Table of Contents

 

		Page
ARTICLE I PURCHASE AND SALE OF PREFERRED INTERESTS		2
SECTION 1.1	ISSUANCE AND PURCHASE OF PREFERRED INTERESTS	2
SECTION 1.2	PAYMENT FOR PREFERRED INTERESTS	2
ARTICLE II PURCHASE AND SALE OF SELLERS’ INTERESTS		2
SECTION 2.1	SALE OF INTERESTS.	2
SECTION 2.2	PURCHASE PRICE AND PAYMENTS FOR THE INTERESTS.	3
SECTION 2.3	PAYMENTS IN CASH; PAYMENTS TO THE SELLERS	4
SECTION 2.4	WITHHOLDING	4
SECTION 2.5	DETERMINATION OF EBITDA.	4
ARTICLE III CLOSINGS		6
SECTION 3.1	INITIAL CLOSING	6
SECTION 3.2	SUBSEQUENT CLOSINGS	6
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY		6
SECTION 4.1	ORGANIZATION AND QUALIFICATION.	7
SECTION 4.2	INTERESTS IN OTHER PERSONS	7
SECTION 4.3	CAPITALIZATION	7
SECTION 4.4	FUNDAMENTAL DOCUMENTS; OTHER RECORDS	8
SECTION 4.5	AUTHORIZATION; ABSENCE OF CONFLICTS.	8
SECTION 4.6	GOVERNMENTAL APPROVALS	9
SECTION 4.7	FINANCIAL STATEMENTS.	9
SECTION 4.8	TAX MATTERS.	10
SECTION 4.9	COMPLIANCE WITH LAWS	11
SECTION 4.10	LITIGATION	14
SECTION 4.11	AGREEMENTS	14
SECTION 4.12	REAL ESTATE	16
SECTION 4.13	ACCOUNTS AND NOTES RECEIVABLE	16
SECTION 4.14	INVENTORIES	17
SECTION 4.15	PRODUCT WARRANTIES; RETURNS.	17
SECTION 4.16	TANGIBLE PROPERTY	17
SECTION 4.17	INTELLECTUAL PROPERTY.	18
SECTION 4.18	TITLE; LIENS	19
SECTION 4.19	LIABILITIES; INDEBTEDNESS.	19
SECTION 4.20	LABOR AGREEMENTS	20
SECTION 4.21	DISCRIMINATION AND OCCUPATIONAL SAFETY	20
SECTION 4.22	ENVIRONMENTAL PROTECTION.	21
SECTION 4.23	EMPLOYEE BENEFIT PLANS	22
SECTION 4.24	EMPLOYEES; COMPENSATION	24
SECTION 4.25	FOREIGN CORRUPT PRACTICES ACT	24
SECTION 4.26	INSURANCE	25

 

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SECTION 4.27	OPERATIONS OF THE COMPANY	25
SECTION 4.28	POTENTIAL CONFLICTS OF INTEREST	26
SECTION 4.29	BANKS, BROKERS AND PROXIES	27
SECTION 4.30	NO BROKER	27
SECTION 4.31	FULL DISCLOSURE	27
ARTICLE V REPRESENTATIONS AND WARRANTIES OF EACH SELLER		27
SECTION 5.1	TITLE TO INTERESTS	27
SECTION 5.2	AUTHORITY RELATIVE TO THIS AGREEMENT	28
SECTION 5.3	ABSENCE OF CONFLICTS	28
SECTION 5.4	GOVERNMENTAL APPROVALS	28
SECTION 5.5	LITIGATION	28
SECTION 5.6	NO BROKER	28
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF BUYER		28
SECTION 6.1	ORGANIZATION	28
SECTION 6.2	AUTHORITY RELATIVE TO THIS AGREEMENT	28
SECTION 6.3	ABSENCE OF CONFLICTS	29
SECTION 6.4	NO BROKER	29
SECTION 6.5	PURCHASE FOR INVESTMENT	29
SECTION 6.6	GOVERNMENTAL APPROVALS	29
SECTION 6.7	FULL DISCLOSURE	30
ARTICLE VII COVENANTS AND AGREEMENTS		30
SECTION 7.1	PRE-CLOSING CONDUCT OF BUSINESS OF THE COMPANY	30
SECTION 7.2	PAYMENT OF INTERCOMPANY DEBTS	30
SECTION 7.3	REVIEW OF THE COMPANY	30
SECTION 7.4	BEST EFFORTS	30
SECTION 7.5	ADVICE OF CHANGES	31
SECTION 7.6	RESTRICTIONS ON THE COMPANY AND THE SELLERS	32
SECTION 7.7	CONFIDENTIALITY	32
SECTION 7.8	COOPERATION AND EXCHANGE OF INFORMATION	33
SECTION 7.9	FURTHER ASSURANCES	33
SECTION 7.10	QUALITY CONTROLS.	35
SECTION 7.11	ACCOUNTING SOFTWARE	36
SECTION 7.12	ACCOUNTING MANAGER	36
SECTION 7.13	FINANCIAL REPORTS	36
SECTION 7.14	SAS 70 COMPLIANCE	36
SECTION 7.15	AUDITORS	36
SECTION 7.16	NOTIFICATION OF CERTAIN MATTERS; UPDATING DISCLOSURE SCHEDULES AND EXHIBITS.	36
SECTION 7.17	PARENT SERVICE AGREEMENTS	37
SECTION 7.18	PARENT CORPORATE SERVICES	37
SECTION 7.19	PARENT INFRASTRUCTURE; OTHER SERVICES.	37
SECTION 7.20	EQUITY GRANTS	38
SECTION 7.21	PAYMENT OF INCENTIVE PAYMENTS	38
SECTION 7.22	754 ELECTION	39

 

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SECTION 7.23	TAXES	39
ARTICLE VIII CONDITIONS PRECEDENT TO THE OBLIGATION OF BUYER TO EFFECT THE PURCHASE OF INTERESTS AT THE INITIAL CLOSING		39
SECTION 8.1	REPRESENTATIONS AND COVENANTS	39
SECTION 8.2	OPERATING AGREEMENT OF THE COMPANY	40
SECTION 8.3	OPINION OF COUNSEL TO THE COMPANY	40
SECTION 8.4	LOAN FROM PARENT	40
SECTION 8.5	GOOD STANDING CERTIFICATES	40
SECTION 8.6	GOVERNMENTAL PERMITS AND APPROVALS	40
SECTION 8.7	LEGISLATION	41
SECTION 8.8	LEGAL PROCEEDINGS	41
SECTION 8.9	THIRD PARTY CONSENTS	41
SECTION 8.10	NO MATERIAL ADVERSE CHANGE	41
SECTION 8.11	INSTRUMENTS OF TRANSFER	41
SECTION 8.12	RESIGNATIONS OF DIRECTORS	42
SECTION 8.13	NON-COMPETITION/EMPLOYMENT	42
SECTION 8.14	DOCUMENTS RELATING TO THE SATISFACTION OF FVA VENTURES DEBT	42
SECTION 8.15	FIRPTA CERTIFICATES	42
SECTION 8.16	APPROVAL OF COUNSEL TO BUYER	43
SECTION 8.17	FDA/FTC RECALL	43
SECTION 8.18	QUALITY CONTROL PLAN	43
SECTION 8.19	WAIVER OF SELLERS’ RIGHT UNDER THE OPERATING AGREEMENT	43
SECTION 8.20	DISPOSITION AGREEMENT	43
ARTICLE IX CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY AND THE SELLERS TO EFFECT THE SALE OF INTERESTS AT THE INITIAL CLOSING		43
SECTION 9.1	REPRESENTATIONS AND COVENANTS	43
SECTION 9.2	GOVERNMENT PERMITS AND APPROVALS	44
SECTION 9.3	PURCHASE PRICE	44
SECTION 9.4	APPROVAL OF COUNSEL TO THE COMPANY AND THE SELLERS	44
ARTICLE X CONDITIONS TO SUBSEQUENT CLOSINGS		44
SECTION 10.1	CONDITIONS PRECEDENT TO THE OBLIGATION OF BUYER TO EFFECT THE SUBSEQUENT CLOSINGS	44
SECTION 10.2	CONDITIONS TO CLOSING BY THE SELLERS OF THE SUBSEQUENT CLOSINGS	46
ARTICLE XI SURVIVAL OF REPRESENTATIONS AND WARRANTIES; TERMINATION		47
SECTION 11.1	SURVIVAL OF REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLERS.	47
SECTION 11.2	TERMINATION OF AGREEMENT	48
SECTION 11.3	EXTENSION OF TERMINATION DATES.	49
SECTION 11.4	EFFECT OF TERMINATION	49
ARTICLE XII INDEMNIFICATION		50

 

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SECTION 12.1	OBLIGATION OF THE COMPANY AND THE SELLERS TO INDEMNIFY.	50
SECTION 12.2	OBLIGATION OF BUYER TO INDEMNIFY.	53
SECTION 12.3	NOTICE AND OPPORTUNITY TO DEFEND	54
SECTION 12.4	COVERED PERSONS	56
SECTION 12.5	EXCLUSIVE REMEDY	56
SECTION 12.6	WAIVER OF BREACHES	56
SECTION 12.7	INCENTIVE PLAN	56
ARTICLE XIII MISCELLANEOUS		56
SECTION 13.1	CERTAIN DEFINITIONS	56
SECTION 13.2	FEES AND EXPENSES	58
SECTION 13.3	PUBLICITY; BUYER SECURITIES.	59
SECTION 13.4	NOTICES	59
SECTION 13.5	ENTIRE AGREEMENT	60
SECTION 13.6	WAIVERS AND AMENDMENTS	61
SECTION 13.7	BINDING EFFECT; BENEFIT	61
SECTION 13.8	NO ASSIGNMENT	61
SECTION 13.9	VARIATIONS IN PRONOUNS	61
SECTION 13.10	CONSTRUCTION	61
SECTION 13.11	COUNTERPARTS	62
SECTION 13.12	EXHIBITS AND SCHEDULES	62
SECTION 13.13	CROSS-REFERENCES	62
SECTION 13.14	SEVERABILITY	62
SECTION 13.15	GOVERNING LAW; CONSENT TO JURISDICTION AND SERVICE OF PROCESS	62
SECTION 13.16	WAIVER OF JURY TRIAL	63
SECTION 13.17	PARENT GUARANTY	63
SECTION 13.18	SELLERS’ REPRESENTATIVE.	63
SECTION 13.19	SPECIFIC PERFORMANCE	64

 

Exhibits

 

Exhibit A :	Sellers and Percentage Interest
Exhibit B :	Form of Revised Operating Agreement
Exhibit C :	Form of Opinion of Counsel to the Company
Exhibit D :	Form of Non-Competition Agreement
Exhibit E :	Form of Employment Agreement

 

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INDEX OF DEFINED TERMS

 

	Page Reference
2009 EBITDA	53
2010 EBITDA	53
2011 EBITDA	53
2012 EBITDA	53
754 Election	36
Affiliate	53
Agreement	1
Ancillary Agreements	54
Applicable Multiple	54
Audited Financials	9
Buyer	1
Buyer Indemnitees	47
Code	54
Company	1
Consistent Basis	54
contracts and/or other agreements	54
control	54
Credit Facility	1, 54
Determination Date	4
Disposition Agreement	40
documents and/or other papers	54
EBITDA	54
Employee Benefit Plans	22
Employment Agreements	39
Environmental Laws	54
Environmental Permit	54
Equity Plan	1
ERISA	22
FCPA	24
FDA	12
Final Accounting Firm	5
Fiscal 2009	55
Fiscal 2010	55
Fiscal 2011	55
Fiscal 2012	55
Form 8-K	59
Founders	55
Fourth Closing	6
Fourth Closing EBITDA	55
Fourth Closing Termination Date	55
Fourth Purchase Incentive Payment	3
Fourth Purchase Interests	3

 

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Fourth Purchase Price	4
FTC	12
Fundamental Documents	55
FVA Balance Sheet	9
FVA Ventures	55
GAAP	55
Governmental Authority	55
HSR Act	9
Incentive Holders	1
Indemnification Notice	51
Indemnification Percentage	55
Indemnified Person	51
Indemnifying Person	51
Initial Closing	6
Initial Closing Date	6
Initial Purchase Interests	2
Initial Purchase Price	3
Intellectual Property	56
Interest	1
Interest Expense	56
Interests	1
Interim Balance Sheet	9
Interim Balance Sheet Date	9
Knowledge	56
Law	56
Laws	12
Leased Real Property	16
Liabilities	20
Licensed Intellectual Property	18
Lien	56
Loan Agreement	1, 56
Losses	47
Material Adverse Effect	56
Material Permits	12
Material to the Business	57
Materials of Environmental Concern	57
Most Recent Balance Sheet	9
Most Recent Balance Sheet Date	9
Net Income	57
Non-Competition Agreements	39
Operating Agreement	1
ordinary course of business	57
Other Authorities	12
Other Parties	12
Parent	1, 57
PathConnect	7

 

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PathConnect Balance Sheet	9
Pay-Off Expenses	39
Percentage Interest	1, 57
Permits	9
Permitted Liens	19
Person	57
Preferred Interest Purchase Price	2
Preferred Interests	1, 57
Principal Sellers	57
Products	58
Quality Control Plan	34
Revised Operating Agreement	37
SEC	59
Second Closing	6
Second Closing EBITDA	58
Second Closing Termination Date	58
Second Purchase Incentive Payment	2
Second Purchase Interests	2
Second Purchase Price	3
Securities Act	29
Seller	1
Sellers	1
Sellers’ Representative	2
Subsequent Closing	6
Subsequent Closings	6
Subsidiary	58
Tangible Property	18
Tax	58
Tax Return	58
Third Closing	6
Third Closing EBITDA	58
Third Closing Termination Date	58
Third Purchase Incentive Payment	3
Third Purchase Interests	3
Third Purchase Price	4
Unaudited Company Financials	9
Unaudited PathConnect Financials	9
Updated Audited Financials	42
Updated Interim Balance Sheet	42
Updated Interim Balance Sheet Date	42
Updated Most Recent Balance Sheet	42
Updated Most Recent Balance Sheet Date	42
Updated Unaudited Financials	43
WARN	24

 

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MEMBERSHIP INTEREST PURCHASE AGREEMENT

 

MEMBERSHIP INTEREST PURCHASE AGREEMENT (this “ Agreement ”), dated August 4, 2008, among Blyth, Inc., a Delaware corporation (“ Parent ”), Blyth VSH Acquisition Corporation, a Delaware corporation and wholly-owned subsidiary of Parent (the “ Buyer ”), ViSalus Holdings, LLC, a Delaware limited liability company (the “ Company ”), and all of the members of the Company, each of whose names are listed on Exhibit A (each, individually, a “ Seller ” and, collectively, the “ Sellers ”).

 

RECITALS

 

WHEREAS, the Parent has determined that it is in the best interests of the Parent and its stockholders that the Parent make, directly or indirectly, an investment in the Company, both by acquiring equity interests in the Company and by making a credit facility available to FVA Ventures (as defined below), a subsidiary of the Company.

 

WHEREAS, the Buyer desires to acquire from the Company, and the Company desires to issue and sell to the Buyer, in the manner and on the terms and conditions set forth in this Agreement, 5,433,016 newly issued Series A-1 Convertible Preferred Units (the “ Preferred Interests ”);

 

WHEREAS, prior to the date hereof, the Parent has made available to FVA Ventures a revolving credit facility in the amount of $5,000,000 (the “ Credit Facility ”), pursuant to a Loan and Security Agreement dated as of July 30, 2008 by and among the Company, as guarantor, FVA Ventures, as borrower, and the Parent, as lender (such Loan and Security Agreement, as amended, restated, supplemented or otherwise modified from time to time, being hereinafter referred to as the “ Loan Agreement ”);

 

WHEREAS, the Sellers are the owners and members of the Company, and own 100% of the existing Series A Convertible Participating Preferred Units, Class A Units and Class B Units of the Company (each, individually an “ Interest ” and, collectively, the “ Interests ”; each Seller’s “ Percentage Interest ” (as defined below) is set forth opposite such Seller’s name on Exhibit A under the caption “ Percentage Interest ”);

 

WHEREAS, pursuant to the Company’s Equity Incentive Plan (the “ Equity Plan ”), various independent representatives and distributors (such Persons, the “ Incentive Holders ”) participate in the Equity Plan;

 

WHEREAS, pursuant to the terms of the Equity Plan and the Company’s Second Amended and Restated Limited Liability Company Agreement (the “ Operating Agreement ”), the Incentive Holders are entitled to receive certain payments if and when the Subsequent Closings (as defined below) occur;

 

WHEREAS, the Sellers desire to sell and the Buyer desires to purchase, in the manner and on the terms and conditions set forth in this Agreement, all of their Interests in the Company; and

 

 

WHEREAS, on the date hereof, Ryan Blair has been appointed as the Sellers’ agent and representative with respect to certain matters hereunder (Mr. Blair being hereinafter referred to, when acting hereunder in such representative capacity, as “ Sellers’ Representative ”).

 

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

ARTICLE I
PURCHASE AND SALE OF PREFERRED INTERESTS

 

Section 1.1              Issuance and Purchase of Preferred Interests .  Based upon the representations, warranties, covenants and agreements set forth in this Agreement, and subject to the satisfaction of the conditions set forth in Articles VIII and IX , the Company shall issue and sell to the Buyer, and the Buyer shall purchase from the Company, the Preferred Interests for $2,500,000 (the “ Preferred Interest Purchase Price ”) at the Initial Closing (as defined below).  It is understood and agreed that the Buyer may assign all or any portion of its rights and obligations with respect to the purchase of Preferred Interests to one or more Persons upon prior written notice to, and with the consent (which consent shall not be unreasonably withheld) of the Company, and subject to the execution and delivery by such Person(s) of a joinder agreement to this Agreement in form and substance reasonably satisfactory to the Company and the Buyer.

 

Section 1.2              Payment for Preferred Interests .  At the Initial Closing, the Buyer shall pay to the Company the Preferred Interest Purchase Price.

 

ARTICLE II
PURCHASE AND SALE OF SELLERS’ INTERESTS

 

Section 2.1              Sale of Interests .

 

(a)                                   Upon the terms and subject to the conditions of this Agreement, at the Initial Closing:  (i) each Seller listed on Schedule 2.1(a)  shall, severally and not jointly, sell, transfer, assign and convey to Buyer his or its Interest set forth on Schedule 2.1(a)  hereto, and (ii) Buyer shall purchase, acquire and accept all of the Interests set forth on Schedule 2.1(a)  hereto (collectively, the “ Initial Purchase Interests ”), for the Initial Purchase Price (as defined below);

 

(b)                                  Upon the terms and subject to the conditions of this Agreement, at the Second Closing (as defined below):  (i) each Seller listed on Schedule 2.1(b)  shall, severally and not jointly, sell, transfer, assign and convey to Buyer his or its Interest set forth on Schedule 2.1(b)  hereto; (ii) Buyer shall purchase, acquire and accept all of the Interests set forth on Schedule 2.1(b)  hereto (collectively, the “ Second Purchase Interests ”), for the Second Purchase Price (as defined below); (iii) Buyer shall pay to the Company, for the benefit of the Incentive Holders, the aggregate amount payable to the Incentive Holders at the Second Closing, calculated as set forth on Schedule 2.1(b)  (the “ Second Purchase Incentive Payment ”); and (iv) subject to receipt of an acknowledgement, in a form reasonably satisfactory to the Buyer, from the Incentive Holders of the receipt of such payment and the partial extinguishment of the obligations of the Company under the Equity Plan, as soon as practicable after the Second

 

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Closing, the Company shall pay the Second Purchase Incentive Payment to the Incentive Holders.

 

(c)                                   Upon the terms and subject to the conditions of this Agreement, at the Third Closing (as defined below):  (i) each Seller listed on Schedule 2.1(c)  shall, severally and not jointly, sell, transfer, assign and convey to Buyer his or its Interest set forth on Schedule 2.1(c)  hereto; (ii) Buyer shall purchase, acquire and accept all of the Interests set forth on Schedule 2.1(c)  hereto (collectively, the “ Third Purchase Interests ”), for the Third Purchase Price (as defined below); (iii) Buyer shall pay to the Company, for the benefit of the Incentive Holders, the aggregate amount payable to the Incentive Holders at the Third Closing, calculated as set forth on Schedule 2.1(c) ( the “ Third Purchase Incentive Payment ”); and (iv) subject to receipt of an acknowledgement, in a form reasonably satisfactory to the Buyer, from the Incentive Holders of the receipt of such payment and the partial extinguishment of the obligations of the Company under the Equity Plan, as soon as practicable after the Third Closing, the Company shall pay the Third Purchase Incentive Payment to the Incentive Holders.

 

(d)                                  Upon the terms and subject to the conditions of this Agreement, at the Fourth Closing (as defined below):  (i) each Seller listed on Schedule 2.1(d)  shall, severally and not jointly, sell, transfer, assign and convey to Buyer his or its Interest set forth on Schedule 2.1(d)  hereto; (ii) Buyer shall purchase, acquire and accept all of the Interests set forth on Schedule 2.1(d)  hereto (collectively, the “ Fourth Purchase Interests ”), for the Fourth Purchase Price (as defined below); (iii) Buyer shall pay to the Company, for the benefit of the Incentive Holders, the aggregate amount payable to the Incentive Holders at the Fourth Closing, calculated as set forth on Schedule 2.1(d)  (the “ Fourth Purchase Incentive Payment ”); and (iv) subject to receipt of an acknowledgement, in a form reasonably satisfactory to the Buyer, from the Incentive Holders of the receipt of such payment and the extinguishment of all of the obligations of the Company under the Equity Plan, as soon as practicable after the Fourth Closing, the Company shall pay the Fourth Purchase Incentive Payment to the Incentive Holders.

 

(e)                                   It is understood and agreed that the Buyer may assign all or any portion of its rights and obligations with respect to the purchase of the Initial Purchase Interests, Second Purchase Interests, Third Purchase Interests or Fourth Purchase Interests to one or more Affiliates upon prior written notice to, and with the consent (which consent shall not be unreasonably withheld) of the Principal Sellers, and subject to the execution and delivery by such Person(s) of a joinder agreement to this Agreement in form and substance reasonably satisfactory to Principal Sellers (as defined below) and the Buyer.

 

Section 2.2              Purchase Price and Payments for the Interests .

 

(a)                                   The aggregate purchase price (the “ Initial Purchase Price ”) for all of the Sellers Interests set forth on Schedule 2.1(a)  hereto shall be equal to $10,500,000, which shall be allocated among the Sellers in accordance with their respective Percentage Interests (as defined below).

 

(b)                                  The aggregate purchase price (the “ Second Purchase Price ”) for all of the Sellers Interests set forth on Schedule 2.1(b)  hereto shall be an amount equal to the difference between (i) the product of (A) fifteen percent (15%) times (B) the Applicable Multiple times (C)

 

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the Second Closing EBITDA (as defined below) (and in no event, less than zero) and (ii) the Second Purchase Incentive Payment, which difference shall be allocated among the Sellers in accordance with their respective Percentage Interests.

 

(c)                                   The aggregate purchase price (the “ Third Purchase Price ”) for all of the Sellers Interests as set forth on Schedule 2.1(c)  hereto shall be an amount equal to the difference between (i) the product of (A) fifteen percent (15%) times (B) the Applicable Multiple times (C) the Third Closing EBITDA (as defined below) (and in no event, less than zero) and (ii) the Third Purchase Incentive Payment, which difference shall be allocated among the Sellers in accordance with their respective Percentage Interests.

 

(d)                                  The aggregate purchase price (the “ Fourth Purchase Price ”) for all of the Sellers Interests set forth on Schedule 2.1(d)  hereto shall be an amount equal to the difference between (i) the product of (A) thirty percent (30%) times (B) the Applicable Multiple times (C) the Fourth Closing EBITDA (as defined below) (and in no event, less than zero) and (ii) the Fourth Purchase Incentive Payment, which difference shall be allocated among the Sellers in accordance with their respective Percentage Interests.

 

Section 2.3              Payments in Cash; Payments to the Sellers .  All cash payments made pursuant to this Article II shall be made in United States dollars, by wire transfer of immediately available U.S. funds in accordance with the written payment instructions furnished by the Company to the Buyer at least one (1) business day prior to the Initial Closing and each Subsequent Closing, if any.

 

Section 2.4              Withholding .  The Company shall be entitled to deduct and withhold from the amounts otherwise payable to any Incentive Holder pursuant to this Article II such amounts as the Company is required to deduct and withhold with respect to payment under any provision of federal, state or local income Tax law.

 

Section 2.5              Determination of EBITDA .

 

(a)                                   The 2009 EBITDA, the 2010 EBITDA, the 2011 EBITDA and, if applicable, the 2012 EBITDA shall be determined on or before the thirtieth (30th) day following the receipt by Buyer, of the final audited consolidated financial statements of the Company, for Fiscal 2009, Fiscal 2010, Fiscal 2011 and Fiscal 2012, as applicable, and in any event no later than March 31 of 2010, 2011, 2012 or 2013, as applicable; provided that if the 2009 EBITDA, 2010 EBITDA, 2011 EBITDA or 2012 EBITDA is disputed pursuant to this Section 2.5 , such determination shall occur on such later date as the 2009 EBITDA, 2010 EBITDA, 2011 EBITDA or 2012 EBITDA, as applicable, shall have been finally determined hereunder (the date described in this sentence, the “ Determination Date ”).

 

(b)                                  No later than ten (10) business days following issuance of the audited financial statements of the Company for Fiscal 2009, Fiscal 2010, Fiscal 2011 and Fiscal 2012, as applicable, the Company shall deliver a copy thereof to the Buyer and the Sellers’ Representative, together with a certificate of the Chief Financial Officer of the Company, which certificate shall set forth the Company’s calculation of the 2009 EBITDA, 2010 EBITDA, 2011

 

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EBITDA or 2012 EBITDA, as applicable.  Time is of the essence with respect to the delivery of such certificate.

 

(c)                                   If the Buyer or the Sellers’ Representative shall disagree with such determination of the 2009 EBITDA, 2010 EBITDA, 2011 EBITDA or 2012 EBITDA, as applicable, the disagreeing party shall notify the other party on or before the date which is thirty (30) days after the date on which the Company delivers to the Buyer and the Sellers’ Representative such statement of the Company’s 2009 EBITDA, 2010 EBITDA, 2011 EBITDA or 2012 EBITDA, as applicable.  Buyer and the Sellers’ Representative shall attempt in good faith to resolve any such disagreements.  If Buyer and the Sellers’ Representative are unable to resolve all such disagreements on or before the date which is fifteen (15) days after notification by the disagreeing party of any such disagreements, the Sellers’ Representative and Buyer shall retain a nationally or regionally recognized independent public accounting firm not engaged by either the Company, Buyer or Parent at such time upon whom the Sellers’ Representative and Buyer shall mutually agree (such accounting firm being referred to as the “ Final Accounting Firm ”), to resolve all such disagreements.  If Buyer and the Sellers’ Representative are unable to agree on the choice of an accounting firm, then Buyer and the Sellers’ Representative shall select a nationally or regionally recognized accounting firm by lot (after each submits a list of five names, excluding their respective regular outside accounting firms), which firm shall be the “Final Accounting Firm .”  The Final Accounting Firm shall adjudicate only those items still in dispute with respect to the calculation of the 2009 EBITDA, 2010 EBITDA, 2011 EBITDA or 2012 EBITDA, as applicable.  The determination by the Final Accounting Firm shall be binding and conclusive on both the Sellers and Buyer.

 

(d)                                  The Final Accounting Firm shall offer the Sellers’ Representative and Buyer the opportunity to provide written submissions regarding their positions on the disputed matters, which written submissions shall be provided to the Final Accounting Firm, if at all, no later than ten (10) days after the date of referral of the disputed matters to the Final Accounting Firm.  The Final Accounting Firm shall deliver a written report resolving only the disputed matters and setting forth the basis for such resolution within thirty (30) days after the date of referral of the disputed matters to the Final Accounting Firm.  The determination of the Final Accounting Firm with respect to the correctness of each matter in dispute shall be final and binding on the parties.  The fees, costs and expenses of the Final Accounting Firm shall be borne entirely by the Buyer, if all the disputed matters are resolved in favor of the Sellers and by the Sellers, if all the disputed matters are resolved in favor of the Buyer.  Otherwise, the fees, costs and expenses of the Final Accounting Firm shall be allocated between the Buyer, on the one hand, and the Sellers, on the other hand, based upon the percentage which the portion of the contested amount not awarded to each party bears to the amount actually contested by such party.  For example, if the Sellers’ Representative claims that the 2010 EBITDA is $1,000 greater than the amount determined by the Company, and the Buyer contests only $500 of the amount claimed by the Sellers’ Representative, and if the Final Accounting Firm ultimately resolves the dispute by awarding the Sellers’ Representative $300 of the $500 contested amount, then the costs and expenses of the Final Accounting will be allocated 60% ( i.e. , 300 ÷ 500) to the Buyer and 40% ( i.e. , 200 ÷ 500) to the Sellers.  The Final Accounting Firm shall conduct its determination activities in a manner wherein all materials submitted to it are held in confidence and shall not be disclosed to third parties.  The parties hereto agree that judgment may be entered

 

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upon the determination of the Final Accounting Firm in any court having jurisdiction over the party against which such determination is to be enforced.

 

(e)                                   The dispute resolution provisions of this Section 2.5 shall not apply to, and the scope of the Final Accounting Firm’s authority herein shall not extend to, any dispute of the Parties relating to the interpretation, breach or enforcement of any provisions of this Agreement.

 

ARTICLE III

CLOSINGS

 

Section 3.1              Initial Closing .  Unless this Agreement shall have been terminated and the transactions herein contemplated shall have been abandoned pursuant to the provisions of Section 11.2 hereof, and subject to the provisions of Articles VIII and IX , the closing (the “ Initial Closing ”) of the purchase and sale of the Initial Purchase Interests and the Preferred Interests shall take place at the offices of Finn Dixon & Herling LLP, 177 Broad Street, 15 ^th Floor, Stamford, Connecticut 06901, on the second business day following the satisfaction or waiver, if applicable, of the conditions thereto set forth in Articles VIII and IX (or as soon as practicable thereafter following satisfaction or waiver of such conditions), or at such other place, time and date as the Buyer and the Sellers’ Representative may mutually agree.  Buyer shall advise the Sellers’ Representative of the satisfaction or waiver, if applicable, of the conditions to the purchase and sale of the Interests set forth in Article VIII as soon as practicable following such satisfaction or waiver.  The date of the Initial Closing is herein referred to as the “ Initial Closing Date ”.

 

Section 3.2              Subsequent Closings .  Unless this Agreement shall have been terminated and the transactions herein contemplated shall have been abandoned pursuant to the provisions of Section 11.2 hereof, and subject to the provisions of Article X , the Closing(s) of the purchase and sale of the Second Purchase Interests (the “ Second Closing ”), Third Purchase Interests (the “ Third Closing ”) and Fourth Purchase Interests (the “ Fourth Closing ”) (each a “ Subsequent Closing ” and collectively the “ Subsequent Closings ”) shall take place at the offices of Finn Dixon & Herling LLP, 177 Broad Street, 15 ^th Floor, Stamford, Connecticut 06901, on the second business day following the satisfaction or waiver, if applicable, of the conditions thereto set forth in Article X (or as soon as practicable thereafter following satisfaction or waiver of such conditions), or at such other place, time and date as the Buyer and the Sellers’ Representative may mutually agree.  Buyer shall advise the Sellers’ Representative of the satisfaction or waiver, if applicable, of the conditions to the purchase and sale of the Interests set forth in Article X as soon as practicable following such satisfaction or waiver.

 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

OF THE COMPANY

 

The Company represents and warrants to the Buyer as hereinafter follows in this Article IV .  All of the representations and warranties contained in this Article IV (and those representations and warranties contained in Articles V and VI ) are subject to the exceptions set forth with reasonable particularity in any schedule corresponding to that particular section of Article IV (or of Article V or Article VI , as the case may be); provided, however, that an

 

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exception so set forth in one schedule will also modify the representations set forth in another section of such article if either (i) said schedule expressly cross-references one or more applicable representations set forth in another section of such article to which such exception applies, or (ii) it is clear from the face of the exception that such exception also applies to one or more representations set forth in another section or sections of such article.  Schedule 4.0 identifies all of the schedules attached hereto pertaining to the representations and warranties contained in this Article IV .

 

Section 4.1              Organization and Qualification .

 

(a)                                   The Company is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware.  The Company has the requisite power and lawful authority to own, lease and operate its assets, properties and business and to carry on its business as it is now being conducted or contemplated to be conducted.  The Company is duly qualified as a foreign limited liability company to transact business, and is in good standing, in each jurisdiction where the character of its properties, owned or leased, or the nature of its activities makes such qualification necessary.  The Company does not own or lease real property in any jurisdiction other than the jurisdictions set forth on Schedule 4.1 .

 

(b)                                  FVA Ventures is a corporation duly organized, validly existing and in good standing under the laws of the State of California.  FVA Ventures has the requisite power and lawful authority to own, lease and operate its assets, properties and business and to carry on its business as it is now being conducted or contemplated to be conducted.  FVA Ventures is duly qualified as a foreign corporation to transact business, and is in good standing, in each jurisdiction where the character of its properties, owned or leased, or the nature of its activities makes such qualification necessary.  FVA Ventures does not own or lease real property in any jurisdiction other than the jurisdictions set forth on Schedule 4.1 .

 

(c)                                   PathConnect, LLC (“ PathConnect ”) is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware.  PathConnect has the requisite power and lawful authority to own, lease and operate its assets, properties and business and to carry on its business as it is now being conducted or contemplated to be conducted.  PathConnect is duly qualified as a foreign limited liability company to transact business, and is in good standing, in each jurisdiction where the character of its properties, owned or leased, or the nature of its activities makes such qualification necessary.  PathConnect does not own or lease real property in any jurisdiction other than the jurisdictions set forth on Schedule 4.1 .

 

Section 4.2              Interests in Other Persons .  Except as set forth on Schedule 4.2 , the Company does not, directly or indirectly, own or control or have any capital or other equity interest or participation in (or any interest convertible into or exchangeable or exercisable for, any capital or other equity interest or participation in), nor is it, directly or indirectly, subject to any obligation or requirement to provide funds to or invest in, any Person.

 

Section 4.3              Capitalization .  The Interests and (when issued) the Preferred Interests constitute all of the outstanding membership interests or other ownership or equity interests in the Company.  Except as set forth in Schedule 4.3 and except for this Agreement, there are no

 

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options, warrants, preemptive rights, purchase rights, subscription rights, conversion rights, stock appreciation, phantom stock or profit participation rights, convertible securities, calls, rights, voting trusts, proxies, or other commitments relating to any equity interests in the Company, to which the Company or any Seller is a party or by which any of them is bound and there exist none of the foregoing that were issued in violation of any federal or state securities laws or regulations or in violation of any preemptive or contractual rights of any Person or entity.  The Interests and the Preferred Interests, when sold to Buyer in accordance with the terms of this Agreement, will be duly authorized, with no personal liability attaching to the ownership thereof, except as provided under the Delaware Limited Liability Company Act, as amended, and shall not be subject to any preemptive rights, rights of first refusal or other similar rights of any other Person.

 

Section 4.4              Fundamental Documents; Other Records .  Copies of the Fundamental Documents (as such term is defined in Section 13.1 ) of the Company and each of its Subsidiaries, and all amendments to each, have been delivered to Buyer and such copies, as so amended, are true, complete and accurate.  Copies of the contents of the minute books (or other similar repositories for records of limited liability company proceedings) of the Company and each of its Subsidiaries have been delivered to Buyer and such materials contain true, complete and accurate records of all meetings and consents in lieu of meetings of the members, managers, and any committees thereof (or Persons performing similar functions) of the Company and each Subsidiary of the Company, since the date of formation of the Company and each Subsidiary, as applicable.  Copies of records pertaining to each issuance or transfer of membership interests in the Company have been delivered to Buyer and such copies are true, complete and accurate.

 

Section 4.5              Authorization; Absence of Conflicts .

 

(a)                                   The Company has the full legal right and authority to enter into, execute and deliver this Agreement and to perform fully its obligations hereunder.  The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by the Company’s Managers.  No other acts or other proceedings on the part of the Company are necessary to authorize this Agreement or the transactions contemplated hereby.  This Agreement constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms except as enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting the enforcement of creditors’ rights in general, or by general principles of equity.

 

(b)                                  The execution and delivery of this Agreement and the Ancillary Agreements by the Company, the consummation of the transactions contemplated hereby and thereby and compliance with the provisions hereof and thereof will not: (i) violate, conflict with or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or result in the creation of any Lien (as such term is defined in Section 13.1 ) upon any of the assets,

 

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properties or businesses of the Company under, any of the terms, conditions or provisions of (x) the Fundamental Documents of the Company or (y) any material contract or other agreement to which the Company or any of the assets, properties or businesses of the Company is subject; or (ii) violate any order, writ, injunction or material Law which is applicable to the Company or any of its assets, properties or businesses.

 

Section 4.6              Governmental Approvals .  Subject to compliance with the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “ HSR Act ”), and applicable federal and state securities laws, the execution and delivery of this Agreement and the Ancillary Agreements by the Company and the consummation of the transactions contemplated hereby and thereby by the Company and compliance by the Company with the provisions hereof and thereof do not require the Company to provide any notice to, filing or registration with, or permit, license, variance, waiver, exemption, franchise, order, consent, authorization or approval of, any Governmental Authority (as such term is defined in Section 13.1 ) (collectively, “ Permits ”).

 

Section 4.7              Financial Statements .

 

(a)                                   The following financial statements have been delivered to the Buyer:  (i) the audited, non-consolidated balance sheet of FVA Ventures for the fiscal years ended December 31, 2006 and December 31, 2007 and the related non-consolidated statements of income and cash flows for the periods then ended (the “ Audited Financials ”); (ii) the unaudited, non-consolidated balance sheet of FVA Ventures for the five month period ended May 31, 2008 (the “ FVA Balance Sheet ”): (iii) the unaudited, non-consolidated balance sheet of PathConnect for the fiscal year ended December 31, 2007 and the related unaudited, non consolidated statements of income and cash flows for the period then ended (the “ Unaudited PathConnect Financials ”); (iv) the unaudited non-consolidated balance sheet of PathConnect for the five-months ended May 31, 2008 (the “ PathConnect Balance Sheet ”); and (iv) the unaudited, non-consolidated balance sheet of the Company for the fiscal year ended December 31, 2007 and the related unaudited, non-consolidated income statement for the period then ended, and the unaudited, consolidated balance sheet of the Company for the fiscal year ended December 31, 2007 and the related unaudited, consolidated income statement for the period then ended (collectively, the “ Unaudited Company Financials ”).  The balance sheets that are included in the December 31, 2007 Audited Financials, the Unaudited PathConnect Financials and the Unaudited Company Financials are collectively referred to as the “ Most Recent Balance Sheet ”.  The FVA Balance Sheet and the PathConnect Balance Sheet are collectively referred to as the “ Interim Balance Sheet ”.  The “ Most Recent Balance Sheet Date ” is December 31, 2007 and the “ Interim Balance Sheet Date ” is May 31, 2008.

 

(b)                                  The Audited Financials have been prepared in accordance with GAAP and fairly present the financial position, results of operations and cash flows of FVA Ventures, on a non- consolidated basis, as of the dates and for the periods indicated.  The Unaudited PathConnect Financials and the Unaudited Company Financials have been prepared by management of the Company in accordance with GAAP (except for the absence of footnote disclosure and any year end audit adjustments) and fairly present the financial position, results of operations and cash flows of PathConnect and the Company, as applicable, on a non- consolidated basis, as of the dates and for the periods indicated.  The FVA Balance Sheet and the PathConnect Balance Sheet have been prepared by management of the Company.

 

(c)                                   Each of the Company and its Subsidiaries maintains a system of internal accounting controls sufficient, in the judgment of its managers, to provide reasonable assurance

 

9

 

that (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of consolidated financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.  The Company has established disclosure controls and procedures and designed such disclosure controls and procedures to ensure that material information relating to the Company and its Subsidiaries is made known to the chief executive officer and chief financial officer of the Company by others within the Company.  Since the Most Recent Balance Sheet Date, there have been no significant changes in the internal controls of the Company and its Subsidiaries over financial reporting or, to the Knowledge of the Company, in other factors that would reasonably be expected to significantly affect the internal controls of the Company and its Subsidiaries over financial reporting.

 

Section 4.8              Tax Matters .

 

(a)                                   The total amounts set forth as charges, accruals and reserves for current Taxes (rather than any reserve for deferred Taxes established to reflect timing differences between book and tax income) on the Most Recent Balance Sheet and the Interim Balance Sheet (in each case on the face thereof and not in any notes thereto) are, and the total amounts accrued and fully disclosed on the books and records of the Company and its Subsidiaries for the period commencing on the day following the Interim Balance Sheet Date and ending on the Closing Date will be, sufficient for the payment of all Taxes, whether or not measured in whole or in part by net income, and whether disputed or not, which are hereafter found to be, or to have been, due with respect to the conduct of the business of the Company and its Subsidiaries up to and through the Most Recent Balance Sheet Date, the Interim Balance Sheet Date and the Closing Date, respectively.  The charges, accruals and reserves for the period from the Interim Balance Sheet Date to the Closing Date will be computed consistently with the charges, accruals and reserves on the Most Recent Balance Sheet and the Interim Balance Sheet, and all such charges, accruals and reserves during such period will reflect only activities in the ordinary course of business of the Company and its Subsidiaries.

 

(b)                                  All Tax Returns (as such term is defined in Section 13.1 ) required to be filed by the Company and its Subsidiaries were filed on a timely basis (after giving effect to any extensions of the time for filing) and were in all material respects true, complete and accurate.

 

(c)                                   The Company and each of its Subsidiaries has paid, within the time and in the manner prescribed by Law, all Taxes that are due and payable (whether or not shown on any Tax Returns), and to the extent such Taxes have not been paid such Taxes are not delinquent, nor has any of them requested any extension of time within which to file any Tax Return, which Tax Return has not since been filed (within such extension of time).

 

(d)                                  Each of the Company and its Subsidiaries has complied in all material respects with all applicable Laws relating to the payment and withholding of Taxes and has, within the time and in the manner prescribed by Law, withheld from employee wages and payments to independent contractors, members of the Company and its Subsidiaries or other

 

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third parties and paid over to the proper Governmental Authorities all amounts required to be so withheld and paid over under all applicable Laws.

 

(e)                                   Except as set forth in Schedule 4.8 , no deficiency for any Taxes has been proposed, asserted or assessed against the Company and its Subsidiaries which has not been resolved and paid in full to the extent required by an such resolution.  None of the Tax Returns of the Company and its Subsidiaries is presently subject to an extension of the applicable statute of limitations which has been consented to or granted.

 

(f)                                     Except as set forth in Schedule 4.8 (which shall set forth the nature of the proceeding, the type of Tax Return, the deficiencies proposed or assessed and the amount thereof and the taxable year in question), none of the Company, its Subsidiaries and the Sellers has received notice that any federal, state, local or foreign audits or other administrative proceedings or court proceedings are presently pending with regard to any Company Taxes or Tax Returns.

 

(g)                                  None of the Sellers is a “foreign person” within the meaning of United States Treasury regulations Section 1.1445-2(b)(2).

 

(h)                                  All material Tax elections with respect to the Company and its Subsidiaries and all positions with respect to the application of Tax treaties that, in either case, are not apparent from the face of the Company’s and its Subsidiaries’ Tax returns are described in Schedule 4.8 .

 

(i)                                      Each of the Company and its Subsidiaries has provided or made available to the Buyer true, correct and complete copies of all Tax Returns, examination reports, and statements of deficiencies filed, assessed against, or agreed to by the Company or any of its Subsidiaries.

 

(j)                                      Except as set forth in the Operating Agreement or, if applicable, the Revised Operating Agreement, none of the Company and its Subsidiaries is a party to any tax allocation, distribution, indemnification or sharing agreement or any agreement to pay or advance income Taxes attributable to its operations or to make distributions in respect thereof.  None of the Company and its Subsidiaries has any liability for the Taxes of any other Person (including any predecessor in interest to the Company, its Subsidiaries and their respective businesses), as a transferee or successor, by contract or otherwise.

 

(k)                                   Each of the Company and PathConnect has been taxable as a partnership for federal, state, local and foreign income Tax purposes at all times during its existence.  FVA Ventures has been taxable as a corporation for federal, state and local income tax purposes at all times during its existence.

 

Section 4.9              Compliance with Laws .  Except as set forth in Schedule 4.9 :

 

(a)                                   Each of the Company and each of its Subsidiaries is in compliance, in all material respects, with, and has not violated in any material respect, any order, writ, injunction or Law of any Governmental Authority applicable to it or to its assets, properties, business or operations.  The conduct by each of the Company and each of its Subsidiaries of its business is in compliance, in all material respects, with, and has not violated in any material respect any

 

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applicable foreign, federal, state, county or local energy, public utility, occupational safety or health requirement or any other foreign, federal, state, county or local governmental, regulatory or administrative requirement (collectively, “ Laws ”).  Except as set forth on Schedule 4.9(a)  (collectively, the “ Material Permits ”), no Permit is material to or necessary for the conduct of each of the Company’s and each of its Subsidiaries’ business.  Each of the Company and each of its Subsidiaries has each Material Permit and all of such Material Permits are in full force and effect.  No violations are recorded in respect of any Material Permit and no proceeding is pending, or to the Knowledge of the Company threatened, (i) to revoke or limit any Material Permit or (ii) alleging any failure to have all Material Permits required to operate the business of each of the Company and each of its Subsidiaries.  None of the transactions contemplated by this Agreement will terminate, violate or limit the effectiveness of any Material Permit or cause any Material Permit to not be renewed.

 

(b)           Neither the Company nor any of its Subsidiaries is in receipt of notice of, or subject to, or has any Knowledge concerning, any adverse inspection, finding of deficiency, finding of non-compliance, compelled or voluntary recall, investigation, penalty, fine, sanction, assessment, request for corrective or remedial action or other compliance or enforcement action by the Food and Drug Administration (the “ FDA ”), the Federal Trade Commission (the “ FTC ”) or by any other federal, state, local or foreign authority having or asserting responsibility for the regulation of the Products (collectively, “ Other Authorities ”), in each case relating to the Products (as defined below) or, to the Knowledge of the Company, to the facilities in which the Products are designed, manufactured, merchandised, serviced, distributed, sold, delivered or handled.

 

(c)           Each of the Company and each of its Subsidiaries and, to the Company’s Knowledge, each other Person involved in the manufacture, sale or distribution of any of the Products (collectively, “ Other Parties ”) have obtained all approvals, registrations and authorizations from, and have made all appropriate applications and other submissions to, and has prepared and maintained all records, studies and other documentation needed to satisfy and demonstrate compliance with the requirements of, all applicable requirements of the FDA, the FTC and Other Authorities necessary for operation of its past and present business activities relating to the Products in compliance, in all material respects, with applicable Law.

 

(d)           Neither the Company nor any of its Subsidiaries has made any false statement in, or omission from, the applications, approvals, reports or other submissions to the FDA, the FTC or the Other Authorities or in or from any other records and documentation prepared or maintained to comply with the requirements of the FDA, the FTC or Other Authorities relating to the Products.

 

(e)           To the Company’s Knowledge, no Other Party has made any false statement in, or omission from, any report, study, or other documentation prepared in conjunction with the applications, approvals, reports or records submitted to or prepared for the FDA, the FTC or Other Authorities relating to the Products.

 

(f)            Neither the Company nor any Subsidiary of the Company, nor, to the Company’s Knowledge, any Other Party has made or offered any payment, gratuity or other thing of value that is prohibited by any applicable Law to any personnel of the FDA, the FTC or

 

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Other Authorities (or any Person directly or indirectly associated with or related to any such personnel) in connection with the approval or regulatory status of the Products or the facilities in which the Products are designed, manufactured, merchandised, serviced, distributed, sold, delivered or handled.

 

(g)           Each of the Company and each of its Subsidiaries and, to the Company’s Knowledge, each Other Party are in compliance, in all material respects, with all applicable regulations and requirements of the FDA, the FTC and Other Authorities relating to the Products, including any good manufacturing or handling practices, requirements for demonstrating and maintaining the safety and efficacy of the Products, export or import requirements, certificates of export, requirements for investigating customer complaints and inquiries, labeling requirements and protocols (including requirements for substantiation of marketing, advertising or labeling claims, requirements which prohibit “drug” claims or which require that the FDA receive notice of structure/function claims or pre-market notification of new dietary ingredients), labeling or registration requirements of any foreign jurisdiction into which the Products are shipped or sold, shipping requirements, monitoring requirements, packaging or repackaging requirements, laboratory controls, sterility requirements, inventory controls and storage and warehousing procedures.

 

(h)           All Products comply in all material respects with current FDA and FTC requirements and the requirements of Other Authorities and were handled by the Company or any of its Subsidiaries and, to the Company’s Knowledge, each Other Party, in conformity with current FDA requirements and the requirements of Other Authorities.

 

(i)            Neither the Company nor any of its Subsidiaries has received any notification, written or verbal, from the FDA, the FTC, FDA or FTC personnel or Other Authorities indicating that any Product is unsafe or ineffective for its intended use, or which questioned or requested the support or substantiation for any such claims.  Each of the Company and each of its Subsidiaries has not, and to the Company’s Knowledge no Other Party has, shipped or sold any Products into any jurisdictions without first having obtained all requisite approvals, registrations and permissions from the FDA, the FTC and Other Authorities.  Except as set forth on Schedule 4.9(i), each of the Company and each of its Subsidiaries has not, and to the Company’s Knowledge no Other Party has, made claims with respect to any Products which are “drug” claims or would cause such Products to be deemed misbranded.  There are no pending or outstanding: (1) warning letters or other regulatory letters or sanctions; (2) inspectional observations or establishment inspection reports; (3) field notifications or alerts; (4) import alerts, holds or detentions received by the Company or any of its Subsidiaries from the FDA or any Other Authority relating to the Products that assert ongoing material lack of compliance with any such Laws by the Company or any of its Subsidiaries or, to the Company’s Knowledge, any Other Party.

 

(j)            Each of the Company and each of its Subsidiaries has made available correct and complete copies, or summaries of, all: (1) adverse event reports; (2) material customer complaints; and (3) medical incident reports in each case solely to the extent relating to any of the Products for the previous three (3) years, which are in the possession or control of the Company or any of its Subsidiaries.

 

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Section 4.10         Litigation .  There are no outstanding orders, writs or injunctions of any Governmental Authority against the Company or any of its Subsidiaries to which the Company or any of its Subsidiaries is a party or by which the Company or any Subsidiaries of the Company or the assets, properties or business of the Company or any of its Subsidiaries are bound.  Except as set forth on Schedule 4.10 , as of the date hereof, neither the Company nor any of its Subsidiaries is a party to any litigation or judicial, governmental, regulatory, administrative or arbitration suit, action, claim, proceeding or investigation or, to the Knowledge of the Company, threatened with any of the foregoing.  The Company has no Knowledge of any fact, event or circumstance that may give rise to any such suit, action, claim, proceeding or investigation.  The Company has no Knowledge of any dispute with any Person under any contract between the Company or any Subsidiary of the Company and such Person which, individually or in the aggregate, could have a Material Adverse Effect.

 

Section 4.11         Agreements .  Schedule 4.11 sets forth all of the following contracts and other agreements to which the Company or any of its Subsidiaries is a party or by or to which the assets, properties or business of the Company or any of its Subsidiaries are bound or subject:

 

(i)            contracts and other agreements with any current or former officer, director, manager, employee, investment banker, scientist, inventor, artist, consultant, agent, member or shareholder that are Material to the Business;

 

(ii)           contracts and other agreements with any labor union or association representing any employee;

 

(iii)          contracts and other agreements Material to the Business (as defined in Section 13.1 ) for the sale or provision (or for the purchase or acquisition) of materials, supplies, equipment, merchandise or services (or any contracts and other agreements involving the sale by the Company or any of its Subsidiaries of merchandise, whether or not Material to the Business, under which the payments thereto are inadequate to cover the cost of goods sold related thereto (excluding close-out or similar sales arrangements));

 

(iv)          each license, agreement, or other permission which any third party has granted to the Company or any of its Subsidiaries with respect to any Intellectual Property, excluding readily available “off the shelf,” “shrink wrapped” software;

 

(v)           distributorship, representative, broker, management, marketing, sales agency, printing or advertising contracts and other agreements Material to the Business.

 

(vi)          contracts and other agreements for the grant to any Person of any rights to purchase any of the assets, properties or businesses of the Company or any of its Subsidiaries;

 

(vii)         joint venture, partnership, and other similar contracts and other agreements;

 

(viii)        contracts and other agreements under which the Company or any of its Subsidiaries have guaranteed the obligations of any Person;

 

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(ix)           contracts or other agreements relating to any indebtedness or deferred purchase obligation of the Company or any of its Subsidiaries;

 

(x)            contracts or other agreements with any Governmental Authority with respect to Taxes (including any transfer pricing agreements);

 

(xi)           contracts and other agreements under which the Company or any of its Subsidiaries agrees to indemnify any Person or to share Liability (as such term is defined in Section 4.19 ) with any Person;

 

(xii)          contracts and other agreements limiting the freedom of the Company or any of its Subsidiaries to engage in any line of business, compete with any Person or carry on its business in any geographic area;

 

(xiii)         contracts and other agreements relating to the acquisition by the Company or any of its Subsidiaries of any operating business or equity interest of any Person;

 

(xiv)        contracts and other agreements for the payment of fees or other consideration to any Seller, any officer, director or manager of any of the Company, any of the Subsidiaries of the Company, or any other entity in which any of the foregoing has an interest;

 

(xv)         leases of personal property which are Material to the Business; and

 

(xvi)        any other contract or other agreement, whether or not made in the ordinary course of business of the Company or any of its Subsidiaries, that is, or may reasonably be expected to have an effect, Material to the Business.

 

All of the contracts and other agreements set forth on Schedule 4.11 are in full force and effect, neither the Company nor any of its Subsidiaries has violated or breached, or received any written notice, or to the Knowledge of the Company, any oral notice, that it has violated or breached, any of the material terms or provisions thereof and, to the Knowledge of the Company, there exists no circumstance which, with the giving of notice, passage of time, or both, could give rise to any violation or breach thereof, and each of the Company and each of its Subsidiaries has paid in full or accrued (to the extent required by GAAP) all amounts due thereunder.  Except as set forth on Schedule 4.11 , none of the contracts and other agreements listed on Schedule 4.11 provides for additional or accelerated payments or other consideration to be made on account of the transactions contemplated hereby and no notice to, filing or registration with, or permit, license, variance, waiver, exemption, franchise, order, consent, authorization or approval of, any Person is required as a consequence of the transactions contemplated hereby in order that the contracts and other agreements set forth on Schedule 4.11 continue in full force and effect (without breach by the Company or any of its Subsidiaries thereof, or giving any contractual party a right to terminate or modify such contract or other agreement) following the consummation of the transactions contemplated hereby.  Except as set forth on Schedule 4.11 , all filings, registrations, permits, licenses, variances, waivers, exemptions, franchises, orders, consents, authorizations and approvals required as a consequence of the transactions contemplated hereby in order that the contracts and other agreements set forth on Schedule 4.11 continue in full force and effect (without breach by the Company or any of its Subsidiaries thereof, or giving any contractual party a right to terminate or modify such contract or other

 

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agreement) following the consummation of the transactions contemplated hereby have been made, effected or obtained and are in full force and effect.  Correct and complete copies of all of the contracts and other agreements referred to on Schedule 4.11 (or, where such contracts and other agreements are oral, true, complete and accurate summaries thereof) have previously been delivered to Buyer.

 

Section 4.12           Real Estate .  Schedule 4.12 sets forth a list of: (i) all leases, subleases or other contracts and other agreements under which the Company or any of its Subsidiaries is a lessee of any real property (collectively, the “ Leased Real Property ”); (ii) all options held by the Company or any of its Subsidiaries or contractual obligations on the part of the Company or any of its Subsidiaries to purchase or acquire any interest in real property (whether by purchase or lease); and (iii) all options granted by the Company or any of its Subsidiaries or contractual obligations on the part of the Company or any of its Subsidiaries to dispose of any interest in real property.  Neither the Company nor any of its Subsidiaries owns any real property.  Neither the Company nor any of its Subsidiaries is a lessor of any real property.  Except as set forth on Schedule 4.12, no consent or agreement of any other Person is required under the documents governing the Leased Real Property in connection with the transactions contemplated by this Agreement.  All leases, subleases and other contracts and other agreements under which the Company or any of its Subsidiaries is a lessee of any real property were negotiated at arms length (including those which are required to be disclosed pursuant to Section 4.28 ), are in full force and effect and binding upon the Company or its Subsidiaries, as applicable, in accordance with their respective terms, except as enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting the enforcement of creditors’ rights in general, or by general principles of equity, and neither the Company nor any of its Subsidiaries has received any notice of any default thereunder.  Such leases, subleases and other contracts and other agreements have not been modified or amended except as set forth on Schedule 4.12 and, except as specifically set forth on Schedule 4.12 , are not subject to (i) any conditions or contingencies not set forth therein or (ii) any unexpired rental concessions or abatements.  No notice from any Governmental Authority has been served upon the Company or any Subsidiary of the Company claiming any material violation of any Law (including any code, rule, regulation, zoning or building ordinance or health or safety ordinance), or requiring or calling attention to the need for any material work, repairs, construction, alterations or installations on or in connection with such real property for which the Company is or would be responsible.  Each of the Company and each of its Subsidiaries has the right to use its properties for its operations.

 

Section 4.13           Accounts and Notes Receivable .  Except as set forth on Schedule 4.13, all accounts and notes receivable reflected on the Most Recent Balance Sheet or the Interim Balance Sheet and all accounts and notes receivable arising subsequent to the Most Recent Balance Sheet Date and on or prior to the Closing Date, have arisen or will arise in the ordinary course of business, represent legal, valid, binding and enforceable obligations to the Company and, subject only to consistently recorded reserves for bad debts established in a manner consistent with past practice, have been, or will be, collected or are, or will be, collectible in the aggregate recorded amounts thereof in accordance with their terms, and are not, and to the Knowledge of the Company, will not be, subject to any contests, claims, counterclaims or setoffs.  All items which are required by GAAP to be reflected as accounts and notes receivable on the Most Recent

 

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Financials and the Interim Financials and on the books and records of the Company are so reflected.

 

Section 4.14            Inventories .  The inventories of the Company and each of its Subsidiaries consist of raw materials and supplies, manufactured and purchased parts, goods in process, and finished goods, all of which is merchantable and fit for the purpose for which it was procured or manufactured, and none of which is slow-moving, obsolete, damaged, or defective, subject only to the reserve for inventory writedown set forth on the face of the Most Recent Balance Sheet and the Interim Balance Sheet.  All slow-moving, obsolete, damaged, defective or excess items of inventories have been written down, written off or otherwise provided for in accordance with GAAP.  Such inventories are carried at amounts which reflect valuations at the lower of cost (determined on a moving average basis) or market, and have been determined in accordance with GAAP applied on a consistent basis.  Since the Most Recent Balance Sheet Date, the inventories of the Company and each of its Subsidiaries have been purchased or produced in the ordinary course of business consistent with past practice and the reasonably anticipated requirements of the Company and each of its Subsidiaries.

 

Section 4.15            Product Warranties; Returns .

 

(a)                                   Schedule 4.15 sets forth the forms of the product warranties of the Company and each of its Subsidiaries that are on the date of this Agreement being made for products being sold on such date.  To the Company’s Knowledge, there is no basis for product warranty claims which would result in costs materially in excess of the reserve for product warranty claims set forth on the face of the Most Recent Balance Sheet (rather than in any notes thereto) as adjusted for the passage of time through the Initial Closing Date or the applicable Subsequent Closing Date, as applicable, in accordance with the past custom and practice of the Company or each of its Subsidiaries, as applicable.  No product manufactured, sold or distributed by the Company or any of its Subsidiaries is subject to any guaranty, warranty, or other indemnity beyond the applicable standard terms and conditions of sale and those imposed by applicable Law.  Neither the Company nor any of its Subsidiaries has any material Liability arising out of any injury to Persons or property as a result of the ownership, use or possession of any products manufactured, sold or distributed by the Company or any of its Subsidiaries.  The products manufactured, sold or distributed by the Company and each of its Subsidiaries have been, in all material respects, in conformity with all applicable contractual commitments and all express warranties and, to the Knowledge of the Company, all implied warranties.

 

(b)                                  Schedule 4.15 describes the Company’s return policy.  Neither the Company nor any of its Subsidiaries has recalled any products.  Neither the Company nor any of its Subsidiaries has any contract or other agreement with any customer that, upon return of any product, the customer will be entitled to a credit for any amount other than the invoice price of the product so returned.  The Most Recent Financials and the Interim Financials reflect reserves which are adequate, in accordance with GAAP, for all returns.

 

Section 4.16            Tangible Property .  Schedule 4.16 sets forth all interests owned or claimed, as of December 31, 2007, by each of the Company and each of its Subsidiaries (including options) in or to Tangible Property (as defined below) which are Material to the Business, but which are not reflected on the Most Recent Balance Sheet or the Interim Balance

 

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Sheet and have not been sold or disposed of in the ordinary course of business since the Most Recent Balance Sheet Date.  All contracts and other agreements Material to the Business pursuant to which the Company or any of its Subsidiaries may hold or use any interest owned or claimed by the Company or any of its Subsidiaries (including options) in or to the Tangible Property are in full force and effect and, with respect to the performance of the Company or any of its Subsidiaries, there is no default or event of default (or event which, with notice or lapse of time or both, would constitute a default) which default, individually or in the aggregate, would have a Material Adverse Effect.  The Tangible Property of the Company and each of its Subsidiaries that is Material to the Business is in good operating condition and repair (subject to normal wear and tear).  For purposes hereof, “ Tangible Property ” means equipment, furniture, leasehold improvements, fixtures, vehicles, structures, any related capitalized items and other tangible property and which is treated by the Company or any of its Subsidiaries as depreciable or amortizable property.

 

Section 4.17            Intellectual Property .

 

(a)                                   Schedule 4.17 identifies (i) all Intellectual Property used in connection with the business of the Company or any of its Subsidiaries, (ii) each license, agreement or other permission which the Company or any of its Subsidiaries has granted to any third party with respect to any Intellectual Property used in connection with its business, and (iii) excluding readily available “off the shelf,” “shrink wrapped” software, each item of Intellectual Property that any third party owns and that the Company or any of its Subsidiaries uses in connection with its business pursuant to license, sublicense, agreement or permission (the items referred to in clauses (ii) and (iii) are collectively referred to as “ Licensed Intellectual Property ”).

 

(b)                                  Except as set forth on Schedule 4.17(b) :

 

(i)            To the Knowledge of the Company, each of the Company and each of its Subsidiaries has not interfered with, infringed upon, misappropriated or otherwise come into conflict with any Intellectual Property rights of third parties or committed any acts of unfair competition, and neither the Company nor any of its Subsidiaries has received any charge, complaint, claim, demand or notice alleging any such interference, infringement, misappropriation, conflict or act of unfair competition;

 

(ii)           each of the Company and each of its Subsidiaries owns, has the right to use, sell, license and dispose of, and has the right to bring actions for the infringement of, and, where necessary, has made timely and proper application for, all Intellectual Property (other than the Licensed Intellectual Property) necessary or required for the conduct of the Company’s business and each of its Subsidiaries’ businesses and, to the Knowledge of the Company, such rights to use, sell, license, dispose of and bring actions are exclusive with respect to such Intellectual Property;

 

(iii)          there are no royalties, honoraria, fees or other payments payable by the Company or any of its Subsidiaries to any Person by reason of the ownership, use, license, sale or disposition of the Intellectual Property;

 

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(iv)          no activity, service or procedure conducted by the Company or any of its Subsidiaries violates any agreement governing the use of any Company Intellectual Property;

 

(v)           each of the Company and each of its Subsidiaries has taken reasonable and practicable steps (including entering into confidentiality and nondisclosure agreements with all of its officers, managers, directors, employees and consultants with access to or knowledge of the Intellectual Property) designed to safeguard and maintain the secrecy and confidentiality of, and its proprietary rights in, all Intellectual Property;

 

(vi)          neither the Company nor any of its Subsidiaries has sent to any third party in the past three years or otherwise communicated to another Person any charge, complaint, claim, demand or notice asserting infringement or misappropriation of, or other conflict with, any of its Intellectual Property rights by such other Person or any acts of unfair competition by such other Person, nor, to the Knowledge of the Company, is any such infringement, misappropriation, conflict or act of unfair competition occurring or threatened; and

 

(vii)         to the Knowledge of the Company, the consummation of the transactions contemplated hereby will not adversely impact any of the Intellectual Property utilized in the business of the Company or any of its Subsidiaries.

 

Section 4.18            Title; Liens .  Each of the Company and each of its Subsidiaries owns (or will own) outright and has (or will have) good and marketable title to all of its assets, properties and businesses, including all of the assets, properties and businesses reflected on the Most Recent Balance Sheet and the Interim Balance Sheet, in each case, free and clear of any Lien, except with respect to: (i) immaterial assets, properties and businesses; (ii) assets, properties and businesses disposed of, or subject to purchase or sales orders, in the ordinary course of business since the Most Recent Balance Sheet Date; (iii) Liens securing Taxes, assessments, governmental, regulatory or administrative charges or levies, or the claims of materialmen, carriers, landlords and like Persons, which are not yet due and payable (the items in clauses (i), (ii) and (iii) being referred to, collectively, as “ Permitted Liens ”); and (iv) Liens disclosed on Schedule 4.18 .  Each of the Company and each of its Subsidiaries enjoys peaceful and undisturbed possession of all of the assets, properties or businesses owned or leased by it, including the Leased Real Property, and used in connection with its business and, to the Knowledge of the Company, such leased properties are not subject to any Liens which in any material respect interfere with or impair the present and continued use thereof in the usual and normal conduct of the business of the Company or any of its Subsidiaries.  Each of the Company and each of its Subsidiaries owns or otherwise has the right to use all of the properties now used by it in the operation of its business.

 

Section 4.19            Liabilities; Indebtedness .

 

(a)                                   As at the Most Recent Balance Sheet Date and the Interim Balance Sheet Date, and except for Liabilities not, individually or in the aggregate, Material to the Business, each of the Company and each of its Subsidiaries did not have any direct or indirect indebtedness, liability, claim, loss, damage, deficiency, obligation or responsibility, known or unknown, fixed or unfixed, choate or inchoate, liquidated or unliquidated, secured or unsecured,

 

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subordinated or unsubordinated, matured or unmatured, accrued, absolute, contingent or otherwise, including liabilities on account of Taxes, other governmental, regulatory or administrative charges or lawsuits brought, whether or not of a kind required by GAAP to be set forth on a financial statement (collectively, “ Liabilities ”), that were not fully and adequately reflected or reserved against on the Most Recent Balance Sheet and the Interim Balance Sheet other than (i) those incurred since the Most Recent Balance Sheet Date in the ordinary course of business; (ii) those not, individually or in the aggregate, Material to the Business; (iii) those that were reflected on the face of the Interim Balance Sheet; and (iv) those that would not be required to be presented on a balance sheet in accordance with GAAP.

 

(b)                                  Schedule 4.19(b)  identifies all indebtedness of the Company and each of its Subsidiaries as of the date hereof.  For purposes of this Agreement, the term “indebtedness” shall include, for any Person, (i) indebtedness created, issued or incurred for borrowed money (whether by loan or the issuance and sale of debt securities or the sale of property to another Person subject to an understanding or agreement, contingent or otherwise, to repurchase such property from such Person), (ii) obligations of such Person to pay the deferred purchase or acquisition price of property or services, other than trade accounts payable arising, and accrued expenses incurred, in the ordinary course of business, (iii) indebtedness of another Person secured by a lien on the property of such Person, (iv) payment obligations of such Person in respect of letters of credit, banker’s acceptances or similar instruments issued or accepted by banks and other financial institutions for the account of such Person, (v) capital lease obligations of such Person, and (vi) indebtedness of another Person guaranteed by such Person.  For purposes of this Agreement, furthermore, the term “indebtedness” (as defined above) includes (vii) any indebtedness of the Company or any of its Subsidiaries to any of the Sellers (excluding any salaries, bonuses and commissions that are earned by Sellers prior to the Closing under existing employment arrangements between the Company, its Subsidiaries and any of the Sellers who are currently employed on a full-time basis by the Company or any of its Subsidiaries); (viii) any indebtedness to any family member of any Seller or any entity in any way related to or affiliated with any Seller; and (ix) any indebtedness of the Company or any of its Subsidiaries not incurred in the ordinary course of business.

 

Section 4.20            Labor Agreements .  No collective bargaining agreement exists between the employees (or any subset of such employees) of the Company or any of its Subsidiaries (or a union representing any of such employees), on the one hand, and the Company or any of its Subsidiaries, on the other hand, and, to the Knowledge of the Company, no union has attempted to organize or represent the labor force of the Company or any of its Subsidiaries in the 24 months immediately prior to the date hereof.  During such 24-month period there have been no lockouts, strikes, slowdowns, work stoppages or threats thereof by or with respect to the labor force of the Company or any of its Subsidiaries.

 

Section 4.21            Discrimination and Occupational Safety .  No Person (including, but not limited to, any Governmental Authority) has made any claim, nor is there a reasonable basis for any suit, action, claim, proceeding or investigation, against the Company or any of its Subsidiaries arising out of any Law relating to discrimination in employment or employment practices or occupational safety and health standards (including The Fair Labor Standards Act, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Rehabilitation Act of 1973, as amended, the Age Discrimination in Employment Act of 1967, as amended, or the Americans

 

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with Disabilities Act of 1990, the Family and Medical Leave Act, the Equal Pay Act, the National Labor Relations Act or comparable state Laws) which, if upheld or decided adversely to the Company or any of its Subsidiaries, could have a Material Adverse Effect.

 

Section 4.22            Environmental Protection .

 

(a)                                   Except as set forth on Schedule 4.22 :

 

(i)            Each of the Company and each of its Subsidiaries has complied in all material respects with all applicable Environmental Laws.  Each of the Company and each of its Subsidiaries has prepared and filed with the appropriate Governmental Authorities all reports, notifications, and filings required pursuant to any applicable Environmental Laws for the operation of the Company and the operation or occupation of the Leased Real Property including any such as are required as a result of the transactions contemplated hereby.  Since January 1, 2007, neither the Company nor any of its Subsidiaries has received any notice or other information regarding any actual or alleged violation of, any actual or potential Liability under, or any corrective or remedial obligation under, any Environmental Law and to the Knowledge of the Company, no basis for any such notice exists.  Neither the Company nor any of its Subsidiaries has been notified that it is potentially responsible or liable, or received any requests for information or other correspondence concerning any site or facility, under the applicable Environmental Laws.  Neither the Company nor any of its Subsidiaries has entered into or received any consent, decree, compliance order, or administrative order pursuant to all applicable Environmental Laws.

 

(ii)           Each of the Company and each of its Subsidiaries holds all Environmental Permits necessary to conduct its operations including any such as are required as a result of the transactions contemplated hereby.  Schedule 4.22 contains a true, complete and accurate list of all such Environmental Permits and, where applicable, their expiration dates.  The Company does not have any reason to believe that any such Environmental Permits (A) will not be renewed, or (B) will be renewed under terms that are reasonably likely to have a Material Adverse Effect.

 

(iii)          Neither the Company nor any of its Subsidiaries has treated, stored, disposed of, arranged for or permitted the disposal of, transported, handled or released any substance including without limitation any Materials of Environmental Concern, or operated any property or facility (and no such property or facility, including the Leased Real Property, is contaminated by any such substance) in a manner that has given rise to Liability pursuant to any applicable Environmental Laws, including any Liability for response costs, corrective action costs, personal injury, property damage, natural resources damage or attorney fees, or any investigative, corrective or remedial obligations.

 

(b)                                  There are no reports, studies, assessments, audits, and other similar documents in the possession or control of the Company or any of its Subsidiaries or the Sellers that address any issues of actual or potential noncompliance with or actual or potential liability under, any Environmental Laws that may affect the Company or any of its Subsidiaries.  Copies of all such reports have been provided or made available to Buyer prior to the signing hereof.

 

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(c)                                   None of the matters set forth on Schedule 4.22 , or any aggregation thereof, could reasonably be expected to result in a Material Adverse Effect.

 

Section 4.23            Employee Benefit Plans .  Schedule 4.23 and Schedule 4.11 lists all employee benefit plans maintained by the Company and its Subsidiaries or to which any of the Company and its Subsidiaries is obligated (or at any time within the last six years, has been obligated) to contribute or with respect to which any of the Company and its Subsidiaries has any Liability, including each single employer, multiemployer and multiple employer pension, profit-sharing, equity (e.g., membership or other limited liability company interest) bonus, money purchase, retirement, welfare benefit, savings, insurance, vacation pay, severance pay, equity purchase, equity option, phantom equity, incentive or deferred compensation and bonus plan or arrangement, and any other employee benefit plan covering any of the Company’s or its Subsidiaries’ employees, consultants, agents and ex-employees, or any of their respective dependents and beneficiaries (collectively, the “ Employee Benefit Plans ”).  None of the Employee Benefit Plans that are not qualified plans under Section 401(a) of the Code and exempt from income taxation under Section 501(a) of the Code provides or promises benefits to ex-employees (including retirees) of the Company or its Subsidiaries or their dependents or beneficiaries, except as set forth on Schedule 4.23 and as otherwise specifically required under Section 4980B of the Code or other similar laws with respect to continuation of coverage.  All Employee Benefit Plans have been operated in all material respects in accordance with their terms.  All Employee Benefit Plans that are subject to the terms of the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”), the Code, or other statutes, laws, ordinances, codes, rules and regulations comply in form and operation in all material respects with ERISA, the Code, and such other statutes, laws, ordinances, codes, rules and regulations, as applicable.  In the case of each Employee Benefit Plan which is intended to be a qualified plan under Section 401(a) of the Code and exempt from income taxation under Section 501(a) of the Code, a determination has been received from the appropriate District Director of Internal Revenue Service that such plan is qualified under Section 401(a) of the Code and the trust created thereunder is exempt from federal taxation under Section 501(a) of the Code, and no facts or circumstances exist that could adversely affect the qualified status of any such plan or the tax exemption of any such trust.  No such Employee Benefit Plan has incurred any accumulated funding deficiency (within the meaning of ERISA or the Code) and each of the Company and its Subsidiaries has no Liability or potential Liability on account of an accumulated funding deficiency with respect to any Employee Benefit Plan.  There has been no transaction involving any Employee Benefit Plan which is a “prohibited transaction” under ERISA or the Code in connection with which the Company or its Subsidiaries would be subject to Liability under ERISA or any Tax Liability imposed by the Code, or which would subject any such Employee Benefit Plan or the Company or its Subsidiaries to a penalty under ERISA, the Code or any other statute, law, ordinance, code, rule or regulation.  There has been no complete or partial termination of any Employee Benefit Plan.  None of the Employee Benefit Plans listed on Schedule 4.23 or Schedule 4.11 provides for additional or accelerated payments or other consideration to be made on account of the transactions contemplated hereby.

 

No suit, action, claim (other than claims by employees for benefits in the ordinary course of business under a medical insurance plan or claims for vacation pay in the ordinary course of business), proceeding, investigation or arbitration has been made or instituted or, to the

 

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Knowledge of the Company, threatened, with respect to any such Employee Benefit Plan or any assets thereof.

 

All contributions or payments required to be made to such Employee Benefit Plans by their terms, the terms of any relevant collective bargaining agreement(s) or any other applicable Law, before or after the Closing Date, with respect to all periods or events occurring prior to the Closing Date (including all insurance premiums) have been properly paid or accrued (to the extent required under GAAP, ERISA or the Code) on the books of account of the Company and its Subsidiaries prior to the Closing Date (including a pro rata share with respect to any period including the Closing Date based on the ratio of the number of days in such period to the total number of days in the fiscal year of the applicable Employee Benefit Plan).  The Liabilities for all benefits provided pursuant to the Employee Benefit Plans set forth on Schedule 4.23 or Schedule 4.11 have been truly and accurately provided for on the books of account of the Company.

 

True, complete and accurate copies of the documents setting forth the terms of each Employee Benefit Plan listed on Schedule 4.23 or Schedule 4.11 , including plans, agreements, amendments, trusts and all related contracts and other agreements (including corporate resolutions and minutes relating to any Employee Benefit Plan) and, where applicable, copies of each Employee Benefit Plan’s: (i) most recent summary plan descriptions and modifications thereto; (ii) notices distributed to employees, consultants, agents, dependents and other beneficiaries with regard to any Employee Benefit Plan and any continuation of coverage required under law; (iii) most recent favorable Internal Revenue Service determination letters; (iv) three most recent annual reports (IRS Forms 5500), including audited financial statements (if any) and all schedules thereto; and (v) five most recent actuarial reports, have heretofore been delivered to Buyer.  There are no oral modifications to any of such Employee Benefit Plans.

 

With respect to each Employee Benefit Plan which is an employee pension benefit plan (as defined in Section 3(2) of ERISA) and that is subject to Title IV of ERISA, (i) the market value of assets under such plan equals or exceeds the present value of all vested and nonvested liabilities thereunder (determined in accordance with then-current funding assumptions) and (ii) such plan has not been completely or partially terminated during the past six years.  None of the Employee Benefit Plans is a multiemployer plan (as defined in Section 3(37)) of ERISA.

 

For purposes of this Section 4.23 , “Company” includes the Company and any trade or business (whether or not incorporated) that is a member of the same “controlled group” of corporations as, or is treated as being under “common control” with, within the meaning of Sections 414(b), (c), (m) and (o) of the Code and the Treasury Regulations promulgated thereunder, the Company.  Except as set forth in Schedule 4.23 , the Company is not a member of any such “controlled group.”

 

With respect to any nonqualified deferred compensation plan of the Company or its Subsidiaries that is subject to Section 409A of the Code, neither the Company nor any of its Subsidiaries has any obligation to any person to cause any such plan to comply with Section 409A of the Code or to provide any “gross-up” or similar payment to any person in the event any such plan fails to comply with Section 409A of the Code.

 

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No benefit or amount payable or which may become payable by the Company and its Subsidiaries pursuant to any Employee Benefit Plan, agreement or contract with any employee shall constitute an “excess parachute payment” within the meaning of Section 280G of the Code, which is or may be subject to the imposition of an excise tax under Section 4999 of the Code or which would not be deductible by reason of Section 280G of the Code.

 

Section 4.24           Employees; Compensation .  Schedule 4.24 lists each of the directors, officers, managers and executive level employees, as the case may be, of the