Exhibit 10.1
Confidential/Subject to Confidentiality
Agreement
STOCK PURCHASE
AGREEMENT
between
BROWN-FORMAN CORPORATION
Seller
and
DEPARTMENT 56, INC.
Buyer
DATED AS OF JULY 21,
2005
TABLE OF CONTENTS
i
ii
iii
INDEX TO
EXHIBITS
|
Exhibit
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Description
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3.3(c)
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Form of Transition Services
Agreement
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INDEX TO
SCHEDULES
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Disclosure Schedule
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Schedule 2.3
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Preparation of Closing Working Capital
Statement
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Schedule 6.10
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Buyer’s Environmental Audits
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Schedule 11.3(n)
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Allocation
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Schedule 11.4
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Certain Assumed Environmental
Obligations
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Schedule 11.9
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Insurance
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iv
STOCK PURCHASE
AGREEMENT
This STOCK PURCHASE AGREEMENT
(this “Agreement” ) is entered into as of
July 21, 2005 by and between Brown-Forman Corporation, a
Delaware corporation ( “Seller” ); and
Department 56, Inc., a Delaware corporation (
“Buyer” ).
WHEREAS, Seller owns all of the issued and outstanding
capital stock of Lenox, Incorporated, a New Jersey corporation (
“Company” ), which Buyer desires to
purchase;
WHEREAS, Company and Company Subsidiaries are engaged
primarily in the business of designing, marketing and manufacturing
dinnerware and silver flatware, collectibles and other tabletop and
giftware products (the “Business,” but excluding
the UK Subsidiary and its business); and
WHEREAS, this Agreement sets forth the terms and
conditions upon which Seller will sell to Buyer, and Buyer will
acquire from Seller, all of the outstanding shares of capital stock
of Company (the “Share Purchase” );
NOW, THEREFORE,
in consideration of the mutual
agreements contained herein, the parties agree as
follows:
ARTICLE 1
CERTAIN DEFINITIONS
1.1
Defined Terms. As used in this
Agreement, the following terms shall have the respective meanings
set forth below:
“338(h)(10) Elections”
is defined in
Section 11.3.
“Adjustment
Amount” is defined
in Section 2.2.
“Affiliate” means, with respect to any Person, each Person
that controls, is controlled by or is under common control with
such Person. For the purpose of this definition,
“control” of a Person shall mean the possession,
directly or indirectly, of the power to direct or cause the
direction of its management or policies, whether through the
ownership of voting securities, by contract or
otherwise.
“Agreement” is defined in the preamble.
“Arbitrator” is defined in Section 2.3.
“Balance
Sheet” and
“Balance Sheet Date” are defined in
Section 5.6.
“Base
Consideration” is
defined in Section 2.2.
“Basket”
is defined in
Section 13.2.
“Business”
is defined in the
preamble.
1
“business
day” means any day
that is not a Saturday, a Sunday or other day on which banks in
Louisville, Kentucky are authorized or obligated by Law to
close.
“Buyer”
is defined in the
preamble.
“Buyer
Damages” is defined
in Section 13.2.
“Buyer Material Adverse
Effect” means any
change, effect, event or occurrence that is materially adverse to
the business, results of operations or financial condition of Buyer
and Buyer’s subsidiaries, viewed as a whole, or on
Buyer’s ability to consummate the transactions contemplated
hereby; provided however, that none of the following (nor the
effects thereof) shall be deemed, individually or in the aggregate,
to constitute, and none of the following (nor the effects thereof)
shall be taken into account in determining whether there has been
or will be, a Buyer Material Adverse Effect:
(a)
this Agreement, the transactions
contemplated by this Agreement or the announcement
thereof;
(b)
changes or conditions affecting the
United States economy or financial markets or foreign economies or
financial markets;
(c)
changes in or developments in any
industry in which Buyer or any Buyer subsidiary operates or changes
in customer demand, including seasonal changes (provided that Buyer
is not disproportionately affected thereby as compared to its peer
companies); or
(d)
changes or conditions resulting from
political or regulatory conditions, acts of war, terrorism,
escalation of hostilities or earthquakes or other natural
occurrences.
“Buyer
Parties” means,
collectively, Buyer and its officers, directors, employees,
subsidiaries, Affiliates (including Company and Company
Subsidiaries from and after the Closing) and their respective
successors and permitted assigns.
“Buyer Tax
Indemnitee” is
defined in Section 11.3.
“Buyer’s
Accountants” is
defined in Section 2.3.
“Buyer’s
Notice” is defined
in Section 2.3.
“Cap
Amount” is defined
in Section 13.2.
“Cause”
means (a) conviction of the
applicable employee for committing a felony under federal law or
the law of the state in which such action occurred,
(b) dishonesty or gross negligence in the course of fulfilling
the applicable employee’s employment duties, or
(c) willful and deliberate failure on the part of the
applicable employee to perform his or her employment duties in any
material respect.
2
“Claim”
is defined in
Section 13.3.
“Closing”
means the closing of the
transactions contemplated by this Agreement as described in
Article 3.
“Closing
Date” means the
date on which the Closing actually occurs.
“Closing Working Capital
Statement” is
defined in Section 2.3.
“COBRA
Coverage” means the
continuation coverage requirements under Section 4980B of the
Code and Part 6 of Title I of ERISA.
“Code”
means the Internal Revenue Code of
1986, as amended.
“Commitment
Letter” is defined
in Section 6.9.
“Company”
is defined in the
preamble.
“Company
Contracts” means
the Contracts set forth on Section 5.10 of the Disclosure
Schedule (and additional Contracts entered into after the date
hereof which would be required to be identified in
Section 5.10 of the Disclosure Schedule if they were in
effect on the date hereof).
“Company Material Adverse
Effect” means any
change, effect, event or occurrence that is materially adverse to
the business, results of operations or financial condition of
Company and Company Subsidiaries, viewed as a whole; provided
however, that none of the following (nor the effects thereof) shall
be deemed, individually or in the aggregate, to constitute, and
none of the following (nor the effects thereof) shall be taken into
account in determining whether there has been or will be, a Company
Material Adverse Effect:
(a)
this Agreement, the transactions
contemplated by this Agreement or the announcement thereof,
including disclosure of the fact that Buyer is the prospective
buyer of Company;
(b)
Buyer’s announcement or other
disclosure of its plans or intentions with respect to the conduct
of the Business;
(c)
changes, conditions, events, effects
or occurrences affecting the United States economy or financial
markets or foreign economies or financial markets;
(d)
changes, conditions, events, effects
or occurrences in or developments in any industry in which Company
or any Company Subsidiary operates or changes in customer demand,
including seasonal changes (provided that the Business is not
disproportionately affected thereby as compared to its peer
companies);
3
(e)
changes, conditions, events, effects
or occurrences resulting from political or regulatory conditions,
acts of war, terrorism, escalation of hostilities or earthquakes or
other natural occurrences;
(f)
changes, conditions, events, effects
or occurrences to the extent predominantly arising from any action
taken by Buyer or any of its Affiliates;
(g)
any change, condition, occurrence,
effect or event resulting from Buyer’s refusal to consent to
Company or a Company Subsidiary taking any action otherwise
prohibited by Section 7.2; or
(h)
any change in Laws or GAAP
accounting rules.
“Company
Plan” is defined in
Section 5.15.
“Company
Subsidiary” means
each entity listed on Section 5.3 of the Disclosure Schedule,
provided, however, that such term does not include the UK
Subsidiary.
“Confidential
Information” is
defined in Section 11.6.
“Confidentiality
Agreement” means
the letter agreement dated as of March 2, 2005, entered into
between Seller and Buyer.
“Contract”
means any written contract, lease,
undertaking, agreement or other arrangement to or under which
Company or any Company Subsidiary is legally bound, including any
and all amendments and modifications thereto.
“Disclosure
Schedule” is
defined at the beginning of Article 4.
“Employee
Beneficiaries” is
defined in Section 12.1.
“Encumbrance”
means any mortgage, pledge, claim,
security interest, encumbrance, lien, assessment, conditional sale
or other title retention agreement, whether consensual, statutory
or otherwise.
“Environmental
Claim” means any
Proceeding seeking Environmental Damages or an order, injunction or
similar relief against Company or any Company Subsidiary by any
Person, arising out of, based on, or resulting from any actual or
threatened (a) release or disposal, or the presence in the
environment, of any Hazardous Substances by Company or any Company
Subsidiary at any location, (b) circumstances forming the
basis of any violation, or alleged violation, of any Environmental
Laws by Company or any Company Subsidiary or (c) exposure to
any Hazardous Substances caused by Company or any Company
Subsidiary.
“Environmental
Damages” means any
and all liabilities, costs and expenditures (including any fees and
expenses of attorneys and of environmental consultants or
engineers, and any fees, fines, penalties or charges imposed by a
Governmental Body) incurred in connection
4
with (i) any violation or alleged violation
of Environmental Laws, or (ii) the defense, Remediation or
other required response to any Release of Hazardous
Materials.
“Environmental
Laws” means all
applicable Laws as in effect as of the date hereof (a) related
to Releases or threatened Releases of any Hazardous Substances in
soil, surface water, groundwater or air, (b) governing the
use, treatment, storage, disposal, transport, or handling of
Hazardous Substances, or (c) related to the protection of the
environment, human health or natural resources. Such
Environmental Laws include the Resource Conservation and Recovery
Act, the Comprehensive Environmental Response, Compensation and
Liability Act, the Toxic Substances Control Act, the Clean Water
Act, the Clean Air Act, the Safe Drinking Water Act, the Emergency
Planning and Community Right-to-Know Act, and their respective
state and local counterparts.
“Environmental
Sites” means such
Properties of Company or Company Subsidiaries and other locations
as are set forth at Section 5.13 of the Disclosure
Schedule.
“ERISA”
means the Employee Retirement
Income Security Act of 1974, as amended.
“ERISA
Affiliate” means,
with respect to any entity, trade or business, any other entity,
trade or business that is, or was at the relevant time, a member of
a group described in Section 414(b), (c), (m) or (o) of the
Code or Section 4001(b)(1) of ERISA that includes or
included the first entity, trade or business, or that is, or was at
the relevant time, a member of the same “controlled
group” as the first entity, trade or business pursuant to
Section 4001(a)(14) of ERISA.
“Financial
Statements” is
defined in Section 5.6.
“Form 8023”
is defined in
Section 11.3.
“Form 8883”
is defined in
Section 11.3.
“GAAP”
means, as of any date, generally
accepted accounting principles in the United States as in effect on
such date.
“Governmental
Authorizations” is
defined in Section 5.12.
“Governmental
Body” means any
United States or foreign, national, multinational, federal, state,
provincial or local governmental, regulatory or administrative
authority, agency or commission or any court or self-regulatory
organization, tribunal or judicial or arbitral body and any
instrumentality of any of the foregoing.
“Hazardous
Substance” means
all hazardous or toxic substances, wastes or materials, any
pollutants or contaminants (including all oil and petroleum of any
kind and in any form, asbestos and raw materials which include
hazardous constituents), or any other similar substances, or
materials which are included under or regulated by any applicable
Environmental Law.
5
“HSR Act”
means the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended.
“Income
Taxes” means U.S.
federal, state or local net income or capital gain Taxes, together
with any interest or penalties imposed with respect
thereto.
“Indemnified
Party” is defined
in Section 13.3.
“Indemnifying
Party” is defined
in Section 13.3.
“Initial
Payment” is defined
in Section 2.2.
“Intellectual
Property” means all
of the following owned or used by Company or any Company Subsidiary
in the operation of their business:
(a)
United States and foreign
trademarks, service marks and trademark and service mark
registrations and applications, trade names, logos, trade dress and
slogans, and all goodwill related to the foregoing;
(b)
patent applications, patents,
inventions, improvements, know-how, formula methodology, research
and development, business methods, processes, technology and
software in any jurisdiction, including re-issues, continuations,
divisions, continuations-in-part, renewals or
extensions;
(c)
trade secrets;
(d)
copyrights in writings, designs,
software, mask works or other works, applications or registrations
in any jurisdiction for the foregoing, other original works of
authorship and all moral rights related thereto;
and
(e)
Internet web sites, web pages,
domain names and applications and registrations pertaining thereto
(excluding any third-party websites linked to or from the websites
of Company).
“Knowledge of
Seller” means such
facts and other information that, as of the date of this Agreement,
are known to any of the individuals set forth in Section 1.1A
of the Disclosure Schedule after review of this Agreement,
including the Disclosure Schedule.
“Law”
means any law, statute, ordinance,
regulation, judgment, order, award or other decision or requirement
of any Governmental Body.
“Leased
Properties” means
any real property that is leased by Company or any Company
Subsidiary.
“List”
means the United States
Environmental Protection Agency’s National Priorities List of
Hazardous Waste Sites or any other list, official record or
determination made by any Governmental Entity schedule log,
inventory or record maintained by any Governmental Entity
identifying any sites at which there has been a Release of
Hazardous Materials.
6
“Losses”
is defined in
Section 13.2.
“Multiemployer
Plan” means any
“multiemployer plan” within the meaning of
Section 4001(a)(3) of ERISA.
“Multiple Employer
Plan” means any
Plan that has two or more contributing sponsors at least two of
whom are not under common control, within the meaning of
Section 4063 of ERISA.
“Other Antitrust
Regulations” is
defined in Section 7.4.
“Other
Party” is defined
in Section 11.7.
“Other
Taxes” means any
Taxes other than Income Taxes.
“Owned
Properties” means
any real property that is owned in fee simple by Company or any
Company Subsidiary.
“Permits”
is defined in
Section 5.13.
“Permitted
Encumbrances” means
(a)
Encumbrances for Taxes (and
assessments and other governmental charges or levies) not yet due
and payable or due but not delinquent or being contested in good
faith by appropriate proceedings;
(b)
mechanics’, builders’,
workmen’s, repairmen’s, warehousemen’s,
landlord’s, carriers’ or other like Encumbrances
(including Encumbrances created by operation of law) with respect
to which Company or any Company Subsidiary is not in default in
payment or which are being contested by Company or a Company
Subsidiary in good faith;
(c)
Encumbrances in respect of
easements, permits, licenses, right-of-way, restrictive covenants
or encroachments or irregularities in, and other similar exceptions
to title;
(d)
zoning, entitlement, building,
planning, land use and environmental restrictions or regulations
and other Laws;
(e)
Encumbrances with respect to debt or
other liabilities that are reflected on the Balance
Sheet;
(f)
such other imperfections in title,
easements, charges, restrictions and Encumbrances which do not
materially detract from, materially diminish the value of or
materially interfere with the present use of the affected property;
and
(g)
Encumbrances consented to by
Buyer.
7
“Person”
means an individual, a partnership
(general or limited), a corporation, a limited liability company,
an association, a joint stock company, Governmental Body, a
business or other trust, a joint venture, any other business entity
or an unincorporated organization.
“Plan”
is defined in
Section 5.15.
“Proceeding” means any suit, proceeding, action, arbitration,
complaint, decree or lawsuit before or involving any third party or
Governmental Body.
“Properties” means the Leased Properties and the Owned
Properties, collectively.
“Proposed
Adjustment” is
defined in Section 2.3.
“Purchase
Price” is defined
in Section 2.2.
“Qualified
Plan” is defined in
Section 5.15.
“Qualifying
Termination” shall
mean a termination of the employment of a Company
employee
(a)
if terminated by Buyer or its
Affiliates, other than a termination for Cause; or,
(b)
if terminated by the Company
employee following a reduction in base salary or a required
relocation that would move such Company employee’s principal
place of employment by more than 50 miles.
“Release”
means the spilling, leaking,
disposing, discharging, emitting, depositing, ejecting, leaching,
escaping or any other release, whether intentional or
unintentional, of any Hazardous Material.
“Remediation
” means any investigative,
response, removal, remedial, treatment, cleanup, disposal,
monitoring and other corrective actions with respect to
environmental matters, including the Release of any Hazardous
Material.
“Reports”
is defined in
Section 5.13.
“Seller”
is defined in the
preamble.
“Seller
Damages” is defined
in Section 13.2.
“Seller
Group” means Seller
and any subsidiary of Seller, other than Company or any Company
Subsidiary.
“Seller
Parties” means,
collectively, Seller, its Affiliates (including, prior to Closing,
Company and the Company Subsidiaries), their respective officers,
directors and employees, and their respective successors and
permitted assigns.
“Seller Restricted
Business” is
defined in Section 11.7.
8
“Seller Tax
Indemnitee” is
defined in Section 11.3.
“Seller’s
Accountants” is
defined in Section 2.3(b).
“Share
Purchase” is
defined in the preamble.
“Shares”
is defined in
Section 2.1.
“Subsidiary” means, with respect to any Person, any other
Person of which such Person (either alone or through or together
with any other subsidiary) owns, directly or indirectly, a majority
of the outstanding equity securities or securities or interests
carrying a majority of the voting power in the election of the
board of directors or other governing body of such
Person.
“Survival
Date” is defined in
Section 13.1.
“Surviving
Entity” is defined
in Section 11.7.
“Tax” or
“Taxes” means
(a)
all taxes, levies or other
assessments of any kind or nature, including U.S., state, local and
foreign income taxes, withholding taxes, branch profit taxes, gross
receipts taxes, franchise taxes, transfer taxes, sales and use
taxes, business and occupation taxes, license taxes, property
taxes, VAT, custom duties or imposts, stamp taxes, excise taxes,
payroll taxes, employment taxes, estimated taxes, severance taxes,
occupancy taxes, intangible taxes and capital taxes;
(b)
any interest or penalties, additions
to tax or additional amounts imposed in connection with any item
described in the foregoing clause (a) or the failure to comply
with any requirement imposed with respect to any Tax Return;
and
(c)
any obligation with respect to Taxes
described in the foregoing clause (a) or (b) payable by
reason of being a successor or indemnitor or by reason of contract,
assumption, transferee liability, operation of Law, Treasury
Regulation §1.1502-6 (or any predecessor or successor thereof
or any analogous or similar provision under Law) or
otherwise.
“Tax
Affiliates” is
defined in Section 5.19.
“Tax
Benefit” means the
Tax effect of any item of loss, deduction or credit or any other
item which decreases Taxes paid or payable or increases tax basis,
including any interest with respect thereto or interest that would
have been payable but for such item, net of any tax detriment
associated therewith.
“Tax Item”
means any item of income, gain,
loss, deduction, credit, recapture of credit or any other item
which increases or decreases Taxes paid or payable, including an
adjustment under Section 481 of the Code resulting from a
change in accounting method.
9
“Tax
Proceeding” means
any Tax audit, contest, litigation, defense or other proceeding
with or against any Taxing Authority.
“Tax Return” or
“Return” means any return, report, declaration,
statement, extension, form or other documents or information filed
with or submitted to, or required to be filed with or submitted to,
any Governmental Body in connection with the determination,
assessment, collection or payment of any Tax.
“Taxing
Authority” means
any Governmental Body exercising any authority to impose, regulate,
or administer the imposition of Taxes.
“Threshold
Amount” is defined
in Section 13.2.
“Transition Services
Agreement” means
the agreement referred to in Section 3.3(c).
“Treasury
Regulation” means
the regulations promulgated under the Code by the United States
Department of Treasury.
“UK
Subsidiary” means
Brooks & Bentley Limited, an English private company
limited by shares.
“Welfare
Benefits” shall
mean the types of benefits described in Section 3(1) of
ERISA (whether or not covered by ERISA).
“Welfare
Plan” shall mean
any employee welfare benefit plan within the meaning of
Section 3(1) of ERISA.
“Withdrawal
Liability” means
liability to a Multiemployer Plan as a result of a complete or
partial withdrawal from such Multiemployer Plan, as those terms are
defined in Part I of Subtitle E of Title IV of
ERISA.
1.2
General Rules of Construction
and Interpretation.
(a)
The words
“hereof,” “herein,” and
“hereunder” and words of similar import, when used in
this Agreement, shall refer to this Agreement as a whole and not to
any particular provision of this Agreement.
(b)
Terms defined in
the singular shall have a comparable meaning when used in the
plural, and vice versa.
(c)
Any reference to
a particular gender shall be deemed to include all other genders
unless the context otherwise requires.
(d)
Headings
contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this
Agreement.
(e)
Unless an express
reference is made to a different document, all references to a
Section or Article will be understood to refer to the
indicated Section or Article of this
10
Agreement, and all
references to a Schedule or Exhibit will be understood to
refer to the indicated Schedule or Exhibit to this
Agreement.
(f)
Whenever the word
“include,” “includes” or
“including” is used in this Agreement, it shall be
deemed to be followed by the words “without
limitation.”
(g)
In the event of
an alleged ambiguity or a question of intent or interpretation,
this Agreement shall be construed as if drafted jointly by the
parties and no presumption or burden of proof shall arise favoring
or disfavoring any party by virtue of the authorship of any
provisions of this Agreement.
(h)
The word
“will” shall be construed to have the same meaning and
effect as the word “shall.”
(i)
The Disclosure
Schedule, and all other Schedules and Exhibits attached hereto or
referred to herein are hereby incorporated in and made a part of
this Agreement as if set forth in full herein. Any
capitalized terms used in the Disclosure Schedule or any other
Schedule or any Exhibit but not otherwise defined therein
shall have the meaning defined in this Agreement.
ARTICLE 2
PURCHASE AND SALE OF STOCK
2.1
Sale. Upon the terms and
subject to the conditions of this Agreement, on the Closing Date,
Seller shall sell, assign, transfer and deliver to Buyer, and Buyer
shall purchase and accept from Seller, all of the issued and
outstanding capital stock of Company, consisting of 1000 shares of
Common Stock, par value $1 per share (the “Shares” ), free and clear of all
Encumbrances.
2.2
Purchase Price; Initial
Payment.
(a)
The purchase
price (the “Purchase
Price” ) to be paid by Buyer to
Seller for the Shares shall be One Hundred Ninety Million Dollars
($190,000,000.00) (the “Base Consideration”
) plus the
Adjustment Amount.
(b)
The
“Adjustment
Amount” (which may be a positive or
negative number) will be equal to the working capital of Company
and the Company Subsidiaries as determined from the Closing Working
Capital Statement prepared in accordance with Section 2.3,
minus Ninety Six Million Nine Hundred Thousand Dollars
($96,900,000.00).
(c)
At Closing, Buyer
will deliver to Seller, as an initial payment (the
“Initial
Payment” ) of the Purchase Price, an
amount equal to (i) Seller’s estimate of the Adjustment
Amount, estimated on the basis of the interim unaudited balance
sheet of Company and Company Subsidiaries as at the end of the most
recently ended month for which such balance sheet is available at
Closing, estimated as though the end of such month were the Closing
Date, plus (ii) the Base Consideration.
11
2.3
Closing Working Capital
Statement.
(a)
As promptly as
practicable following the Closing, but not later than 60 days
thereafter, Seller shall
(1)
prepare and
deliver to Buyer a statement of the consolidated current assets and
current liabilities of Company and the Company Subsidiaries as of
the close of business on the last business day immediately
preceding the Closing Date, including a calculation of the
Adjustment Amount (the “Closing Working Capital
Statement” ), which shall be prepared
in accordance with Schedule 2.3 attached hereto;
and
(2)
deliver to Buyer
a report of PricewaterhouseCoopers LLP or another
nationally-recognized independent public accounting firm selected
by Seller ( “Seller’s Accountants”
) stating that
the Closing Working Capital Statement has been prepared in
accordance with Schedule 2.3 .
(b)
Buyer may cause
another independent public accounting firm selected by Buyer
( “Buyer’s
Accountants” ), to conduct a review of the
Closing Working Capital Statement. Representatives of Buyer
and Buyer’s Accountants shall have reasonable access to all
journal entries and other records used by Seller in its preparation
of the Closing Working Capital Statement. Within 45 days
after Buyer’s receipt of the Closing Working Capital
Statement and report of Seller’s Accountants, Buyer shall
deliver written notice (the “Buyer’s Notice”
) to Seller
either (i) stating that Buyer accepts the Closing Working
Capital Statement or (ii) describing in reasonable detail,
including the nature and amount thereof, each adjustment (a
“Proposed
Adjustment” ) that Buyer proposes be made
to the Closing Working Capital Statement; provided ,
however , that Buyer’s Notice of any Proposed
Adjustment shall not be effective unless accompanied by a special
report of Buyer’s Accountants stating that each such Proposed
Adjustment is required to be made in order for the Closing Working
Capital Statement to have been prepared in accordance with
Schedule 2.3 . Furthermore, the Closing Working
Capital Statement shall not be subject to any adjustment unless the
aggregate amount of all such adjustments as finally determined
exceeds $300,000; provided , that, if such adjustments
exceed $300,000, then the final amount of such adjustments (and not
merely the excess over $300,000) shall be included in the Closing
Working Capital Statement and the final determination of the
Adjustment Amount. If Seller has not received Buyer’s
Notice within such 45-day period, Buyer shall be deemed to have
accepted the amount of the working capital and the calculation of
the Adjustment Amount set forth in the Closing Working Capital
Statement.
(c)
If Buyer’s
Notice contains any Proposed Adjustment, then Buyer and Seller
shall negotiate in good faith to resolve such Proposed Adjustment
in accordance with this Agreement, provided that if the
parties have not resolved all Proposed Adjustments within 30 days
following Seller’s receipt of Buyer’s Notice, then
Buyer and Seller shall engage Ernst & Young LLP (provided
it is not serving as Buyer’s Accountants) or another mutually
acceptable firm of independent public accountants of nationally
recognized reputation (the “Arbitrator” ). The Arbitrator shall
act as an arbitrator to determine only those Proposed Adjustments
still in
12
dispute and the resulting
computation of the Adjustment Amount, which determination shall be
made in accordance with the terms of this Agreement, rendered
within 60 days of the Arbitrator’s engagement, and shall be
final and binding on all parties.
2.4
Settlement . Within five business
days following the final determination of the Adjustment Amount in
accordance with Section 2.3 above, whether by agreement or
deemed agreement of the parties or by the Arbitrator:
(a)
if the Purchase
Price is more than the Initial Payment, Buyer shall deliver to
Seller immediately available funds in an amount equal to the
difference between the Purchase Price and the Initial Payment
plus interest on such amount at the rate of 4.5% per annum from the
Closing Date to, but not including, the date of payment;
or
(b)
if the Initial
Payment is more than the Purchase Price, Seller shall deliver to
Buyer immediately available funds in an amount equal to the
difference between the Initial Payment and the Purchase Price plus
interest on such amount at the rate of 4.5% per annum from the
Closing Date to, but not including, the date of
payment.
2.5
Expenses . All expenses
relating to the work to be performed by Buyer’s Accountants
as contemplated by Section 2.3 shall be borne by Buyer, all
expenses relating to the work to be performed by Seller’s
Accountants as contemplated by Section 2.3 shall be borne by
Seller, and all expenses relating to the work, if any, to be
performed by the Arbitrator in accordance with Section 2.3 to
resolve disputes shall be borne equally by Buyer and
Seller.
ARTICLE 3
CLOSING
3.1
Time and Place . The Closing shall
take place at the offices of Seller, Louisville, Kentucky at
10:00 a.m., Louisville, Kentucky time, on the second business
day after the date on which all of the conditions to the Closing
(other than those that by their terms are to be satisfied at
Closing) set forth in Article 8 and Article 9 have been
satisfied or waived, or on such other date and at such other time
and place as Seller and Buyer may mutually agree.
3.2
Simultaneous Actions
. All
proceedings to be taken and all documents to be executed and
delivered by the parties at the Closing shall be deemed to have
been taken and executed simultaneously and no proceedings shall be
deemed taken nor any documents executed or delivered until all have
been taken, executed and delivered.
3.3
Deliveries by Seller
. On or
before the Closing Date, Seller will deliver to Buyer the
following:
(a)
a certificate,
dated the Closing Date, executed by Seller, certifying that the
conditions to Buyer’s obligation to consummate the Closing
under Sections 8.1 and 8.2 have been satisfied;
(b)
the original
certificate(s) evidencing the Shares accompanied by duly executed
stock transfer power(s) and any other documents necessary to
transfer to Buyer good title to the Shares;
13
(c)
the Transition
Services Agreement, duly executed by Seller and Company, in the
form of Exhibit 3.3(c) ;
(d)
an assignment to
Buyer of Seller’s rights with respect to confidentiality
agreements signed by other prospective purchasers of
Company;
(e)
a certificate of
good standing for Company and a certified copy of the Certificate
of Incorporation of Company issued by the Secretary of State of New
Jersey, as of a recent date; and
(f)
resignations of
all members of the board of directors of Company, to the extent
received by Seller at or prior to Closing.
3.4
Deliveries by Buyer
. On or
before the Closing Date, Buyer will deliver to Seller the
following:
(a)
a certificate,
dated the Closing Date, executed by Buyer, certifying that the
conditions to Seller’s obligation to consummate the Closing
under Sections 9.1 and 9.2 have been satisfied;
(b)
the Initial
Payment, by wire transfer of immediately available funds in United
States currency to an account or accounts designated in writing by
Seller; and
(c)
the Transition
Services Agreement, duly executed by Buyer, in the form of
Exhibit 3.3(c) .
ARTICLE 4
REPRESENTATIONS AND WARRANTIES REGARDING SELLER
Simultaneously with the execution of
this Agreement by Seller, Seller is delivering to Buyer a
disclosure schedule (the “Disclosure
Schedule” ) with numbered sections corresponding to
sections in this Agreement. Any matter disclosed in any
section of the Disclosure Schedule shall be deemed
disclosed in all other sections of the Disclosure Schedule to
the extent that such disclosure is reasonably apparent to be
applicable to such other sections, notwithstanding the reference to
a particular section or subsection. The inclusion of any
information in the Disclosure Schedule shall not be deemed an
admission or acknowledgement that such information is required to
be set forth therein or that such information is material or that
such information constitutes or would reasonably be expected to
constitute a Company Material Adverse Effect.
Except as set forth in the
Disclosure Schedule, Seller represents and warrants to Buyer as
follows :
4.1
Organization. Seller is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware.
14
4.2
Power. Seller has all
requisite corporate power and authority to own the Shares and to
enter into this Agreement, to perform its obligations hereunder,
and to consummate the sale of the Shares and other transactions
contemplated by this Agreement.
4.3
Authorization. The execution,
delivery and performance of this Agreement by Seller and the
consummation of the transactions contemplated hereby by Seller have
been duly and validly authorized by all necessary corporate action
on the part of Seller. This Agreement has been duly and
validly executed and delivered by Seller, and is a valid and
binding obligation of Seller, enforceable in accordance with its
terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors’ rights and
to general principles of equity.
4.4
Noncontravention.
Neither
the execution, delivery and performance of this Agreement by
Seller, nor the consummation by Seller of the transactions
contemplated hereby nor compliance by Seller with any of the
provisions hereof will:
(a)
conflict with or
result in a breach of any provision of the Certificate of
Incorporation or Bylaws of Seller;
(b)
cause a default,
or result in a material breach or give rise to any right of
termination, cancellation, or acceleration under any material
agreement or other material obligation to which Seller is a party,
except for such matters as would not reasonably be expected to
result in a material adverse effect upon the ability of Seller to
perform its obligations under this Agreement;
(c)
assuming
compliance with the HSR Act, violate any Law, order of any
Governmental Body or Governmental Authorization applicable to
Seller, except as would not reasonably be expected to result in a
material adverse effect upon the ability of Seller to perform its
obligations under this Agreement; or
(d)
result in the
creation of any Encumbrance upon the Shares held by
Seller.
4.5
Consents. No consent or
approval by, or notification of or filing with, any Governmental
Body is required to be obtained or made by Seller in connection
with the execution, delivery and performance by Seller of this
Agreement, or the consummation by Seller of the transactions
contemplated hereby, except for compliance with the HSR Act and
except for any such consent, approval, notification or filing the
failure of which to obtain or make would not reasonably be expected
to result in a material adverse effect upon Seller’s ability
to perform its obligations under this Agreement.
4.6
Stock Ownership. Seller has, and agrees
to transfer to Buyer at Closing, good and valid title to the
Shares, free and clear of all Encumbrances, options, restrictions
on transfer or rights of refusal. No Person owns or has any
beneficial interest in any of the Shares except Seller.
Seller has not transferred or assigned, or entered into any
agreement to transfer or assign, any of the Shares or any of the
voting rights or dividend rights pertaining thereto.
4.7
Litigation. No Proceeding has, as
of the date of this Agreement, been commenced or, to the Knowledge
of Seller, threatened against Seller that challenges the
validity
15
of this Agreement or the
transactions contemplated hereby or that would reasonably be
expected to have the effect of preventing, materially delaying,
materially impairing or making illegal the transactions
contemplated, or have a material adverse effect on Seller’s
ability to perform its obligations under this
Agreement.
4.8
Brokers. Neither Seller nor
Company has employed any broker, finder or investment banker in
connection with the transactions contemplated by this Agreement
which would be entitled to a fee or commission in connection with
such transactions, except for any broker, finder or investment
banker whose fees or commissions shall be the sole responsibility
of Seller.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES REGARDING COMPANY
Except as set forth in the
Disclosure Schedule, Seller represents and warrants to Buyer as
follows:
5.1
Organization. Company is a
corporation duly organized, validly existing and in good standing
under the laws of the State of New Jersey and has all requisite
corporate power and authority to own, lease and operate its
material properties and to carry on its business as now being
conducted. Company is duly qualified and in good standing to
do business in every jurisdiction in which such qualification is
necessary because of the nature of the property owned, leased or
operated by it or the nature of the business conducted by it,
except where the failure to be so qualified or be in good standing
would not result in a Company Material Adverse Effect.
5.2
Capitalization. The entire authorized
capital stock of Company consists of 2000 shares of Common Stock,
par value $1 per share, and 1000 shares of Preferred Stock, par
value $5 per share. There are currently issued and
outstanding only the Shares, which are all duly authorized, validly
issued, fully paid and nonassessable. There is
no:
(a)
outstanding
security convertible into or exchangeable for capital stock of
Company;
(b)
option, warrant,
put, call or other right to purchase or subscribe to capital stock
of Company;
(c)
stock restriction
agreement, or contract, commitment or agreement of any kind
relating to the issuance or disposition of Company capital stock or
the issuance or disposition of any security convertible into or
exchangeable for Company capital stock; or
(d)
registration
rights agreement, voting trust, proxy or other agreement or
restriction on transfer with respect to the Shares.
The Shares are all duly
authorized, validly issued, fully paid and non-assessable, and in
certificated form, and have been offered, sold and issued by
Company in compliance with all applicable securities and corporate
Laws, agreements or contracts applicable to Company and
Company’s Certificate of Incorporation and Bylaws, and in
compliance with any preemptive rights, rights of first refusal or
other rights. The consummation of the Share Purchase
will
16
convey to Buyer good and
valid title to the Shares, of record and beneficially, free and
clear of all Encumbrances, except for those created by Buyer or
arising out of ownership of the Shares by Buyer.
5.3
Company Subsidiaries.
All
entities of which Company owns, directly or indirectly, any capital
stock, together with the jurisdiction of incorporation, are set
forth at Section 5.3 of the Disclosure Schedule. Such
entities are duly organized, validly existing and in good standing
under the laws of their respective jurisdictions of organization,
have all requisite corporate power and authority to own, lease and
operate their respective material properties and to carry on their
respective businesses as now being conducted, and are duly
qualified and in good standing to do business in every jurisdiction
in which such qualification is necessary because of the nature of
the property owned, leased or operated by such entities or the
nature of the business conducted by such entities, except where the
failure to be so qualified or be in good standing would not result
in a Company Material Adverse Effect. Company owns all of the
issued and outstanding capital stock of each such entity free and
clear of all Encumbrances, options, restrictions on transfer and
rights of refusal other than Permitted Encumbrances.
5.4
Noncontravention.
Neither
the execution, delivery and performance of this Agreement by
Seller, nor the consummation by Seller of the transactions
contemplated hereby nor compliance by Seller or Company with any of
the provisions hereof will:
(a)
conflict with or
result in a breach of any provision of the Certificate of
Incorporation or Bylaws of Company or any Company
Subsidiary;
(b)
except as would
not reasonably be expected to result in a Company Material Adverse
Effect, cause a default, or result in a breach or give rise to any
right of termination, cancellation, or acceleration under any
Company Contract or other material obligation to which Company or
any Company Subsidiary is a party, or by which Company or any
Company Subsidiary or any of their respective material properties
or assets is or may be bound or benefited; or
(c)
except as would
not reasonably be expected to result in a Company Material Adverse
Effect and except for compliance with the HSR Act, violate any Law
applicable to Company or any Company Subsidiary.
5.5
Consents. Except for compliance
with the HSR Act or as would not reasonably be expected to result
in a Company Material Adverse Effect, no consent or approval by, or
notification of or filing with, any Governmental Body is required
to be obtained or made by Company or any Company Subsidiary in
connection with the execution, delivery and performance by Seller
of this Agreement, or the consummation of the transactions
contemplated hereby.
5.6
Financial Statements.
(a)
Seller has
delivered to Buyer true and complete copies of the audited
consolidated balance sheets of Company and Company Subsidiaries as
of April 30, 2005 (the “Balance Sheet Date”
, with the
consolidated balance sheet as of such date being referred to as
the “Balance
Sheet” ), and April 30, 2004,
with the Company’s investment in the UK
Subsidiary
17
accounted for under the
equity method, and the related statements of operations,
stockholder’s equity and cash flow for the fiscal years then
ended (collectively, the “Financial Statements”
).
(b)
The Financial
Statements
(1)
have been
prepared based on the books and records of Company and Company
Subsidiaries;
(2)
have been
prepared in accordance with GAAP (in effect as of the respective
dates thereof), consistently applied, in all material respects,
except that the UK Subsidiary has been accounted for under the
equity method, and except that the stock option expense for the
Company employees participating in the Brown-Forman Corporation
Omnibus Compensation Plan for the periods ended April 30, 2005
and 2004, and the associated disclosures required by Statement of
Financial Accounting Standard Number 123, Accounting for
Stock-Based Compensation, as amended, have been omitted from the
Financial Statements; and
(3)
present fairly in
all material respects the financial position of Company and Company
Subsidiaries on a consolidated basis as of the respective dates
thereof and the results of operations, changes in
stockholder’s equity and cash flows for the periods covered
thereby.
5.7
Absence of Undisclosed
Liabilities. There are no
liabilities or obligations of Company or any Company Subsidiary
(whether accrued, absolute, contingent, unliquidated or otherwise),
in each case to the extent required by GAAP to be disclosed or
reserved against in the Financial Statements, other than those that
(a) are accrued, reflected, disclosed or reserved against in
the Financial Statements, (b) have arisen in the ordinary
course of business since the Balance Sheet Date, (c) were
incurred pursuant to the transactions contemplated by this
Agreement, (d) were discharged or paid in full prior to the
date hereof in the ordinary course of business, or (e) would
not reasonably be expected to result in a Company Material Adverse
Effect.
5.8
Absence of Changes.
Since the
Balance Sheet Date, Company’s business has operated in all
material respects in the ordinary course and consistent with past
practice, and there has not been any Company Material Adverse
Effect.
5.9
Real Property.
(a)
Section 5.9
of the Disclosure Schedule sets forth a true and complete list
of the addresses of all Properties (identifying those that are
Owned Properties and those that are Leased Properties) that are
owned, used by or occupied by and, in each case, material to the
operations of Company and the Company Subsidiaries, taken as a
whole.
18
(b)
Company has valid
title in fee simple to all of the Owned Properties and valid
leasehold interests in all Leased Properties, in each case free and
clear of any Encumbrance, except for Permitted
Encumbrances.
(c)
Neither Seller
nor Company has received written notice with respect to any Owned
Property or to any Leased Property in either case that is material
to the operation of Company and the Company Subsidiaries taken as a
whole:
(1)
that any building
or structure thereon, any equipment therein or the operation or
maintenance thereof violates any Law in any material respect
(including applicable zoning ordinances);
(2)
that any building
or other improvement owned by Company encroaches upon property of
others or encroaches over applicable setback lines in a way that
would be material to the operation of such building or improvement;
or
(3)
that any
condemnation proceeding is pending or threatened.
(d)
Except as would
not reasonably be expected to result in a Company Material Adverse
Effect:
(1)
neither Company
nor any Company Subsidiary is in default under any lease for any
Leased Property and there are no events which with the passage of
time or the giving of notice or both would constitute a default by
Company or a Company Subsidiary under any such lease;
and
(2)
there are no
outstanding written notices of breach or default given to Company
or a Company Subsidiary by any party to any such lease that remains
uncured.
5.10
Company Contracts.
Section 5.10 of the Disclosure Schedule sets forth a true
and complete list of the following Contracts to which Company or a
Company Subsidiary is a party:
(a)
material
distributor, dealer, advertising, agency, sales representative or
similar material Contracts relating to the marketing or sale of
Company’s products (excluding customer purchase orders
accepted in the ordinary course of business);
(b)
Contracts in
amounts in excess of $500,000 for the future purchase or lease by
Company or a Company Subsidiary of material, supplies, equipment,
services or finished products purchased for resale;
(c)
Contracts having
a term exceeding one year or involving amounts in excess of
$500,000 for the future sale of products by Company or a Company
Subsidiary;
(d)
collective
bargaining agreements with any labor union;
19
(e)
Contracts for the
employment of any officer, director or employee, or any other
material Contracts with or commitments to any officer, director or
employee;
(f)
Material joint
venture, partnership, design or license agreements;
(g)
indenture,
mortgage, promissory note, loan agreement, reimbursement agreement,
guaranty, or other Contract or commitment for the borrowing of
money, for a line of credit or letter of credit, or for a leasing
transaction of a type required to be capitalized in accordance with
FASB Statement of Financial Accounting Standards
No. 13;
(h)
agreement for the
sale of assets of Company and Company Subsidiaries, which assets
have a book value of $500,000 or more in the aggregate, other than
sales of inventory in the ordinary course of business;
(i)
all product
licensing Contracts in which Company has guaranteed an annual
obligation of $500,000 or more; and
(j)
all Contracts or
commitments for capital expenditures with respect to which the
remaining unpaid balance exceeds $500,000.
Neither Company nor any Company Subsidiary
(i) is in breach or default with respect to any material term
of any Company Contract and, to the Knowledge of Seller, no other
party to any Company Contract is in breach or default with respect
to any material term of any Company Contract, or (ii) has
received any written notice since January 1, 2005 of any
breach or default with respect to any Company Contract which
remains uncured.
5.11
Litigation. Section 5.11 of
the Disclosure Schedule sets forth a list, as of the date of
this Agreement, of all: (a) Proceedings pending or, to the
Knowledge of Seller, threatened against Company or a Company
Subsidiary, which (i) if resolved unfavorably to Company or
any Company Subsidiary, is reasonably likely to result in payments
by Company or Company Subsidiary in excess of $500,000,
(ii) would materially adversely affect the ability of Seller
or Company to consummate the transactions contemplated by this
Agreement, (iii) would materially adversely affect the ability
of Buyer to operate the Business following the Closing in
substantially the same manner as operated by Company prior to the
Closing, or (iv) involve or relate to any trade practices of
Company, including any pricing, promotion, rebate, discount,
commission, allocation, merchandising practice or territorial
restriction; and (b) judgments, decrees, injunctions or orders
of any Governmental Body having a material continuing effect
against Company or a Company Subsidiary.
5.12
Compliance.
(a)
Company and each
Company Subsidiary is in compliance with, and has not received any
written notice of any violation of, applicable Laws (including the
U. S. Foreign Corrupt Practices Act and applicable import and
export Laws), except, in each case, for such non-compliance or
violations as would not result in a Company Material Adverse
Effect.
(b)
Except as would
not result in a Company Material Adverse Effect, (i) Company
and the Company Subsidiaries have all governmental licenses and
permits necessary in
20
the conduct of their
business as currently conducted ( “Governmental Authorizations”
), which
Governmental Authorizations are in full force and effect, and
(ii) no violations are outstanding or uncured with respect to
any such Governmental Authorizations and, as of the date hereof, no
Proceeding is pending or, to the Knowledge of Seller, threatened to
revoke any of them.
5.13
Environmental.
(a)
Notwithstanding
the generality of any other representations and warranties in this
Agreement, this Section 5.13 shall be deemed to contain the
only representations and warranties in this Agreement or arising
out of the transactions contemplated by this Agreement with respect
to Environmental Laws, Hazardous Substances, Environmental Claims,
the environment or workplace health and safety.
Section 5.13(a) of the Disclosure Schedule lists
each Environmental Site with respect to which Company has incurred
costs to investigate, remediate or settle Environmental Claims that
are, to Seller’s Knowledge, not fully resolved or has
received notification of potential Environmental Claims against
Company or any Company Subsidiary.
(b)
Seller has
provided Buyer true and complete copies of the environmental
reports listed in Section 5.13(b) of the Disclosure
Schedule (which, together with the environmental audits
obtained by Buyer as referred to in Section 6.10, are
collectively referred to as the “Reports” ). To the Knowledge of
Seller and except as set forth in the Reports, since May 1,
2003 there has been no storage, disposition, generation, treatment,
Release or discharge of any Hazardous Substance by Company or any
Company Subsidiary, in any manner or at a level that is in
violation of applicable Environmental Laws in any material respect,
on, in, under, about or from the Properties or the land and
buildings on and in which Company or the Company Subsidiaries
previously conducted their operations.
(c)
To the Knowledge
of Seller and except as set forth in the Reports, Company and each
Company Subsidiary is in compliance in all material respects with
all Environmental Laws and since May 1, 2003 has not received
written notice of any unresolved potential liability with respect
to any Environmental Law that would be material to the conduct of
Company’s business.
(d)
Except as set
forth in the Reports or Section 5.11 of the Disclosure
Schedule, there is no material Environmental Claim pending or, to
the Knowledge of Seller, threatened against Company or any Company
Subsidiary or otherwise relating to any of the Properties.
Section 5.13(d) of the Disclosure Schedule sets
forth insurance settlement and PRP agreements related to
Environmental Sites to which Company or a Company Subsidiary is a
party.
(e)
Each of Company
and the Company Subsidiaries have obtained all permits, licenses
and approvals ( “Permits” ) relating to the
Environmental Laws necessary for its operation, except as would not
have a Company Material Adverse Effect.
5.14
Employment Matters.
(a)
To the Knowledge
of Seller, Company and the Company Subsidiaries are in material
compliance with all applicable Laws respecting labor, employment
and employment
21
practices, terms and
conditions of employment and wages and hours. There is no
material labor strike or work stoppage pending or, to the
Knowledge of Seller, threatened involving Company or any Company
Subsidiary. There is no material unfair labor practice
complaint against Company or any Company Subsidiary pending before
the National Labor Relations Board or other Governmental
Body. To the Knowledge of Seller, there are no union
organizational activities currently underway with respect to
non-union employees of Company or any Company
Subsidiary.
(b)
As of the date of
this Agreement, there are no pending or, to the Knowledge of
Seller, threatened material investigations, audits, complaints or
Proceedings against Company by or before any Governmental Body,
respecting or involving any applicant for employment, any employee
or any former employee, or any class of the foregoing,
including:
(1)
the Equal
Employment Opportunity Commission or any other corresponding state
or local agency relating to any claim or charge concerning
discrimination,
(2)
the United States
Department of Labor or any other corresponding state or local
agency relating to any claim or charge concerning hours or
wages,
(3)
the Occupational
Safety and Health Administration or any other corresponding state
or local agency relating to any claim or charge concerning the
safety and health of employees or former employees,
(4)
the Office of
Federal Contract Compliance or any corresponding state agency,
and
(5)
the U. S.
Citizenship and Immigration Services, a bureau of the Department of
Homeland Security, with respect to matters involving employees of
Company who hold a temporary work authorization, including H-1B,
F-1 or J-1 visas or work authorizations.
(c)
Company is not
obligated as of the date of this Agreement to pay any amounts
pursuant to the requirements of the Worker Adjustment and
Retraining Notification Act of 1988.
5.15
Employee Benefit Plans.
(a)
Section 5.15(a) of
the Disclosure Schedule lists each material plan, agreement,
arrangement or policy providing for compensation, bonuses,
profit-sharing, stock option or other stock related rights or other
forms of incentive or deferred compensation, vacation benefits,
insurance (including any self-insured arrangements), health or
medical benefits, employee assistance program, disability or sick
leave benefits, workers’ compensation, supplemental
unemployment benefits, change in control benefits, severance
benefits and post-employment or retirement benefits (including
compensation, pension, health, medical or life
22
insurance benefits), or
other employee benefits, in each case, which is maintained,
administered, sponsored or contributed to by Company or any
Affiliate of Company for the benefit of any current or former
employee (excluding, as to employees of Company who also are or
were employed by Seller, those benefits attributable solely to
their employment with Seller) of Company or any Company Subsidiary
or which is between Company or any of its Affiliates and any such
individual (each, individually, a “Plan” and collectively, the
“Plans”
). The Disclosure
Schedule specifically denotes each Plan that is either
sponsored by Company or a Company Subsidiary or to which Company or
a Company Subsidiary is party (each, a “Company Plan” ).
(b)
With respect to
each Company Plan, Seller has made available to Buyer: (i) a
true, correct and complete copy of such Company Plan; (ii) the
most recent Annual Report (Form 5500 Series) and accompanying
schedules, if any; (iii) the most recent annual financial
report, if any; (iv) the most recent actuarial report, if any;
and (v) the most recent determination letter from the Internal
Revenue Service, if any. Seller has also made available to
Buyer the current summary plan description and any material
modifications thereto for each Plan in respect of which there
exists a summary plan description.
(c)
Section 5.15(c) of
the Disclosure Schedule identifies each Company Plan that is
intended to be a “qualified plan” within the meaning of
Section 401(a) of the Code ( “Qualified Plan” ). The Internal Revenue
Service has issued a favorable determination letter with respect to
each Qualified Plan and the related trust that has not been
revoked, and, to the Knowledge of Seller, no events have occurred
that would adversely affect the qualified status of any Qualified
Plan or the related trust.
(d)
Company or a
Company Subsidiary has in all material respects timely made or
accrued all contributions required with respect to any Qualified
Plan subject to Title IV of ERISA. No “accumulated
funding deficiency” (determined under the rules set
forth in Section 412 of the Code and related Code sections and
regulations), whether or not waived, exists with respect to any
Qualified Plan subject to Title IV of ERISA. There have not,
within the past five years, been any “reportable
events” (within the meaning of Section 4043 of ERISA)
with respect to any Qualified Plan subject to Title IV of
ERISA.
(e)
Neither any Plan
nor any other employee benefit plan maintained by an ERISA
Affiliate of Company is a Multiemployer Plan or a Multiple Employer
Plan. None of Company, any Company Subsidiary or any of their
respective ERISA Affiliates has (i) at any time during the
last six years, contributed to or been obligated to contribute to
any Multiemployer Plan or Multiple Employer Plan, or
(ii) incurred any Withdrawal Liability that has not been
satisfied in full.
(f)
The Plans are in
material compliance both in form and operation with ERISA, the Code
and other applicable Laws, and have been administered in all
material respects in accordance with their terms.
(g)
Consummation of
the transactions contemplated by this Agreement will not be a
factor causing payments to be made by Company or any Tax Affiliate
that are not deductible (in whole or in part) as a result of the
application of Section 280G of the Code.
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5.16
Intercompany Transactions.
Section 5.16 of the Disclosure Schedule sets forth a list
of all material Contracts between Seller or its subsidiaries (other
than Company and Company Subsidiaries), on the one hand, and
Company or a Company Subsidiary, on the other hand, and other
material arrangements whereby Seller or its subsidiaries (other
than Company and Company Subsidiaries) provide goods or services
to, or obtain goods or services from, Company or Company
Subsidiaries. All such arrangements will cease as of the
Closing Date other than (a) those provided for in Contracts
specifically noted at Section 5.16 of the Disclosure
Schedule as continuing in effect after Closing, which will
continue in effect in accordance with their respective terms, and
(b) as provided in the Transition Services
Agreement.
5.17
Intellectual Property.
(a)
Company or the
Company Subsidiaries own all right, title and interest in and to,
or have valid licenses to use, all Intellectual Property that is
material to the current operations of Company and the Company
Subsidiaries taken as a whole, free and clear of all Encumbrances
other than Permitted Encumbrances.
(b)
Section 5.17(b) of
the Disclosure Schedule sets forth a true and complete list of
all material patents, patents pending, trademark/service mark
applications and registrations, copyright applications and
registrations, and domain name registrations that are owned by
Company or any Company Subsidiary.
(c)
To the Knowledge
of Seller:
(1)
there is no
material infringement, misappropriation or other misuse being made
by any third person of any Intellectual Property material to the
business of Company and Company Subsidiaries as a
whole;
(2)
no claim is
pending or threatened to the effect that the operations of Company
or Company Subsidiaries infringe or conflict with the asserted
rights of others in respect of any Intellectual Property material
to the business of Company and Company Subsidiaries as a whole;
and
(3)
no claim is
pending or threatened to the effect that any Intellectual Property
material to the business of Company and Company Subsidiaries as a
whole is invalid or unenforceable.
(d)
Section 5.17(d) of
the Disclosure Schedule sets forth the licenses pursuant to
which Company or any Company Subsidiary grants to any other Person
(other than Company or any Company Subsidiary) the right to use
Intellectual Property owned by Company or any Company Subsidiary
material to the business of Company and Company Subsidiaries as a
whole, and the licenses pursuant to which any other Person grants
to Company or any Company Subsidiary the right to use Intellectual
Property material to the business of Company and Company
Subsidiaries as a whole owned by any other Person (other than
licenses to use off-the-shelf software). To the Knowledge of
Seller:
24
(1)
neither Company
nor any Company Subsidiary is in material breach or default with
respect to any of such licenses;
(2)
no other party
thereto is in material breach or default with respect to any of
such licenses; and
(3)
no event has
occurred which, with due notice or lapse of time or both, would
constitute such a default.
5.18
Ownership of Necessary Assets and
Rights.
(a)
Except
for
(1)
those assets and
services to be provided pursuant to the terms of the Transition
Services Agreement,
(2)
those assets and
services that, prior to the Closing, were provided to Company or
any Company Subsidiary by Seller or any of its other Affiliates,
and
(3)
the capital stock
of the UK Subsidiary and the related trademarks and other
intangible assets that are described at Section 5.18 of the
Disclosure Schedule (which have been distributed to Seller
prior to the execution of this Agreement),
the assets of Company and Company Subsidiaries
are and as of the Closing will be in all material respects
sufficient for the conduct of the Business immediately following
the Closing in substantially the same manner as currently
conducted, subject to such changes as are implemented in accordance
with Article 7.
(b)
Company has good
and valid title to, or a valid leasehold interest in, all
machinery, equipment and other tangible assets and personal
property used by the Business, wherever located, or shown in the
Balance Sheet or acquired after the date thereof, which in any case
are material to and necessary for the conduct of the Business as a
whole as presently conducted, free and clear of all Encumbrances,
except for Permitted Encumbrances and except for properties and
assets disposed of in the ordinary course of business since the
Balance Sheet Date.
(c)
Since May 1,
2005, Company has not reduced in any material respect its ordinary
course practices with respect to the maintenance and repair of its
material operating assets.
5.19
Tax Matters. Notwithstanding the
generality of any other representations and warranties in this
Agreement, this Section 5.19 shall be deemed to contain the
only representations and warranties in this Agreement or arising
out of the transa
