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PURCHASE AGREEMENT
by and among
LEONARD RIGGIO,
R. RICHARD FONTAINE,
DANIEL A. DEMATTEO,
THE LEONARD RIGGIO TRUST,
VENDAMERICA B.V.,
BABBAGE'S ETC. LLC
and
BARNES & NOBLE, INC.
Dated as of October 6, 1999
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TABLE OF CONTENTS
Page
Article 1. Purchase and Sale.................................................1
1.1 General...........................................................1
1.2 Purchase Price....................................................2
1.3 Closing and Closing Date..........................................4
1.4 Taking of Necessary Action; Further Action........................4
1.5 Purchase Price Adjustment.........................................5
Article 2. Representations and Warranties Relating to the Members and
the Company.......................................................7
2.1 Organization and Standing.........................................7
2.2 Binding Agreement.................................................7
2.3 Absence of Conflicting Agreements or Required Consents............8
2.4 Company Interests.................................................8
2.5 Financial Statements..............................................9
2.6 Absence of Certain Changes, Events and Conditions................10
2.7 Litigation.......................................................11
2.8 Insurance........................................................11
2.9 Material Contracts...............................................11
2.10 Permits and Licenses; Compliance with Law. .....................12
2.11 Environmental Matters...........................................12
2.12 Employee Benefit Matters........................................12
2.13 Intellectual Property...........................................13
2.14 Taxes...........................................................14
2.15 Commissions.....................................................14
2.16 Affiliate Transactions..........................................14
2.17 Year 2000 Compliance............................................14
2.18 Inventory.......................................................14
2.19 Assets other than Real Property.................................15
2.20 Real Property...................................................15
2.21 Important Suppliers and Customers...............................15
2.22 Accuracy and Completeness of Representations and Warranties.....16
Article 3. Representations and Warranties Relating to Vendamerica...........16
3.1 Organization and Standing........................................16
3.2 Absence of Liabilities...........................................16
3.3 Capital Stock....................................................16
3.4 Litigation.......................................................17
3.5 Insurance........................................................17
3.6 Contracts........................................................17
3.7 Permits and Licenses; Compliance with Law........................17
3.8 Environmental Matters............................................18
3.9 Employee Benefit Matters.........................................18
3.10 Taxes...........................................................18
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3.11 Assets other than Real Property.................................18
3.12 Real Property...................................................19
3.13 Accuracy and Completeness of Representations and Warranties.....19
Article 4. Representations and Warranties of the Buyer......................19
4.1 Organization and Standing........................................19
4.2 Binding Agreement................................................19
4.3 Absence of Conflicting Agreements or Required Consents...........19
4.4 Litigation.......................................................20
4.5 Commissions......................................................20
4.6 Investment Representation........................................20
4.7 Fairness Opinion.................................................20
Article 5. Covenants and Agreements.........................................21
5.1 Conduct of the Business Prior to Closing; Access.................21
5.2 Cooperation......................................................23
5.3 Public Announcements.............................................24
5.4 No Solicitation..................................................24
5.5 Noncompetition; Proprietary Information..........................25
5.6 Special Management Bonuses.......................................26
5.7 Certain Actions..................................................26
5.8 Taxes and Tax Returns............................................26
Article 6. Conditions to Obligations of the Buyer...........................30
6.1 Representations and Warranties...................................30
6.2 Performance by the Sellers and the Company.......................30
6.3 No Material Adverse Change. .....................................30
6.4 Certificate......................................................30
6.5 Consents; No Objections..........................................31
6.6 No Proceedings or Litigation.....................................31
6.7 Financing........................................................31
6.8 Opinions of Sellers'and Company's Counsel........................31
6.9 Outstanding Option...............................................31
Article 7. Conditions to Obligations of the Sellers.........................31
7.1 Representations and Warranties...................................31
7.2 Performance by the Buyer.........................................32
7.3 Certificate......................................................32
7.4 HSR Act..........................................................32
7.5 No Proceedings or Litigation.....................................32
Article 8. Tax Matters......................................................32
8.1 Transfer and Conveyance Taxes....................................32
Article 9. Indemnification and Survival.....................................32
9.1 Indemnification by the Sellers...................................32
9.2 Indemnification by Parent........................................33
9.3 Indemnification by the Buyer.....................................33
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9.4 Limitations on Indemnification Claims and Liability..............33
9.5 Computation of Claims and Damages................................34
9.6 Notice of Claims.................................................35
9.7 Defense of Third Party Claims....................................35
9.8 Treatment of Indemnity Payments..................................36
Article 10. Definitions.....................................................36
Article 11. Miscellaneous Provisions........................................45
11.1 Termination Rights..............................................45
11.2 Litigation Costs................................................45
11.3 Expenses........................................................46
11.4 Notices.........................................................46
11.5 Benefit and Assignment..........................................47
11.6 Waiver..........................................................47
11.7 Severability....................................................47
11.8 Amendment.......................................................48
11.9 Effect and Construction of this Agreement.......................48
11.10 Knowledge of and Actions by the Company........................48
11.11 Specific Performance...........................................48
11.12 Appointment of Sellers'Representative..........................49
11.13 Governing Law..................................................49
11.14 Consent to Jurisdiction........................................49
11.15 Apportionment of Costs Among Sellers...........................49
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PURCHASE AGREEMENT
This PURCHASE AGREEMENT (this "Agreement") made as of October 6,
1999 by and among Leonard Riggio, R. Richard Fontaine, Daniel A. DeMatteo and
The Leonard Riggio Trust (collectively, and with Vendamerica, Inc.
("Vendamerica"), the "Members"), Vendamerica B.V., a corporation organized under
the laws of the Netherlands ("Parent" and with the Members other than
Vendamerica, the "Sellers"), Babbage's Etc. LLC, a Delaware limited liability
company (the "Company "), and Barnes & Noble, Inc., a Delaware corporation (the
"Buyer").
W I T N E S S E T H :
WHEREAS, the Members are the sole members of the Company and the
record and beneficial owners of all limited liability company interests in the
Company;
WHEREAS, (i) the Sellers other than Parent desire to sell to the
Buyer all of their limited liability company interests in the Company
(collectively, the "Member Interests"), (ii) Parent desires to sell to the Buyer
all of the outstanding shares of capital stock of Vendamerica, (iii) the Sellers
desire to cause the Buyer to become a member of the Company, and (iv) the Buyer
desires to purchase from (a) each of the Members (other than Vendamerica) all of
his or its limited liability company interests in the Company and (b) Parent all
of the outstanding capital stock of Vendamerica (the "Shares"), and (v) the
Buyer desires to become a member of the Company, in each case upon the terms and
subject to the conditions set forth in this Agreement;
WHEREAS, a Special Committee of the Board of Directors (the "Special
Committee") has recommended that the Board of Directors of the Buyer approve,
the Board of Directors of the Buyer has approved, and the Sellers have each
approved, the terms of this Agreement and the transactions contemplated hereby;
WHEREAS, concurrently herewith Vendex KBB N.V. ("Vendex") is issuing
to the Buyer a guarantee pursuant to which Vendex will guarantee the obligations
of Parent under this Agreement; and
WHEREAS, capitalized terms used herein have the meaning set forth in
Article 10 hereof;
NOW, THEREFORE, in consideration of the mutual promises and
covenants contained herein, the parties, intending legally to be bound, agree as
follows:
Article 1. Purchase and Sale.
1.1 General. (a) At the Closing, and subject to the terms and
conditions of this Agreement, each of the Members (other than Vendamerica)
agrees to sell, assign, convey and
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deliver to the Buyer, and the Buyer agrees to purchase, acquire and accept from
such Members, all of the limited liability company interests in the Company
owned by such Members.
(b) At the Closing, and subject to the terms and conditions of this
Agreement, Parent agrees to deliver to the Buyer stock certificates evidencing
the Shares with stock powers attached, duly endorsed in blank, and with any
required stock transfer stamps attached.
(c) At the Closing, and subject to the terms and conditions of this
Agreement, each of the Sellers agrees to (or, in the case of Parent, Parent
agrees to cause Vendamerica to) cause the Buyer to be admitted as a member of
the Company and to cause such admission to be reflected in the records of the
Company, and each of the Members (other than Vendamerica) agrees to resign as a
member of the Company, and the Buyer agrees to accept such admission and to
permit such resignation, in each case in accordance with the Amended and
Restated Limited Liability Company Agreement of Babbage's Etc. LLC dated
February 19, 1997 (the "LLC Agreement") and the Delaware Limited Liability
Company Act.
1.2 Purchase Price. (a) Calculation. The total consideration for the
Member Interests and the Shares shall be equal to $208,670,338 (representing
$182,520,338 in cash and the assumption of a $26,150,000 liability which shall
be accrued and paid by the Company prior to Closing) (collectively, the "Base
Purchase Price"), less any Deficiency Amount (as defined below), if any (the
"Purchase Price"); provided that, if the Closing shall occur more than 45 days
after the date hereof other than due to a failure of any of the conditions set
forth in Sections 6.1, 6.2, 6.3, 6.4, 6.8 or 6.9 hereof, the Base Purchase Price
shall accrue interest at the Prime Rate from the date which is 45 days after the
date hereof to the Closing Date. Set forth on Section 1.2(a) of the Sellers'
Disclosure Letter are the names of the Persons to whom the Base Purchase Price
shall be paid at the Closing and the respective amounts to be paid to each such
person.
(b) Purchase Price Estimate. Not less than three Business Days prior
to the Closing, the Sellers shall prepare and deliver to the Buyer a good faith
estimate, in reasonable detail and certified as reasonable by the chief
executive officer of the Company, of the Purchase Price (which amount, subject
to such adjustments as may be agreed upon by the Sellers' Representative and the
Buyer, shall be herein referred to as the "Estimated Purchase Price").
(c) Payment of Estimated Purchase Price. On or before the date which
is two Business Days prior to the Closing, the Sellers shall deliver to the
Buyer a schedule (the "Payment Schedule") which shall indicate the account or
accounts to which the Estimated Purchase Price is to be paid for the benefit of
the Sellers; provided, however, that if the calculation to be made pursuant to
Section 1.5 shall be completed by the Closing, the Purchase Price shall be paid
at Closing. At the Closing, the Buyer shall deliver, by wire transfer in
immediately available funds, to the accounts set forth on the Payment Schedule,
an amount equal to the Estimated Purchase Price.
(d) Contingent Payments. (i) If the EBITDA of the Company for the
fiscal year ending February 3, 2001 or February 2, 2002, respectively, meets or
exceeds $45.3 million and $54.3 million, respectively (the "Management EBITDA
Targets"), then Buyer shall pay to the
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Sellers, to the accounts set forth on the Payment Schedule (or to such other
account as may be designated by any Seller at least two business days before the
date on which such payment is due), $9,664,831 in immediately available funds
within 120 days after the end of any such fiscal year in which the applicable
Management EBITDA Target is met or exceeded (each such payment, a "Contingent
Payment," and the Contingent Payments plus the Purchase Price shall be the
"Total Purchase Price"). Set forth in Section 1.2(d) of the Sellers' Disclosure
Letter are the respective amounts to be paid to each Seller in connection with
any Contingent Payment. It is understood and agreed that if the applicable
Management EBITDA Target for any one fiscal year is not met, the amount of the
Contingent Payment in respect of such fiscal year shall be forfeited in its
entirety and shall not be carried forward to the next succeeding fiscal year.
(e)(i) Through the fiscal year ending February 2, 2002, the Company
shall maintain its accounting books and records for purposes of tracking EBITDA
for purposes of Section 1.2(d), in accordance with GAAP applied in a manner
consistent with the Company's pre-Closing Date practices. Without limiting the
generality of the foregoing, the Sellers and Buyer agree that, without the
consent of the Sellers' Representative for purposes hereof, no changes shall be
made in any reserve or other account, and no special charges shall be taken,
except as a result of specific events or developments occurring after the
Closing Date, and in such event, only in a manner consistent with GAAP and past
practices. The Company shall deliver to the Sellers' Representative within 120
days after the end of each fiscal year to and including the year ending February
2, 2002, the Company's audited financial statements, together with a written
audit report certified by the Company's independent certified public accountants
(the "Company's Auditors"). The Company shall deliver to the Sellers'
Representative together with the audited financial statements a certificate of
the chief financial officer of the Company (or another officer of the Company
not a Seller or an Affiliate of a Seller) stating that such statements have been
prepared in accordance with GAAP applied on a basis consistent with the
financial statements of the Company for the year ending January 30, 1999 (the
"CFO's Certificate"). In addition, the Company shall use its reasonable best
efforts to cause the Company's Auditors to make available to the Sellers'
Representative the work papers used in preparation of the information set forth
above in sufficient detail to enable the Sellers' Representative to verify the
information set forth above subject to the Sellers' Representative's execution
of customary access letters required by the Company's Auditors. The Company's
calculation of EBITDA shall be subject to review by members of senior management
of the Buyer who are neither Sellers nor Affiliates of Sellers.
(ii) The Company shall use its reasonable best efforts to cause the
Company's Auditors to make all of its work papers and other relevant documents
in connection with such audit and calculations available to the Sellers'
Representative and any independent accounting firm chosen by the Sellers'
Representative, and shall make appropriate representatives of the Company's
Auditors available for reasonable inquiry by the Sellers' Representative and
such accounting firm, subject to execution by the Sellers' Representative of
customary access letters required by the Company's Auditors. If the Sellers'
Representative notifies the Company in writing that it does not agree with the
manner of calculation of EBITDA for either the fiscal year ended February 3,
2001 or February 2, 2002, and identifies with reasonable specificity the reasons
for such objection, within 30 business days after the delivery of such audit
report, the
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Sellers' Representative and the Company shall promptly select a mutually
acceptable accounting firm of nationally recognized reputation other than the
Company's Auditors (the "Additional Auditor") to act as the arbitrator of such
dispute. Any such arbitration shall be conducted in New York, New York. If the
parties are not able to agree to an Additional Auditor, then the office of the
American Arbitration Association, located in New York City, shall select a firm
of independent public accountants of nationally recognized reputation to serve
as the Additional Auditor. The Additional Auditor shall be requested to act
promptly to resolve any dispute in accordance with the terms of this Agreement,
it being understood that the sole issues for the Additional Auditor shall be
whether EBITDA was (A) derived from financial statements which were prepared in
accordance with GAAP, applied in a manner consistent with the Company's
pre-Closing Date practices, as provided in Section 1.2(e)(i) and (B) consistent
with the definition of EBITDA herein, and to issue its written decision within
thirty days after the appointment of such Additional Auditor, which decision
shall be final, binding and conclusive on both the Buyer and the Sellers. The
Buyer and the Sellers' Representative shall cooperate with the Additional
Auditor in connection with this Section 1.2. Without limiting the generality of
the foregoing, the Buyer and the Sellers' Representative shall each provide, or
cause to be provided to the Additional Auditor, all information and records, and
to make available at the arbitration proceeding all personnel, as are reasonably
necessary to permit the Additional Auditor to resolve any disputes pursuant to
this Section 1.2. The expenses of the Additional Auditor in resolving any
disputes under this Section 1.2 shall be borne equally by the Buyer on the one
hand and the Sellers on the other hand.
(f) In the event that Buyer consummates the sale of all or
substantially all of its interest in the Company or all or substantially all of
the assets of the Company (a "Change of Control") for compensation in excess of
$215,000,000 plus any Contingent Payment made as of the date of such sale in
cash or Cash Equivalents prior to February 2, 2002, any Contingent Payments that
the Sellers remain eligible to receive shall be accelerated and shall become due
and payable by the Buyer immediately prior to the consummation of such Change of
Control.
1.3 Closing and Closing Date. Unless this Agreement shall have been
terminated and the transactions herein contemplated shall have been terminated
pursuant to Section 11.1 hereof, the closing (the "Closing") of the transactions
herein contemplated shall take place as promptly as practicable following the
satisfaction of the conditions set forth in Sections 6.5(a) and 7.4 hereof, and
the satisfaction or waiver of the other conditions set forth in Articles 6 and 7
hereof, or at such other time and date as the Sellers, the Company and the Buyer
shall agree (such time and date being referred to herein as the "Closing Date"),
at the offices of Simpson Thacher & Bartlett, 425 Lexington Avenue, New York,
New York, or at such other place as the Sellers, the Company and the Buyer shall
agree. At the Closing, each of the parties hereto shall take, or cause to be
taken, all such actions and deliver, or cause to be delivered, all such
documents, instruments, certificates and other items as may be required under
this Agreement or otherwise, in order to perform or fulfill all covenants and
agreements on its part to be performed at or prior to the Closing Date.
1.4 Taking of Necessary Action; Further Action. Each of the parties
shall use its respective reasonable best efforts to take all such action as may
be necessary or appropriate in
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order to effectuate the Closing as promptly as possible. If, at any time after
the Closing Date, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Company with full right, title and
possession to all assets, property, rights, privileges, powers, and franchises
of the Company, the officers of the Company are fully authorized, in the name of
the Company, any Seller, any other Member or otherwise, to take, and shall take,
all such lawful and necessary action.
1.5 Purchase Price Adjustment
(a) Calculation of Net Equity Adjustment. In accordance with the
provisions of this Section 1.5, the Buyer and the Sellers agree that to the
extent that the Closing Net Equity is less than $(16,150,000), the Sellers shall
pay to the Buyer the difference between $(16,150,000) and Closing Net Equity
(the "Deficiency Amount"). For purposes of this Agreement, "Closing Net Equity"
shall mean (A) the Company's total assets minus (B) the Company's total
liabilities, in each case as set forth on the balance sheet of the Company as of
the close of business on the Closing Date (the "Closing Balance Sheet"). The
parties agree that the Closing Balance Sheet shall reflect the total assets and
total liabilities required to be included therein by, and in accordance with,
GAAP, consistently applied.
(b) Closing Balance Sheet and Closing Statement. As promptly as
practicable following the Closing Date, but in no event later than thirty days
following the Closing Date, the Sellers' Representative (a) shall prepare and
deliver to the Buyer (i) the Closing Balance Sheet, (ii) a statement (the
"Closing Statement") showing the Closing Net Equity, the determination of the
Deficiency Amount, if any, and a calculation of the Purchase Price, and (iii) a
certificate to the effect that the Closing Balance Sheet has been prepared in
accordance with GAAP and fairly presents the financial condition of the Company
as of the Closing Date and (b) make available to the Buyer all supporting
documentation relating to the Closing Balance Sheet and the Closing Statement.
The Buyer and the Sellers shall cooperate with the Sellers' Representative in
the preparation of the Closing Balance Sheet and the Closing Statement. The
Buyer and the Company shall provide the Sellers' Representative with reasonable
access, during normal business hours, to the facilities, personnel and
accounting records of the Company, to the extent reasonably necessary to permit
the Sellers' Representative to prepare the Closing Balance Sheet and the Closing
Statement.
(c) Review of Closing Balance Sheet and Closing Statement. During
the 30-day period following the Buyer's receipt of the Closing Balance Sheet and
the Closing Statement (the "Review Period"), the Special Committee and its
advisors shall be afforded the opportunity to review the Closing Balance Sheet
and the Closing Statement and the supporting documentation relating thereto.
(d) Proposed Adjustment Notice. If the Special Committee and its
advisors believe that the Closing Balance Sheet was not prepared in accordance
with Section 1.5, the Special Committee shall deliver to the Sellers'
Representative, prior to the expiration of the Review Period, a proposed
adjustment notice (a "Proposed Adjustment Notice"). If the Special Committee
does not deliver a Proposed Adjustment Notice to the Sellers' Representative
prior to
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the expiration of the Review Period, the Closing Balance Sheet and the Closing
Statement shall become final, binding and conclusive on both the Buyer and the
Sellers.
(e) Dispute Resolution. If a Proposed Adjustment Notice is delivered
within the period set forth in Section 1.5(d), the Special Committee and the
Sellers' Representative shall negotiate in good faith for a ten Business Day
period commencing on the date of delivery of the Proposed Adjustment Notice to
resolve such dispute. If the Special Committee and the Sellers' Representative
cannot resolve such dispute within such ten Business Day period, the Special
Committee and the Sellers' Representative shall retain a mutually acceptable
accounting firm of nationally recognized reputation to act as the arbitrator
(the "Arbitrator") of such dispute. Any such arbitration shall be conducted in
New York, New York. If the parties are not able to agree to an Arbitrator, then
the office of the American Arbitration Association, located in New York City,
shall select a firm of independent public accountants of nationally recognized
reputation to serve as the Arbitrator. The Arbitrator shall be requested to act
promptly to resolve any dispute in accordance with the terms of this Agreement,
it being understood that the sole issue for the Arbitrator shall be whether the
Closing Balance Sheet was prepared in accordance with Section 1.5, and to issue
its written decision within thirty days after the appointment of such
Arbitrator, which decision shall be final, binding and conclusive on both the
Buyer and the Sellers. The Special Committee, the Buyer and the Sellers'
Representative shall cooperate with the Arbitrator in connection with this
Section 1.5. Without limiting the generality of the foregoing, the Special
Committee, the Buyer and the Sellers' Representative shall each provide, or
cause to be provided to the Arbitrator all information and records, and to make
available at the arbitration proceeding all personnel, as are reasonably
necessary to permit the Arbitrator to resolve any disputes pursuant to this
Section 1.5. The expenses of the Arbitrator in resolving any disputes under this
Section 1.5 shall be borne equally by the Buyer, on the one hand, and the
Sellers, on the other hand.
(f) Payment of Purchase Price Adjustment. At such time as the
Closing Statement becomes final and binding in accordance with Section 1.5 after
the Closing then, within three Business Days thereafter, if the Closing
Statement reflects that the Purchase Price is less than the Estimated Purchase
Price, then the Sellers shall pay to an account designated by the Buyer in
immediately available funds, an amount equal to the amount of such shortfall,
and if the Closing Statement reflects that the Purchase Price is greater than
the Estimated Purchase Price, then the Buyer shall pay to an account designated
by the Sellers' Representative, the amount of such excess, in each case, plus
interest for the number of days from and including the thirtieth day following
the Closing Date to but excluding the payment date, at a rate equal to the Prime
Rate, calculated on the basis of actual days elapsed over a 365-day year.
(g) Adjustment for Cash of Vendamerica. At least one Business Day
before the Closing, Parent shall provide notice to the Buyer of the amount in
Vendamerica's checking account at Citibank N.A. as of such date. On the Closing
Date, the Buyer shall pay to Parent, as additional consideration for the Shares,
an amount equal to the amount set forth in such notice.
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Article 2. Representations and Warranties Relating to the Members
and the Company.
Except as set forth in the corresponding sections of the disclosure
letter delivered by the Sellers and the Company to the Buyer upon or prior to
entering into this Agreement (the "Sellers' Disclosure Letter") the Sellers and
the Company represent and warrant severally as to representations and warranties
relating to themselves (and, with respect to Parent, severally as to
representations and warranties relating to Vendamerica), and jointly and
severally as to representations and warranties relating to the Company, to the
Buyer as follows:
2.1 Organization and Standing. (a) The Company is a limited
liability company duly formed, validly existing, and in good standing under the
Laws of the State of Delaware and has all requisite limited liability company
power and authority to own, lease and operate its properties and assets and to
conduct its business as it is now being conducted. The Company is duly qualified
to do business as a foreign limited liability company and is in good standing
under the Laws of each state in which the operation of its business or ownership
of its assets makes such qualification necessary, except where the failure to so
qualify or be in good standing would not reasonably be expected to have a
Material Adverse Effect.
(b) The Buyer has been furnished a complete and correct copy of the
Company's certificate of formation and the LLC Agreement, each as currently in
effect.
(c) Except as set forth in Section 2.1(c) of the Sellers' Disclosure
Letter, none of the Members nor the Company has made an election pursuant to
Regulation Section 301.7701-3(c) or any comparable state Law or regulation to
have the Company treated as an association taxable as a corporation for federal
or state income tax purposes.
2.2 Binding Agreement. (a) Each Member which is a natural person has
the capacity, and each other Member that is a party hereto has all requisite
power and authority, to execute and deliver this Agreement, to carry out its
obligations hereunder and to consummate the transactions contemplated hereby.
Pursuant to the terms of the LLC Agreement, Leonard Riggio hereby consents to
the transfer of each of such Members' limited liability company interests
pursuant to this Agreement. This Agreement has been duly executed and delivered
on behalf of each of such Members and, assuming the due authorization, execution
and delivery by the Buyer, constitutes a legal, valid and binding obligation of
each of such Members enforceable in accordance with its terms, except as may be
limited by bankruptcy, insolvency, moratorium or other laws affecting creditors'
rights generally and general principles of equity.
(b) Parent has all requisite corporate power and authority to
execute and deliver this Agreement, to carry out its obligations hereunder and
to consummate the transactions contemplated hereby. The execution and delivery
of this Agreement by Parent and the consummation by Parent of its obligations
hereunder have been duly and validly authorized by all necessary corporate
action on the part of Parent. This Agreement has been duly executed and
delivered on behalf of Parent and, assuming the due authorization, execution and
delivery by the Buyer and the Members, constitutes a legal, valid and binding
obligation of Parent enforceable in
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accordance with its terms, except as may be limited by bankruptcy, insolvency,
moratorium or other laws affecting creditors' rights generally and general
principles of equity.
(c) The Company has all requisite limited liability company power
and authority to enter into this Agreement, to execute and deliver this
Agreement, to carry out its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by the Company and the consummation by the Company of its obligations hereunder
have been duly and validly authorized by all necessary limited liability company
and Member action on the part of the Company. This Agreement has been duly
executed and delivered on behalf of the Company and, assuming the due
authorization, execution and delivery by the Buyer, constitutes a legal, valid
and binding obligation of the Company enforceable in accordance with its terms,
except as may be limited by bankruptcy, insolvency, moratorium or other laws
affecting creditors' rights generally and general principles of equity.
2.3 Absence of Conflicting Agreements or Required Consents. Except
as set forth in Section 2.3 of the Sellers' Disclosure Letter and, in the case
of clauses (c) and (d), except for such violations, conflicts, breaches,
defaults, consents, approvals, authorizations, orders, actions, registrations,
filings, declarations, notifications and Encumbrances that would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect or materially impair or delay the consummation of the
transactions contemplated hereby, the execution, delivery and performance by the
Sellers and the Company of this Agreement do not and will not (a) violate,
conflict with or result in the breach or default of any provision of the
Company's certificate of formation or the LLC Agreement, or the organizational
documents of any of the Members or Parent, (b) conflict with or violate any Law
or Governmental Order applicable to any Member, Parent or the Company or any of
their respective properties or assets, (c) except for the notification
requirements of the HSR Act and any filing obligations of the Buyer pursuant to
the Exchange Act, require any consent, approval, authorization or other order
of, action by, registration or filing with or declaration or notification to any
Governmental Authority or any other Person or (d) conflict with, result in any
violation or breach of, constitute a default (or event which with the giving of
notice, or lapse of time or both, would become a default) under, require any
consent under, or give to others any rights of termination, amendment,
acceleration, suspension, revocation or cancellation of, or result in the
creation of any Encumbrance on any of the Members', Parent's or the Company's
respective assets, or result in the imposition or acceleration of any payment,
time of payment, vesting or increase in the amount of compensation or benefit
payable, pursuant to, any note, bond, mortgage or indenture, contract,
agreement, lease, sublease, license or permit, or franchise to which any Member,
Parent or the Company is a party or by which their respective assets are bound.
2.4 Company Interests. (a) The Members are the sole members of the
Company. Upon the consummation of the transactions contemplated hereby, Buyer
will own, directly or indirectly, 100% of the limited liability company
interests in the Company. No Person has any preemptive right to purchase any
limited liability company interests or any other securities of the Company.
There are no outstanding securities or other instruments of the Company which
are convertible into or exchangeable for any limited liability company interests
of the Company and there are no commitments to issue such securities or
instruments or otherwise make a Person a
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member of the Company (except the Buyer pursuant to this Agreement). Except as
set forth in Section 2.4(a) of the Sellers' Disclosure Letter, there is no
existing option, warrant, right, call, commitment of any character granted or
issued by the Company governing the issuance of any limited liability company
interests of the Company or any "phantom" securities giving the holder thereof
any economic attributes of ownership. All limited liability company interests of
the Company have been offered, issued and sold in compliance with applicable
Law. The limited liability company interests of the Members, as set forth on
Schedule I, constitute all of the outstanding limited liability company
interests of the Company.
(b) Each of the Members has good and marketable title to, and owns,
the limited liability company interests of the Company, beneficially and of
record which are set forth next to his or its name on Schedule I. Such limited
liability company interests are fully paid and non-assessable and, except for
any right of the Buyer under this Agreement, are free and clear of all
Encumbrances, demands, preemptive rights and adverse claims of any nature. Each
Member has full voting power over his limited liability company interests,
subject to no proxy, members' agreement, voting trust or other agreement
relating to the voting of any of the limited liability company interests of the
Company. Except as set forth in Section 2.4(b) of the Sellers' Disclosure Letter
and other than this Agreement, there is no agreement between any of the Members
and any Person with respect to the disposition of the limited liability company
interests of the Company. Upon the consummation of the Closing, (i) each Member
(other than Vendamerica) will have transferred to the Buyer good title to all
limited liability company interests owned by such Member, and (ii) Vendamerica
will have good title to the limited liability company interests owned by it, in
each case free and clear of all Encumbrances, other than those that may be
imposed by or on behalf of the Buyer.
(c) Except as set forth in Section 2.4 of the Sellers' Disclosure
Letter, the Company, directly or indirectly, does not own or have the power to
vote or the right to acquire the power to vote, or to exercise a controlling
influence with respect to, securities of, or any other direct or indirect equity
interest in, any Person.
2.5 Financial Statements. (a) The Buyer has been furnished audited
balance sheets for the Company as of February 1, 1997, January 31, 1998 and
January 30, 1999 and audited statements of income and retained earnings and cash
flows for the years then ended, or, in the case of February 1, 1997, the period
from inception to February 1, 1997, all certified by BDO Seidman, LLP,
independent accountants, whose opinions thereon are included therein
(collectively referred to herein as the "Audited Financial Statements"), and the
consolidated balance sheet for the Company as of July 31, 1999 and statements of
income and cash flows for the six-month period then ended (the "Unaudited
Financial Statements" and, together with the Audited Financial Statements, the
"Financial Statements"). Except as otherwise disclosed in Section 2.5 of the
Sellers' Disclosure Letter, (i) the Unaudited Financial Statements (including
any notes thereto) present fairly, in all material respects, the financial
position of the Company as of the dates thereof and the results of its
operations for the periods then ended in conformity with GAAP, subject to
year-end adjustments which are, in the aggregate, not material and (ii) the
balance sheets contained in the Financial Statements present fairly the
valuation of the Company's merchandise inventory.
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(b) Except as set forth in Section 2.5 of the Sellers' Disclosure
Letter, the Company has no material liability or obligation, secured or
unsecured (whether absolute, accrued, contingent or otherwise, and whether due
or to become due), of a nature required by GAAP to be reflected in a balance
sheet or disclosed in the notes thereto, except such liabilities and obligations
that are adequately accrued or reserved against in the Financial Statements or
disclosed in the notes thereto or that were incurred after the date of the
Financial Statements either in the ordinary course of business of the Company
consistent with past practice or in connection with the transactions
contemplated by this Agreement.
2.6 Absence of Certain Changes, Events and Conditions. From January
30, 1999 through the date hereof, except as otherwise provided in or
contemplated by this Agreement or as disclosed in Section 2.6 of the Sellers'
Disclosure Letter:
(a) other than in the ordinary course of business consistent with
past practice, the Company has not sold, transferred, leased, subleased,
licensed or otherwise disposed of any material assets (for the purposes of
this clause (a), a "material asset" is an individual asset that has a
value in excess of $50,000 or assets that have an aggregate value in
excess of $100,000);
(b) (i) the Company has not granted any increase, or announced any
increase, in the wages, salaries, compensation, bonuses, incentives,
pension or other benefits payable to any of the officers or employees of
the Company, including any increase or change pursuant to any Employee
Benefit Plan, or (ii) established, increased (or promised to increase) or
accelerated the payment or vesting of any benefits under any Employee
Benefit Plan with respect to officers or employees, in either case except
(A) as required by Law, (B) that involve only increases to employees (but
not officers) consistent with the past practices of the Company or (C) as
required under any existing agreement or arrangement (a copy of which has
been made available to the Buyer);
(c) the Company has not made any material change in any method of
accounting or accounting practice or policy used by the Company, other
than changes required by Law or under GAAP;
(d) the Company has not suffered any material casualty loss or
damage, whether or not covered by insurance;
(e) there has not been any direct or indirect redemption or other
acquisition by the Company of any limited liability company interests of
any class of the Company, or any declaration, setting aside or payment of
any dividend or other distribution in respect of any limited liability
company interest of the Company;
(f) there has not been any Material Adverse Effect;
(g) the Company has been operated only in the ordinary and usual
course consistent with past practice;
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(h) the Company has not created, incurred, assumed or guaranteed any
liabilities, obligations or indebtedness for borrowed money except for net
borrowings under existing lines of credit or the creation of trade
payables, in each case in the ordinary course of business consistent with
the past practices of the Company;
(i) the Company has not compromised, settled, granted any waiver or
release relating to, or otherwise adjusted any material Action,
Indebtedness or any other claims or rights of the Company; and
(j) the Company has not entered into any agreement, contract,
commitment or arrangement to do any of the foregoing.
2.7 Litigation. Except as disclosed in Section 2.7 of the Sellers'
Disclosure Letter, (i) there are no Actions against any of the Sellers (with
respect to the Company) or the Company pending, or, to the knowledge of the
Sellers or the Company, threatened to be brought by or before any Person or
Governmental Authority, in each case with respect to the Company, which would,
if adversely determined as to such Seller or the Company, result in a liability
to the Company of greater than $100,000, (ii) none of the Sellers nor the
Company is subject to any Governmental Order (nor, to the knowledge of the
Company and the Sellers, are there any such Governmental Orders threatened to be
imposed by any Governmental Authority), in each case with respect to the Company
and (iii) there is no Action pending, or, to the knowledge of the Sellers and
the Company, threatened to be brought before any Governmental Authority, that
seeks to question, delay or prevent the consummation of the transactions
contemplated hereby.
2.8 Insurance. Except as set forth in Sections 2.8 or 2.12 of the
Sellers' Disclosure Letter, (i) all insurance policies to which the Company is a
party or under which the Company is covered as an additional named insured or
otherwise (or replacement policies therefor) are in full force and effect, and
the Members or the Company has paid all premiums due and is not in default, (ii)
no notice of cancellation or non-renewal with respect to, or disallowance of any
claim under, any such policy has been received by the Members or the Company and
(iii) none of the Members nor the Company has been refused insurance with
respect to the Company, nor has coverage with respect to the Company been
previously canceled or materially limited, by an insurer to which a Member or
the Company has applied for such insurance, or with which a Member or the
Company has held insurance, within the last three years.
2.9 Material Contracts. Section 2.9 of the Sellers' Disclosure
Letter sets forth all Material Contracts of the Company as of the date hereof.
Complete and accurate copies of all written Material Contracts listed in Section
2.9 of the Sellers' Disclosure Letter have been delivered or made available to
the Buyer (except as otherwise noted therein). Except as set forth in Section
2.9 of the Sellers' Disclosure Letter, (a) each Material Contract is legal,
valid and binding on the Company and, to the knowledge of the Sellers and the
Company, the other parties thereto, and enforceable in accordance with the terms
thereof, (b) each Material Contract is in full force and effect, (c) neither the
Company nor any of the Members is in default under any Material Contract, (d)
none of the Members nor the Company has waived any of its rights under any
Material Contract and (e) to the knowledge of the Sellers and the Company, no
other party to
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any Material Contract has breached or is in default thereunder and there does
not exist any event or condition that, with or without the lapse of time or the
giving of notice, would become such a breach or default or would cause the
acceleration of any obligation thereunder.
2.10 Permits and Licenses; Compliance with Law. (a) Except as set
forth in Section 2.10 of the Sellers' Disclosure Letter, (i) the Company
currently holds all the permits, licenses, authorizations, certificates,
exemptions and approvals of Governmental Authorities or other Persons including
Environmental Permits, necessary for the current operation and conduct of the
Company in all material respects as it is being conducted by the Company
(collectively, "Permits"), and all Permits are in full force and effect, (ii)
since November 26, 1996, the Company has not received any written notice from
any Governmental Authority revoking, canceling, rescinding, materially modifying
or refusing to renew any Permit and (iii) the Company is in compliance in all
material respects with the requirements of all Permits.
(b) Except as disclosed in Section 2.10 of the Sellers' Disclosure
Letter, (i) the Company is in compliance in all material respects with all Laws
and Governmental Orders applicable to the conduct of the Company as it is being
conducted and (ii) the Company has not been charged since November 26, 1996 by
any Governmental Authority with a violation of any Law or any Governmental Order
relating to the conduct of the Company.
2.11 Environmental Matters. Except as disclosed in Section 2.11 of
the Sellers' Disclosure Letter, and only with respect to Real Property that is
leased, to the knowledge of the Company, (i) Hazardous Materials have not been
Released on any Real Property in violation of applicable Environmental Law and
have not migrated to or from the Real Property so as to result in a violation of
applicable Environmental Law, and all Releases required to be reported under
applicable Environmental Law have been reported to the appropriate Governmental
Authority in accordance with such Environmental Law and, to the extent required,
remediated to the satisfaction of such Governmental Authority; (ii) there have
been no events related to the Company that would reasonably be expected to give
rise to liability under any Environmental Law; (iii) the Company is now, and has
been since November 26, 1996, in compliance with all applicable Environmental
Laws relating to the Company and there are no extant conditions that would
reasonably be expected to constitute an impediment to such compliance in the
future, nor are there any pending investigations or requests for information by
any Governmental Authority with respect to past compliance; (iv) the Company has
disposed of all wastes arising from or otherwise relating to the Company,
including those wastes containing Hazardous Materials, in compliance with all
applicable Environmental Laws (including the filing of any required reports with
respect thereto) and Environmental Permits and (v) there are no pending or
threatened, Environmental Claims against the Company relating to its Real
Property.
2.12 Employee Benefit Matters. (a) Section 2.12(a) of the Sellers'
Disclosure Letter identifies each Employee Benefit Plan. The Buyer has been
furnished copies of the Employee Benefit Plans (and, if applicable, related
trust agreements) and all amendments thereto and written interpretations thereof
together with the three most recent annual reports (Form 5500 including, if
applicable, Schedule B thereto) and the most recent actuarial valuation report
prepared in connection with any Employee Benefit Plan. Neither the Company nor
any of its
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ERISA Affiliates has now, or has maintained in the past, any Employee Benefit
Plan which is (i) a Multiemployer Plan, (ii) a Title IV Plan or (iii) Employee
Benefit Plan maintained in connection with any trust described in Section
501(c)(9) of the Code.
(b) No transaction prohibited by Section 406 of ERISA or Section
4975 of the Code has occurred with respect to any Employee Benefit Plan or
arrangement which is covered by Title I of ERISA which transaction has or will
cause the Company or any of its Subsidiaries to incur any material liability
under ERISA, the Code or otherwise, excluding transactions effected pursuant to
and in compliance with a statutory or administrative exemption.
(c) Each Employee Benefit Plan that is intended to be qualified
under Section 401(a) of the Code is so qualified and has been so qualified
during the period since its adoption; each trust created under any such Employee
Benefit Plan is exempt from Tax under Section 501(a) of the Code and has been so
exempt since its creation. Buyer has been provided with the most recent
determination letter of the Internal Revenue Service relating to each such
Employee Benefit Plan. Each Employee Benefit Plan has been maintained in
substantial compliance with its terms and with the requirements prescribed by
any and all applicable statutes, orders, rules and regulations, including ERISA
and the Code.
(d) Neither the Company nor any of its Subsidiaries has any current
or projected liability in respect of post-employment or post-retirement health
or medical or life insurance benefits for retired, former or current employees
of the Company, except as required to avoid excise Tax under Section 4980B of
the Code.
(e) Except as disclosed in Section 2.12(e) of the Sellers'
Disclosure Letter, there is no contract, plan or arrangement (written or
otherwise) covering any employee or former employee of the Company that,
individually or collectively, could give rise to the payment of any amount that
would not be deductible pursuant to the terms of Section 280G of the Code and no
employee or former employee of the Company or any of its Subsidiaries will
become entitled to any bonus, retirement, severance, job security or similar
benefit or enhanced such benefit (including acceleration of vesting or exercise
of an incentive award) as a result of the transactions contemplated hereby.
(f) There are no pending, or, to the knowledge of the Company,
threatened or anticipated, claims under or with respect to any Employee Benefit
Plan, by any employee or beneficiary covered under any such Employee Benefit
Plan, or otherwise involving such Employee Benefit Plan (other than routine
claims for benefits).
2.13 Intellectual Property. Except as disclosed in Section 2.13 of
the Sellers' Disclosure Letter, (a) the rights of the Company in or to the
Intellectual Property do not conflict with or infringe on the rights of any
other Person, and the Company has not received any claim from any Person to such
effect nor, to the Company's or the Sellers' knowledge, has any such claim been
threatened, (b) the Company owns, licenses or otherwise has the right to use,
all Intellectual Property and (c) to the knowledge of the Company, no other
Person is infringing or diluting the rights of the Company with respect to the
Intellectual Property.
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2.14 Taxes. Except as disclosed in Section 2.14 of the Sellers'
Disclosure Letter, (i) all Tax Returns required to be filed by the Company have
been timely filed, and such Tax Returns are true, complete and correct in all
material respects; (ii) all Taxes shown on such Tax Returns have been timely
paid other than such Taxes, if any, as are described in Section 2.14 of the
Sellers' Disclosure Letter and are being contested in good faith and as to which
adequate reserves (determined in accordance with GAAP) have been provided in the
Financial Statements of the Company; (iii) no adjustment relating to such Tax
Returns has been proposed in writing by any Tax authority and remains
unresolved; (iv) there are no Tax liens on any of the Company's assets (other
than liens for Taxes that are not yet due and payable); and (v) all Taxes that
the Company is required to pay, withhold or collect have been duly paid,
withheld or collected and, to the extent required, have been paid to the proper
Tax authority.
2.15 Commissions. Other than Merrill Lynch & Co. there is no broker,
financial advisor or finder or other Person who has any valid claim against the
Members, Parent, the Company, any of their respective Affiliates or any of their
respective assets for a commission, finders' fee, brokerage fee, advisory fee or
other similar fee in connection with this Agreement, or the transactions
contemplated hereby, by virtue of any actions taken by or on behalf of the
Company, the Members, Parent or the Company's officers, employees or agents.
2.16 Affiliate Transactions. Except as set forth in Section 2.16 of
the Sellers' Disclosure Letter or as otherwise provided or permitted in this
Agreement, since November 26, 1996, the Company has not engaged in any
transaction with any Affiliate thereof that was material to the Company. Except
as set forth in Section 2.16 of the Sellers' Disclosure Letter, the Company is
not a party to any material agreements or arrangements with any Affiliates.
2.17 Year 2000 Compliance. Assuming that the Company continues after
the Closing Date to adhere to the current programs and practices of the Company
with respect to such matters (including expenditures for the items relating
thereto set forth in the Company's current 1999 capital expenditure budget), to
the knowledge of the Company, there are no Year 2000 Conditions that would
reasonably be expected to interfere in any material respect with the conduct of
the Company's business as it is currently conducted. For purposes of this
Section 2.17, a "Year 2000 Condition" means any condition imbedded in any
computer software used by the Company that would reasonably be expected to cause
such software not to (i) correctly handle date information before, during and
after September 9, 1999, including accepting data input, providing date output
and performing calculations on dates or portions of dates, (ii) function
accurately and without interruption before, during and after September 9, 1999,
without any change in operations associated with the advent of the new century,
(iii) fail to respond to two-digit, year-date input in a way that resolves the
ambiguity as to century in a disclosed, defined and predetermined manner and
(iv) store and provide output of data information in ways that are unambiguous
as to century.
2.18 Inventory. All of the inventory of the Company reflected in the
Unaudited Financial Statements or acquired after July 31, 1999, (i) is owned by
the Company free and clear of any Encumbrances other than Permitted
Encumbrances, (ii) except for reserves reflected in the Unaudited Financial
Statements or as set forth in Section 2.18 of the Sellers' Disclosure Letter,
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based on commercial circumstances existing on the date hereof, is in usable and
saleable condition and (iii) was acquired by the Company in the ordinary course
of business.
2.19 Assets other than Real Property. The Company has good and valid
title to all material assets (other than Real Property or interests in Real
Property) it owns, including those reflected in the Unaudited Financial
Statements or thereafter acquired, except those sold or otherwise disposed of
since the date of the Unaudited Financial Statements not in violation of this
Agreement, in each case free and clear of all Encumbrances except Permitted
Encumbrances.
2.20 Real Property. (a) Section 2.20(a) of the Sellers' Disclosure
Letter sets forth a complete list of all material Real Property and interests in
Real Property owned in fee by the Company (the "Owned Properties") or leased and
a complete list of all material Real Property and interests in Real Property
leased by the Company (the "Leased Properties"; an Owned Property or a Leased
Property being sometimes referred to herein, individually, as a "Subject
Property" and collectively, as "Subject Properties"). The Company has good and
marketable fee title to all Owned Property free and clear of all Encumbrances
except (i) Permitted Encumbrances, (ii) as set forth in Section 2.20(a) of the
Sellers' Disclosure Letter, (iii) easements, covenants, rights-of-way and other
similar restrictions, whether or not of record, (iv) any conditions that may be
shown by a current, accurate survey or physical inspection of any Subject
Property made prior to the Closing and (v) (A) zoning, building and other
similar restrictions, and (B) Encumbrances, easements, covenants, rights-of-way
and other similar restrictions that have been placed by a developer, landlord or
other third party on any Subject Property which is not owned in fee by the
Company and subordination or similar agreements relating thereto. Except as set
forth in Section 2.20(a) of the Sellers' Disclosure Letter, all buildings and
structures included within any Owned Property lie wholly within the boundaries
of the Owned Property and do not encroach upon the property of, or otherwise
conflict with the property rights of, any other Person. Except as set forth in
Section 2.20(a) of the Sellers' Disclosure Letter, the Company is the lessee of
all the Leased Property and is in possession of the premises purported to be
leased thereunder, and each such lease is a valid obligation of such lessee
without any material default thereunder by such lessee. The consummation of the
transactions contemplated by this Agreement will not result in a breach of, or a
default under, any lease with respect to any Leased Property.
(b) Set forth in Section 2.20(b) of the Sellers' Disclosure Letter
is a list of those 50 leases with respect to Leased Property that
generated the most revenues for the fiscal year ended February 1, 1999.
Those leases generated in the aggregate 18.6% of the Company's revenues
for such period.
2.21 Important Suppliers and Customers. Set forth in Section 2.21 of
the Sellers' Disclosure Letter is a complete and accurate list of:
(a) the names and addresses of the ten largest suppliers (by dollar
volume) of products and services to the Company during each of its last
two fiscal years, with a description of the existing contractual
arrangements, if any, for continued supply from each such firm;
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(b) the names and addresses of any sole source suppliers of
significant goods or services to the Company with respect to which
practical alternative sources of supply are not available on comparable
terms and conditions, with a description of the contractual arrangements
for continued supply from each such firm; and
(c) the dollar volume of purchases from each supplier referred to in
paragraphs (a) and (b) above during each of the last two fiscal years.
2.22 Accuracy and Completeness of Representations and Warranties. No
representation, warranty or statement made by the Company in this Agreement
contains any untrue statement of a material fact or omits a material fact
necessary in order to make the representation, warranty or statement made not
misleading.
Article 3. Representations and Warranties Relating to Vendamerica.
Except as set forth in the corresponding sections of the disclosure
letter delivered by Parent to the Buyer upon or prior to entering into this
Agreement (the "Parent Disclosure Letter"), Parent represents and warrants to
the Buyer as follows:
3.1 Organization and Standing. (a) Vendamerica is a corporation duly
incorporated, validly existing and in good standing under the Laws of the State
of Connecticut and has all requisite corporate power and authority to own, lease
and operate its properties and assets and to conduct its business as it is now
being conducted. Vendamerica is duly qualified to do business as a foreign
corporation and is in good standing under the Laws of each state in which the
operation of its business or ownership of its assets makes such qualification
necessary.
(b) Parent has previously delivered to the Buyer a complete and
correct copy of Vendamerica's certificate of incorporation and by-laws,
each as currently in effect.
3.2 Absence of Liabilities. Except as set forth in Section 3.2 of
the Parent Disclosure Letter, Vendamerica has no liability or obligation,
secured or unsecured (whether absolute, accrued, contingent or otherwise, and
whether due or to become due).
3.3 Capital Stock. (a) The authorized capital stock of Vendamerica
consists of 1000 shares of common stock, no par value per share, all of which
are issued and outstanding as of the date hereof; and such shares are duly
authorized and validly issued, fully paid and non-assessable. Parent is the
record and beneficial owner of the Shares. The Shares have not been issued in
violation of, and are not subject to any purchase option, call, right of first
refusal, preemptive, subscription or similar rights under, any provision of
applicable Law, the organization documents of Vendamerica, or any contract,
agreement or instrument to which either Parent or Vendamerica is a party. Except
for the obligations of Parent under this Agreement, there are no outstanding
warrants, options, rights, agreements, convertible or exchangeable securities or
other commitments pursuant to which Parent or Vendamerica is or may become
obligated to issue, sell, purchase or redeem any shares of capital stock, or
other securities of Vendamerica.
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(b) Parent has good and marketable title to the Shares, free and
clear of any Encumbrances. At the Closing, Parent will transfer to Buyer
good and marketable title to the Shares, free and clear of any
Encumbrances other than those that may be imposed by or on behalf of the
Buyer.
(c) Other than its limited liability company interests in the
Company, Vendamerica, directly or indirectly, does not own or have the
power to vote or the right to acquire the power to vote, or to exercise a
controlling influence with respect to, securities of, or any other direct
or indirect equity interest in, any Person.
3.4 Litigation. (a) There are no Actions against Parent (with
respect to Vendamerica) or Vendamerica pending, or, to the knowledge of Parent
or Vendamerica, threatened to be brought by or before any Person or Governmental
Authority, in each case with respect to Vendamerica and (b) neither Parent nor
Vendamerica is subject to any Governmental Order (nor, to the knowledge of
Vendamerica and Parent, are there any such Governmental Orders threatened to be
imposed by any Governmental Authority), in each case with respect to
Vendamerica.
3.5 Insurance. (i) All insurance policies to which Vendamerica is a
party or under which Vendamerica is covered as an additional named insured or
otherwise (or replacement policies therefor) are in full force and effect, and
all premiums due have been paid and neither Parent nor Vendamerica is in
default, (ii) no notice of cancellation or non-renewal with respect to, or
disallowance of any claim under, any such policy has been received by Parent or
Vendamerica and (iii) neither Parent nor Vendamerica has been refused insurance
with respect to Vendamerica, nor has coverage with respect to Vendamerica been
previously canceled or materially limited, by an insurer to which Parent or
Vendamerica has applied for such insurance, or with which Parent or Vendamerica
has held insurance, within the last three years.
3.6 Contracts. Section 3.6 of the Parent Disclosure Letter sets
forth all contracts of Vendamerica as of the date hereof (the "Vendamerica
Contracts"). Complete and accurate copies of all written contracts listed in
Section 3.6 of the Parent Disclosure Letter have been delivered or made
available to the Buyer. Except as set forth in Section 3.6 of the Parent
Disclosure Letter, (a) each Vendamerica Contract is legal, valid and binding on
Vendamerica and, to the knowledge of Parent and Vendamerica, the other parties
thereto, and enforceable in accordance with the terms thereof, (b) each
Vendamerica Contract is in full force and effect, (c) neither Parent or
Vendamerica is in default under any Vendamerica Contract, (d) neither Parent or
Vendamerica has waived any of its rights under any Vendamerica Contract and (e)
to the knowledge of Parent and Vendamerica, no other party to any Vendamerica
Contract has breached or is in default thereunder and there does not exist any
event or condition that, with or without the lapse of time or the giving of
notice, would become such a breach or default or would cause the acceleration of
any obligation thereunder.
3.7 Permits and Licenses; Compliance with Law. (a) (i) Vendamerica
currently holds all the permits, licenses, authorizations, certificates,
exemptions and approvals of Governmental Authorities or other Persons including
Environmental Permits, necessary for the
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current operation and conduct of the business of Vendamerica as it is being
conducted by Vendamerica (collectively, "Vendamerica Permits"), and all
Vendamerica Permits are in full force and effect, (ii) since December 31, 1995,
Vendamerica has not received any written notice from any Governmental Authority
revoking, canceling, rescinding, materially modifying or refusing to renew any
Vendamerica Permit and (iii) Vendamerica is in compliance with the requirements
of all Vendamerica Permits.
(b) (i) Vendamerica is in compliance with all Laws and Governmental
Orders applicable to the conduct of the business of Vendamerica as it is being
conducted and (ii) Vendamerica has not been charged by any Governmental
Authority with a violation of any Law or any Governmental Order relating to the
conduct of Vendamerica which charge has not been settled.
3.8 Environmental Matters. With respect to Real Property that is
leased, to the knowledge of Vendamerica, (i) Hazardous Materials have not been
Released on any Real Property in violation of applicable Environmental Law and
have not migrated to or from the Real Property so as to result in a violation of
applicable Environmental Law, and all Releases required to be reported under
applicable Environmental Law have been reported to the appropriate Governmental
Authority in accordance with such Environmental Law and, to the extent required,
remediated to the satisfaction of such Governmental Authority; (ii) there have
been no events related to Vendamerica that would reasonably be expected to give
rise to liability under any Environmental Law; (iii) Vendamerica is now, and has
been since December 31, 1995, in compliance with all applicable Environmental
Laws relating to Vendamerica and there are no extant conditions that would
reasonably be expected to constitute an impediment to such compliance in the
future, nor are there any pending investigations or requests for information by
any Governmental Authority with respect to past compliance; (iv) Vendamerica has
disposed of all wastes arising from or otherwise relating to Vendamerica,
including those wastes containing Hazardous Materials, in compliance with all
applicable Environmental Laws (including the filing of any required reports with
respect thereto) and Environmental Permits and (v) there are no pending or
threatened, Environmental Claims against Vendamerica relating to its Real
Property.
3.9 Employee Benefit Matters. As of the date hereof, Vendamerica has
no employees and no Employee Benefit Plans.
3.10 Taxes. Except as disclosed in Section 3.10 of the Parent
Disclosure Letter, (i) all Tax Returns required to be filed by Vendamerica have
been timely filed, and such Tax Returns are true, complete and correct in all
material respects; (ii) all Taxes shown on such Tax Returns have been timely
paid; (iii) no adjustment relating to such Tax Returns has been proposed in
writing by any Tax authority and remains unresolved; (iv) there are no Tax liens
on any of Vendamerica's assets (other than liens for Taxes that are not yet due
and payable); and (v) all Taxes that Vendamerica is required to pay, withhold or
collect have been duly paid, withheld or collected and, to the extent required,
have been paid to the proper Tax authority.
3.11 Assets other than Real Property. Vendamerica has good and valid
title to all material assets (other than Real Property or interests in Real
Property) it owns, free and clear of
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all Encumbrances except Permitted Encumbrances. Vendamerica has no assets and
has not owned, directly or indirectly, any material assets (other than Real
Property or interests in Real Property) except as set forth in Section 3.11 of
the Parent Disclosure Letter.
3.12 Real Property. Section 3.12 of the Parent Disclosure Letter
sets forth a complete list of all material Real Property and interests in Real
Property leased by Vendamerica (the "Vendamerica Leased Property"). Vendamerica
does not own any Real Property. Except as set forth in Section 3.12 of the
Parent Disclosure Letter, Vendamerica is the lessee of all the Vendamerica
Leased Property and is in possession of the premises purported to be leased
thereunder, and each such lease is a valid obligation of Vendamerica without any
material default thereunder by Vendamerica. The consummation of the transactions
contemplated by this Agreement will not result in a breach of, or a default
under, any lease with respect to any Vendamerica Leased Property.
3.13 Accuracy and Completeness of Representations and Warranties. No
representation, warranty or statement made by Parent in this Agreement contains
any untrue statement of a material fact or omits a material fact necessary in
order to make the representation, warranty or statement made not misleading.
Article 4. Representations and Warranties of the Buyer.
The Buyer represents and warrants to the Sellers and the Company as
follows:
4.1 Organization and Standing. The Buyer is a corporation duly
incorporated, validly existing, and in good standing under the Laws of its
jurisdiction of incorporation and has all requisite corporate power and
authority to own, lease and operate its properties and assets and to conduct its
business.
4.2 Binding Agreement. The Buyer has all requisite corporate power
and authority to enter into this Agreement, to execute and deliver this
Agreement, to carry out its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by the Buyer and the consummation by the Buyer of its obligations hereunder have
been duly and validly authorized by all necessary corporate and stockholder
action on the part of the Buyer. This Agreement has been duly executed and
delivered on behalf of the Buyer and, assuming the due authorization, execution
and delivery by the Sellers and the Company, constitutes a legal, valid and
binding obligation of the Buyer enforceable in accordance with its terms, except
as may be limited by bankruptcy, insolvency, moratorium or other laws affecting
creditors' rights generally and general principles of equity.
4.3 Absence of Conflicting Agreements or Required Consents. Except
in the case of clauses (c) and (d), for such violations, conflicts, breaches,
defaults, consents, approvals, authorizations, orders, actions, registrations,
filings, declarations, notifications and Encumbrances that would not reasonably
be expected to have a material adverse effect on the business, results of
operations or financial condition of the Buyer and its Subsidiaries, taken as a
whole, or materially impair or delay the consummation of the transactions
contemplated hereby,
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the execution, delivery and performance by the Buyer of this Agreement does not
and will not (a) violate, conflict with or result in the breach or default of
any provision of the certificate of incorporation or by-laws of the Buyer, (b)
conflict with or violate any Law or Governmental Order applicable to the Buyer,
or any of its properties or assets, (c) except for the notification requirements
of the HSR Act and any filing obligations of the Buyer pursuant to the Exchange
Act, require any consent, approval, authorization or other order of, action by,
registration or filing with or declaration or notification to any Governmental
Authority or any other Person or (d) except for the Amended and Restated Credit
Agreement, dated as of November 18, 1997, among the Buyer, the subsidiaries of
the Buyer party thereto, the lenders named therein and The Chase Manhattan Bank
(as Agent and as Swingline Bank), conflict with, result in any violation or
breach of, constitute a default (or event which with the giving of notice, or
lapse of time or both, would become a default) under, require any consent under,
or give to others any rights of termination, amendment, acceleration,
suspension, revocation or cancellation of, or result in the creation of any
Encumbrance on any of the Buyer's assets, pursuant to, any note, bond, mortgage
or indenture, contract, agreement, lease, sublease, license or permit, or
franchise to which the Buyer is a party or by which its assets are bound.
4.4 Litigation. There are no Actions pending or, to the Buyer's
knowledge, any Action threatened to be brought by or before any Governmental
Authority, against the Buyer or any of its Affiliates that (i) seeks to
question, delay or prevent the consummation of the transactions contemplated
hereby or (ii) would reasonably be expected to affect adversely the ability of
the Buyer to fulfill its obligations hereunder, including the Buyer's
obligations under Article 1 hereof.
4.5 Commissions. Except for Peter J. Solomon Company, there is no
broker, financial advisor or finder or other Person who has any valid claim
against the Buyer, any of its Affiliates or any of their respective assets for a
commission, finders' fee, brokerage fee, advisory fee or other similar fee in
connection with this Agreement, or the transactions contemplated hereby, by
virtue of any actions taken by on or behalf of the Buyer or its officers,
employees or agents.
4.6 Investment Representation. The Buyer is acquiring the Member
Interests and the Shares for its own account for investment and not with a view
to the distribution thereof and will not dispose of the Member Interests or the
Shares except in compliance with the Securities Act of 1933, as amended (the
"Securities Act"), and other applicable securities laws. The Buyer acknowledges
that the Member Interests and the Shares have not been registered under the
Securities Act or any other applicable securities laws. Neither the Member
Interests nor the Shares will be transferred except in a transaction registered
or exempt from registration under the Securities Act and other applicable
securities laws.
4.7 Fairness Opinion. The Buyer has received an opinion, addressed
to the Special Committee and the Buyer and dated the date hereof from Peter J.
Solomon Company, as to the fairness of the Total Purchase Price from a financial
point of view.
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Article 5. Covenants and Agreements.
5.1 Conduct of the Business Prior to Closing; Access. The Company
covenants as follows:
(a) Between the date hereof and the Closing Date, except as
expressly contemplated by this Agreement, except as described in Sections
2.6 or 5.1 of the Sellers' Disclosure Letter, or except with the written
consent of the Buyer (which consent shall not be unreasonably withheld),
the Company will use all reasonable efforts to preserve the business of
the Company intact, to preserve the good will of customers, suppliers,
employees and others having business relations with the Company, to retain
its key employees, and to maintain insurance in full force and effect,
will operate its business in the ordinary course of business consistent
with past practice and will not:
(i) subject any of its assets to any Encumbrance, other than
Permitted Encumbrances, that will not be released at or prior to the
Closing Date;
(ii) make any material changes in the operations of the
Company;
(iii) other than, in each case, in the ordinary course of
business consistent with past practice, sell, transfer, lease,
sublease, license or otherwise dispose of any material assets (for
the purposes of this clause (iii), a "material asset" is an
individual asset that has a value in excess of $50,000 or assets
that have an aggregate value in excess of $100,000);
(iv) (A) grant any increase, or announce any increase, in the
wages, salaries, compensation, bonuses, incentives, pension,
severance or termination pay or other benefits payable by the
Company to any of the officers or employees of the Company,
including any increase or change pursuant to any Employee Benefit
Plan, (B) establish or increase (or promise to increase) or
accelerate the payment or vesting of any benefits under any Employee
Benefit Plan with respect to officers or employees of the Company or
(C) enter into any employment, consulting or severance agreements
with any officers or employees or consultants to the Company or
change the terms thereof, in the case of clauses (A), (B) and (C),
except (I) as required by Law, (II) that involve only increases to
employees (but not officers) consistent with the past practices of
the Company, (III) as required under any existing agreement or
arrangement or (IV) that involve increases related to promotions in
the ordinary course of business;
(v) make any material change in any method of accounting or
accounting practice or policy used by the Company, other than
changes required by Law or under GAAP;
(vi) terminate or amend in any material respect any Material
Contract;
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(vii) merge or consolidate with, or acquire securities or any
interest in, any Person, or enter into any joint venture,
partnership or similar arrangement;
(viii) fail to pay any creditor any amount owed to such
creditor when due (after the expiration of any applicable grace
periods), except if any such amount is being disputed in good faith
in the ordinary course of business consistent with past practice;
(ix) terminate, discontinue, close or dispose of any business
operation or otherwise materially change the character or conduct of
its business;
(x) declare, set aside or pay any dividend or other
distribution in respect of any limited liability company interest of
the Company; provided that the Company may make the tax distribution
to Members set forth in Section 5.1(a)(x) of the Sellers' Disclosure
Letter;
(xi) make any commitments by the Company for any individual
capital expenditure in excess of $200,000;
(xii) amend the Company's certificate of formation or the LLC
Agreement;
(xiii) amend any material term of any outstanding
Indebtedness, issue or sell any new debt securities, create, incur,
assume or guarantee any Indebtedness or enter into any new credit
facility (other than roll-overs under existing facilities), except
for borrowings under existing lines of credit or the creation of
trade payables, in each case in the ordinary course of business
consistent with the past practices of the Company; provided, that
such borrowings shall not exceed $40,000,000 and shall be on terms
consistent with the Company's prior borrowings and the proceeds of
which shall be used for purposes consistent with prior borrowings,
collectively, without the prior written consent of the Buyer;
(xiv) compromise, settle, grant any waiver or release relating
to, or otherwise adjust, any material Action, Indebtedness or any
other claims or rights of the Company;
(xv) enter into any new agreement, contract, commitment or
arrangement with any Affiliate of the Company that will continue in
effect after the Closing Date and not be terminable by the Company
on not more than 60 days' written notice without payment of premium
or penalty;
(xvi) make any change in the membership of the Company or
grant or assign any limited liability company interest, options,
rights or phantom shares in the Company;
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(xvii) enter into any agreement, contract, commitment or
arrangement to do any of the foregoing; or
(xviii) accelerate the collection of receivables or defer the
payment of payables, except in the ordinary course of business
consistent with past practice to accommodate customary seasonal
needs.
(b) Pending the Closing Date, the Company shall:
(i) Give to the Buyer and its representatives reasonable
access during normal business hours to all of the employees,
properties, books and records of the Company and furnish the Buyer
and its representatives with such information concerning the Company
as the Buyer may reasonably require, including such access and
cooperation as may be necessary to allow the Buyer and its
representatives to interview the employees, to examine the books and
records of the Company, and to inspect the Real Property and
Equipment (which inspection may include environmental testing,
geologic testing and engineering tests and which right of access
shall not be exercised in any way which would unreasonably interfere
with the normal operations, business or activities of the Company);
(ii) Furnish the Buyer within 20 days after the end of each
month ending between the date of this Agreement and the Closing Date
a statement of income and a balance sheet for the Company for the
month just ended;
(iii) From time to time, furnish to the Buyer such additional
information (financial or otherwise) concerning the Company as the
Buyer may reasonably request (which right to request information
shall not be exercised in any way which would unreasonably interfere
with the normal operations, business or activities of the Members or
the Company); and
(iv) Continue in full force and effect "all-risk" property
damage insurance on the Real Property in the full amount of the
replacement cost of the Owned Property and as required under the
leases for the Leased Property.
5.2 Cooperation. Following the execution of this Agreement, the
Buyer, the Sellers and the Company agree as follows:
(a) The parties shall each use their reasonable best efforts, and
shall cooperate fully with each other in preparing, filing, prosecuting,
and taking any other actions with respect to, any filings, applications,
requests, or actions which are or may be necessary, to obtain the
consents, approvals, authorizations or other orders of any Governmental
Authority or other Person which are or may be necessary in connection with
the transactions contemplated by this Agreement; and, without limiting the
generality of the foregoing, the parties shall use their respective
reasonable best efforts to prepare and file as promptly as practicable,
but in any event no later than 15 Business Days after the date
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hereof, all of the information called for in the Notification and Report
Form required under the HSR Act and to prepare and file any supplemental
information, also in a timely fashion, which may be required by the United
States Department of Justice or the Federal Trade Commission pursuant to
such Notification and Report Form Filings, and otherwise to use their
respective reasonable best efforts to obtain the requisite clearances;
(b) Without limiting the foregoing, the Sellers shall cooperate with
the Buyer at the Buyer's request and in so doing use their best efforts
from and after the Closing Date to obtain consents to the leases set forth
in Section 2.20 of the Sellers' Disclosure Letter, as required in
accordance with the terms of such leases;
(c) If the Buyer or the Company receives an administrative or other
order or notification relating to any violation or claimed violation of
the rules and regulations of any Governmental Authority that could affect
the Buyer's, the Sellers' or the Company's ability to consummate the
transactions contemplated hereby, the Buyer, the Sellers or the Company
shall promptly notify the other party or parties thereof and shall use its
reasonable best efforts to take such steps as may be necessary to remove
any such impediment to the transactions contemplated by this Agreement;
and no such notification shall affect the representations or warranties of
the parties or the conditions to their respective obligations hereunder;
and
(d) Subject to the terms and conditions of this Agreement, each of
the parties agrees to use its reasonable best efforts to take, or cause to
be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective the
transactions contemplated hereby as soon as practicable but in no event
later than the Closing.
5.3 Public Announcements. Except as otherwise required by Law, the
parties shall not issue any report, statement or press release or otherwise make
any public announcement with respect to this Agreement, and the transactions
contemplated hereby without prior consultation with and approval of the other
parties hereto (which approval shall not be unreasonably withheld). To the
extent any such announcement is required by Law, each party hereto shall use
reasonable efforts to notify and consult with the other parties hereto prior to
making any such announcement.
5.4 No Solicitation. Other than as specified in this Agreement,
through the Closing Date, the Sellers and the Company shall not, and the Company
shall cause its officers, directors, representatives, Affiliates or associates
not to, (a) initiate contact with, solicit, encourage or respond to any
inquiries or proposals by, or (b) enter into any discussions or negotiations
with, or disclose, directly or indirectly, any information concerning the
Company to, or afford any access to the properties, books and records of the
Company to, any Person in connection with any possible proposal for the
acquisition (directly or indirectly, whether by purchase, merger, consolidation
or otherwise) of all or substantially all of the assets, business or membership
interests of the Company or the capital stock of Vendamerica. The Sellers and
the Company agree to terminate immediately any such discussions or negotiations.
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5.5 Noncompetition; Proprietary Information. (a) Each of the Sellers
severally agrees that, commencing on the Closing Date until the fourth (or, in
the case of Parent, second) anniversary of the Closing Date, or, if later and if
applicable, such time as is two years following the date on which such Seller
ceases to be employed, directly or indirectly, by the Buyer, he or it will not
or its Affiliates will not, in North America, directly or indirectly, invest in
(other than a passive equity investment constituting no more than 5% (or, in the
case of Parent, 15%) of the equity of the subject company), engage in, become
financially interested in, or be employed by, whether as an employee,
consultant, partner, principal, agent, representative, member or stockholder or
in any other corporate or representative capacity, if it involves engaging in,
or rendering services that are integral to the business of or advice pertaining
to, any lines of business that the Company was actively conducting on the date
of this Agreement or the Closing Date, except in connection with an agreement
consented to in writing by the Buyer, nor will the Sellers or their Affiliates
solicit any business of the type conducted by the Company from any customer of
the Company or hire any employee of the Company or any of its Subsidiaries (or
any of their successors); provided, however, that the foregoing shall not
prohibit any of the Sellers or their Affiliates from owning an interest in,
being employed by, whether as an employee, consultant or representative, or
acting in any other corporate or representative capacity to, the Buyer or the
Company or any of the Buyer's Affiliates.
(b) It is the intention of the parties that if any of the
restrictions or covenants contained herein is held to cover a geographic area or
to be for a length of time that is not permitted by applicable Law, or in any
way construed to be too broad or to any extent invalid, such provision shall not
be construed to be null, void and of no effect, but to the extent such provision
would be valid or enforceable under applicable Law, a court of competent
jurisdiction shall construe and interpret or reform this Section 5.5 to provide
for a covenant having the maximum enforceable geographic area, time period and
other provisions (not greater than those contained herein) as shall be valid and
enforceable under such applicable Law. Each of the Sellers acknowledges that any
breach of the terms, conditions or covenants set forth in this Section 5.5 shall
be competitively unfair and may cause irreparable damage to the Buyer because of
the special, unique, unusual, extraordinary and intellectual character of the
Company's business, and the Buyer's recovery of damages at law will not be an
adequate remedy. Accordingly, each of the Sellers agrees that for any breach of
the terms, covenants or agreements of this Section 5.5, a restraining order or
an injunction or both may be issued against such Person, in addition to any
other rights or remedies the Buyer may have.
(c) Each Seller agrees to hold (and, prior to the Closing, in the
case of Parent, to cause Vendamerica to hold) in strict confidence all data and
information relating to the business of the Company and its Subsidiaries (the
"Proprietary Information") obtained in the course of its direct or indirect
ownership of limited liability company interests or participation in the
management of the Company or any of its Subsidiaries or otherwise which is
either non-public, confidential or proprietary in nature. Each Seller agrees
that subject to any requirement of Law, it will keep (and, prior to the Closing,
in the case of Parent, cause Vendamerica to keep) such Proprietary Information
confidential and will not, without the prior written consent of the Buyer,
disclose or permit the disclosure by its Affiliates of such Proprietary
Information to any Person. This Agreement shall be inoperative to each Seller in
its capacity as an employee of Buyer and as
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to such portions of the Proprietary Information which (i) are or become
generally available to the public other than as a result of a disclosure by any
Seller or, prior to the Closing, Vendamerica or any of its authorized
representatives, (ii) become available to any Seller or Vendamerica or one of
its authorized representatives on a nonconfidential basis from a source other
than any of the Buyer or any of its authorized representatives, which has not
advised such Seller or, prior to the Closing, Vendamerica that it is bound by a
confidentiality agreement with, or other contractual, legal or fiduciary
obligation of confidentiality to, any of the Buyer or any of its Subsidiaries or
Affiliates with respect to such portions of the Proprietary Information, or
(iii) were known by any Seller or Vendamerica on a nonconfidential basis prior
to its commencement of employment with, or direct or indirect ownership of, the
Company or one of its Subsidiaries. The Sellers agree that the Buyer shall be
entitled to equitable relief, including injunction and specific performance, in
the event of any breach of the provisions of this Section 5.5. Such remedies
shall not be deemed to be the exclusive remedies for a breach of this Section
5.5 by any Seller but shall be in addition to all other remedies available at
law or equity. It is further understood and agreed that failure or delay by the
Buyer in exercising any right, power or privilege under this Section 5.5 shall
not operate as a waiver thereof nor shall any single or partial exercise thereof
preclude and other or further exercise of any right, power or privilege under
this Agreement.
5.6 Special Management Bonuses. Prior to the Closing, the Company
shall pay special management bonuses to the persons listed in Section 5.6 of the
Sellers' Disclosure Letter in the amounts set forth therein.
5.7 Certain Actions. The Buyer hereby represents and warrants to
Parent that it has no plan or intention to, and covenants and agrees with Parent
that prior to the end of the second year following the Closing Date it will not,
liquidate Vendamerica, merge Vendamerica with or into any other Person or cause
Vendamerica to transfer any of its Member Interests to any other Person.
5.8 Taxes and Tax Returns. (a) In any case where applicable law does
not require Vendamerica to close its taxable year on the Closing Date, then
Taxes, if any, attributable to the taxable year of Vendamerica beginning on or
before and ending after the Closing Date (a "Straddle Period") shall be
allocated (i) to Parent for the period up to and including the Closing Date and
(ii) to the Buyer for the period subsequent to the Closing Date. The liability
for Taxes applicable to a Straddle Period reflected on any related Tax Return
shall be allocated between Parent and the Buyer on the basis of a closing of the
books and records of Vendamerica on the Closing Date and, to the extent not
susceptible to such allocation, on the basis of elapsed days. Subject to Section
5.8(e) hereof, Parent shall be responsible for, and shall indemnify the Buyer
under the terms of Section 9 hereof for any Claims or Damages with respect to,
all Taxes of Vendamerica for all taxable periods ending on or prior to the
Closing Date and for all Straddle Period Taxes allocated to Parent under the two
preceding sentences (including any Taxes of any Person for which Vendamerica is
liable under Treasury Regulation Section 1.1502-6 (or any similar provision of
state, local or foreign law), or as a transferee or successor, by contract or
otherwise, with respect to any taxable period or portion thereof ending on or
prior to the Closing Date), and Parent shall make payment to the Buyer with
respect to such Taxes at the time and in the manner specified in Section 5.8(b)
below. The Buyer shall be responsible for, and shall
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indemnify Parent under the terms of Article 9 hereof for any Claims or Damages
with respect to, all other Taxes payable by Vendamerica.
(b) The Buyer shall be responsible for filing or causing to be filed
all Tax Returns required to be filed by or on behalf of Vendamerica after the
Closing Date. With respect to any Tax Return required to be filed by the Buyer
for a taxable period of Vendamerica beginning on or before the Closing Date, the
Buyer shall deliver, at least twenty Business Days prior to the due date for
filing of such Tax Return (including extensions), to Parent a statement setting
forth the amount of Tax for which Parent is responsible pursuant to Section
5.8(a) hereof (the "Statement"), and copies of such Tax Return. In determining
the amount of Tax for which Parent is responsible, the Statement shall take into
account and credit to Parent any estimated Tax payments or other deposits made
to a taxing authority by or on behalf of Vendamerica for the applicable period
as well as any Taxes or other deposits paid to a taxing authority by or on
behalf of Vendamerica for any prior period that are credited to the applicable
period. Parent shall have the right to review such Tax Return and the Statement
prior to the filing of such Tax Return and, with respect to Tax Returns relating
to periods ending on or before the Closing Date, the Buyer shall make any
reasonable changes to such Tax Return and Statement requested by Parent to the
extent such changes are in accordance with past practices (to the extent
relevant) and applicable law. Parent and the Buyer agree to consult and attempt
to resolve in good faith any issue arising as a result of the review of such Tax
Return and the Statement and to mutually consent to the filing as promptly as
possible of such Tax Return. In the event the parties are unable to resolve any
dispute within ten Business Days following the delivery of such Tax Return and
the Statement, the parties shall jointly request a mutually acceptable
accounting firm of nationally recognized reputation (the "Settlement Auditor")
to resolve any issue in dispute as promptly as possible. If the parties are not
able to agree to a Settlement Auditor, then the office of the American
Arbitration Association, located in New York City, shall select a firm of
independent public accountants of nationally recognized reputation to serve as
Settlement Auditor. If the Settlement Auditor is unable to make a determination
with respect to any disputed issue within five Business Days prior to the due
date (including extensions) for the filing of the Tax Return in question, then
the Buyer may file such Tax Return on the due date (including extensions)
therefor without such determination having been made and without Parent's
consent. Notwithstanding the filing of such Tax Return, the Settlement Auditor
shall make a determination with respect to any disputed issue and the amount of
Taxes for which Parent is responsible under Section 5.8(a) hereof shall be as
determined by the Settlement Auditor. The fees and expenses of the Settlement
Auditor shall be paid one-half by the Buyer and one-half by Parent. Not later
than five Business Days before the due date for the payment of Taxes with
respect to such Tax Return, Parent shall pay to the Buyer an amount equal to the
Taxes (i) shown on the Statement, (ii) otherwise agreed between Parent and the
Buyer or (iii) determined by the Settlement Auditor, as applicable, as being the
responsibility of Parent under Section 5.8(a) hereof. Notwithstanding the
foregoing, in the case of a dispute that is not resolved within five Business
Days of the due date for the payment of Taxes with respect to a Tax Return, no
later than five Business Days after resolution of the dispute the Buyer shall
pay to Parent the amount of any positive difference or Parent shall pay to the
Buyer the amount of any negative difference, as the case may be, between the
amount paid by Parent pursuant to the preceding sentence and the amount
determined by the Settlement Auditor to be owed by Parent.
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(c) The Buyer shall pay to Parent as additional consideration for
the Shares any refund of Taxes received or amount of actual reduction in Taxes
realized (or portion of either thereof) after the Closing Date by the Buyer,
Vendamerica or any other Affiliate of the Buyer relating to Taxes imposed on or
with respect to Vendamerica with respect to any taxable period (or portion of
any taxable period) ending on or prior to the Closing Date. Any payment required
pursuant to the preceding sentence shall be made within fifteen Business Days of
the receipt of the refund of Taxes or realization of the actual reduction in
Taxes in question. In addition, but without duplication of the foregoing, in the
event that the liability of Vendamerica, the Buyer or any Affiliate of the Buyer
for Taxes for any taxable period (or portion thereof) beginning on or after the
Closing Date (in each case, a "Post-Closing Period") is actually reduced as a
result of taking into account in any such Post-Closing Period (i) any net
operating loss carryover, net capital loss carryover or other Tax attribute of
Vendamerica attributable to a taxable period, or portion thereof, ending on or
before the Closing Date, or (ii) to the extent not already reflected in clause
(i), any item of loss, depreciation, amortization or other deduction or tax
benefit (including, without limitation, increased basis in Vendamerica's
interest in the Company) arising from Vendamerica's allocable share of the
payment of the special management bonuses described in Section 5.6 (in each
case, a "Tax Reduction Item"), the Buyer shall, within fifteen Business Days
after the Tax reduction is actually realized, pay to Parent as additional
consideration for the Shares the amount of such reduction. For purposes of the
preceding sentence, "Vendamerica's allocable share" shall be an amount equal to
13.5% of the payment and any net loss of Vendamerica arising during the portion
of any Straddle Period ending on or prior to the Closing Date shall be treated
as a net operating loss carryover, or capital loss carryover, as applicable. To
the maximum extent permitted by applicable law, the Buyer shall, and shall cause
its Affiliates (including, without limitation, Vendamerica) to, claim the Tax
Reduction Items as items of deduction, depreciation, amortization, loss, loss
carryover or otherwise as early as possible. For purposes of the foregoing the
amount of any reduction in Taxes attributable to a Tax Reduction Item to be
taken into account for any Post-Closing Period shall be an amount equal to the
excess (if any) of (x) the liability of the Buyer and its Affiliates for Taxes
for such Post-Closing Period determined without regard to any Tax Reduction
Items over (y) the liability of the Buyer and its Affiliates for Taxes for such
Post-Closing Period determined by taking into account any available Tax
Reduction Items. The Buyer shall keep Parent apprised of all progress with
respect to the claiming of any Tax Reduction Items and in the event of any
dispute regarding any Tax Reduction Items, Parent and the Buyer agree to consult
and attempt to resolve in good faith such dispute, but if Parent and the Buyer
are unable to resolve such dispute within 30 Business Days of the dispute
arising, such dispute shall be resolved by the Settlement Auditor (and if the
Settlement Auditor has not been previously selected in connection with the
matters governed by Section 5.8(a), the Settlement Auditor shall be selected in
the same manner as that set forth in Section 5.8(a)) and any amounts due by the
Buyer to Parent upon resolution of such dispute by the Settlement Auditor, as
determined by the Settlement Auditor, shall be paid within five Business Days of
such resolution. The resolution of the Settlement Auditor shall be binding on
both parties and shall be Parent's sole recourse against the Buyer with respect
to disputes regarding Tax Reduction Items.
(d) At Parent's written request and expense, the Buyer shall file or
cause to be filed an amended Tax Return or claim for refund for Taxes with
respect to Vendamerica for any
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taxable period ending on or prior to the Closing Date or for any Straddle Period
to the extent such amended Tax Return or claim for refund relates to events
occurring, or Tax attributes of Vendamerica arising, prior to the Closing on the
Closing Date. For purposes of determining Parent's entitlement to refunds for
any Straddle Period, Parent shall be entitled to that portion of such refund
equal to the excess (if any) of (x) the refund of Taxes owing to Vendamerica for
such Straddle Period determined by taking into account any available Tax
Reduction Items over (y) the refund of Taxes owing to Vendamerica for such
Straddle Period determined without regard to any Tax Reduction Items. Except (i)
as required by applicable Tax law or any taxing authority (ii) at the written
request of Parent (which written request shall be promptly performed by the
Buyer), neither Vendamerica, the Buyer nor any Affiliate of the Buyer shall file
or cause to be filed any amended tax return or claim for a refund of Taxes for
any taxable period ending on or before the Closing Date.
(e) The Buyer covenants and agrees that it shall not make, or permit
to be made (i) any election under Section 338 of the Code (or any comparable
election under state, local or foreign law) with respect to its acquisition of
the Shares of Vendamerica or (ii) any election pursuant to Treasury Regulation
Section 301.7701-3(c) or any comparable state or local Law or regulation to have
the Company treated as an association taxable as a corporation for federal,
state or local Tax purposes for any taxable period or portion thereof ending on
or prior to the Closing Date. The Buyer further covenants and agrees,
notwithstanding any other provision of this Agreement, that Parent shall have no
liability for any Taxes attributable to any such elections. In addition,
notwithstanding any other provision of this Agreement, Parent shall have no
liability for any Taxes of Vendamerica attributable to any actions taken by the
Buyer simultaneous with or after the Closing on the Closing Date other than (i)
actions expressly contemplated by this Agreement, or (ii) actions carried out or
effected in the ordinary course of business of Vendamerica; provided that in
either case, in any circumstance in which the Buyer causes the Company to pay or
otherwise discharge any liability of the Company on the Closing Date from funds
that are provided by the Buyer or any Affiliate of the Buyer (other than the
Company) on the Closing Date, such funds shall be contributed by the then
members of the Company in proportion to their member interests immediately
preceding the contribution.
(f) After the Closing, Parent and the Buyer shall cooperate fully,
as and to the extent reasonably requested by the other party, in connection with
the filing of Tax Returns pursuant to Section 5.8 hereof and any audit, claim,
litigation, other proceeding or other matter with respect to Taxes of
Vendamerica. Such cooperation shall include, without limitation, the retention
and (upon the other party's request) the provision of records and information
which are reasonably relevant to any such audit, claim, litigation, other
proceeding or other matter and making employees available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder. The Buyer shall retain or cause Vendamerica to
retain all books and records with respect to Tax matters pertinent to
Vendamerica relating to any taxable period until the expiration of the
applicable statute of limitations for that taxable period.
(g) At the Closing, Parent shall deliver to the Buyer a
certification in accordance with Treasury Regulation Section 1.1445-2(c)(3)
certifying that stock in Vendamerica is not a
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United States real property interest because Vendamerica is not and has not been
a United States real property holding corporation (as defined in Section
897(c)(2) of the Code) during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code.
Article 6. Conditions to Obligations of the Buyer.
Notwithstanding any other provision of this Agreement, the
obligation of the Buyer to consummate the transactions contemplated by this
Agreement is subject to the satisfaction, or the Buyer's waiver in writing, on
or before the Closing Date of each of the following conditions:
6.1 Representations and Warranties. The representations and
warranties of the Sellers and the Company contained herein and qualified
as to materiality shall be true and correct and those not so qualified
shall be true and correct in all material respects at and as of the
Closing Date as though each such representation and warranty were made at
and as of such time, other than such representations and warranties as are
made as of a date specified in such representation or warranty, in each
case except for changes that are expressly contemplated by this Agreement.
6.2 Performance by the Sellers and the Company. All of the covenants
and agreements to be complied with and performed by the Sellers and the
Company on or before the Closing Date shall have been complied with or
performed in all material respects.
6.3 No Material Adverse Change. There shall have been no
circumstance, change in, or effect on the Company that has a material
adverse effect on the business, results of operations, financial condition
and prospects of the Company or on the ability of the Sellers or the
Company to consummate the transactions contemplated hereby.
6.4 Certificate. (a) The Buyer shall have received a certificate,
dated as of the Closing Date, executed by or on behalf of the Sellers by
the Sellers' Representative and by the Company by its chief executive
officer and chief financial officer, (i) that attached to such certificate
is a true copy of the certificate of formation and a certificate of good
standing of the Company under the Delaware Limited Liability Company Act,
(ii) to the effect of Sections 6.1, 6.2 and 6.3 hereof, and (iii) that
such Person signing such certificate is authorized to do so by the party
whom he or she represents.
(b) The Buyer shall have received a certificate, dated as of the
Closing Date, executed by or on behalf of Parent by an authorized officer,
(i) that attached to such certificate is a true copy of a resolution, if
any, of the Board of Management of Parent, which resolutions authorize the
execution, delivery and performance of this Agreement, (ii) to the effect
of Sections 6.1, 6.2 and 6.3 hereof (with respect to Parent only), and
(iii) that such Person signing such certificate is authorized to do so by
the party whom he or she represents.
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6.5 Consents; No Objections. (a) The applicable waiting periods
under the HSR Act shall have expired or been terminated; and
(b) The parties shall have received all material authorizations,
consents, orders and approvals from Governmental Authorities and material
consents from third parties, in each case listed or described in Section
6.5 of the Sellers' Disclosure Letter.
6.6 No Proceedings or Litigation. No preliminary or permanent
injunction or other order issued by any United States federal or state
Governmental Authority, nor any Law promulgated or enacted by any United
States federal or state Governmental Authority, that restrains, enjoins or
otherwise prohibits the transactions contemplated hereby or limits the
ability in any respect of the rights of the Company to hold its assets and
operate its business as it is being conducted as of the Closing Date such
as to have a Material Adverse Effect, or imposes civil or criminal
penalties on any stockholder, director or officer of the Buyer if such
transactions are consummated, shall be in effect.
6.7 Financing. The Buyer shall have received the proceeds of
financing in an amount no less than the Estimated Purchase Price and on
terms and conditions which are, in the reasonable judgment of the Buyer,
satisfactory to the Buyer.
6.8 Opinions of Sellers' and Company's Counsel. The Buyer shall have
received at Closing opinions addressed to the Buyer and dated the Closing
Date from counsel to the Sellers and the Company in form and substance
reasonably satisfactory to the Buyer with respect to certain corporate
matters.
6.9 Outstanding Option. The Buyer shall have received evidence in
form and substance reasonably satisfactory to the Buyer that the option to
purchase 1.5% of the limited liability company interests of the Company
held by Jan Michiel Hessels has been canceled.
Article 7. Conditions to Obligations of the Sellers.
Notwithstanding any other provision of this Agreement, the
obligations of the Sellers to consummate the transactions contemplated by this
Agreement are subject to the satisfaction, or the Sellers' waiver in writing, on
or before the Closing Date of each of the following conditions:
7.1 Representations and Warranties. The representations and
warranties of the Buyer contained herein and qualified as to materiality
shall be true and correct and those not so qualified shall be true and
correct in all material respects at and as of the Closing Date as though
each such representation and warranty were made at and as of such time,
other than such representations and warranties as are made as of a date
specified in such representation or warranty, in each case except for
changes that are expressly contemplated by this Agreement.
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7.2 Performance by the Buyer. All of the covenants and agreements to
be complied with and performed by the Buyer on or prior to the Closing
Date shall have been complied with or performed in all material respects.
7.3 Certificate. The Sellers shall have received a certificate,
dated as of the Closing Date, executed by or on behalf of the Buyer by its
duly authorized officers or representatives, (i) that attached to such
certificate is a true copy of a resolution of the board of directors which
resolution authorizes the execution, delivery and performance of this
Agreement, (ii) to the effect of Sections 7.1 and 7.2 hereof, and (iii)
that each such Person signing such certificate is authorized to do so by
the party whom he or she represents.
7.4 HSR Act. The applicable waiting periods under the HSR Act shall
have expired or been terminated.
7.5 No Proceedings or Litigation. No preliminary or permanent
injunction or other order issued by any United States federal or state
Governmental Authority, nor any Law promulgated or enacted by any United
States federal or state Governmental Authority, that restrains, enjoins or
otherwise prohibits the transactions contemplated hereby, or imposes civil
or criminal penalties on any Seller, manager or officer of the Company if
such transactions are consummated, shall be in effect.
Article 8. Tax Matters.
8.1 Transfer and Conveyance Taxes. The Sellers, on the one hand, and
the Buyer, on the other hand, shall be equally liable for and shall each pay or
cause to be paid one-half of all applicable sales, transfer, recording, deed,
stamp and other similar Taxes (but expressly excluding any income Taxes),
including any Real Property transfer or excise Taxes (if any) (collectively,
"Transaction Taxes"), resulting from the consummation of the transactions
contemplated by this Agreement, and, as among the Sellers, Parent shall be
responsible solely for Transaction Taxes resulting from the sale of Shares and
the other Sellers shall be responsible solely for Transaction Taxes resulting
from the consummation of the other transactions contemplated by this Agreement.
Article 9. Indemnification and Survival.
9.1 Indemnification by the Sellers. Subject in all respects to the
provisions of this Article 9, the Sellers hereby agree to indemnify and hold
harmless the Buyer, and its Affiliates, officers, directors, employees, agents,
and successors and permitted assigns (the "Buyer Indemnified Parties"), after
the Closing Date from and against any Claims and Damages incurred by them and in
connection with, arising out of or resulting from (a) any breach on the part of
any Seller of any representation or warranty made by the Sellers in Article 2
hereof or in any certificate delivered pursuant to this Agreement and (b) any
breach on the part of any Seller of any covenant or agreement made by the
Sellers in this Agreement or in any certificate delivered pursuant to this
Agreement. Without duplication of payment, and subject to Section 9.4(c), the
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indemnification liability of Leonard Riggio for any Claims and Damages pursuant
to this Section 9.1 shall be joint and several, and the liability of each of the
other Sellers shall be limited to such Seller's pro rata portion of any Claims
and Damages, calculated with respect to such Seller's (or, in the case of
Parent, Vendamerica's) percentage ownershi