and Accounts. All of
Seller’s (i) cash in its possession, in warehouses or in
transit at Closing (but excluding cash in vending, amusement,
change and other machines used in the conduct of the Business) and
(ii) cash and cash equivalents in all bank accounts, deposits and
other accounts of any nature at any bank, trust company, savings
and loan association or other financial institution, all of which
bank accounts are identified on Schedule 2.2(a)
hereof.
(b) Excluded Contracts.
Seller’s Contracts listed on Schedule 2.2(b)
.
(c) Platinum Accounting
System . The Platinum accounting system used by Seller, which
resides on servers and hardware owned by Pacific Communications,
Inc.
(d) Corporate Records . The
accounting ledgers, articles of organization, corporate seals,
minute books, stock books, Tax and supporting data prepared
expressly in connection therewith, and other records prepared
directly in connection with the organization and capitalization of
the Seller and its operations as a limited liability company under
applicable law, as applicable.
(e) Deposits . Those rights
relating to deposits and prepaid expenses and claims for refunds
(except to the extent any of these are reflected as a current asset
in the Final NWC Determination).
(f) Insurance Policies . All
insurance policies and rights and refunds thereunder (except to the
extent specified in Section 2.1(k).
(g) Personnel Records . All
personnel records and other records that Seller is required by law
to retain in its possession.
(h) Tax Refunds . All claims
for refund of Taxes and other governmental charges of whatever
nature.
(i) Employee Benefit Plans .
All rights in connection with and assets of the Employee Benefit
Plans, that are not Assumed Plans;
(j) GCB Stock . The 1,500
shares of Class B Common Stock, $1.00 par value per share, of GCB,
held by Seller.
2.3 Assumption of
Liabilities. Upon the
terms and subject to the conditions of this Agreement, Buyer
agrees, effective at the time of Closing, to assume and pay when
due (a) all obligations, contracts, and liabilities of Seller
arising primarily or exclusively out of the conduct of the Business
from and after the Closing Date; (b) the accounts payable of Seller
incurred in the ordinary course of the Business through the Closing
Date; (c) the accrued expenses and
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liabilities of Seller (other than with respect
to Taxes) on Seller’s books which were incurred in the
ordinary course of the Business through the Closing Date; (d) all
obligations and liabilities arising under the Contracts included in
the Assets arising from and after the Closing Date; and (e) without
duplication, any current liability reflected in the Final NWC
Determination (collectively, the “ Assumed
Liabilities ”).
2.4 Excluded
Liabilities. Buyer shall
not assume any obligations or liabilities of Seller other than the
Assumed Liabilities, and all obligations and liabilities of Seller
other than the Assumed Liabilities shall remain obligations and
liabilities of Seller (all obligations or liabilities not assumed
by Buyer herein are called the “ Excluded
Liabilities ”). As part of the Excluded Liabilities,
all liabilities relating to the Excluded Assets are specifically
excluded from assumption. Without limiting the generality of the
foregoing, except as provided in Section 12.3 and Section 12.1, any
and all Taxes and other assessments attributable to the conduct of
the Business, the ownership or operation of the Assets or the
Facilities or the sale of Products on or prior to the Closing Date
are Excluded Liabilities.
2.5 Instruments of Sale and
Transfer. On or prior to
the Closing Date, Seller shall deliver to Buyer and Buyer shall
deliver to Seller, as the case may be, such instruments of sale and
assignment as shall, in the reasonable judgment of Buyer and
Seller, be effective to vest in Buyer on the Closing Date all of
Seller’s right, title and interest in and to the Assets and
to evidence the assumption of the Assumed Liabilities by Buyer,
including, without limitation, a Bill of Sale and Assignment
substantially in the form of Exhibit 2.5(a) (the “
Bill of Sale ”) and an Assignment and
Assumption Agreement substantially in the form of Exhibit
2.5(b) (the “ Assignment and Assumption
Agreement ”). All of Seller’s rights to the
Leased Real Property shall be transferred to Buyer on the Closing
Date by a Lease Assignment and Assumption substantially in the form
of Exhibit 2.5(c) (the “ Lease Assignment and
Assumption ”). Seller shall take all reasonable
additional steps as may be necessary to put Buyer in possession and
operating control of the Assets at the Closing, and Buyer shall
take all reasonable additional steps as may be necessary for it to
assume the Assumed Liabilities at the Closing. In addition, Seller
shall deliver to Buyer on the Closing Date leases as contemplated
by Section 9.5(l).
2.6 Further
Assurances. From time to
time following the Closing, Buyer, Seller and Levine shall execute
and deliver, or cause to be executed and delivered, to the other
such additional instruments of conveyance and transfer and
evidences of assumption as such party may reasonably request or as
may be otherwise necessary or desirable to carry out the purposes
of this Agreement.
3. Purchase Price
3.1 Purchase
Price.
(a) The aggregate purchase price for
the Assets shall be the sum of Thirty Six Million Dollars
($36,000,000) plus the New Equipment Amount (together, the “
Aggregate Purchase Price ”) minus the Escrow
Amount (such amount after such deduction(s), the “
Closing Amount ”); provided, however, that the
parties acknowledge and agree that the New Equipment Amount will
not in any event exceed $250,000.
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(b) Payment of the Closing Amount
shall be made by payment of an aggregate number of validly issued,
fully paid and nonassessable shares of common stock of Coinstar
(“ Common Stock ”) equal to the number
determined by dividing (1) the Closing Amount by (2) the Coinstar
Share Price (the “ Closing Shares ”). For
purposes of this Agreement, the “ Coinstar Share
Price ” shall mean the average closing price of the
Common Stock as publicly reported by Nasdaq as of 4:00 p.m. Eastern
Time on the twenty (20) trading days prior to the fifth (5
th
) trading day prior to
the date of this Agreement.
(c) Payment of the Escrow Amount
shall be made by payment of an aggregate number of validly issued,
fully paid and nonassessable shares of Common Stock equal to the
number determined by dividing (1) the Escrow Amount by (2) the
Coinstar Share Price (the “ Escrow Shares
” and, together with the Closing Shares and after any
adjustment under Section 3.2(e) or 3.2(f), the “
Shares ”).
(d) No fractional shares of Common
Stock will be issued in connection with this Agreement whether in
connection with payment of the Closing Amount, the Escrow Amount or
any distribution of such amounts to Levine. All fractional shares
of Common Stock that Levine would otherwise be entitled to receive
as a result of the transactions contemplated by this Agreement will
be aggregated and if a fractional share of Common Stock results
from such aggregation, such holder shall be entitled to receive in
lieu thereof, an amount in cash determined by multiplying (1) the
closing sale price per share of a share of Common Stock on Nasdaq
as of the first (1 st ) trading day immediately preceding
the Closing Date, by (2) the fraction of a share of Common Stock to
which Levine would otherwise have been entitled to receive pursuant
to this Agreement.
(e) The parties agree that for
purposes of allocating the Aggregate Purchase Price, together with
any liability assumed, for federal, state, local and other tax
purposes, the parties will assign fair market value to the Assets
as follows: (i) fair market value of fixed assets (that are not
cash, securities, inventory or accounts receivable) (the “
Fixed Assets ”) shall be determined by a
valuation performed by a third-party valuation service provider
hired at Buyer’s sole expense, which shall be performed and
provided to the parties hereto in accordance with the provisions of
Section 8.11 hereof; and (ii) fair market value of cash,
securities, inventory and accounts receivable shall be determined
in accordance with the Buyer’s opening balance
sheet.
3.2 Net Working
Capital.
(a) The parties hereto expect and
intend that, from December 31, 2004 through the Closing Date, the
Business has been and will be operated in a manner consistent with
prior practices, and consistent with the Seller’s ongoing
operations.
(b) At least 2 business days prior
to the estimated Closing Date, Seller shall prepare in good faith
and deliver to Buyer a preliminary projected balance sheet as of
the anticipated Closing Date (the “ Closing Balance
Sheet ”). The Closing Balance Sheet shall be prepared
according to GAAP consistent with the Seller’s past practices
and shall be accompanied by a projected statement of income in
accordance with GAAP consistent with the Seller’s past
practices for the period ended (the “ Closing
Statement ”). In addition to the Closing Balance
Sheet, the Seller shall provide on the Closing Date a schedule
reasonably detailing the Seller’s estimate as of the
projected Closing Date (the “ Seller Estimated
NWC ”) of the net working
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capital of the Seller prepared in accordance
with the provisions set forth on Exhibit 3.2(b) (the “
Net Working Capital ”), including evidence
reasonably satisfactory to Buyer of all prepaid amounts included in
the Seller Estimated NWC. The Seller shall consult with Buyer
during the preparation of the Closing Balance Sheet, the Closing
Statement and the Seller Estimated NWC.
(c) As promptly as practicable after
the Closing, but in no event more than 60 days after the Closing,
Buyer shall prepare a schedule calculating the Net Working Capital
prepared in accordance with the provisions set forth on Exhibit
3.2(b) (the “ Buyer Estimated NWC ”), and
may engage KPMG LLP or such other nationally recognized accounting
firm to verify the determination of the Buyer Estimated NWC at
Buyer’s sole cost. The Buyer Estimated NWC shall be prepared
in accordance with the provisions set forth on Exhibit 3.2(b). The
Buyer Estimated NWC shall be promptly delivered to Levine as soon
as it is available for review and comment, and Buyer and Levine
shall thereafter attempt to reach agreement on the Buyer Estimated
NWC. Buyer and Levine shall have access to the work papers of the
Seller used in the preparation of the Buyer Estimated
NWC.
(d) If Levine and Buyer are unable
to agree on the Buyer Estimated NWC and the amount(s) to be paid in
accordance with the Net Working Capital provisions of this Section
3.2, then Levine shall present any objections or comments in
writing to Buyer no later than 10 business days after
Levine’s receipt of the Buyer Estimated NWC, specifying in
reasonable detail any objections thereto (the “ NWC
Dispute Notice ”). Buyer and Levine shall be deemed
to have agreed upon all other items and amounts contained in the
Buyer Estimated NWC which are not objected to or commented upon by
Seller. If within ten business days after Buyer’s receipt of
the NWC Dispute Notice, Buyer and Levine are unable to resolve
informally matters which are the subject of the NWC Dispute Notice
and Levine has not retracted the NWC Dispute Notice, the parties
shall submit the matters which are the subject of such NWC Dispute
Notice to the Accounting Arbitrator for resolution. If the parties
are unable to agree upon one Accounting Arbitrator, each shall
appoint an Accounting Arbitrator and these appointees shall appoint
a third Accounting Arbitrator (collectively the “
Accounting Arbitrators ”), in which case the
resolution of the items contained in the NWC Dispute Notice shall
be made by a majority decision of the Accounting Arbitrators. The
Accounting Arbitrator(s) shall be directed to make a resolution
within 30 days of engagement limited to those areas at issue and
determined in accordance with Exhibit 3.2(b), and such resolution
shall be conclusive and binding on all parties. Buyer and Levine
shall each pay the costs and expenses of their own Accounting
Arbitrator, accountants and attorneys and shall bear equally the
expense of any independent Accounting Arbitrator.
(e) To the extent that the Net
Working Capital as of the Closing Date (as finally determined in
accordance with the provisions set forth above, a “
Final NWC Determination ”) results in a Net
Working Capital figure of over $0.00 (with the amount by which such
Net Working Capital figure exceeds $0.00 being the “
Final NWC Increase ”), then within 5 business
days following such Final NWC Determination, the Buyer shall pay
the amount of the Final NWC Increase in cash to Levine.
(f) To the extent that a Final NWC
Determination results in a Net Working Capital figure that is less
than $0.00 (with the amount by which such Net Working Capital
figure falls below $0.00 being the “ Final NWC
Decrease ”), then within 5 business days following
such Final NWC Determination, Escrow Agent shall return to Buyer
that number of Escrow Shares equal to the number determined by
dividing (1) the Final NWC Decrease by (2) the Coinstar Share Price
(as set forth in the Escrow Agreement).
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(g) Any adjustments in connection
with the Net Working Capital in this Section 3.2 shall be treated
as an increase or decrease, as the case may be, in the Aggregate
Purchase Price.
3.3 Additional Equipment
Payment. At least 2
business days prior to the estimated Closing Date, Seller shall
prepare in good faith and deliver to Buyer (a) a list of vending
machines and amusement equipment purchased in the ordinary course
of the Business after June 29, 2005 (the “ New
Equipment List ”), and (b) reasonable evidence of the
aggregate purchase price (including freight and taxes) paid for the
machines and equipment (and such add-ons) on the New Equipment List
(the “ New Equipment Amount ”);
provided , however , that the New Equipment List and
New Equipment Amount shall not include any Excluded Assets. Buyer
shall pay Seller at Closing an amount equal to the New Equipment
Amount as described in Section 3.1. As promptly as practicable
after the Closing, but in no event more than 60 days after the
Closing, Buyer shall notify Levine if Buyer disputes any machinery,
equipment or price information in connection with the New Equipment
List or New Equipment Amount (a “ Buyer’s
Equipment Dispute Notice ”), which notice will
specify the basis of Buyer’s dispute. Buyer and Levine shall
thereafter attempt to reach agreement on the New Equipment List and
New Equipment Amount. If Levine and Buyer are unable to agree on
the New Equipment List and New Equipment Amount, then Levine shall
present any objections or comments in writing to Buyer no later
than 10 days after Levine’s receipt of the Buyer’s
Equipment Dispute Notice, specifying in reasonable detail any
objections thereto (the “Levine Equipment Dispute
Notice ”). Buyer and Levine shall be deemed to have
agreed with all other items and amounts not contained in
Buyer’s Equipment Dispute Notice or contained in the Levine
Equipment Dispute Notice. If within 20 business days after
Buyer’s receipt of the Levine Equipment Dispute Notice, Buyer
and Levine are unable to resolve informally matters raised by the
Levine Equipment Dispute Notice and Levine has not retracted the
Levine Equipment Dispute Notice, the parties shall submit the
Levine Equipment Dispute Notice to an arbitrator for resolution and
final determination of the New Equipment List and New Equipment
Amount. If the parties are unable to agree upon one arbitrator,
each shall appoint an arbitrator and these appointees shall appoint
a third arbitrator, in which case the resolution of the items
contained in the Levine Equipment Dispute Notice shall be made by a
majority decision of the arbitrators. The arbitrator(s) shall be
directed to make a resolution within 30 days of engagement limited
to those areas at issue, and such resolution shall be conclusive
and binding on all parties. Buyer and Levine shall each pay the
costs and expense of their own arbitrator, accountants and
attorneys and shall bear equally the expense of any independent
arbitrator. To the extent that a final determination is made by the
arbitrator(s) that the amount paid to Seller at Closing for the New
Equipment Amount exceeds or is less than the amount that the
arbitrator(s) determines should have been the New Equipment Amount
(such excess or deficit being referred to herein as the “
Adjusted New Equipment Amount ”), (a) in the
case of an excess, Levine shall return to Buyer an aggregate number
of shares of Common Stock equal in value to (i) the Adjusted New
Equipment Amount divided by (ii) the Coinstar Share Price within 5
business days after any such final determination; and (b) in the
case of a deficit, Buyer shall issue to Levine an aggregate number
of shares of Common Stock equal in value to (i) the Adjusted New
Equipment Amount divided by (ii) the Coinstar Share Price within 5
business days after any such final determination. Any payment made
in connection with the New Equipment List and New Equipment Amount
in this Section 3.3 shall be treated as an increase in the
Aggregate Purchase Price.
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3.4 Allocation of Purchase
Price. The parties agree
to utilize the fair market value of the Assets as determined as
provided under Section 3.1(e) for the purpose of allocating the
Aggregate Purchase Price paid, together with the liabilities
assumed, hereunder for the Assets for federal, state, local and
other Tax purposes, which allocation is in accordance with Section
1060 of the Code. Each party agrees to report the federal, state,
local and other Tax consequences of the transactions contemplated
by this Agreement and the Transaction Documents in a manner
consistent with such allocation and shall not take any position
inconsistent therewith upon examination of any Tax return, in any
refund claim, or in any litigation, investigation or otherwise.
Each party shall cooperate with the other party in the filing of
Form 8594 with the U.S. Internal Revenue Service.
3.5 Escrow.
The parties agree that at Closing an
aggregate of One Million Eight Hundred Thousand Dollars
($1,800,000) of the Aggregate Purchase Price (the “
Escrow Amount ”), calculated and paid as
contemplated by Section 3.1(c), shall be deposited in a
non-interest bearing escrow account (the “
Escrow ”) with Comerica Bank (the “
Escrow Agent ”). The Escrow Amount shall be
held and administered after the Closing Date for a period of twelve
(12) months in accordance with the Escrow Agreement attached hereto
as Exhibit 3.5 (the “ Escrow Agreement
”) and such Escrow Amount shall be withheld and deducted from
the Aggregate Purchase Price otherwise payable to Levine at
Closing. By signing this Agreement, Levine agrees to be bound with
respect to the indemnification obligations of Levine and the
procedures set forth in Section 13 and that the Escrow shall be
available to satisfy the indemnification obligations of Levine
pursuant to Sections 12.4 and 13 and the applicable provisions of
the Escrow Agreement. The fees of the Escrow Agent in connection
with the Escrow Agreement shall be paid 50% by Seller and 50% by
Buyer. All dividends and distributions accrued by the Escrow Shares
during the Escrow period shall be the property of
Levine.
4. Closing
4.1 Closing Date.
Subject to the terms and conditions
of this Agreement, the Closing shall take place at the offices of
Perkins Coie LLP, at 1201 Third Avenue, Suite 4800, Seattle,
Washington, at 9:00 a.m. on November 1, 2005, or at such other
location or time as the parties may agree, provided
that:
(a) If any of the conditions set
forth in Section 10 is not satisfied by the time the Closing would
otherwise occur, Buyer may, by notice to Seller, defer the Closing
to a business day specified in such notice, but not later than
November 30, 2005;
(b) If any of the conditions set
forth in Section 9 is not satisfied by the time the Closing would
otherwise occur, Seller may, by notice to Buyer, defer the Closing
to a business day specified in such notice, but not later than
November 30, 2005; and
(c) If both of Sections 4.1(a) and
4.1(b) are applicable, the Closing shall take place on the later of
the dates determined in accordance with those Sections.
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4.2 Closing Payments.
At the Closing, Buyer shall issue to
(a) Levine, on behalf of the Seller, an aggregate number of validly
issued, fully paid and nonassessable shares of Common Stock as
contemplated by Section 3.1(b) and (b) the Escrow Agent, an
aggregate number of validly issued, fully paid and nonassessable
shares of Common Stock as contemplated by Section
3.1(c).
5. Representations and Warranties of
Seller
To induce Buyer to enter into and
perform this Agreement, Seller represents and warrants to Buyer
(which representations and warranties shall survive the Closing as
provided in Section 13) all as follows in this Section
5:
5.1 Organization, Good Standing,
etc. Seller is a limited
liability company duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation.
Seller has all requisite power and authority to own, operate and
lease the Assets and to carry on the Business as now being
conducted. Seller is duly qualified to do business, and is in good
standing in the states required due to (a) the ownership or lease
of real or personal property for use in the operation of the
Business’s business or (b) the nature of the business
conducted by the Business, except where the failure to be so
qualified or in good standing would not have a material adverse
effect on the Assets or the Business. Schedule 5.1 sets
forth all of the jurisdictions in which Seller is qualified to do
business, as well as the jurisdictions in which Seller has
conducted business in the 5 years prior to the date of this
Agreement.
5.2 Authority.
Seller has full power and authority
to execute and deliver this Agreement and the Transaction Documents
to which it is a party and perform its obligations hereunder and
thereunder. The execution and delivery by Seller of this Agreement
and the Transaction Documents to which it is a party, the
performance by Seller of its obligations hereunder and thereunder
and the consummation by Seller of the transactions contemplated
hereby and thereby have been duly authorized by all necessary
action. This Agreement constitutes a valid and binding obligation
of Seller, enforceable against Seller in accordance with its terms,
except (i) as the same may be limited by bankruptcy, insolvency,
reorganization, moratorium, or other laws affecting generally the
enforcement of creditors’ rights and by the effect of rules
governing the availability of equitable remedies, and (ii) as
rights to indemnity or contribution may be limited under applicable
law or by principles of public policy thereunder. The Transaction
Documents to which Seller is a party, when executed and delivered
by Seller, will constitute valid and binding obligations of Seller,
enforceable against Seller in accordance with their respective
terms, subject to the exceptions noted in the immediately preceding
sentence.
5.3 No Conflict.
Except for any matters arising from
the failure to obtain the consents, approvals and other
authorizations described in Section 5.5 hereof, the execution,
delivery and performance of this Agreement or the Transaction
Documents by Seller and the consummation of the transactions
contemplated hereby or thereby will not (a) violate, conflict with,
or result in any breach of, any provision of Seller’s
operating agreement (or equivalent documents); or (b) violate,
conflict with, result in any breach of, or constitute a default (or
an event that, with notice or lapse of time or both, would
constitute a default) under any Contract or Judgment to which
Seller is a party or by which it is bound or which relates to the
Products, the Assets or the Business; or (c) result in the creation
of any Encumbrance on any of the Assets
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(other than the Permitted Encumbrances); or (d)
to the Best Knowledge of Seller, violate any applicable law,
statute, rule, ordinance or regulation of any Governmental Body; or
(e) to the Best Knowledge of Seller, violate or result in the
suspension, revocation, modification, invalidity or limitation of
any Permits relating to the Products, the Assets or the Business;
or (f) give any party with rights under any Contract, Judgment or
other restriction to which Seller is a party or by which it is
bound or which relates to the Products, the Assets or the Business,
the right to terminate, modify or accelerate any rights,
obligations or performance under such Contract, Judgment or
restriction (except as to an applicable Permitted Encumbrance); or
(g) violate, conflict with, result in any breach of, or constitute
a default (or an event that, with notice or lapse of time or both,
would constitute a default) under any Contract of or Judgment
applicable to Seller or Levine containing any noncompetition,
nonsolicitation, no-shop, standstill or similar
provisions.
5.4 Capitalization.
(a) The authorized equity interests
of Seller consist of a 100% participation percentage (the “
Membership Interests ”), all of which is issued
and outstanding (the “ Total Outstanding Equity
Interests ”). The Total Outstanding Equity Interests
constitute all of the issued and outstanding Membership Interests
of Seller and are held as of the date of this Agreement by Fred
Simon and GCB as reflected on Schedule 5.4(a) . Levine will
own all of the Membership Interests at Closing. All of the Total
Outstanding Equity Interests have been duly authorized and validly
issued. There is no contract or agreement relating to the voting of
any of the Total Outstanding Equity Interests.
(b) Except as set forth on
Schedule 5.4(b) , there is no: (1) outstanding subscription,
option, call, warrant or right to acquire any Membership Interests
of Seller; (2) outstanding security, instrument or obligation that
is or may become convertible into or exchangeable for any
Membership Interests of Seller; (3) rights plan (or similar plan
commonly referred to as a “poison pill”) under which
Seller is or may become obligated to sell or otherwise issue any
Membership Interests or any other securities; or (4) any claim,
condition or circumstance by any Person to the effect that such
Person is entitled to acquire or receive any Membership Interests
or other securities of Seller.
(c) Seller has no ownership interest
in any other entity. Seller is not a general partner of, nor is
Seller otherwise liable for any of the debts or other obligations
of any general partnership, limited partnership or other
entity.
5.5 Consents and
Approvals. Except that no
representation or warranty is made by Seller with respect to the
Permits in this Section 5.5, and except as set forth in Schedule
5.5 , (a) no consent, approval or authorization of, or
declaration, filing or registration with, any Governmental Body is
required for the execution, delivery and performance by Seller of
this Agreement and the Transaction Documents to which it is a party
and for the consummation by Seller of the transactions contemplated
hereby and thereby and (b) no consent, approval or authorization of
any third party is required for the execution, delivery and
performance by Seller of this Agreement and the Transaction
Documents to which it is a party and the consummation by Seller of
the transactions contemplated hereby and thereby.
5.6 Financial
Statements. (a) Seller
has delivered to Buyer the following financial statements of the
Business, which are set forth in Schedule 5.6(a)
(collectively, the “ Financial Statements
”): an audited balance sheet for the Business (the “
2004 Balance Sheet ”) as of
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December 31, 2004 (the “ Balance
Sheet Date ”), an audited restated balance sheet for
the Business as of December 31, 2003, the related audited
statements of income for each of the years then ended, the
unaudited interim balance sheet for the Business as of June 30,
2005 (or more current date if available) and the related unaudited
statement of income for the period then ended. The Financial
Statements were prepared from the books and records kept by Seller
for the Business and fairly present the financial position of the
Business as of their respective dates and the results of operations
of the Business for the respective years or periods then ended, in
accordance with GAAP consistently applied. Each accrual reflected
on the Financial Statements is adequate to meet the liability
underlying such accrual in accordance with GAAP. The foregoing
balance sheets reflect all properties and assets, whether real,
personal or mixed, that are used by Seller in the Business and are
required to be reflected on such balance sheets pursuant to GAAP
consistently applied.
(b) Schedule 5.6(b) sets
forth (1) all loans, promissory notes, lines of credit, letters of
credit, swaps, interest rate derivatives, other interest rate
derivative products or similar obligations of Seller (the “
Debt Agreements ”), and (2) all leases with
respect to any equipment, machinery, office equipment, computer
equipment, communications equipment, vehicles and similar tangible
property of Seller (the “ Equipment Leases
”).
5.7 Absence of Certain Changes or
Events. Except as set
forth in Schedule 5.7 , since the Balance Sheet Date, Seller
has conducted the Business in the ordinary course consistent with
Seller’s past practice, and has not, with respect to the
Business:
(a) taken any action or entered into
or agreed to enter into any transaction, agreement or commitment
(other than this Agreement and matters related thereto) not in the
ordinary course of business;
(b) created or incurred any new debt
or reduced any outstanding debt, except in the ordinary course of
business;
(c) encumbered or disposed of any
assets or made any capital expenditures, except in the ordinary
course of business;
(d) taken any action resulting in
the reduction of the Business’s working capital (current
assets including cash, less current liabilities not including the
short-term or current portion of long-term debt) except for such
customary changes as may be required in the ordinary course of
business;
(e) changed the compensation and
terms of employment provided to the Business’s officers and
principal employees, except for changes that were not material or
were made with the prior knowledge and consent of Buyer;
(f) entered into or agreed to enter
into any transaction, agreement or commitment, suffered the
occurrence of any event or events or experienced any change in
financial condition, business, results of operations or otherwise
that, in the aggregate, has (1) interfered with the normal and
usual operations of the business or business prospects of the
Business or (2) resulted in a material adverse change in the
financial condition, assets, liabilities, earnings or business or
could reasonably be expected to have a material adverse effect on
the business prospects of the Business; or
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(g) taken any action resulting in a
charge by Seller to the Business except for those customary,
periodic charges described in Schedule 5.7 .
5.8 Taxes.
(a) Except to the extent the
inaccuracy of the following cannot reasonably be expected to result
in (i) an Encumbrance on any of the Assets, or (ii) the
commencement of a Claim against Buyer: all Tax Returns required to
be filed by Seller have been duly and timely filed and all such Tax
Returns are (and were at the time they were filed) true, correct
and complete; all Tax obligations of Seller have been timely paid
or accrued and, except as reflected in the balance sheets included
in the Financial Statements and in any balance sheet hereafter
delivered to Buyer; and Seller has no liability for any Tax
obligations and no interest or penalties have accrued or are
accruing with respect thereto, whether state, county, local or
otherwise with respect to any periods prior to the Closing
Date.
(b) Except as set forth in
Schedule 5.8(b) , there is no action, suit, proceeding,
audit, investigation or other Claim pending or threatened in
respect of any Taxes, nor has any deficiency or Claim for any such
Taxes been proposed, asserted or threatened, nor does Seller have
any reason to believe that any deficiency or Claim for any such
Taxes has been proposed, asserted or threatened.
(c) Except as set forth in
Schedule 5.8(c) and except to the extent the inaccuracy of
the following cannot reasonably be expected to result in (i) an
Encumbrance on any of the Assets, or (ii) the commencement of a
Claim against Buyer, Seller does not conduct business in or derive
income from any jurisdiction other than jurisdictions for which Tax
Returns have been duly filed by Seller. No Claim has ever been made
by any Governmental Body in a jurisdiction where Seller does not
file Tax Returns that Seller is or may be subject to taxation by
such jurisdiction.
(d) Except to the extent the
inaccuracy of the following cannot reasonably be expected to result
in (i) an Encumbrance on any of the Assets, or (ii) the
commencement of a Claim against Buyer, Seller has complied in all
respects with all rules and regulations relating to the withholding
of Taxes. There are no Encumbrances on any of the Assets with
respect to Taxes, other than Encumbrances for Taxes not yet due and
payable.
(e) Except as set forth in
Schedule 5.8(e) and except to the extent the inaccuracy of
the following cannot reasonably be expected to result in (i) an
Encumbrance on any of the Assets, or (ii) the commencement of a
Claim against Buyer, Seller is not currently the beneficiary of any
extension of time within which to file any Tax Return, and Seller
has not waived any statute of limitations in respect of Taxes or
agreed to any extension of time with respect to any Tax assessment
or deficiency.
(f) Seller has been properly
classified as a “partnership” within the meaning of
Section 7701(a)(2) of the Code (and any comparable provisions of
state, local or foreign law) at all times since
inception.
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5.9 Property.
(a) Seller does not own any real
property. All real property, and rights thereto, leased by Seller
and used in the operation of the Business as of the close of
business on the Closing Date are listed in Schedule 2.1(g) .
Seller has provided to Buyer a list, which is accurate in all
material respects, whether by item or category, of all personal
property (the “ Personal Property ”)
owned, leased or rented by Seller for use in the operation of the
Business. Seller has delivered to Buyer true and complete copies of
all leases, subleases, rental agreements, contracts of sale,
tenancies or licenses of any portion of the Transferred Real
Property and the Personal Property. The Assets, including the
Leased Real Property and the Personal Property, include all
property used in the conduct of the Business as presently
conducted.
(b) Seller has good and marketable
title to all Personal Property, subject to Permitted Encumbrances
and the Equipment Leases described in Schedule 2.1(b) and
other leases or licenses to Personal Property described elsewhere
in this Agreement or the Schedules thereto. To Seller’s Best
Knowledge there are no Encumbrances with respect to the Leased Real
Property that impair the use in any material respect by Seller of
the Leased Real Property in the Business as presently conducted by
Seller.
(c) To Seller’s Best
Knowledge, there are no applicable adverse zoning, building or land
use codes or rules, ordinances, regulations or other restrictions
relating to zoning or land use that currently prevent, or cause the
imposition of material fines or penalties as the result of, the use
of all or any portion of the Leased Real Property for the conduct
thereon of the Business as presently conducted. To Seller’s
Best Knowledge, Seller has received all necessary approvals with
regard to occupancy and maintenance of the Leased Real
Property.
(d) There are no existing leases,
subleases, tenancies or licenses of any portion of the Leased Real
Property between Seller and any non-Affiliate.
(e) Each lease of any portion of the
Leased Real Property, and each lease, license, rental agreement,
contract of sale or other agreement to which Personal Property is
subject, is valid and enforceable against Seller and to
Seller’s Knowledge, lessor. Seller has performed all material
obligations imposed on it thereunder, and neither Seller nor, to
the Best Knowledge of Seller, any other party thereto is in
material default thereunder in any material respect, nor is there
any event that with notice or lapse of time, or both, would
constitute a material default thereunder by Seller or, to the Best
Knowledge of Seller, any other party thereto. Seller has not
received notice, and Seller is not otherwise aware, that any party
to any such lease, license, rental agreement, contract of sale or
other agreement intends to cancel, terminate or refuse to renew the
same or to exercise or decline to exercise any option or other
right thereunder. To Seller’s Knowledge, no Leased Real
Property or Personal Property is subject to any lease, license,
contract of sale or other agreement that could reasonably be
expected to have a material adverse effect on the business,
properties or financial condition of the Business.
(f) Except for (1) assessments for
Taxes not yet due and payable, (2) mechanics’,
materialmen’s, carriers’ and other similar liens
securing indebtedness that is in the aggregate less than $10,000,
is not yet due and payable, and was incurred in the ordinary course
of business, (3) the Encumbrances set forth on Schedule
5.9(f) , and (4) the Permitted Encumbrances, the Personal
Property is free and clear of all liens, mortgages, pledges, deeds
of trust, security interest, conditional sales agreements, charges,
encumbrances and other adverse claims or interests of any
kind.
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(g) Seller is not in default under
any material covenant, condition, restriction, easement,
right-of-way or governmental approval relating to the Leased Real
Property.
5.10 Equipment.
The machinery, equipment, furniture
and other physical assets included in the Assets do not, to
Seller’s Best Knowledge, have any structural defects, are in
good operating condition and repair (normal wear and tear excepted)
and are adequate for the conduct of the Business as currently
conducted and, to Seller’s Best Knowledge, they conform to
and are free of any building, fire or other violations under all
applicable zoning, pollution, health and safety and other laws,
statutes, rules, ordinances and regulations. During the past three
years there has not been any significant interruption in the
conduct of the Business, including, but not limited to, the
operation of the Facilities, due to the malfunctioning of any such
Assets. Except for those items specifically listed in the
Disclosure Memorandum as Excluded Assets, either by item or
category, no machinery, equipment, furniture or physical assets
(except for immaterial items or items replaced in the ordinary
course of business) other than those listed in Schedule
2.1(a) are used or required by Seller in the conduct of the
Business as currently conducted including, but not limited to, the
operation of the Facilities.
5.11 Environmental and Safety
Matters. Except as set
forth on Schedule 5.11 of the Disclosure
Memorandum:
(a) There are no Judgments pending
or, to Seller’s Best Knowledge, threatened Claims against the
Seller (1) that require or seek damages, injunctive relief or any
other remedy under any Environmental and Safety Law, or that could
result in any liability under any Environmental and Safety Law, or
(2) that require or seek any Remedial Action, or (3) that require
or seek Seller’s performance of any work, repairs,
construction or capital expenditures pursuant to any Environmental
and Safety Law, in each case with respect to the Facilities, or
with respect to properties currently or previously owned or leased
by Seller or by any third party acting on Seller’s behalf and
related to the Business. To Seller’s Best Knowledge, there
are no conditions, circumstances, activities, practices, events,
plans or actions that could prevent the compliance or continued
compliance with, or that could result in any liability of Seller
under, any Environmental and Safety Laws, or that could otherwise
form the basis under any Environmental and Safety Laws of any past,
present or future Claims against Seller, related to the
manufacture, generation, processing, distribution, use, treatment,
handling, storage, disposal, transport or abandoning of Hazardous
Materials on, at, around or under the Facilities, or the emission,
discharge, spill, migration, release, disposal or placing of
Hazardous Materials, or the threat of the same, into the
Environment on, at, around or under the Facilities.
(b) To Seller’s Best
Knowledge, the Facilities and properties currently or previously
leased by Seller, or by any third party acting on Seller’s
behalf and related to the Business, are not and were not used by
Seller for the treatment, storage or disposal of Hazardous
Materials. Seller, nor any third party acting on Seller’s
behalf, has transported or arranged for the transportation of any
Hazardous Materials from the Facilities or from properties
currently or previously leased by Seller. To Seller’s Best
Knowledge, there are no Claims related to the disposal of Hazardous
Materials nor is there any basis for any such Claims.
(c) To Seller’s Best
Knowledge, there are no facts material to Buyer’s evaluation
of the status of the Business or the Facilities with respect to
material compliance with Environmental and Safety Laws, and to
Seller’s Best Knowledge, there are no conditions that now or
in the future would require Remedial Action to achieve such
material compliance.
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5.12 Contracts.
(a) Schedule 5.12 contains a
complete and accurate list of all material Contracts and, in the
case of any oral Contracts, Schedule 5.12 contains an
accurate description of the material terms thereof) relating to the
Products, the Assets or the Business (excluding the leases for the
Leased Real Property, which are subject to Section 5.9), to which
Seller is a party or by which it is in any way affected or bound
(except, with respect to Sections 5.12(d)(1) and 5.12(d)(8) below,
for Contracts that do not meet either the applicable dollar or time
threshold including, without limitation, security agreements,
conditional sale agreements, instruments relating to the borrowing
of money and broker or distributorship agreements. For the purposes
of this Section 5.12, the term “material” shall have
the meaning set forth in Sections 5.12(d)(1) through 5.12(d)(8)
below.
(b) All of the Contracts listed on
Schedule 5.12 are valid and in full force and effect, Seller
has performed all material obligations imposed on it thereunder,
and there are not, under any of such Contracts, any defaults or
events of default on the part of Seller or, to Seller’s Best
Knowledge, any other party thereto, that would materially adversely
affect the business, assets or financial condition of the Business
or that could reasonably be expected to materially adversely affect
the business prospects of the Business.
(c) With respect to the Contracts
listed on Schedule 5.12 , Seller has not received written
notice nor is Seller otherwise aware that any party to any such
Contract intends to cancel, terminate or refuse to renew such
Contract or to exercise or decline to exercise any option under any
Contract or right thereunder
(d) Material Contracts:
(1) all Contracts for the purchase
or sale of Products, supplies, machinery, equipment, services or
other tangible or intangible property, in each case involving the
payment or receipt by Seller of Two Hundred Fifty Thousand Dollars
($250,000) or more in the case of any single Contract, or providing
for performance, regardless of dollar amount, over a period of one
year or more;
(2) all sales agency or
distributorship Contracts or franchises;
(3) all Contracts providing for the
manufacture, packaging, storage or distribution of Products or the
performance of manufacturing, packaging, storage or distribution
services by or for Seller;
(4) all Contracts providing for the
services of consultants or independent contractors, including, but
not limited to, Contracts relating to research, development,
advertising or promotion;
(5) all Contracts relating to trade
names, trademarks, service marks, copyrights, or applications for
any of the foregoing, or inventions, formulas, processes,
technology, know-how, trade secrets, technical information or other
intellectual property rights, including, but not limited to, the
Intellectual Property;
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(6) all Contracts that contain
restrictions on Seller’s ability to conduct the Business
relating to noncompetition provisions or guaranteed performance or
payments;
(7) all Contracts pursuant to which
Seller derives more than 5% of its revenues or profits (based upon
Seller’s revenues or profits in calendar 2004);
and
(8) all other Contracts relating to
the Products, the Assets or the Business that involve the payment
or receipt by Seller of Two Hundred Fifty Thousand Dollars
($250,000) or more in the case of any single Contract, or providing
for performance, regardless of dollar amount, over a period of one
year or more.
(e) To the Best Knowledge of Seller,
there are no obligations that remain to be performed by Seller
under any material Contract contained in the Assets that could not
be fulfilled by Seller.
5.13 Claims and Legal
Proceedings. Except as
specifically set forth in Schedule 5.13 , there are no
Claims pending or, to Seller’s Best Knowledge, threatened
against Seller or any Employee Benefit Plan (except for benefit
claims submitted by employees in the normal course) with respect to
the operation of the Business, before or by any court or other
Governmental Body or nongovernmental department, commission, board,
bureau, agency, instrumentality, arbitrator, arbitration panel or
any other Person. To Seller’s Best Knowledge, there is no
valid basis for any Claim, other than as specifically set forth in
Schedule 5.13 , materially adverse to the Business or any
Employee Benefit Plan, by or before any Governmental Body or
nongovernmental department, commission, board, bureau, agency or
instrumentality, or any other Person. There are no outstanding or
unsatisfied judgments, orders, decrees or stipulations to which
Seller with respect to the operation of the Business or any
Employee Benefit Plan is a party, that involve the transactions
contemplated herein or that would alone or in the aggregate have a
material adverse effect on the business, assets or financial
condition of the Business or that could reasonably be expected to
have a material adverse effect on the business prospects of the
Business.
5.14 Labor Matters.
Except as set forth in Schedule
5.14 , there are no disputes, material employee grievances or
material disciplinary actions pending or, to Seller’s Best
Knowledge, threatened between Seller and any employees of Seller
who are employed at the Business (collectively, the “
Relevant Employees ”). Seller, with respect to
the Relevant Employees, has complied in all material respects with
all provisions of all laws relating to the employment of labor and
has no liability for any arrears of wages or Taxes or penalties for
failure to comply with any such laws. Seller has no knowledge of
any organizational efforts presently being made or threatened by or
on behalf of any labor union with respect to any Relevant
Employees.
Except as specifically set forth in
Schedule 5.
