UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 8, 2019
PETIQ, INC.
(Exact name of registrant as specified in its charter)
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Delaware
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001-38163
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35-2554312
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923 S. Bridgeway Pl.
Eagle, Idaho
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83616
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(208) 939-8900
(Registrant’s telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
☒ Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act (17 CFR 230.405) or Rule 12b-2 of the Securities Exchange Act (17 CFR 240.12b-2)
☒ Indicate by check mark if the registrant has elected not to use the extended transition period for complying with new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act (17 CFR 240.13(a)-1)
Securities registered pursuant to Section 12(b) of the Act:
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Title of Each Class |
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Trading Symbol |
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Name of Exchange on Which Registered |
Class A common stock, par value $0.001 per share |
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PETQ |
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NYSE |
Item 1.01. Entry Into a Material Definitive Agreement
On May 8, 2019, PetIQ, Inc. (“PetIQ” or the “Company”) entered into a Purchase and Sale Agreement (the “Purchase Agreement”) by and among PetIQ, LLC (“Buyer”), L. Perrigo Company (“Seller”), Perrigo Company plc and the Company. Upon the terms and subject to the conditions set forth in the Purchase Agreement, Buyer will acquire all of the outstanding capital stock of Sergeant’s Pet Care Products, Inc., including any assets related to Perrigo’s animal health business (the “Business”), from Seller, resulting in the Business becoming an indirect wholly-owned subsidiary of the Company (the “Acquisition”). A press release announcing the execution of the Purchase Agreement is included as Exhibit 99.1 to this Current Report on Form 8-K.
The purchase price for the Acquisition is $185 million in cash, subject to customary adjustments for net working capital, closing indebtedness and transaction expenses. The Purchase Agreement contains customary representations and warranties, covenants and agreements, including, among others, in the case of Seller to conduct the Business in the ordinary course of business during the period between the execution of the Purchase Agreement and the consummation of the Acquisition. In addition, the parties to the Purchase Agreement have agreed to indemnify each other for certain liabilities arising out of the Purchase Agreement, subject to various limitations including, among other things caps and time limitations. Buyer will also obtain representation and warranty insurance that provides coverage for certain breaches of, and inaccuracies in, representations and warranties made by Seller in the Purchase Agreement, subject to exclusions, deductibles and other terms and conditions.
The obligation of the parties to close the Acquisition is subject to customary closing conditions, including the receipt of antitrust clearance in the United States. The Purchase Agreement may be terminated in certain circumstances including, among other things, if the parties fail to receive antitrust clearance in the United States by May 8, 2020 or if Buyer and Seller mutually agree there is no reasonable likelihood that the Transaction will receive antitrust clearance in the United States by May 8, 2020, in which case Buyer shall pay Seller a termination fee of $5 million.
The Purchase Agreement is filed as Exhibit 2.1 to this Current Report on Form 8-K and incorporated by reference herein. The above description of the material terms of the Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to Exhibit 2.1.
Item 9.01 Financial Statements and Exhibits.
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(d)
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Exhibits:
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Exhibit No.
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Description
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2.1 99.1 |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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PETQ, INC.
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Dated: May 8, 2019 |
By |
/s/ John Newland |
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Name: |
John Newland |
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Title: |
Chief Financial Officer |
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PURCHASE AND SALE AGREEMENT |
by and among |
PETIQ, LLC, |
L. PERRIGO COMPANY, |
Solely for purposes of Section 9.13, PERRIGO COMPANY PLC |
and |
Solely for purposes of Section 9.14, PETIQ, INC. |
Dated as of May 8, 2019 |
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TABLE OF CONTENTS
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ARTICLE I DEFINITIONS |
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Section 1.1 Definitions |
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ARTICLE II PURCHASE AND SALE |
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Section 2.1 Purchase and Sale of the Purchased Interests |
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Section 2.2 Closing |
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Section 2.3 Transactions to Be Effected at the Closing |
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Section 2.4 Purchase Price Adjustment |
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Section 2.5 Withholding |
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ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLER |
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Section 3.1 Organization and Existence |
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Section 3.2 Authority and Enforceability |
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Section 3.3 Capitalization of the Company; Title to Purchased Interests |
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Section 3.4 Company Subsidiaries |
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Section 3.5 Noncontravention |
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Section 3.6 Financial Statements |
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Section 3.7 Absence of Undisclosed Liabilities |
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Section 3.8 Absence of Changes |
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Section 3.9 Proceedings and Orders |
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Section 3.10 Compliance with Laws; Permits |
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Section 3.11 Material Contracts |
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Section 3.12 Real and Personal Property |
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Section 3.13 Employee Benefits |
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Section 3.14 Labor and Employment Matters |
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Section 3.15 Environmental Matters |
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Section 3.16 Insurance |
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Section 3.17 Taxes. |
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Section 3.18 Intellectual Property |
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Section 3.19 Affiliate Transactions |
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Section 3.20 Major Customers and Major Vendors |
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Section 3.21 Brokers |
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Section 3.22 Product Liability |
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Section 3.23 Accounts and Notes Receivable; Accounts Payable |
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Section 3.24 Inventory |
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Section 3.25 Disclaimer of Warranties |
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ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE BUYER |
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Section 4.1 Good Standing; Organization |
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Section 4.2 Authority and Enforceability |
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Section 4.3 Noncontravention |
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Section 4.4 Proceedings and Orders |
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Section 4.5 Financing; Sufficient Funds |
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Section 4.6 Investment Representations |
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Section 4.7 Brokers |
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Section 4.8 Independent Investigation; Acknowledgements and Confirmations |
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ARTICLE V COVENANTS |
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Section 5.1 Access to Information |
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Section 5.2 Conduct of Business Pending the Closing |
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Section 5.3 Publicity |
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Section 5.4 Exclusivity |
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Section 5.5 Expenses |
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Section 5.6 HSR Filings |
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Section 5.7 Transfer Taxes |
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Section 5.8 Tax Matters |
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Section 5.9 Further Actions |
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Section 5.10 Releases |
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Section 5.11 Employee Matters |
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Section 5.12 D&O Indemnification and Insurance |
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Section 5.13 Insurance |
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Section 5.14 Financial Statements |
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Section 5.15 Confidentiality |
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Section 5.16 Intercompany Balances Arrangements |
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Section 5.17 R&W Policy |
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Section 5.18 Financing |
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Section 5.19 Seller Restrictive Covenants |
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Section 5.20 Payments from Third Parties |
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Section 5.21 Litigation Matters |
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Section 5.22 Last Quarter Financials |
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Section 5.23 Perrigo Marks |
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Section 5.24 Non-US Trademarks |
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ARTICLE VI CLOSING CONDITIONS |
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Section 6.1 The Buyer’s Conditions to Closing |
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Section 6.2 The Seller’s Conditions to Closing |
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Section 6.3 Mutual Conditions to Closing |
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ARTICLE VII TERMINATION |
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Section 7.1 Grounds for Termination |
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Section 7.2 Effect of Termination |
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ARTICLE VIII SURVIVAL; INDEMNIFICATION |
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Section 8.1 Survival of Representations, Warranties and Covenants; Recourse |
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Section 8.2 Indemnification by the Seller |
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Section 8.3 Indemnification by the Buyer |
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Section 8.4 Indemnification Procedure for Third-Party Claims |
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Section 8.5 Indemnification Procedures for Non-Third-Party Claims |
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Section 8.6 Calculation of Indemnity Payments |
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Section 8.7 Characterization of Indemnification Payments |
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ARTICLE IX MISCELLANEOUS |
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Section 9.1 Notices |
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Section 9.2 Severability |
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Section 9.3 Entire Agreement; Third-Party Beneficiaries |
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Section 9.4 Governing Law |
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Section 9.5 Consent to Jurisdiction; Waiver of Jury Trial |
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Section 9.6 Right to Specific Performance |
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Section 9.7 Assignment |
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Section 9.8 Headings |
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Section 9.9 Construction |
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Section 9.10 Amendments and Waivers |
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Section 9.11 Appendices, Schedules and Exhibits |
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Section 9.12 Counterparts |
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Section 9.13 Seller Parent Guarantee |
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Section 9.14 Buyer Guarantor Guarantee |
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Appendix A Definitions
Schedule A- 1 Accounting Principles; Sample Calculation; Closing Statement Format
Exhibit A Debt Financing Commitment
Exhibit B Form of Transition Services Agreement
Exhibit C Form of Resignations
Exhibit 5.8(f) Section 336(e) Agreement
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This PURCHASE AND SALE AGREEMENT , dated as of May 8, 2019 (this “ Agreement ”), is entered into by and among PetIQ, LLC, an Idaho limited liability company (the “ Buyer ”), L. Perrigo Company, a Michigan corporation (the “ Seller ”), solely for purposes of Section 9.13 , Perrigo Company plc, an Irish public limited company (the “ Seller Parent ”), and, solely for purposes of Section 9.14 , PetIQ, Inc., a Delaware corporation (the “ Buyer Guarantor ”). The Buyer and the Seller are each referred to in this Agreement individually as a “ Party ” and, collectively, as the “ Parties ”.
RECITALS
WHEREAS , the Seller owns all of the issued and outstanding capital stock (the “ Purchased Interests ”) of Sergeant’s Pet Care Products, Inc., a Michigan corporation (the “ Company ”); and
WHEREAS , the Seller desires to sell to the Buyer, and the Buyer desires to purchase from the Seller, upon the terms and conditions set forth in this Agreement, all of the Purchased Interests.
NOW THEREFORE , in consideration of the foregoing premises and the respective representations and warranties, covenants and agreements contained in this Agreement, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:
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Section 1.1 Definitions . Capitalized terms used in this Agreement have the meanings ascribed to them in Appendix A to this Agreement. |
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(b) an amount (which may be positive or negative) equal to (i) the Final Closing Working Capital, minus (ii) the Target Working Capital, plus |
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(c) the lesser of (x) Final Closing Cash or (y) $5,000,000, minus |
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DB1/ 103254064.10
In the event that a Section 336(e) Election is made, the Parties agree to allocate the Purchase Price for tax purposes as provided in Section 5.8(f ) .
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(ii) pay an amount equal to the estimated Closing Indebtedness to the applicable payees, as set forth on the Estimated Closing Statement; |
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(iii) subject to Section 2.3(c) , pay the estimated Closing Transaction Costs to the applicable payees, as set forth on the Estimated Closing Statement; |
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(i) certificates representing the Purchased Interests, each duly endorsed by the Seller or accompanied by separate stock powers attached thereto and signed in blank; |
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(ii) a properly prepared certificate of non-foreign status under Treas. Reg. § 1.1445-2(b)( 2) and an IRS Form W- 9, in each case, duly executed by the Seller; |
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(v) a counterpart to the Transition Services Agreement, duly executed by the Seller; |
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(x) an unaudited, pre-tax balance sheet of the Company Entities, as of the end of the calendar quarter immediately preceding the Closing Date (provided that if the end of such calendar quarter ends within 45 days prior to the Closing, then such balance sheet shall be as of the end of the prior calendar quarter) and the related unaudited pre-tax statements of income, pre-tax cash flows and pre-tax equity for the applicable year-to-date period (provided that if such calendar quarter ends within 45 days prior to the Closing, then such statements of income, cash flows and equity shall be as of the period ending on the last day of the prior calendar quarter) (the balance sheet and statements described in this Section 2.3(b)(x) , the “ Last Quarter Financials ”). |
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(ii) the Closing Cash; |
The Estimated Closing Statement shall also include instructions that identify (A) the bank account for the Seller and the amount of the Closing Payment to be paid to such bank account at the Closing and (B) the bank accounts designated to facilitate direct payment by the Buyer of the Closing Indebtedness and the Closing Transaction Costs, in each case as set forth in the Estimated Closing Statement, to the applicable payees on behalf of the Company Entities. The Estimated Closing Statement shall be prepared and calculated using the applicable definitions contained in this Agreement, in accordance with the Accounting Principles and in the same format as the Sample Calculation. The Seller will review any comments proposed by the Buyer with respect to the Estimated Closing Statement, and will consider, in good faith, any appropriate changes; provided that the Seller shall not be required to make any changes proposed by the Buyer that it does not deem appropriate and in the event of any disagreement between the Seller and the Buyer prior to the Closing with respect to the Estimated Closing Statement, the Closing Amounts provided by the Seller in the Estimated Closing Statement shall be used for calculating the Closing Payment. At the request of the Buyer, the Seller shall reasonably cooperate with and assist, and shall cause the Company Entities and each of their respective Representatives to reasonably cooperate with
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and assist, the Buyer and its Representatives in the review of the Estimated Closing Statement (including by taking actions as may be reasonably required to cause the Seller and the Company Entities and their respective accountants to deliver to the Seller and its Representatives copies of their work papers relating to the preparation of the Estimated Closing Statement) and provide the Buyer and its Representatives with any information reasonably requested by the Buyer that is necessary for its review of the Estimated Closing Statement; provided that any such review conducted by the Buyer shall not delay the Closing.
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(c) Upon receipt from the Buyer, the Seller shall have 45 days to review the Closing Statement (the “ Review Period ”). At the request of the Seller, the Buyer shall: |
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(ii) provide the Seller and its Representatives with any information reasonably requested by the Seller that is necessary for its review of the Closing Statement. |
If the Seller disagrees with the Buyer’s computation of the Closing Amounts (each as set forth in the Closing Statement), the Seller shall, on or prior to the last day of the Review Period, deliver a written notice to the Buyer (the “ Notice of Objection ”) that sets forth the Seller’s objections to the Buyer’s calculation of the Closing Amounts, as applicable. Any Notice of Objection shall specify those items or amounts with which the Seller disagrees and shall set forth the Seller’s calculation of the Closing Amounts and the Closing Payment based on such objections.
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(f) Within three Business Days after the Purchase Price Adjustment has been finally determined pursuant to this Section 2.4 : |
The Seller represents and warrants to the Buyer that each statement contained in this Article III is true and correct as of the date of this Agreement and of the Closing Date, except as set forth in the disclosure schedule accompanying this Agreement (the “ Disclosure Schedule ”).
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(b) The Seller owns (of record and beneficially) the Purchased Interests, free and clear of all Liens, except for Liens: |
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(iv) arising pursuant to applicable securities Laws ((i) through (iv) collectively, the “ Transaction Permitted Liens ”). |
At the Closing, the Seller will transfer to the Buyer all of the Seller’s right, title and interest in and to such Purchased Interests free and clear of all Liens (except for Transaction Permitted Liens).
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(d) Sergeant’s Pet Care Products Mexico, S, DE R.L.DE C.V. does not engage, and for the past three years has not engaged, in any business activities or operations and currently has no assets or Liabilities other than Liabilities imposed by Laws (including Tax Liabilities). |
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(ii) violate in any material respect any Law or Order applicable to the Seller or any Company Entity; |
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(iii) create or impose a Lien (other than Permitted Liens) on any Purchased Interests or asset of any Company Entity; or |
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(a) Section 3.6 of the Disclosure Schedule contains true, correct and complete copies of the following financial information: |
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prepared in good faith, are not misleading and do not materially misstate the financial position or results of operation of the Seller Business as of the dates thereof and the respective periods covered thereby. |
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Section 3.8 Absence of Changes . During the period commencing on December 31, 2018 and ending on the date of this Agreement: |
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(d) no sale, lease or other disposition of any properties or assets of any Company Entity has occurred that is material to its business, other than in the ordinary course of business; |
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(e) there has been no grant, issuance, sale or other disposition of any of the Equity Securities of any Company Entity; |
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(f) there has been no merger or consolidation with or into any other Person, dissolution or liquidation; |
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(m) there has been no change in the material accounting principles or practices of the Company Entities, except as required by GAAP or applicable Law; |
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expected to be, at least $100,000, (v) entrance into any severance, retention, or change in control agreement or arrangement with any current or former Employee or independent contractor, or (vi) termination of any Employee, other than termination for cause, whose annual base compensation was at least $100,000; |
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currently conducted (collectively, the “ Approvals ”). Each Approval is valid, binding and in full force and effect, except as would not reasonably be expected to be material to the Company Entities taken as a whole. The Company Entities have been in compliance in all material respects with the terms and conditions of each Approval since such Approval was obtained, and the Company Entities are currently in compliance in all material respects with the terms and conditions of each Approval. |
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than trade payables and other liabilities incurred in the ordinary course of business), including all seller notes, earnout payments and purchase price adjustments; |
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(vii) any broker, distributor or manufacturer’s representative Contract involving payments in excess of $ 250, 000 per annum; |
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(xi) any Contract with any staffing, temporary labor or similar agency providing services to any Company Entity or the Seller Business; |
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or expires after the date of this Agreement in accordance with its terms, (ii) as limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar Laws relating to creditors’ rights generally, and (iii) as limited by general principles of equity, whether such enforceability is considered in a Proceeding in equity or at law. |
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(a) Section 3.13(a) of the Disclosure Schedule includes a list, as of the date of this Agreement, of (i) all Company Benefit Plans, (ii) all Seller Benefit Plans, and (iii) all Foreign Benefit Plans. |
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(b) No Company Benefit Plan or Seller Benefit Plan is (i) subject to Section 302 or Title IV of ERISA or Section 412 of the Code, (ii) a multiemployer plan as defined under Section 3(37) of ERISA, (iii) a multiple employer plan within the meaning of Section 413(c) of the Code or Sections 4063, 4064 or 4066 of ERISA, or (iv) a multiple employer welfare arrangement within the meaning of Section 3(40)(A) of ERISA, and no Company Entity nor any ERISA Affiliate of any Company Entity has any Liability with respect to any plan described in (i) through (iv) herein. |
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(c) No Foreign Benefit Plan is a defined benefit pension plan, and no Company Entity has any Liability with respect to any defined benefit pension plan. |
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(d) Each Company Benefit Plan and Seller Benefit Plan that is intended to be qualified under Section 401(a) of the Code is subject to a favorable determination letter from the IRS, and, to the Knowledge of the Seller, no event has occurred and no condition exists that is reasonably likely to result in the revocation of any such determination. Each Foreign Benefit Plan is registered and approved, as required, by any applicable Governmental Entity. |
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(e) Each Company Benefit Plan, Seller Benefit Plan, and Foreign Benefit Plan has been maintained, funded and administered in material compliance with its terms and in compliance with applicable Law, including applicable provisions of ERISA and the Code, except, |
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with respect to each Seller Benefit Plan and Foreign Benefit Plan, as would not reasonably be expected to result in Liability to any Company Entity or any Employee. |
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(f) No non-exempt prohibited transaction, as defined in Section 406 of ERISA or Section 4975 of the Code, has occurred with respect to any Seller Benefit Plan or any Company Benefit Plan. |
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(g) None of the Company Benefit Plans, Seller Benefit Plans, nor any administrator or sponsor thereof is or has been required to report any excise Tax due to violation of Laws applicable to group health plans on Form 8928, except, with respect to the Seller Benefit Plans, as would not reasonably be expected to result in Liability to any Company Entity. |
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(h) With respect to each Company Benefit Plan and the obligations of any Company Entity under each Seller Benefit Plan and Foreign Benefit Plan, there are no material benefit obligations for which contributions, payments, premiums or reimbursements have not been made or properly accrued and there are no unfunded benefit obligations that have not been accounted for by reserves or otherwise properly footnoted in the financial statements of the Company, to the extent required by the Company’s usual method of accounting. |
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(i) There are no pending or, to the Knowledge of Seller, threatened (A) audits or investigations by any Governmental Entity involving any Company Benefit Plan, Foreign Benefit Plan, or Seller Benefit Plan that would reasonably be expected to result in Liability to any Company Entity, or (B) claims (except for individual claims for benefits payable in the normal operation), suits or proceedings involving any Company Benefit Plan, Foreign Benefit Plan, or Seller Benefit Plan, or any service provider thereto, that would reasonably be expected to result in Liability to any Company Entity. |
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(j) No Company Benefit Plan, Seller Benefit Plan, or Foreign Benefit Plan provides post-employment or retiree welfare benefits to any current or former Employees, except, as applicable, to the extent required by Part 6 of Subtitle B of Title I of ERISA or Section 4980B of the Code or applicable state Law. |
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(k) Neither the Seller nor any Company Entity has any obligation to gross up, indemnify or otherwise reimburse any current or former director or Employee for any Tax incurred under Section 409A, 457A or 4999 of the Code. Each Company Benefit Plan and each Seller Benefit Plan that is subject to Section 409A of the Code is, in all material respects, in documentary and operational compliance with Section 409A of the Code or an available exemption therefrom. |
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280G of the Code (determined without regard to the exceptions set forth in Section 280G(b)(5) of the Code). |
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(m) As applicable with respect to each of the Company Benefit Plans, Seller has made available to Buyer true and correct copies of (i) the applicable plan document (including all amendments and modifications thereof), or in the absence of a plan document, a written description of the underlying Company Benefit Plan, (ii) the most recent summary plan description, (iii) the three most recently filed Form 5500 series and all schedules thereto, (iv) the most recent determination, opinion or advisory letter issued by the IRS, (v) the three most recent summary annual reports, financial statements, and/or trustee reports, (vi) the three most recent compliance testing results, and (vii) any material correspondence with or from the IRS, the Department of Labor, or any other Governmental Entity. With respect to each Seller Benefit Plan and each Foreign Benefit Plan, Seller has made available to Buyer true and correct copies of the applicable plan document (including all amendments and modifications thereof). |
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(a) Section 3.14(a)(i) of the Disclosure Schedule sets forth a list of the names, job titles, employing entity, locations, hire dates, current annual base salary or hourly wage rate, 2018 base salary or hourly wage rate, 2018 and 2019 bonus and commission compensation paid or payable, status (as exempt or non-exempt under the Fair Labor Standards Act, active or a description of leave and full-time or part-time) and the amounts of accrued and unused vacation time (for non-exempt employees only) of all Employees of the Company Entities. Section 3.14(a)(ii) of the Disclosure Schedule sets forth any individual who is listed on Section 3.14(a)(i) of the Disclosure Schedule who is not entirely dedicated to the Seller Business and the percentage of time spent by such individual performing work for the Seller Business on an annual basis. Section 3.14(a)(iii) of the Disclosure Schedule sets forth any employee of the Seller or an Affiliate of Seller (other than any Company Entity) who is dedicated to the Seller Business, and includes such individual’s title and employing entity. All current Employees in the United States are “at will” employees, and except for employee offer letters entered into in the ordinary course of business, no Company Entity is party to any written employment agreements. |
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(b) As of the date of this Agreement, there are no pending or, to the Knowledge of the Seller, threatened strikes, labor disputes, work stoppages, requests for representation, pickets, unfair labor practices, work slow-downs due to labor disagreements or any actions or arbitrations that involve the labor or employment relations of any Company Entity or any Employee. Neither the Seller (with respect to any current or former Employee) nor any Company Entity is party to any collective bargaining agreement or similar agreement for labor representation, and there is no organizing activity by any labor union with respect to any Employees. The consummation of the Transactions shall not create any notice or consent rights with respect to any union, works council, employee representative or other labor representative body. |
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(c) During the three-year period prior to the date of this Agreement, all independent contractors, subcontractors, and consultants utilized by the Seller or any Company Entity to provide services to the Seller Business have been properly characterized as independent contractors. |
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(d) During the three-year period prior to the date of this Agreement, the Seller (with respect to any current or former Employee or any current or former independent contractor or consultant dedicated to the Seller Business) and each Company Entity have complied in all material respects, with all applicable Laws which relate to employment or labor, including those concerning wages, hours, occupational safety and health, work authorization, equal employment opportunity, immigration, labor relations, discrimination, harassment, plant layoffs or closings, temporary workers, independent contractors, disability, employment practices, employment taxes, worker classification, collective bargaining, unemployment compensation and worker’s compensation. During the three-year period prior to the date of this Agreement, the Seller (with respect to any current or former Employee dedicated to the Seller Business) and each Company Entity have complied in all material respects, with all requirements related to the proper classification of employees as exempt or non-exempt under the Fair Labor Standards Act and similar state Laws. |
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(e) There are no pending or, to the Knowledge of the Seller, threatened material Proceedings (i) against any Company Entity relating to employees or employment practices or with respect to breaches of any such employment or labor Law, or (ii) against the Seller or an Affiliate of the Seller (except for any Company Entity) with respect to any current or former Employee. |
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(g) Neither the Seller nor any Company Entity has sought to enforce any confidentiality, intellectual property assignment, non-competition, non-solicitation or non-disparagement Contract covering a former Employee during the three-year period prior to the date of this Agreement. |
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(h) During the three-year period prior to the date of this Agreement, the Seller (with respect to any current or former Employee or any independent contractor or consultant dedicated to the Seller Business) and each Company Entity, as applicable, has, in all material respects, paid in full all payments due or owing to any of its current and former Employees, consultants or independent contractors for any wages, salaries, commissions, bonuses or other direct compensation for any service performed for it to the date hereof or amounts required to be reimbursed to such employees, consultants or independent contractors. |
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(a) Each Company Entity is in compliance with all Environmental Laws, except for any non-compliance that would not result in a material liability to the Company. |
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(b) Within the last three years, no Company Entity has received any written notice of any alleged material violation of any Environmental Law that is unresolved. |
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(c) There are no Proceedings pending or, to the Knowledge of the Seller, threatened in writing against any Company Entity alleging a material violation of any Environmental Law. |
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(f) No Company Entity is subject to any consent decree or order which imposes material obligations on any Company Entity under any Environmental Laws. |
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due and payable with respect to any such Tax Returns (or otherwise payable by a Company Entity) have been timely paid. |
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(c) There are no Liens for Taxes on any of the assets of any Company Entity except for Permitted Liens. |
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(f) The Company and the Seller are eligible to make an election under Section 336(e) of the Code with respect to the sale of the Purchased Interests. |
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(l) No Company Entity owns an interest in any Flow-Thru Entity other than American Business Sergeant’s Pet Care Products Trade (Shanghai) Co, Ltd. |
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(n) No Company Entity engages in (or has engaged) in a trade or business in a country other than the country in which such Company Entity is incorporated or otherwise organized. |
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(p) There are no gain recognition agreements under Code Section 367 that were entered into with respect to, by or otherwise related to any gain deferred by any Company Entity. |
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Registered Intellectual Property or, to the Knowledge of the Seller, any other Owned Intellectual Property is threatened, pending or reasonably foreseeable, except for patents expiring at the end of their statutory terms (and not as a result of any act or omission by the Company Entities, including failure by a Company Entity to pay any required maintenance fees). |
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(c) The Company Entities have not used, incorporated, distributed or combined any open source, copyleft or community source code in such a way that requires, as a condition of use, modification and/or distribution of such open source, copyleft or community source code, that the Owned Software be (i) disclosed or distributed in source code form, (ii) be licensed for the purpose of making derivative works, or (iii) be redistributable at no charge. All Owned Software does not contain any Unauthorized Code or any back door, time bomb, drop dead device or other Software routine designed to disable a computer program. No Person other than a Company Entity possesses a copy, in any form (print, electronic, or otherwise), of any source code for any Owned Software, and all such source code is in the sole possession of the Company Entities and has been maintained strictly confidential. The Company Entities have no obligation to afford any Person access to any such source code. The Company Entities are in possession of all other material relating to the Software used in the business of the Company Entities, including installation and user documentation, engineering specifications, flow charts and know-how, reasonably necessary for the use, maintenance, enhancement, development and other exploitation of such Software as used in, or currently under development for, the business of the Company Entities. |
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(e) The Company Entities and their Affiliates have taken commercially reasonable action to maintain and protect all of the Company Entity Intellectual Property. The Company Entities and their Affiliates have taken commercially reasonable measures to protect the confidentiality of all trade secrets and any other confidential information that are Company Entity Intellectual Property (and any confidential information owned by any Person to whom the Company Entities have a confidentiality obligation). No such trade secrets or other confidential information have been disclosed by the Company Entities or their Affiliates to any Person other than pursuant to a written agreement restricting the disclosure and use of such trade secrets or any other confidential information by such Person. No current or former employee, contractor or |
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consultant of a Company Entity or any Affiliate of any Company Entity has any right, title or interest, directly or indirectly, in whole or in part, in any Owned Intellectual Property. The Company Entities have obtained from all Persons (including all current and former employees and contractors) who have created any Owned Intellectual Property valid and enforceable written assignments of any such Intellectual Property to the Company Entities, and the Seller has delivered true and complete copies of such assignments to the Buyer. To the Knowledge of the Seller, no Person is in violation of any such written confidentiality or assignment agreements . |
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(h) No funding, facilities or personnel of any Governmental Entity or university has been used in connection with the development of any Owned Intellectual Property. |
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(i) The Company Entities have complied and are in compliance, in each case, in all material respects with all applicable Laws relating to patent marking with respect to the products and services of the business of the Company Entities. |
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(j) As of the Closing, none of the Seller nor any of its Affiliates (other than the Company Entities) shall have any right, title or interest in or to any Owned Intellectual Property. |
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(m) During the past three years, the Company Entities have been in compliance in all material respects with their Privacy Policies and Privacy Contracts. The Company Entities have delivered to the Buyer true, correct and complete copies of all Privacy Policies and Privacy Contracts. |
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(n) The Company Entities are, and during the past three years, always have been in compliance in all material respects with all applicable Privacy and Security Requirements. The Company Entities do not have any legal or contractual obligation to comply with non-United States Privacy Laws, including the European Union’s General Data Protection Regulation. |
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(o) The Company Entities maintain industry standard data back-up and/or contingency operations plans and have proven such plans effective through periodic testing. The Company Entities and, to the Knowledge of the Seller, all third parties that receive Personal Information from or on behalf of the Company Entities have implemented industry standard physical, technical and administrative safeguards that are designed to protect Personal Information from unauthorized access by any Person and that comply in all material respects with all applicable Privacy and Security Requirements. The Company Entities do not have any obligation, contractual or otherwise, to comply with the Payment Card Industry Data Security Standard. |
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(c) To the Knowledge of the Seller (i) no account debtor or note debtor has refused or threatened to refuse to pay its obligations to a Company Entity for any reason and (ii) no account debtor or note debtor is insolvent or bankrupt. |
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(d) All accounts payable by each Company Entity to third parties arose in the ordinary course of business. |
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Section 3.25 Disclaimer of Warranties . Except as set forth in this Article III (as qualified or modified by the Disclosure Schedule): |
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The Buyer represents and warrants to the Seller that each statement contained in this Article IV is true and correct as of the date of this Agreement and as of the Closing Date, except as set forth in the Disclosure Schedule.
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Buyer of this Agreement, the performance by the Buyer of its obligations under this Agreement and the consummation by the Buyer of the Transactions, except for Permits and Filings the failure of which to obtain or make would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on the Buyer’s ability to perform its obligations under this Agreement. |
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(d) As of the date hereof, no event has occurred that, with or without notice, lapse of time or both, would reasonably be expected to constitute a default or breach on the part of the Buyer or, to the Knowledge of the Buyer, any other party thereto under the Debt Financing Commitment. As of the date hereof, to the Knowledge of the Buyer, there is no fact, event or other occurrence that makes any of the representations or warranties of the Buyer under the Debt Financing Commitment inaccurate in any respect taking into account any materiality or other qualifications set forth therein. There are no conditions precedent or contingencies directly or indirectly related to the funding of the full amount of the Debt Financing (including any flex provisions) other than the conditions precedent expressly set forth in the Debt Financing Commitment and to the Knowledge of the Buyer, the Buyer has no reason to believe that it will be unable to satisfy on a timely basis any condition precedent to funding contained in the Debt Financing Commitment. |
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(a) The Buyer has conducted to its satisfaction its own independent review and analysis of, and based thereon has formed an independent judgment concerning the Transactions, the Purchased Interests and the assets, properties, liabilities, condition, operations and prospects of the business of the Company Entities. In entering into this Agreement, the Buyer has relied solely upon its own review and analysis and the specific representations and warranties of the Seller expressly set forth in Article III (as qualified or modified by the Disclosure Schedule) and not on any other representations, warranties, statements or omissions (whether by another Person, the Seller or the Company) or the Evaluation Material. |
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(a) The Buyer acknowledges and confirms that, except for the representations and warranties expressly set forth in Article III (as qualified or modified by the Disclosure Schedule), none of the Seller, the Company, their respective Affiliates or any of their respective Representatives have made, or shall be deemed to have made, and the Buyer has not relied on, is not relying on and disclaims reliance upon, any other representation or warranty, express or implied, at law or in equity, in respect of the Purchased Interests or the assets and properties of the Company Entities, including with respect to: (i) the operation or profitability of the Seller Business after the Closing; or (ii) the accuracy or completeness of any Evaluation Material or the appropriateness or suitability of such information for the purposes of enabling the Buyer to evaluate the consummation of the Transactions. |
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(i) that the Seller reasonably believes the Seller or any Company Entity is prohibited from providing to the Buyer by reason of applicable Law; |
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(ii) that constitutes, or allows access to, information protected by attorney-client privilege; provided , further , that such access shall: |
(A) be conducted at the Buyer’s expense, during normal business hours and under the supervision of personnel of the Seller or the Company Entities, as applicable;
(B) not materially disrupt the normal operations of any Company Entity;
(C) comply with all applicable Laws, including those regarding the exchange of competitively sensitive information; and
(D) not include the right to conduct any invasive environmental sampling (including soil, groundwater, surface water, air or sediment sampling).
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All of such information shall be treated as Evaluation Material subject to the terms of the Confidentiality Agreement, the provisions of which are incorporated into this Agreement and acknowledged by the Parties as a continuing obligation in accordance with its terms. Notwithstanding anything to the contrary contained in this Agreement, the Buyer shall not be permitted during the Interim Period to contact any Company Entity’s vendors, employees, customers or suppliers, or any Governmental Entities (except in connection with applications for Permits or Filings required to be made prior to the Closing under this Agreement and, in such case, only in accordance with the terms of this Agreement) regarding the operations or legal status of, or any such Person’s relationships with, any Company Entity without receiving prior consent from the Seller.
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(iii) comply with financial and Tax reporting requirements, and will afford such Persons reasonable assistance in connection therewith; provided , however , that such access shall: |
(A) be conducted at the Seller’s expense, during normal business hours and under the supervision of personnel of the Buyer and the Company Entities, as applicable;
(B) not materially disrupt the normal operations of the Buyer or any Company Entity; and
(C) comply with all applicable Laws, including those regarding the exchange of competitively sensitive information.
The Buyer will cause such records to be maintained for not less than six years from the Closing Date and will not dispose of such records thereafter without first offering in writing to deliver them to the Seller; provided , however , that in the event that the Buyer transfers all or a portion of the business of any Company Entity to any third party during such period, the Buyer may transfer to such third party all or a portion of the books, records, files and documents related thereto, so long as such third-party transferee expressly assumes in writing the obligations of the Buyer under this Section 5.1(c ) .
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(a) incur any additional Indebtedness in excess of $ 250, 000, except for Indebtedness with the Company Entities’ Affiliates that will be cancelled at Closing; |
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(b) sell, lease or otherwise dispose of any of its properties or assets that are material to its business other than the sale of inventory in the ordinary course of business; |
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(d) split, combine, redeem or reclassify, or purchase or otherwise acquire, any Equity Securities, shares of its capital stock or its other securities, as applicable; |
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(i) make any change in its material accounting principles or practices, except as required by GAAP or applicable Law or as otherwise apply generally to the Seller and its Affiliates; |
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aggregate amount of such increases in connection with such promotions does not exceed $100,000 on an annualized basis, or (y) in the ordinary course of business, or (iv) enter into any employment, consulting, collective bargaining, labor, independent contractor, severance, retention or change in control agreement or arrangement with any current or former Employee or any independent contractor providing services to any Company Entity or to the Seller Business, except with respect to consulting agreements providing for an annual rate of compensation less than $75,000; |
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(k) (i) hire any Employee or (ii) terminate the employment of any Employee, except for cause or as already determined prior to the date of this Agreement, in the case of each of the preceding clauses (i) and (ii), to the extent such Employee has an annual rate of base compensation in excess of $100,000; |
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(m) mortgage, pledge or subject to any Lien (other than Permitted Liens) any of its material assets; |
Notwithstanding anything to the contrary set forth in this Agreement, during the Interim Period, the Company Entities shall be permitted , at least one Business Day prior to the Closing Date, to (A) declare, set aside and pay dividends or distributions and (B) repay or otherwise settle any Indebtedness of the Company Entities. Nothing contained in this Agreement will give the Buyer, directly or indirectly, rights to control or direct the business or operations of any Company Entity prior to the Closing. Prior to the Closing, the Company Entities shall exercise, consistent with the terms and conditions of this Agreement, complete control and supervision over their respective businesses, assets and operations.
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(a) Obligations of Both Parties . Without limiting the generality of Section 5.9(a) , each Party must: |
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(ii) supply as promptly as practicable any additional information or documents that may be requested pursuant to the HSR Act; |
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(v) promptly inform the other Party of any material communication regarding this Agreement or any of the Transaction: |
(A) received by such Party from, or given by such Party to, any Governmental Entity from which any such Permit is required, or
(B) received by such Party, or given by such Party, in connection with any Proceeding by a private party;
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(A) furnish to each other Party’s counsel such reasonably necessary information and reasonable assistance as the other Party may request in connection with its preparation of any Filing or submission that is necessary under the HSR Act (except for sharing any Item 4(c) or Item 4(d) documents); and
(B) cooperate in the filing of any substantive memoranda, white papers, Filings, correspondence or other written or oral communications explaining or defending this Agreement or any of the Transactions, articulating any regulatory or competitive argument or responding to requests or objections made by any Antitrust Authority or any Person under the HSR Act; and
(A) prior notice of the meeting or discussion, the opportunity to confer with each other regarding appropriate contacts with and responses to personnel of said Antitrust Authority;
(B) the opportunity to review and comment on the contents of any representations (oral or otherwise) expected to be communicated at the meeting or discussion, and, to the extent permitted by the relevant Antitrust Authority; and
(C) the opportunity to attend and participate at the meeting or discussion (which, at the request of the Buyer or the Seller, as applicable, shall be limited to outside antitrust counsel only); provided, that the Buyer and the Seller agree to mutually approve any substantive comment to be communicated to any Antitrust Authority in advance.
Notwithstanding the foregoing, the Parties have the joint responsibility for determining the timing and sequence of seeking the required approval or early termination under the HSR Act, and the strategy with respect to obtaining any such approval or early termination, in good faith consultation with the other Party and after giving due consideration to the other Party’s views.
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(ii) In connection with resolving any impediments under the HSR Act, the Buyer shall not directly or indirectly: |
(A) be required to effect or undertake (or be required to agree or consent to) any sale, license, divestiture or disposition or holding separate of, or any other structural, behavioral or conduct remedy with respect to, or restriction on the conduct or operation of, any assets, properties or businesses of the Buyer or any of its subsidiaries or Affiliates or the Company or any of its subsidiaries; or
(B) be obligated to litigate or participate in the litigation of any action, whether judicial or administrative, brought by any Governmental Entity challenging or seeking to restrain, prohibit or place conditions on the consummation of the Transaction;
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(iii) The Seller shall include the Company Entities on the U.S. federal Income Tax Return for the Seller Affiliated Group through the close of business on the Closing Date. |
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(i) Subject to Section 5.8(d)(iii) , to the extent not taken into account in calculating the Closing Amounts, the Buyer shall, or shall cause the Company Entities to, pay the Seller the amount of any cash Tax refunds or credits of Taxes actually received by the Company Entities that arise with respect to any Pre-Closing Tax Period (including any such amount that is credited against the year in which an audit is settled or ultimately concluded) and the amount of any benefit of any overpayment actually received with respect to any Pre-Closing Tax Period (including any such amount that is credited against the year in which an audit is settled or ultimately concluded) that is applied in a taxable period (or portion thereof) beginning on or after the Closing Date (other than, in each case, refunds, credits or overpayments attributable to the carryback of losses, credits or similar items from a taxable period or portion thereof beginning on or after the Closing Date), in each case, net of any reasonable costs or Taxes incurred in connection therewith. Such payments shall be made within 15 days of receipt of any such refund or credit or application of any such overpayment by the Buyer or the Company Entities. All other refunds and credits shall be retained by the Buyer or the Company Entities. |
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(ii) After the Closing, upon the Seller delivery of notice to the Buyer within 30 days of the Seller’s receipt of written notice of such Tax Claim, the Seller shall have the right (at its option) to represent the interests of the applicable Company Entity in any Tax Claim relating to a Pre-Closing Tax Period (other than a Straddle Period. In connection with such Seller-controlled Tax Claim (A) the Seller shall keep the Buyer reasonably informed and consult in good faith with the Buyer with respect to any issue relating to such Tax Claim; (B) the Seller shall provide the Buyer with copies of all correspondence, notices and other written material received from any Governmental Entity with respect to such Tax Claim; (C) the Seller shall provide the Buyer with a copy of, and an opportunity to review and comment on, all submissions made to any Governmental Entity in writing in connection with such Tax Claim; (D) the Seller shall allow the Buyer to participate in the defense of such Tax Claim (including employing counsel separate from the counsel employed by the Seller); and (E) the Seller shall not agree to a settlement or compromise thereof without the prior written consent of the Buyer, which consent shall not be unreasonably withheld, conditioned or delayed. |
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(iii) If (A) the Seller does not notify the Buyer of its election to control a Tax Claim with respect to a Pre-Closing Tax Period within 30 days following receipt by the Seller of written notice of such Tax Claim or (B) such Tax Claim relates to a Straddle Period, the Buyer shall, or shall cause the applicable Company Entity to, control such Tax Claim. In connection with such Buyer-controlled Tax Claim with respect to a Straddle Period (A) the Buyer shall keep the Seller reasonably informed and consult in good faith with the Seller with respect to any issue relating to such Tax Claim; (B) the Buyer shall provide the Seller with copies of all correspondence, notices and other written material received from any Governmental Entity with respect to such Tax Claim; (C) the Buyer shall provide the Seller with a copy of, and an opportunity to review and comment on, all submissions made to any Governmental Entity in writing in connection with such Tax |
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Claim; (D) the Buyer shall allow the Seller to participate in the defense of such Tax Claim (including employing counsel separate from the counsel employed by the Buyer); and (E) the Buyer and the Company Entity shall not agree to a settlement or compromise thereof without the prior written consent of the Seller, which consent shall not be unreasonably withheld, conditioned or delayed. In connection with any other Buyer-controlled Tax Claim, the Buyer shall not (and shall not allow the applicable Company Entity to) agree to a settlement or compromise thereof without the prior written consent of the Seller, which consent shall not be unreasonably withheld, conditioned or delayed. |
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be prepared in accordance with the applicable provisions of the Code. If within 30 days Seller objects to the Purchase Price Allocation Schedule, Seller and Buyer shall cooperate in good faith to resolve their differences, provided that if after 30 days, Seller and Buyer are unable to agree, the parties shall engage the Independent Accountants to resolve any dispute in accordance with the procedures described in Section 2.4(d) . |
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(v) The Buyer shall cause the Company to either liquidate or convert into a limited liability company characterized as a partnership or disregarded entity effective as of the Closing Date. |
(A) preparing, and, filing with and obtaining from each applicable Governmental Entity, all Filings and other Permits as may be necessary for the consummation of the Transactions in accordance with the terms of this Agreement; and
(B) giving any notices required to be made or given and obtaining any other consent required to be obtained (pursuant to any applicable Law, Contract or otherwise), in each case by such Party in connection with the Transactions; provided, that in respect of any notice or consent required to be obtained under any Contract, no Party shall be required to pay any fee or give any consideration to a counterparty to a Contract in connection with such notice or consent; and
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(ii) not to take any action, or fail to take any action, that could reasonably be expected to prevent, delay or make it more difficult to consummate the Transactions. |
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(d) During the Interim Period, the Parties shall discuss in good faith any reasonable request by the Buyer for access to any additional services that are necessary for the operation of the Company Entities and which are not currently contemplated on Schedule 1 to the Transition Services Agreement, including such services relating to current duties performed by the individual set forth on Section 3.14(a)(ii) of the Disclosure Schedule for the Company Entities, at a price to be agreed upon after good faith negotiations between the Parties, and shall amend the Transition Services Agreement to reflect such additional services and fees. |
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(ii) The Seller and its Affiliates (excluding any Company Entity) shall transfer the employment of those individuals set forth on Section 3.14(a)(iii) of the Disclosure Schedule who are dedicated to the Seller Business to a Company Entity prior to the Closing, and the Seller shall be solely responsible for all liabilities, costs, and expenses related to such actions. |
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(b) Notwithstanding anything herein to the contrary, the Company Entities shall not have Liability with respect to the Foreign Benefit Plans or the Seller Benefit Plans, and the Seller shall retain all such Liabilities, other than in respect of contributions due to the Foreign |
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Benefit Plans or the Seller Benefit Plans related to the pre-Closing period and included in the calculation of the Closing Working Capital or as otherwise expressly provided in this Section 5.11 . The Seller shall retain Liability for claims incurred under the Foreign Benefit Plans and the Seller Benefit Plans irrespective of whether such claims arise prior to, on, or after the Closing. Effective as of the Closing, each Continuing Employee shall cease participation in, and shall have no further rights under (except as a former participant), all Seller Benefit Plans and Foreign Benefit Plans. For purposes of the foregoing, (i) a medical or dental claim shall be considered incurred when the medical services are rendered or medical supplies are provided, and not when the condition arose; and (ii) a disability or workers’ compensation claim shall be considered incurred on or prior to the Closing if the injury or condition giving rise to the claim occurs prior to the Closing. |
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(i) a base salary or hourly wage rate, as applicable, that is at least equal to the base salary or hourly wage rate provided to such Continuing Employee immediately prior to the Closing; |
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(ii) annual cash bonus opportunities (excluding change in control bonuses and retention bonuses) that are no less favorable than the annual cash bonus opportunities (excluding change in control bonuses and retention bonuses) provided to such Continuing Employee immediately prior to the Closing; and |
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(d) With respect to each Continuing Employee whose employment is terminated on, or during the 12-month period following, the Closing under circumstances that would entitle a participant in the U.S. Severance Policy to receive severance benefits, the Buyer shall provide such Continuing Employee with severance benefits equal to the value of the severance benefits contemplated by the U.S. Severance Policy, taking into account such Continuing Employee’s service with the Seller and its Affiliates prior to the Closing and with the Buyer and its Affiliates on and after the Closing. |
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Benefit Plan, other than any Foreign Benefit Plan, and for any other out-of-pocket expenses that count against any maximum out-of-pocket expense provision of the applicable group Seller Benefit Plan, other than any Foreign Benefit Plan, or the Buyer’s or such Affiliate’s group health plans. |
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(f) The Buyer and its Affiliates shall be responsible for all bonuses and commissions for all Continuing Employees in respect of the performance period in which the Closing Date occurs; provided that, for the portion of such performance period preceding the Closing Date, the Buyer shall be liable for such amounts and the employer Taxes attributable thereto only to the extent they have been accrued in the Closing Working Capital calculation. The Buyer or its Affiliates shall timely remit all such amounts to the Continuing Employees. |
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(h) The Seller and the Buyer shall take all actions necessary or reasonably appropriate so that, effective as of the Closing Date: |
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(ii) the elections, contribution levels and coverage levels of such Continuing Employees will apply under the Buyer FSA Plan in the same manner as under the Seller FSA Plan; and |
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(iii) such Continuing Employees will be reimbursed from the Buyer FSA Plan for claims incurred at any time during the plan year of the Seller FSA Plan in which the Closing Date occurs that are submitted to the Buyer FSA Plan from and after the Closing Date on the same basis and the same terms and conditions as under the Seller FSA Plan. |
As soon as reasonably practicable after the Closing Date, and in any event within 30 Business Days after the amount of the Transferred FSA Balances is determined, the Seller or its Affiliates shall pay to the Buyer or its Affiliates the net aggregate amount of the Transferred FSA Balances, if such amount is positive, and the Buyer or its Affiliates shall pay to the Seller or its Affiliates the net aggregate amount of the Transferred FSA Balances, if such amount is negative.
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(j) Following the Closing Date and only to the extent such vacation, personal days, and sick days are included in the Closing Working Capital calculation, for each Continuing Employee, the Buyer shall, or shall cause an Affiliate of the Buyer to, honor all unused vacation, personal days and sick days of each Continuing Employee during the calendar year in which the Closing Date occurs, and immediately following the Closing Date, the Buyer shall cause the Continuing Employees to be subject to, and commence to accrue benefits under, the vacation, sick leave and other personal time off policies of the Buyer or an Affiliate of the Buyer applicable to the respective Continuing Employees. To the extent it is required under applicable Law that, in connection with the Transactions, the Seller or any Company Entity make a payment to any Continuing Employees with respect to his or her unused vacation, personal days or sick days related to the pre-Closing period, the Seller shall be responsible for such payment and the Buyer and its Affiliates shall not be required to honor such unused vacation, personal days or sick days to the extent they were covered by such payment. |
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(k) A group health plan of the Seller or an Affiliate of the Seller will be responsible for providing COBRA continuation coverage with respect to any and all “M & A qualified beneficiaries,” as defined in Treasury Regulation Section 54.4980B-9, with respect to the Transactions whose “qualifying event” as defined in Treasury Regulation Section 54.4980B-4 occurs upon or prior to the Closing, irrespective of when such “M & A qualified beneficiaries” elects COBRA continuation coverage. A group health plan of the Buyer or an Affiliate of the Buyer will be responsible for providing COBRA continuation coverage with respect to any and all “M & A qualified beneficiaries” whose “qualifying event” occurs following the Closing. |
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(l) Immediately prior to the Closing, the Seller shall provide the Buyer with a list of all employees of each Company Entity and of the Seller Business who were terminated by the Seller, an Affiliate of the Seller (other than any Company Entity) or any Company Entity within 90 days of the Closing Date. The Buyer shall be solely responsible for any liabilities under the WARN Act or any other Law relating to reductions in work force or the impact on employees of plant closings or sales of business for any actions taken by the Buyer or any of its Affiliates (including any Company Entity) after the Closing. |
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(m) Seller and its Affiliates (excluding any Company Entity) shall assign to the Buyer on the Closing Date (to the extent not already assigned to any Company Entity in connection with the transfer of such Employees to the Company Entity) all restrictive covenant agreements by and between any former Employee or current Employee who transfers to the Buyer, independent contractor or consultant of the Seller Business and the Seller or any Affiliate (other than any Company Entity). |
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(n) The Seller shall remain responsible for the payment of all nonqualified deferred compensation due to the Continuing Employees under any Seller Benefit Plan or Foreign Benefit Plan. For the avoidance of doubt, Seller may, in its sole discretion, determine to terminate and liquidate, with respect to any Employees, any such Seller Benefit Plan or Foreign Benefit Plan providing for deferred compensation, including in accordance with Treasury Regulation Section 1.409A-3(j)(4)(ix)(B). |
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(o) The Seller agrees that, as soon as reasonably practicable after the date hereof, but in any event prior to the Closing, the Seller will provide current vacation accruals for exempt employees. |
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(p) The Seller shall retain all Liability for the agreements set forth on Section 3.13(l) of the Disclosure Schedule and shall pay to the applicable Continuing Employees any amounts which become payable in respect of such agreements directly to each applicable Continuing Employee in such Employee’s payroll payment covering the period through the Closing. To the extent the Seller cannot make the payments required by the agreements set forth on Section 3.13(l) of the Disclosure Schedule in the payroll period on or following the Closing Date, such payments and the employer Taxes related thereto shall be taken into account in the calculation of Closing Working Capital and the Buyer shall remit such payments to the applicable Continuing Employees. |
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(q) The Seller shall take all actions necessary and appropriate so that outstanding and unvested equity or equity-based incentive awards granted to the Employees pursuant to the Seller Benefit Plans will vest at the Closing. |
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(s) Nothing contained in this Section 5.11 or elsewhere in this Agreement, express or implied, shall confer upon any current or former Employee, director, manager, officer or consultant of any Company Entity any right to continued employment or service (or resumed employment or service) subsequent to the Closing or any third-party beneficiary rights under this Agreement (except as provided for in Section 5.12 ). |
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of six years from the Closing Date, the Buyer shall cause each Company Entity to maintain in effect the exculpation, indemnification, advancement of expenses and insurance coverage provisions of such Company Entity’s Organizational Documents as in effect immediately prior to the Closing or in any indemnification agreements of any Company Entity with any D&O Indemnified Party as in effect immediately prior to the Closing, and the Buyer shall not, and shall cause the Company Entities not to, amend, repeal or otherwise modify any such provisions in any manner that would adversely affect the rights thereunder of any D&O Indemnified Party; provided , however , that all rights to exculpation, indemnification, advancement of expenses or insurance coverage in respect of any Proceedings pending or asserted or any claim made within such period shall continue until the disposition of such Proceeding or resolution of such claim. From and after the Closing, the Buyer shall cause the Company Entities to honor, in accordance with their respective terms, each of the covenants contained in this Section 5.12 . |
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(collectively, the “ Unaudited Financial Statements ” and together with the Audited Financial Statements, the “ Rule 3- 05 Financial Statements ”). |
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otherwise). Intercompany balances and accounts solely among any of the Company Entities shall not be affected by this Section 5.16 . |
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(a) On or prior to the date of this Agreement, the Buyer has bound the R&W Policy with the R&W Insurer and provided a true and correct copy of the R&W Policy to the Seller. |
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(b) The Buyer shall use its reasonable best efforts to take, or cause to be taken, all actions and do, or cause to be done, all things necessary, customary or advisable to arrange and obtain the Debt Financing on the terms and conditions described in or contemplated by the Debt |
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Financing Commitment, including using reasonable best efforts to (i) maintain in full force and effect the Debt Financing Commitment, (ii) satisfy on a timely basis all conditions and covenants applicable to the Buyer or any of its Affiliates in the Debt Financing Commitment and otherwise ensure compliance with the obligations of the Buyer or any of its Affiliates thereunder, (iii) enter into definitive agreements with respect thereto on the terms and conditions contemplated by the Debt Financing Commitment (including with respect to any “flex” provisions contained therein), (iv) in the event that all conditions in the Debt Financing Commitment have been satisfied or waived (other than conditions that the Buyer or any of its Affiliates solely control the satisfaction of and other than those conditions that by their nature are to be satisfied at the Closing), consummate the Debt Financing contemplated by the Debt Financing Commitment at or prior to the Closing and (v) enforce its rights under the Debt Financing Commitment in the event that all conditions in the Debt Financing Commitment have been satisfied (other than conditions that the Buyer or any of its Affiliates solely control the satisfaction of and other than those conditions that by their nature are to be satisfied at the Closing), to cause the Financing Source and other Persons providing the Debt Financing to fund on the Closing Date the Debt Financing required to consummate the Transactions. |
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(c) Without limiting the generality of the immediately preceding clause (b), the Buyer shall give the Seller prompt (and, in any event within one Business Day) written notice: (i) of any amendment, modification, waiver or replacement to the Debt Financing Commitment (together with a copy of such amendment, modification, waiver or replacement); (ii) of any material breach or material default (or any event or circumstance that, with or without notice, lapse of time or both, could give rise to any material breach or material default) by any party to the Debt Financing Commitment or definitive document related to the Debt Financing of which the Buyer becomes aware; (iii) of the receipt of any notice or other communication from any party to the Debt Financing Commitment with respect to any actual expiration, lapse, withdrawal, breach, default, termination or repudiation by any party to the Debt Financing Commitment or any definitive document related to the Debt Financing or any provisions of the Debt Financing Commitment or any definitive document related to the Debt Financing; or (iv) if the Buyer does not expect to be able to obtain all or any portion of the Debt Financing on the terms, in the manner or from the sources contemplated by the Debt Financing Commitment or the definitive documents related to the Debt Financing. |
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(i) causing the Company Entities to execute and deliver customary guarantee, pledge and security documents or other definitive financing documents or other certificates, legal opinions and documents as may be reasonably requested by the Buyer, provided , however , that no obligation of any of the Company Entities, under any such document or agreement, as applicable, is effective until the Closing; |
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(ii) furnishing the Buyer and the Financing Source with the most recent combined financial statements, financial data and other information of the Company Entities available and reasonably requested by the Buyer or the Financing Source in connection with the Debt Financing, including the combined unaudited balance sheet of the Company Entities as of the last day of each fiscal quarter (from and after the fiscal quarter ending March 31, 2019) within 60 days following the end of each such fiscal quarter and the related unaudited statements of income as prepared by management for each such fiscal quarter then ended, other than the Last Quarter Financials; |
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(iii) assisting any Financing Source in the preparation of syndication documents and materials (including assistance in creating usual and customary “public versions” of the foregoing), including confidential information memoranda, lender presentations, rating agency presentations, business and financial projections and similar documents and materials, in connection with any Debt Financing (all of the foregoing, collectively, the “ Syndication Documents ”), including providing the business description to be contained therein, and providing customary authorization and representation letters with respect thereto, and materials for any Syndication Documents, including business projections and financial statements (including assisting the Buyer in preparing pro forma financial statements); |
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(iv) promptly correct any information provided by it under this Section 5.18 if and to the extent such information shall have become false or misleading in any material respect; |
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(v) taking such corporate actions (subject to the occurrence of Closing) reasonably required to permit the consummation of the Debt Financing; |
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(vi) cooperating reasonably with the Financing Source’s due diligence of the Company Entities and the Seller Business, |
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(vii) requesting and co-operating with the Buyer or the Financing Source in obtaining documents relating to the repayment of any Indebtedness of the Company Entities and the release, discharge and termination of any related Liens and guarantees thereunder, including payoff letters and, to the extent required, evidence that notice of such repayment has been timely delivered to the holders of such Indebtedness; and |
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(viii) taking other actions reasonably requested by the Buyer and/or the Financing Source in connection with the Debt Financing; |
provided , however , that, notwithstanding anything in this Agreement to the contrary, nothing contained in this Section 5.18(e) shall require, and in no event shall reasonable best efforts of the Seller be deemed or construed to require Seller or any Company Entity to (A) prior to the Closing,
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allow any arranger or syndicate lender access to the personnel or facilities of any Company Entity that is greater in scope or frequency than the access afforded to the Buyer under this Agreement , (B) make any representations in connection with the Debt Financing or otherwise incur any actual or potential liability or cost in connection with the Debt Financing other in respect of the customary authorization or representation letters, (C) be in privity with any arranger, lender or other party to the Debt Financing, (D) make any disclosure not required under this Agreement, (E) waive or modify any terms of this Agreement or any other Contract to which any Seller or any Company Entity is a party, (F) take any action that will conflict with or violate any applicable Law, (G) pay any commitment or other fee, incur any liability or obligation under any indenture, loan agreement or any related document or any other agreement or document related to the Debt Financing or incur any other liability or obligation in connection with the Debt Financing or (H) approve any Debt Financing prior to the Closing
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(f) The Buyer shall, promptly upon request by the Seller, reimburse the Seller for any and all reasonable and documented out-of-pocket costs incurred by the Seller in connection with cooperation provided for in Section 5.18(e) and execute, deliver and provide such documentation as the Seller may reasonably request in connection with therewith. |
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Section 5.19 Seller Restrictive Covenants . |
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(c) The covenants and undertakings contained in this Section 5.18(g) relate to matters which are of a special, unique and extraordinary character and a violation of any of the terms of this Section 5.18(g) will cause irreparable injury to the Buyer, the amount of which will be impossible to estimate or determine and which cannot be adequately compensated. Therefore, the Buyer will be entitled to seek an injunction, restraining order or other equitable relief from any court of competent jurisdiction in the event of any breach of this Section 5.18(g) , in each case without the posting of bond or other security. The rights and remedies provided by this Section 5.18(g) are cumulative and in addition to any other rights and remedies which the Buyer may have hereunder or at law or in equity. The obligations contained in this Section 5.18(g) shall be tolled during any period that the Seller is in breach of any of its obligations in this Section 5.18(g) so that the Buyer and its Affiliates are provided with the full benefit of the restrictive periods set forth herein. |
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(a) Prior to the Closing Date, the Seller shall, and shall cause its applicable Affiliates to, assign, transfer and convey (or cause to be assigned, transferred and conveyed), without violation thereof, all of the Seller ’s or its applicable Affiliates’ rights, interests and obligations with respect to the Merial Lawsuits to a Company Entity. The Seller and its Affiliates shall release any further claims it may have in respect of the Merial Lawsuits. |
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(b) From the date of this Agreement until the Closing Date, the Seller shall (i) keep the Buyer apprised of updates regarding the Merial Lawsuits from time to time as requested by the Buyer, (ii) coordinate with the Buyer with respect to the management of the Merial Lawsuits; provided that such coordination shall not prohibit the Seller from making any filings or taking any actions that the Seller deems appropriate, and (iii) not consent to the entry of any judgment or agree to any settlement, in each case, with respect to the Merial Lawsuits, without the prior written consent of the Buyer, which shall not be unreasonably withheld, conditioned or delayed. |
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(c) After the Closing, the Buyer agrees that at its sole cost and expense, that it shall manage and assume control of the Merial Lawsuits. For purposes of clarification, from and after the Closing, the Seller shall have no right or obligation to participate in the prosecution or defense of any Merial Lawsuit and shall have no right or obligation to approve the settlement or consent to any judgment with respect to any Merial Lawsuit. |
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(a) Following the Closing and except as otherwise expressly permitted under this Section 5.23 , neither the Buyer nor any of its subsidiaries may register, or attempt or seek to register, or use any of the “Perrigo” name or the Perrigo Marks, including in signage, corporate letterhead, business cards, Internet web sites, domain names or other marketing materials. |
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(b) As soon as practicable following the Closing and in no event more than 90 days after the Closing Date, the Buyer will (i) cease production of any tangible materials that contain, display or otherwise make use of the “Perrigo” name or the Perrigo Marks, and are visible by, or distributed to, the public (including inventory packaging and labels, corporate letterhead, advertising materials, websites, domain names and marketing brochures), and (ii) otherwise discontinue all uses of the “Perrigo” name and the Perrigo Marks; provided, however, that nothing in this Section 5.23 shall prohibit the sale of inventory displaying the “Perrigo” name or other Perrigo Marks so long as such inventory was produced on or prior to the 90 th day following the Closing Date. From and after the Closing, the Buyer shall indemnify the Seller and its Affiliates to the extent the Seller or its Affiliates suffer any Losses that arise from any litigation resulting from the sale by Buyer and its Affiliates (including the Company Entities) of inventory with Perrigo Marks, provided that the Seller is not in breach of any of its representations or warranties in respect of such inventory. |
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(c) Effective as of the Closing, the Seller, on behalf of itself and its applicable Affiliates, hereby grants to the Buyer and its subsidiaries a fully paid-up, non-exclusive, royalty-free, worldwide license to use the “Perrigo” name and any Perrigo Marks in connection with the Business, in the same or a similar manner as used by the Company Entities prior to the Closing, for a period of 90 days following the Closing. The Buyer will not, and will cause its subsidiaries not to, contest the ownership or validity of any rights of the Seller or any of their Affiliates in or to the Perrigo Marks. |
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Section 5.24 Non-US Trademarks. Within 15 days after the date hereof, the Seller shall deliver to the Buyer an updated Section 3.18(a) of the Disclosure Schedule reflecting the addition of trademarks that are Owned Intellectual Property and registered or applied for in countries other than the United States. The Seller represents and warrants that the representations in Section 3.18 relating to Registered Intellectual Property shall be true and correct with respect to Registered Intellectual Property registered or applied for worldwide as of the date on which such updated schedule is delivered. The Seller will give the Buyer a reasonable opportunity to comment on the proposed list of Registered Intellectual Property registered or applied for in countries other than the United States prior to delivery of the updated Section 3.18(a) of the Disclosure Schedule . |
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(c) Documents . The Seller shall have delivered to the Buyer all of the certificates, instruments, Contracts and other documents specified to be delivered by it in Section 2.3(b) . |
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expressly speaks as of an earlier date, in which case such representation and warranty shall be true and correct as of such earlier date). |
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(c) Documents . The Buyer shall have delivered all of the certificates, instruments, Contracts and other documents specified to be delivered by it in Section 2.3(a) . |
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(b) Absence of Orders . No temporary, preliminary or permanent restraining Order prohibiting, enjoining, restricting or making illegal the consummation of the Transactions shall be in effect. |
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Section 7.1 Grounds for Termination . This Agreement may be terminated at any time prior to Closing: |
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(i) there exists a breach of any representation or warranty of the Seller contained in this Agreement such that the Closing condition set forth in Section 6.1(a) would not be satisfied; or |
provided , that (A) the Buyer shall not be entitled to terminate this Agreement pursuant to this Section 7.1(b ) unless, in the case of the immediately preceding clauses (i) or (ii), such breach, if curable, is not cured by the Seller within 30 days after the Seller receives written notice of such breach from the Buyer; provided, further that the Seller may elect by written notice to the Buyer to extend the Outside Date if and as required in order for the Seller to have a full 30 days after receipt of written notice of such breach from the Buyer within which to cure such breach; and (B) the Buyer shall not be entitled to terminate this Agreement pursuant to this Section 7.1(b ) if, at the time of such termination, the Buyer is in breach of any representation, warranty, covenant or other agreement contained in this Agreement in a manner such that the conditions to Closing set forth in Section 6.2(a ) or Section 6.2(b ) , as applicable, would not have been satisfied;
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(i) there exists a breach of any representation or warranty of the Buyer contained in this Agreement such that the Closing condition set forth in Section 6.2(a) would not be satisfied; or |
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provided , that (A) the Seller shall not be entitled to terminate this Agreement pursuant to this Section 7.1(d ) unless, in the case of the immediately preceding clauses (i) or (ii), such breach, if curable, is not cured by the Buyer within 30 days after the Buyer receives written notice of such breach from the Seller; provided , further , that the Buyer may elect by written notice to the Seller to extend the Outside Date if and as required in order for the Buyer to have a full 30 days after receipt of written notice of such breach from the Seller within which to cure such breach; and (B) the Seller shall not be entitled to terminate this Agreement pursuant to this Section 7.1(d ) if, at the time of such termination, the Seller is in breach of any representation, warranty, covenant or other agreement contained in this Agreement in a manner such that the conditions to Closing set forth in Section 6.1(a ) or Section 6.1(b ) , as applicable, would not have been satisfied;
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(iv) Transaction Costs and outstanding Company Indebtedness, in each case, to the extent not deducted from the Purchase Price . |
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ability to make a claim pursuant to the Transition Services Agreement or (iii) any coverage available under the R&W Policy. |
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(iii) any act taken by the Seller or any Company Entity pursuant to Section 5.18(e) , except to the extent such Losses were suffered or incurred as a result of the knowing and intentional fraud of the Seller or its Affiliates; or |
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in connection with this Agreement or the consummation of the Transactions or (ii) the Seller’s ability to make a claim pursuant to the Transition Services Agreement. |
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(e) To the extent there is any conflict between this Section 8.4 and Section 5.8(e) as relates to a Tax Claim, the provisions of Section 5.8(e) shall control. |
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amount of Losses payable under this Article VIII by the Indemnitor shall be reduced by any and all amounts recovered by the Indemnitee under applicable insurance policies or from any other Person alleged to be responsible therefor (net of all costs and expenses associated with the recovery thereof, including any insurance premium increases or loss of coverage resulting therefrom, with respect to insurance policies other than the R&W Policy). If the Indemnitee receives any amounts under applicable insurance policies or from any other Person alleged to be responsible for any Losses subsequent to an indemnification payment by the Indemnitor, then such Indemnitee shall promptly reimburse the Indemnitor for any payment made or expense incurred by such Indemnitor in connection with providing such indemnification up to the amount received by the Indemnitee, net of any expenses incurred by such Indemnitee in collecting such amount. |
PetIQ, Inc.
923 South Bridgeway Place
Eagle, Idaho 83616
Attn: R. Michael Herrman, General Counsel
Email: michael.herrman@petiq.com
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with a required copy (which shall not constitute notice) to:
Winston & Strawn LLP
200 Park Avenue
New York, New York 10020
Attention: Dominick DeChiara
Bryan Goldstein
Email: ddechiara@winston.com
bgoldstein@winston.com
L. Perrigo Company
515 Eastern Avenue
Allegan, MI 49010
Attention:
Legal Department
Email:
legal@perrigo.com
with a required copy (which shall not constitute notice) to:
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178
Attention:
Sheryl L. Orr
Email:
sheryl.orr@morganlewis.com
or to such other address or to the attention of such Person or Persons as the recipient Party has specified by prior written notice in the manner set forth in this Section 9.1 to the sending Party (or in the case of counsel, to such other readily ascertainable business address as such counsel may maintain from and after the date of this Agreement). If more than one method for sending notice as set forth above is used, the earliest notice date established as set forth above shall control.
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dispute arising out of or relating in any way to the Debt Financing or the performance thereof or the transactions contemplated thereby, in any forum other than exclusively in the Supreme Court of the State of New York, County of New York, or, if under applicable law exclusive jurisdiction is vested in the federal courts, the United States District Court for the Southern District of New York (and appellate courts thereof), (ii) submits for itself and its property with respect to any such action to the exclusive jurisdiction of such courts, (iii) agrees that service of process, summons, notice or document by registered mail addressed to it at its address provided in Section 9.1 shall be effective service of process against it for any such action brought in any such court, (iv) waives and hereby irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of venue of, and the defense of an inconvenient forum to the maintenance of, any such action in any such court and (v) agrees that a final judgment in any such action shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. EACH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT THE TRANSACTIONS, THE OTHER TRANSACTIONS CONTEMPLATED BY ANY OF THE FOREGOING OR THE ACTIONS, INCLUDING COUNTERCLAIMS, OF THE PARTY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT OF THIS AGREEMENT OR THEREOF. NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY. EACH SELLER PARTY AND EACH OTHER PARTY THERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE TRANSACTIONS, THE DEBT FINANCING OR ANY OF THE OTHER TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, INCLUDING IN ANY ACTION, PROCEEDING OR COUNTERCLAIM AGAINST ANY FINANCING SOURCE. |
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Financing Source shall have any rights or claims against any Seller Party in connection with this Agreement, the Debt Financing or the transactions contemplated hereby or thereby, whether at law or equity, in contract, in tort or otherwise; provided that the foregoing will not limit the rights of the parties to the Debt Financing under any commitment letter related thereto. No Financing Source shall be subject to any special, consequential, punitive or indirect damages or damages of a tortious nature. Each party hereto waives and releases all such rights and claims against the Financing Source (other than as set forth under any commitment letter related to the Debt Financing). |
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and the same instrument. This Agreement shall become effective when each Party shall have received a counterpart of this Agreement signed by the other Parties. The Parties agree that the delivery of this Agreement, and the other documents, agreements and instruments to be delivered in connection with this Agreement, may be effected by means of an exchange of electronically transmitted signatures (including by electronic mail in .pdf format). |
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Buyer Guarantor in accordance with its terms, except as limited by (a) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar Laws relating to creditors’ rights generally and (b) general principles of equity, whether such enforceability is considered in a Proceeding in equity or at law. |
[ Signature Page Follows ]
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IN WITNESS WHEREOF , the Parties have caused this Agreement to be duly executed as of the day and year first above written.
BUYER:
PETIQ, LLC
By: /s/ McCord Christensen
Name:
McCord Christensen
Title: Chief Executive Officer
BUYER GUARANTOR:
PETIQ, INC.
By: /s/ McCord Christensen
Name:
McCord Christensen
Title: Chief Executive Officer
By: /s/ R. Michael Herrman
Name:
R. Michael Herrman
Title: SVP, General Counsel and Corporate Secretary
Signature Page to Purchase and Sale Agreement
SELLER:
L. PERRIGO COMPANY
By: /s/ Todd Kingma
Name:
Todd Kingma
Title: Executive Vice President and Secretary
SELLER PARENT:
PERRIGO COMPANY PLC
By: /s/ Murray Kessler
Name:
Murray Kessler
Title: President and Chief Executive Officer
Signature Page to Purchase and Sale Agreement
Appendix A
Definitions
When used in this Agreement, the following terms have the meanings assigned to them in this Appendix:
“ Accounting Principles ” means the accounting methodologies, principles and procedures set forth on Schedule A-1 .
“ Accounts Receivable ” has the meaning set forth in Section 3.23(a ) .
“ Acquisition Proposal ” has the meaning set forth in Section 5.4 .
“ Affiliate ” of any Person means any other Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with such first Person. For purposes of this definition, “control” (including the terms “controlled by” and “under common control with”) of a Person means the power to, directly or indirectly, direct or cause the direction of the management and policies of such Person whether through ownership of voting securities or other ownership interests, by Contract or otherwise, including, with respect to a corporation, partnership or limited liability company, the direct or indirect ownership of more than 50% of the voting securities in such corporation or of the voting interest in a partnership or limited liability company. For the avoidance of doubt, the Company Entities shall be considered Affiliates of (a) the Seller prior to the Closing and (b) the Buyer following the Closing.
“ Affiliate Agreement ” has the meaning set forth in Section 5.16(b ) .
“ Affiliated Group ” means any group of corporations that has elected or is otherwise required to file as a consolidated, combined, or unitary tax group.
“ Agreement ” has the meaning set forth in the preamble to this Agreement.
“ Ancillary Agreements ” has the meaning set forth in Section 3.2 .
“ Annual Financial Statements ” has the meaning set forth in Section 3.6(a)(i) .
“ Anti-Corruption Laws ” means the U.S. Foreign Corrupt Practices Act of 1977, as amended, or any rules or regulations thereunder, the United Kingdom Bribery Act of 2010, or any similar laws and regulations regarding corruption, bribery, ethical business conduct, or gifts, hospitalities or expense reimbursements to public officials and private persons which are applicable in countries where the Company Entities engage in business.
“ Antitrust Authorities ” means the Federal Trade Commission, the Antitrust Division of the United States Department of Justice and the attorneys general of the several states of the United States.
“ Applicable Survival Period ” has the meaning set forth in Section 8.1(b ) .
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“ Approvals ” has the meaning set forth in Section 3.10(b ) .
“ Audited Financial Statements ” has the meaning set forth in Section 5.14(a ) .
“ Balance Sheet Date ” has the meaning set forth in Section 3.6(a)(i) .
“ Base Purchase Price ” has the meaning set forth in Section 2.1(a ) .
“ Benefit Plan ” means any (i) each “employee benefit plan” as defined in Section 3(3) of ERISA, including each “pension” plan within the meaning of Section 3(2) of ERISA (determined without regard to whether such plan is subject to ERISA); and (ii) each “welfare” plan (within the meaning of Section 3(1) of ERISA (determined without regard to whether such plan is subject to ERISA), and (iii) each other retirement, disability, vacation, leave of absence, bonus, incentive compensation, deferred compensation, change in control, equity, phantom equity, severance, fringe benefit, health, welfare, change-in-control, disability or other similar plan, program, policy, agreement or other arrangement .
“ Business ” means the manufacturing, research & development, supply and distribution of animal health products.
“ Business Day ” means any day, other than Saturday, Sunday or any other day on which banks located in the State of New York are authorized or required to close.
“ Buyer ” has the meaning set forth in the preamble to this Agreement.
“ Buyer 401(k) Plan ” has the meaning set forth in Section 5.11(g) .
“Buyer-Filed Tax Return” has the meaning set forth in Section 5.8(a)(ii) .
“ Buyer FSA Plan ” has the meaning set forth in Section 5.11(h)(i) .
“ Buyer Guarantor ” has the meaning set forth in the preamble to this Agreement.
“ Buyer Indemnitees ” has the meaning set forth in Section 8.2(a ) .
“ Buyer Parties ” has the meaning set forth in Section 5.10(b ) .
“ Capital Interest ” has the meaning set forth in this Appendix A under the term “Equity Securities.”
“ Closing ” has the meaning set forth in Section 2.2 .
“ Closing Amounts ” means the Closing Working Capital, the Closing Cash, the Closing Indebtedness and the Closing Transaction Costs.
“ Closing Cash ” means, as of 12:01 a.m. Eastern Time on the Closing Date, the aggregate amount of all cash and cash equivalents, including checks, any deposits in transit as of such time that have not yet cleared, money orders, marketable securities, short term instruments, negotiable instruments, funds in time and demand deposits or similar accounts on hand, in lock
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boxes, in financial institutions or elsewhere, together with all accrued but unpaid interest thereon, and all bank, brokerage or other similar accounts, of the Company Entities, excluding (i) any amounts taken into account in calculating any other Closing Amount, (ii) the amount of any checks, drafts and wires issued as of such time that have not yet cleared, but only to the extent that such checks, drafts and wires are not included as a Current Liability in the calculation of Closing Working Capital, and (iii) any amounts included as Current Assets in the calculation of Closing Working Capital.
“ Closing Date ” has the meaning set forth in Section 2.2 .
“ Closing Indebtedness ” means, as of 12: 01 a.m. Eastern Time on the Closing Date, the aggregate amount of all Indebtedness of the Company Entities, excluding any amounts taken into account in calculating any other Closing Amount.
“ Closing Payment ” means an amount equal to (a) the Base Purchase Price, plus (b) an amount (which may be positive or negative) equal to (i) the Closing Working Capital as set forth in the Estimated Closing Statement, minus (ii) the Target Working Capital, plus , (c) the lesser of (x) Closing Cash as set forth on the Estimated Closing Statement or (y) $5,000,000, minus (d) the Closing Indebtedness as set forth in the Estimated Closing Statement, minus (e) the Closing Transaction Costs as set forth in the Estimated Closing Statement.
“ Closing Statement ” has the meaning set forth in Section 2.4(b ) .
“ Closing Transaction Costs ” means, as of 12: 01 a.m. Eastern Time on the Closing Date, the aggregate amount of Transaction Costs that remain unpaid, excluding any amounts taken into account in calculating any other Closing Amount.
“ Closing Working Capital ” means, as of 12: 01 a.m. Eastern Time on the Closing Date, (a) the aggregate amount of Current Assets, minus (b) the aggregate amount of Current Liabilities, in each case, (i) as calculated in accordance with the Accounting Principles and (ii) excluding any amounts taken into account in calculating any other Closing Amount.
“ Code ” means the Internal Revenue Code of 1986, as amended.
“ Company ” has the meaning set forth in the recitals to this Agreement.
“ Company Benefit Plan ” means any Benefit Plan that is currently maintained or sponsored by any Company Entity, and shall exclude, for the avoidance of doubt, any Benefit Plan that is a Seller Benefit Plan .
“ Company Consolidated Return Taxes ” means any Tax of a Seller Affiliated Group (or member thereof) for which a Company Entity is liable under Treasury Regulations Section 1.1502- 6 (or any analogous provision of state or local Law) or other applicable provision of Law.
“ Company Consolidated Tax Returns ” has the meaning set forth in Section 5.8(a)(i) .
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“ Company Entity ” and “ Company Entities ” means each of the Company and each Company Subsidiary.
“ Company Entity Intellectual Property ” means all Owned Intellectual Property and all other Intellectual Property used, held for use or planned for use in connection with or otherwise necessary for conducting the business of the Company Entities as currently conducted and as proposed to be conducted.
“ Company Subsidiary ” means each of SPC Trademarks, LLC, Pet Logic, LLC, Meridian Animal Health, LLC, Velcera, Inc., FidoPharm, Inc., LoradoChem, Inc., FidoPharmBrands, LLC and American Business Sergeant’s Pet Care Products Trade (Shanghai) Co, Ltd.
“ Confidentiality Agreement ” means that certain Confidentiality Agreement, dated December 10, 2018, by and between PetIQ, LLC and Perrigo Company, plc.
“ Contest Requirement ” has the meaning set forth in the definition of Permitted Lien.
“ Continuation Period ” has the meaning set forth in Section 5.11(c) .
“ Continuing Employee ” has the meaning set forth in Section 5.11(c) .
“ Contract ” means any written contract, lease, license, indenture, undertaking or other agreement that is legally binding.
“ Current Assets ” means, without duplication, only those line items shown on Schedule A- 1 as current assets of the Company Entities and as determined in accordance with the Accounting Principles (which shall exclude any assets related to Income Taxes (whether current or deferred)).
“ Current Liabilities ” means, without duplication, only those line items shown on Schedule A- 1 as current liabilities of the Company Entities and as determined in accordance with the Accounting Principles (which shall exclude any liabilities related to Income Taxes (whether current or deferred).
“ D&O Indemnified Party ” has the meaning set forth in Section 5.12(a ) .
“ Debt Financing ” has the meaning set forth in Section 4.5(a) .
“ Debt Financing Commitment ” has the meaning set forth in Section 4.5(a) .
“ Disclosure Schedule ” has the meaning set forth in the lead-in to Article III .
“ Employee ” means each employee of the Company Entities listed on Section 3.14(a)(i) of the Disclosure Schedule and each employee of the Seller or an Affiliate of Seller (other than any Company Entity) listed on Section 3.14(a)(iii) of the Disclosure Schedule , but shall
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not include each employee of the Seller or an Affiliate of Seller (other than any Company Entity) listed on Section 3.14(a)(ii) of the Disclosure Schedule .
“ Employee Payment ” has the meaning set forth in Section 2.3(c ) .
“ Environmental Law ” means any applicable Law relating to the protection of the environment or the protection of human health as it may be affected by exposure to Hazardous Materials and/or governing the handling, use, generation, treatment, storage, transportation, disposal, manufacture, registration, distribution, formulation, packaging, labeling or release of or exposure to Hazardous Materials, including but not limited to: the Clean Air Act, 42 U.S.C. § 7401 et seq. ; the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. § 9601 et seq. ; the Federal Water Pollution Control Act, 33 U.S.C. § 1251 et seq. ; the Hazardous Material Transportation Act, 49 U.S.C. § 1801 et seq. ; the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. § 136 et seq. ; the Resource Conservation and Recovery Act of 1976 (“RCRA”), 42 U.S.C. § 6901 et seq. ; the Toxic Substances Control Act, 15 U.S.C. § 2601 et seq. ; in each case as in effect as of the applicable date of determination.
“ EPA ” has the meaning set forth in Section 3.10(b ) .
“ Equity Securities ” means (a) capital stock, partnership or membership interests or units (whether general or limited), and any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distribution of assets of, the issuing entity or a right to control such entity (a “ Capital Interest ”), (b) subscriptions, calls, warrants, options, purchase rights or commitments of any kind or character relating to, or entitling any Person to acquire, any Capital Interest, (c) stock appreciation, phantom stock, equity participation or similar rights and (d) securities convertible into or exercisable or exchangeable for any Capital Interests.
“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended, and the rules and the regulations promulgated thereunder.
“ Estimated Closing Statement ” has the meaning set forth in Section 2.4(a ) .
“ Evaluation Material ” has the meaning set forth in Section 3.25(b) .
“ Exchange Act ” means the Securities Exchange Act of 1934.
“ Ex-Im Laws ” means all U.S. and non-U.S. Laws relating to export, reexport, transfer and import controls, including the Export Administration Regulations, the International Traffic in Arms Regulations and the customs and import Laws administered by U.S. Customs and Border Protection.
“ FDA ” has the meaning set forth in Section 3.10(b ) .
“ Filing ” means a registration, declaration or filing with a Governmental Entity.
“ Final Closing Cash ” has the meaning set forth in Section 2.4(e)(i ) .
“ Final Closing Indebtedness ” has the meaning set forth in Section 2.4(e)(i ) .
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“ Final Closing Transaction Costs ” has the meaning set forth in Section 2.4(e)(i ) .
“ Final Closing Working Capital ” has the meaning set forth in Section 2.4(e)(i ) .
“ Financial Statements ” has the meaning set forth in Section 3.6(a)(ii) .
“ Financing Source ” has the meaning set forth in Section 4.5(a) .
“ Firm ” has the meaning set forth in Section 2.2 .
“ Flow-Thru Entity ” means (a) any entity, plan or arrangement that is treated for Income Tax purposes as a partnership, (b) a “specified foreign corporation” within the meaning of Code Section 965 (including a “controlled foreign corporation” within the meaning of Code Section 957), or (c) a “passive foreign investment corporation” within the meaning of Code Section 1297.
“ Foreign Benefit Plan ” means any Benefit Plan that is currently maintained outside of United States and is sponsored, contributed to or required to be contributed to by the Seller, any of its Affiliates, or any Company Entity for the benefit of any current or former Employee or any current or former director, officer or independent contractor of any Company Entity, in respect of such individual’s employment or service with any Company Entity .
“ FTC ” has the meaning set forth in Section 3.10(i) .
“ Fundamental Representations ” means the representations and warranties contained in Section 3.1 (Organization and Existence), Section 3.2 (Authority and Enforceability), Section 3.3 (Capitalization of the Company; Title to Purchased Interests), Section 3.4 (Company Subsidiaries), Section 3.21 (Brokers), Section 4.1 (Good Standing; Organization), Section 4.2 (Authority and Enforceability) and Section 4.7 (Brokers).
“ GAAP ” means generally accepted accounting principles in the United States.
“ Governmental Entity ” means any court, tribunal, arbitrator, authority, agency, commission, legislative body or official of the United States or any state, or similar governing entity, in the United States or in a foreign jurisdiction, including, the FDA, the EPA or any other self-regulatory or administrative organizations.
“ Hazardous Material ” means petroleum, asbestos or asbestos-containing materials, gasoline, diesel fuel, polychlorinated biphenyls; and any other chemicals, materials, substances or wastes which are defined or regulated as hazardous or toxic under any applicable Environmental Law.
“ HSR Act ” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended and the rules and regulations promulgated thereunder.
“ Income Tax ” means any Tax based on, or computed with respect to, net income or earnings, gross income or earnings, capital, or net worth and any franchise Taxes or Tax on doing business imposed in lieu thereof) and all related interest and penalties.
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“ Indebtedness ” means any of the following: (a) indebtedness for borrowed money; (b) obligations evidenced by bonds, debentures, notes or other similar instruments; (c) obligations under acceptance, letters of credit or similar facilities, in each case, solely to the extent drawn upon; (d) all obligations under capitalized leases required to be recorded as capitalized leases by GAAP prior to the adoption of ASC 842 (other than obligations relating to any leases that were classified as operating leases prior to the adoption of ASC 842), (e) all obligations with respect to interest rate and currency obligations, swaps, collars, caps or similar hedging obligations (valued at the termination value thereof), (f) all obligations of the type referred to in clauses (a) through (e) of any Person the payment of which such Person is responsible, directly or indirectly, as obligor, guarantor, surety or otherwise, (g) any accrued interest, fees and charges in respect of any of the foregoing and (h) any prepayment premiums and penalties, and any other fees, expenses, indemnities and other amounts payable as a result of the prepayment or discharge of any of the foregoing at or prior to the Closing.
“ Indemnified Taxes ” (and the correlative meaning, “ Indemnified Tax ”) means, without duplication, any of the following Taxes (in each case, whether imposed, assessed, due or otherwise payable directly, as a successor or transferee, jointly and/or severally, pursuant to a contract entered (or assumed) by any Company Entity on or prior to the Closing Date, in connection with the filing of a Tax Return, as a result of an assessment or adjustment by any Governmental Entity, by means of withholding, or for any other reason and whether disputed or not):
(a) all Taxes of any Company Entity (other than Transfer Taxes (which are governed by (d))) for (or as provided in Section 5.8(c) attributable to) any Pre-Closing Tax Period;
(b) all Company Consolidated Return Taxes;
(c) all Taxes resulting from (i) a breach of a representation contained in Section 3.17 (in each case disregarding any materiality or Material Adverse Effect qualifications therein) or (ii) a breach of a covenant or other agreement of the Seller contained in Section 5.2(o) , Section 5.7 or Section 5.8 ;
(d) the Seller’s allocable share of all Transfer Taxes as determined under Section 5.7 ; and
(e) all Taxes for which the Seller is responsible under Section 5.8(d)(ii) .
Indemnified Taxes shall exclude Taxes to the extent included in the final computation of the Closing Amounts.
“ Indemnitee ” means any Person that is seeking indemnification pursuant to the provisions of this Agreement.
“ Indemnitor ” means any Party from which a Person is seeking indemnification pursuant to the provisions of this Agreement.
“ Independent Expert ” has the meaning set forth in Section 2.4(d ) .
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“ Intellectual Property ” means all worldwide (a) patents, industrial designs, utility models, and applications for any of the foregoing, including all provisionals, continuations, continuations-in-part, divisions, reissues, re-examinations and extensions thereof; (b) trademarks, service marks, certification marks, trade dress, logos, trade names, domain names, social media accounts and other source of business identifiers, whether registered or unregistered, and all registrations and applications for any of the foregoing, all renewals and extensions thereof and all common law rights in and goodwill associated with any of the foregoing; (c) works of authorship (including Software), copyrights, mask work rights, database rights and design rights, whether registered or unregistered, together with all applications, registrations, renewals and extensions therefor and all moral rights associated with any of the foregoing; (d) trade secrets and other proprietary and confidential information, including inventions (whether or not patentable), invention disclosures, ideas, developments, improvements, know-how, designs, drawings, algorithms, source code, methods, processes, techniques, formulae, recipes, research and development, compilations, compositions, manufacturing processes, production processes, devices, technical data, specifications, reports, analyses, data analytics, customer lists, supplier lists, pricing information, cost information, business plans and proposals and marketing plans and proposals and (e) any rights recognized under applicable Law that are equivalent or similar to any of the foregoing.
“Intercompany Contract” means each Contract between any Company Entity, on the one hand, and any other Company Entity, on the other hand.
“ Interim Balance Sheet Date ” has the meaning set forth in Section 3.6(a)(ii) .
“ Interim Financial Statements ” has the meaning set forth in Section 3.6(a)(ii) .
“ Interim Period ” means the period beginning on the date of this Agreement and ending on the earlier of (a) the Closing and (b) the termination of this Agreement.
“ IRS ” means the Internal Revenue Service.
“ IT Assets ” means Software, systems, servers, computers, hardware, firmware, middleware, networks, data communications lines, routers, hubs, switches and all other information technology equipment, and all associated documentation, in each case, used or held for use in the operation of the business of the Company Entities.
“ Knowledge ” means the actual knowledge, following reasonable inquiry, of (a) in the case of the Seller, Neal Wilmore, Jeff Needham, Ben Needham, James Larson and Ben Shane and (b) in the case of the Buyer, Cord Christensen, Michael Herrman, John Newland, Jeff Caywood and Pat Jones.
“ Last Quarter Financials ” has the meaning set forth in Section 2.3(b)(x) .
“ Law ” means, with respect to any Person, any statute, law (including common law), code, treaty, ordinance, rule or regulation of any Governmental Entity applicable to such Person as of the date of this Agreement.
“ Leased Real Property ” has the meaning set forth in Section 3.12(b ) .
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“ Liabilities ” means all debts, liabilities, guarantees, assurances, commitments and obligations of any kind, whether fixed, contingent or absolute, asserted or unasserted, matured or unmatured, liquidated or unliquidated, accrued or not accrued, known or unknown, due or to become due, whenever or however arising.
“ Lien ” means with respect to any property or asset, any lien, mortgage, pledge, charge, security interest or other encumbrance in respect of such property or asset.
“ Losses ” means any loss, liability, obligation, demand, charge, Proceeding, assessed interest, penalty, damage and Tax.
“ Major Customers ” means the top 20 customers of the Company Entities based on gross amounts paid for goods or services provided by the Company Entities during the 12 months ending on the Balance Sheet Date.
“ Major Vendors ” means the top 20 suppliers and vendors of goods and services to the Company Entities based on gross amounts paid for such goods or services during the 12 months ending on the Balance Sheet Date.
“ Marketing Period ” means the first period of 15 consecutive Business Days, commencing on the first Business Day after the date of delivery of the Required Financial Information (throughout which the Buyer shall have the Required Financial Information); provided , that (a) the Marketing Period shall not be deemed to have commenced if, prior to the completion of such 15 consecutive Business Day period, the Seller has determined or is contemplating restating any financial statements or financial information included in the Required Financial Information, in which case the Marketing Period shall not be eligible to commence unless and until such restatement has been completed and the relevant Required Financial Information has been amended or the Seller has determined that no restatement shall be required in accordance with GAAP, (b) if the Seller shall in good faith reasonably believe that it has delivered the Required Financial Information, the Seller may deliver to the Buyer written notice to that effect (stating when the Seller believes it completed any such delivery), in which case the Seller shall be deemed to have delivered such Required Financial Information on the date specified in such notice and the Marketing Period shall be deemed to have commenced on the date specified in such notice, unless the Buyer in good faith reasonably believes that the Seller has not completed delivery of such Required Financial Information and, within three Business Days after their receipt of such notice from the Seller, the Buyer delivers a written notice to the Seller to that effect (stating with specificity what Required Financial Information the Seller has not delivered), (c) the Marketing Period shall end on any earlier day that is the date on which the Debt Financing is consummated, (d) if the Marketing Period shall not have been completed on or prior to August 16, 2019 or December 17, 2019, then such Marketing Period shall be deemed not to have commenced until September 3, 2019 or January 2, 2020, as applicable, (e) the Marketing Period shall not include July 3, 2019, July 4, 2019, July 5, 2019, November 28, 2019 and November 29, 2019 and (f) for the avoidance of doubt, May 27, 2019, October 14, 2019, November 11, 2019, January 20, 2020, February 17, 2020 and April 10, 2020 shall not be considered “Business Days” for purposes of the Marketing Period.
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“ Material Adverse Effect ” means any change, development, impact, fact, circumstance, condition, effect or event (A) that has, or would reasonably be expected to have, individually or in the aggregate with all other changes, developments, impacts, facts, circumstances, conditions, events or effects, a material adverse effect to the business, assets, liabilities, properties, results of operations or financial or other condition of the Company Entities, taken as a whole; provided , however , that any changes or events resulting from the following items shall not be considered when determining whether a Material Adverse Effect has occurred: (a) changes in economic, political, regulatory, financial or capital market conditions generally or in the industries in which the Company Entities operate, (b) any acts of war, sabotage, terrorist activities or changes imposed by a Governmental Entity associated with national security, (c) effects of weather or other meteorological events, (d) any change of Law, accounting standards, regulatory policy or industry standards after the date of this Agreement, (e) any actions taken by, or at the express request of, the Buyer, (f) any failure by the Company to meet projections or forecasts or revenue or earnings predictions for any period (but, for the purposes of clarity, not the underlying cause of such failure), and (g) the announcement, execution, delivery or performance of this Agreement or the fact that the prospective owner of the Company is the Buyer; provided , further , that in the case of clauses (a), (b), (c) or (d) above, if such change, effect, event, occurrence, state of facts or development disproportionately affects the Company Entities as compared to other Persons or businesses that operate in the industry in which the Company Entities operate, then the disproportionate aspect of such change, effect, event, occurrence, state of facts or development may be taken into account in determining whether a Material Adverse Effect has occurred or will occur; provided , further , that, in the case of the foregoing clauses (a), (b), (c) or (d) above, the underlying causes of such failures shall not be excluded if such facts, change, event, effect or occurrence referred to therein has had, or is reasonably likely to have, a disproportionate adverse impact on the Company Entities, taken as a whole, relative to other similarly situated companies in the industries in which the Company Entities operate or (B) that will, or is reasonably likely to, prevent or materially delay the performance by the Seller of any of its obligations under this Agreement.
“ Material Contracts ” has the meaning set forth in Section 3.11(b ) .
“ Merial Lawsuits ” means the following lawsuits (including any appeals from these lawsuits): (a) Perrigo Company; Sergeant’s Pet Care Products, Inc. d/b/a Perrigo Animal Health; Velcera, Inc.; and Fidopharm, Inc. v. Merial Limited d/b/a Merial, L.L.C. (U.S. District Court, N.D. Georgia); and (b) Merial, Incorporated v. Sergeant’s Pet Care Products, Incorporated (U.S. District Court, W.D. Michigan).
“ Notice of Claim ” has the meaning set forth in Section 8.4(a ) .
“ Notice of Objection ” has the meaning set forth in Section 2.4(c ) .
“ OFAC ” has the meaning set forth in this Appendix A under the term “Sanctions Laws.”
“ Order ” means any award, injunction, judgment, order, writ, decree or ruling entered, issued, made or rendered by any Governmental Entity that possesses competent jurisdiction.
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“ Organizational Documents ” means, with respect to any Person that is not an individual, the articles or certificate of incorporation or formation, by-laws, limited partnership agreement, partnership agreement, limited liability company agreement, shareholders agreement, trust agreement or such other organizational documents of such Person.
“ Outside Date ” has the meaning set forth in Section 7.1(a ) .
“ Owned Intellectual Property ” means all Intellectual Property owned or purported to be owned by a Company Entity.
“ Owned Real Property ” has the meaning set forth in Section 3.12(a ) .
“ Owned Software ” means all Software that is Owned Intellectual Property.
“ Party ” or “ Parties ” has the meaning set forth in the preamble to this Agreement.
“ Permit ” means a consent, approval, license, permit, certificate, authorization or the expiration without condition or qualification of applicable waiting period from any Governmental Entity.
“ Permitted Lien ” means (a) any Lien for Taxes that are not yet due or delinquent or that are being contested in good faith for which adequate reserves have been established on the books of the appropriate Company Entity by appropriate proceedings and in each case, and in accordance with any applicable Real Property Lease(s), provided that such proceedings operate during the pendency thereof to prevent or stay (i) the collection of, or other realization upon such Lien so contested, (ii) the sale, forfeiture or loss of any Real Property or any rent under any Real Property Lease to satisfy or to pay any damages caused by such contested Lien, (iii) any interference with the use or occupancy of any Real Property, (iv) any interference with the payment of any rent under the applicable Real Property Lease(s) or (v) the cancellation or increase in the rate of any insurance policy or a statement by the carrier that coverage will be denied (collectively, the “ Contest Requirements ”), (b) any mechanics’, workmen’s, repairmen’s, warehousemen’s, carriers’ or other like Lien arising in the ordinary course of business that are being contested by appropriate proceedings that satisfy the Contest Requirements, (c) imperfections or irregularities of title that do not and would not, individually or in the aggregate, materially detract from the value of, or materially interfere with, the present use and enjoyment of the asset or property subject thereto or affected thereby, (d) zoning, planning, building and other similar limitations, restrictions and rights of any Governmenta l Entity to regulate property, (e) any Lien arising pursuant to, or as a result of the Transactions, and (f) any Lien that a reputable title insurance company would have omitted as an exception or affirmatively insure against in a title insurance policy for the affected property.
“ Perrigo Marks ” means all trademarks, service marks, corporate names or trade names that contain or comprise the word “Perrigo” or any variations or derivatives thereof.
“ Person ” means any natural person, corporation, general partnership, limited partnership, limited liability company, joint venture, trust, proprietorship, other business organization or Governmental Entity.
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“ Personal Information ” means information that, alone or in combination with other information, allows the identification of an individual or can be used to contact an individual, or serve advertisements to an individual, including name; Social Security number; government-issued identification numbers; health or medical information, including health insurance information; financial account information; passport numbers; user names/email addresses in combination with a password or security code that would allow access to an online account; unique biometric identifiers (e.g., fingerprints, retinal scans, face scans, or DNA profile); employee ID numbers; date of birth; digital signature; and Internet Protocol (IP) addresses.
“ Pre-Closing Tax Period ” means any taxable period ending on or before the Closing Date and the portion through the end of the Closing Date for any Straddle Period.
“ Privacy and Security Requirements ” means, to the extent applicable to the Company Entities, (a) all Privacy Laws; (b) all Privacy Contracts; and (c) all Privacy Policies.
“ Privacy Contracts ” means all Contracts between any Company Entity and any Person that are applicable to the Processing of Personal Information.
“ Privacy Laws ” means any Laws regulating the Processing of Personal Information including Section 5 of the Federal Trade Commission Act, all state Laws related to unfair or deceptive trade practices, the Fair Credit Reporting Act, the Controlling the Assault of Non-Solicited Pornography And Marketing Act of 2003, the Telephone Consumer Protection Act, the Illinois Biometric Information Privacy Act, all Laws related to faxes, telemarketing and text messaging and all Laws related to breach notification.
“ Privacy Policies ” means all written policies and procedures applicable to the Company Entities relating to the Processing of Personal Information, including all website and mobile application privacy policies and internal information security procedures.
“ Proceeding ” means any action, cause of action, suit, hearing, claim, complaint, dispute, controversy, lawsuit, litigation, investigation or inquiry (including any request for additional information or documentary materials from an Antitrust Authority concerning the Transactions), arbitration or proceeding (in each case, whether civil, criminal or administrative or at law or in equity) by or before a Governmental Entity.
“ Process” means the creation, collection, use (including for the purposes of sending telephone calls, text messages and emails), storage, maintenance, processing, recording, distribution, transfer, transmission, receipt, import, export, protection, safeguarding, access, disposal or disclosure or other activity regarding data (whether electronically or in any other form or medium).
“ Purchased Interests ” has the meaning set forth in the recitals to this Agreement.
“ Purchase Price ” has the meaning set forth in Section 2.1 .
“ Purchase Price Adjustment ” has the meaning set forth in Section 2.4(e)(ii ) .
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“ Purchase Price Allocation Schedule ” has the meaning set forth in Section 5.8(f)(iii) .
“ R&W Insurer ” means AIG Specialty Insurance Company.
“ R&W Policy ” means policy number 24156697, issued by the R&W Insurer to the Buyer on or prior to the date of this Agreement.
“ Real Property ” has the meaning set forth in Section 3.12(a ) .
“ Real Property Leases ” has the meaning set forth in Section 3.12(b ) .
“ Redacted Fee Letters ” has the meaning set forth in Section 4.5(c) .
“ Registered Intellectual Property ” has the meaning set forth in Section 3.18(a) .
“ Regulated Product Marketing Services ” has the meaning set forth in Section 3.10(i) .
“ Related Parties ” means, with respect to a Person, such Person’s former, current and future direct or indirect equityholders, controlling Persons, shareholders, members, general or limited partners, Affiliates, Representatives, sources of financing and each of their respective successors and assigns.
“ Representatives ” means the officers, directors, managers, trustees, employees, counsel, accountants, agents, financial advisers and consultants of a Person.
“ Required Financial Information ” shall mean such information and data regarding the Company Entities as is reasonably requested in good faith by the Buyer that is customarily delivered by a borrower and necessary for the preparation of customary confidential information memoranda for senior secured term loan financings, including any information required as part of a Supplemental Request. The Required Financial Information to be delivered by the Seller shall be prepared in accordance with the Seller’s accounting methods, policies, practices, principles, bases and procedures, including in respect of the exercise of management judgment, adopted in the preparation of the Annual Financial Statements.
“ Review Period ” has the meaning set forth in Section 2.4(c ) .
“ Rule 3 - 05 Financial Statements ” has the meaning set forth in Section 5.14(b ) .
“ Sample Calculation ” means for illustrative purposes, the sample calculation of Closing Working Capital set forth on Schedule A- 1 , as if the Closing Date were the Interim Balance Sheet Date.
“ Sanctioned Country ” means any country or region that is the subject or target of a comprehensive embargo under Sanctions Laws (including, but not limited to, Iran, North Korea, Sudan, Cuba, Syria and the Crimea region of Ukraine).
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“ Sanctioned Person ” means any Person that is the subject or target of sanctions or restrictions under Sanctions Laws or Ex-Im Laws, including: (i) any individual or entity listed on any relevant U.S. or non-U.S. sanctions- or export-related restricted party list, including OFAC’s Specially Designated Nationals and Blocked Persons List; (ii) any entity that is, in the aggregate, 50 percent or greater owned, directly or indirectly, or otherwise controlled by a Person or Persons described in clause (i); or (iii) any national of a Sanctioned Country.
“ Sanctions Laws ” means all U.S. and non-U.S. Laws relating to economic or trade sanctions, including the Laws administered or enforced by the United States (including by the U.S. Department of Treasury Office of Foreign Assets Control (“ OFAC ”) or the U.S. Department of State), or the United Nations Security Council.
“ Section 336(e) Agreement ” has the meaning set forth in Section 5.8(f)(i ) .
“ Section 336(e) Election ” has the meaning set forth in Section 5.8(f)(i ) .
“ Section 336(e) Forms ” has the meaning set forth in Section 5.8(f)(i ) .
“ Securities Act ” means the Securities Act of 1933, as amended from time to time.
“Security Breach ” means security breach or breach of Personal Information under applicable Laws.
“ Security Incident ” means any unauthorized access, acquisition, use, disclosure, modification, deletion, or destruction of information (including Personal Information) or interference with system operations of IT Assets.
“ Seller ” has the meaning set forth in the preamble to this Agreement.
“ Seller Benefit Plan ” means any Benefit Plan other than a Company Benefit Plan (a) that is currently maintained, sponsored, contributed to or required to be contributed to by the Seller or any of its Affiliates, including the Company Entities, for the benefit of any current or former Employee or any current or former director, officer or independent contractor in respect of such individual’s employment or service with any Company Entity or with respect to the Seller Business, or (b) with respect to which any Company Entity has any Liability; provided that, for the avoidance of doubt, Seller Benefit Plans shall not include any Foreign Benefit Plan .
“ Seller Affiliated Group ” means any Affiliated Group that includes a Company Entity, and has as its common parent the Seller or any Affiliate of the Seller (other than a Company Entity).
“ Seller Business ” means the Perrigo Animal Health Business involving the manufacturing, research & development, supply and distribution of animal health products carried on by the Seller worldwide immediately prior to the Closing, including its Omaha, Nebraska Animal Health Plant, the full range of Perrigo Animal Health’s product line, including pipeline projects in development, and all manufacturing, supply and distribution of such animal health products.
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“ Seller-Filed Tax Returns ” has the meaning set forth in Section 5.8(a)(i) .
“ Seller 401(k) Plan ” has the meaning set forth in Section 5.11(g) .
“ Seller FSA Plan ” has the meaning set forth in Section 5.11(h)(i) .
“ Seller Indemnitees ” has the meaning set forth in Section 8.3(a ) .
“ Seller Parent ” has the meaning set forth in the preamble to this Agreement.
“ Seller Parties ” has the meaning set forth in Section 5.10(a ) .
“ Software ” means (a) all computer software and databases, including source code and object code, development tools, comments, user interfaces, menus, buttons and icons; (b) all files, data, scripts, application programming interfaces, manuals, design notes, programmers’ notes, architecture, algorithms and other items and documentation related thereto or associated therewith; (c) any derivative works, foreign language versions, fixes, upgrades, updates, enhancements, new versions, previous versions, new releases and previous releases thereof; and (d) all media and other tangible property necessary for the delivery or transfer thereof.
“ Straddle Period ” has the meaning set forth in Section 5.8(c)(i ) .
“ Supplemental Request ” has the meaning set forth in Section 5.18(g) .
“ Syndication Documents ” has the meaning set forth in Section 5.18(e)(iii) .
“ Target Working Capital ” means $19,588,000.
“ Tax ” or “ Taxes ” means any net or gross income, net or gross receipts, net or gross proceeds, profits, franchise, withholding, ad valorem, personal property (tangible and intangible), employment, payroll, sales and use, social security, disability, occupation, real property, severance, excise, capital gains, capital stock, user, leasing, lease, transfer, natural resources, value added, gaming, license, capital, estimated, goods and services, stamp, fuel, interest equalization, registration, recording, premium, turnover, unclaimed or abandoned property, alternative or add-on, windfall or excess profits, environmental, unemployment or other tax or customs duties or amount imposed by (or otherwise payable to) any including any interest, penalty or addition thereto, in each case, whether disputed or not.
“ Tax Claim ” has the meaning set forth in Section 5.8(e)(i) .
“ Tax Returns ” means any return, report, claim for refund or similar statement filed or required to be filed with any Governmental Entity with respect to any Taxes (including any attached schedules), including any information return, claim for refund, amended return and declaration of estimated Tax.
“ Tax Sharing Agreement ” means any existing agreement or arrangement (whether or not written) binding any of the Company Entities that provides for the allocation, apportionment, sharing or assignment of any Tax liability or benefit, or the transfer or assignment
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of income, revenues, receipts or gains for the purpose of determining any Person’s Tax liability, provided that such term shall not include (i) any provisions of contracts entered into in the ordinary course of business with third parties that normally include these type of provisions such as leases or credit agreements or (ii) any provision of this Agreement.
“ Termination Fee ” has the meaning set forth in Section 7.2(b) .
“ Third-Party Claim ” has the meaning set forth in Section 8.4(a ) .
“ Third-Party Defense ” has the meaning set forth in Section 8.4(b ) .
“ Transaction Costs ” means all out-of-pocket fees, costs and expenses incurred by the Company Entities prior to the Closing in connection with the preparation, negotiation and execution of this Agreement and consummation of the Transactions to the extent not paid at or prior to the Closing, including all fees or payments owed to William Blair & Co in connection with the transactions contemplated by this Agreement, and any transaction, change in control, severance or similar payments that are payable to any current or former employee, independent contractor, director or other service provider of the Seller or its subsidiaries, in each case solely as a result of the Transactions, including the employer portion of any employment and payroll Taxes related thereto.
“ Transaction Permitted Liens ” has the meaning set forth in Section 3.3(b)(iv ) .
“ Transactions ” means the transactions contemplated by this Agreement.
“ Transaction Tax Deductions ” means any tax deduction attributable to the payment by the Seller (or a Company Entity prior to the Closing) of an amount included in calculating the Closing Amounts (including any amount that would have been included in calculating the Closing Amounts but for the fact that such amount was paid prior to the Closing), Transaction Costs or any deduction for unamortized financing costs of the Company Entities and premium deductions arising from the repayment of indebtedness; provided , that the parties shall make any available elections under Revenue Procedure 2011-29, 2011-18 IRB to treat seventy percent (70%) of any success based fees that were paid as an amount that did not facilitate the transactions contemplated by this Agreement, and therefore to treat seventy percent (70%) of such costs as deductible in the taxable year that included the Closing Date for U.S. federal income tax purposes.
“ Transferred FSA Balances ” has the meaning set forth in Section 5.11(h)(i) .
“ Transfer Taxes ” means all transfer, sales, use, real property transfer, goods and services, value added, documentary, stamp duty, gross receipts, excise, transfer and conveyance Taxes and other similar Taxes, duties, fees or charges.
“ Transition Services Agreement ” has the meaning set forth in Section 2.3(a)(v) .
“ Unaudited Financial Statements ” has the meaning set forth in Section 5.14(b ) .
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“ Unauthorized Code ” means any virus, Trojan horse, worm, or other Software routines or hardware components designed to permit unauthorized access, to disable, erase or otherwise harm Software, hardware or data.
“ U.S. Severance Policy ” means the Perrigo Company PLC U.S. Severance Policy amended and restated effective as of February 13, 2019.
“ WARN Act ” has the meaning set forth in Section 3.14(f) .
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Schedule A-1
Accounting Principles; Sample Calculation; Closing Statement Format
R-1
Accounting Principles: 1. The Estimated Closing Statement and the Closing Statement shall be prepared in accordance with the following Accounting Principles: (a) the following accounting methods, policies, practices, principles, bases and procedures, including classification and estimation methodology: (i) shall not include any purchase accounting or other adjustment arising out of the consummation of the Transactions;
(ii) shall be based on facts and circumstances as they exist up to the Closing, and shall exclude the effect of any act, decision or event occurring after the Closing;
(iii) shall include the same line accounts (and only those line accounts) set forth in the Sample Calculation below with respect to the calculation of the Closing Working Capital;
(iv) the Estimated Closing Statement and Closing Statement shall be prepared in U.S. Dollars, and all amounts included in the Estimated Closing Statement and Closing Statement denominated in a currency other than U.S. Dollars shall be converted into U.S. Dollars at the mid-point U.S. Dollar spot rate of exchange applicable to such other currency quoted by The Wall Street Journal as of the close of business on the Business Day prior to the Closing;
(v) the Estimated Closing Statement and Closing Statement shall be prepared on the basis that the Company is a going concern and shall exclude (except with respect to Transaction Costs) the effect of the change of control or ownership of the Company and will not take into account the effects of any post-Closing reorganizations or the post-Closing intentions or obligations of the Buyer or its Affiliates;
(vi) intercompany balances shall be reconciled and eliminated and any unreconciled liabilities shall be released, for which no amounts shall be included in Closing Indebtedness or Closing Working Capital;
(vii) no new categories, classifications, or types of accrued liabilities, employee-related liabilities or other types of current liabilities will be included in Closing Working Capital that were not classified as such in the Interim Financial Statements;
(viii) where an accrual, provision or reserve was made in the Interim Financial Statements in relation to any matter or series of related matters, no increase in that accrual, provision or reserve shall be made in the calculation of Closing Working Capital unless since the preparation of |
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such balance sheet new facts or circumstances have arisen prior to 12:01 a.m. ET on the Closing Date which justify such increase using the same policies, methods and estimation techniques, as set out in paragraph (b) below;
(ix) the Estimated Closing Statement and the Closing Statement shall be prepared so as not to include any provision with respect to any matter (A) which is the subject of an indemnity in favor of the Buyer or any of its Affiliates under this Agreement or any of the other Ancillary Agreements or (B) to the extent it will be assumed or settled by the Seller or any of its Affiliates at or after the Closing; and
(x) For purposes of determining any component of the Estimated Closing Statement and the Closing Statement, the application of GAAP shall be interpreted as if FASB Accounting Standards Codification Topic 842, Accounting for Leases, has not taken effect;(b) to the extent not addressed in Section 1(a) above, the accounting methods, policies, practices, principles, bases and procedures, including classification and estimation methodology (including in respect of the exercise of management judgment), adopted in the preparation of the Annual Financial Statements; and (c) to the extent not otherwise addressed in Section 1(a) or Section 1(b) above, GAAP, as in effect as of the date of this Agreement. 2. For the avoidance of doubt: (a) Section 1(a) above shall take precedence over Section 1(b) and Section 1(c) above; and (b) Section 1(b) above shall take precedence over Section 1(c) above. |
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Sample Calculation:
Illustrative Calculation of Closing Working Capital (December 31, 2018)
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Account
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Closing
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Current Assets |
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|
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Net Accounts Receivable |
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|
|
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11000 - Accounts Receivable - Trade |
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(2,448) |
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(2,448) |
11001 - Accounts Receivable - Reconciliation Acct |
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9,337 |
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9,337 |
11005 - Accounts Receivable - BAC |
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(63) |
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(63) |
11010 - Accounts Receivable - Credit Memo Accrual |
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- |
|
- |
11230 - Accounts Receivable - Other |
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5 |
|
5 |
11502 - Unsaleables Allowance |
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(313) |
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(313) |
11500 - Allowance for Doubtful Accounts |
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- |
|
- |
Net Inventory |
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|
|
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12000 - Inventory - Raw Materials |
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3,624 |
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3,624 |
12020 - Inventory - Packaging |
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2,476 |
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2,476 |
12310 - WIP - Subassemblies |
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1,323 |
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1,323 |
12330 - WIP-Open Productions Orders |
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- |
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- |
12500 - Inventory - Finished Assemblies |
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10,067 |
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10,067 |
12530 - Inventory - Unbilled Shipments 12530 |
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- |
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- |
12535 - Inventory - Unbilled Shipments 12535 |
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(81) |
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(81) |
12540 - Finished Goods Adjustment |
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182 |
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182 |
13020 - Reserve for Obsolescence |
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(1,567) |
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(1,567) |
13080 - Reserve for Production Variance |
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1,027 |
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1,027 |
13090 - Reserve for PPV |
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1 |
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1 |
Prepaid Expense |
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|
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15020 - Prepaid Insurance - General Liability |
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368 |
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368 |
15250 - Prepaid - Miscellaneous |
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1,387 |
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1,387 |
Assets Held for Sale |
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|
|
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15800 - Assets Held for Sale |
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- |
|
- |
Current Liabilities |
|
|
|
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Accounts Payable |
|
|
|
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20001 - Trade Payables - Reconciliation Accoun |
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(2,128) |
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(2,128) |
20002 - Employees as Vendors - Reconciliation |
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0 |
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0 |
20012 - GR/IR Clearing Account |
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(264) |
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(264) |
20020 - Trade Payables - Other |
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(156) |
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(156) |
20040 - Trade Payables - Estimate |
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(927) |
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(927) |
Accrued Payroll |
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|
|
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21020 - Accrued Payroll |
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- |
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- |
21040 - Accrued Administrative Bonus |
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(378) |
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(378) |
21041 - Accrued Salaried Employee Incentive Bonus |
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(214) |
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(214) |
21050 - Accrued Sales Bonus |
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- |
|
- |
21180 - Donations Withheld |
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- |
|
- |
21230 - Miscellaneous Deductions Withheld |
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(1) |
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(1) |
21290 - Accrued Sick Pay |
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(415) |
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(415) |
21330 - Accrued Profit Sharing Contribution |
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(321) |
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(321) |
21400 - Accrued Severance |
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- |
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- |
Accrued Customer Program |
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|
|
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22500 - Accrued Volume Incentive Rebate |
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(59) |
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(59) |
23000 - Accrued Overbills |
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(4,200) |
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(4,200) |
Accrued Other |
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|
|
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22000 - Accrued Commissions |
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(46) |
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(46) |
24020 - Accrued Property Taxes |
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(385) |
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(385) |
24045 - Sales |
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39 |
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39 |
24130 - Accrued Hospitalization |
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(317) |
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(317) |
24200 - Other Accruals 24200 |
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(565) |
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(65) |
24320 - Accrued Royalties and Profit Sharing Accrual |
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- |
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- |
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|
|
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Closing Working Capital |
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15,486 |
1 - For the avoidance of doubt, Closing Working Capital shall exclude accruals related to Virbac (lost customer).
The Sample Calculation set forth above has been included for illustrative purposes. The line items included in the Sample Calculation represent the line items to be included in Closing Working Capital; provided , that the numbers contained within the Sample Calculation shall not form part of the actual calculation of Closing Working Capital, which shall be based on the Current Assets and Current Liabilities of the Company Entities as of 12:01 a.m. Eastern Time on the Closing Date. In addition, Closing Working Capital shall be presented using the same format as that of the Sample Calculation above.
Closing Statement Format:
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(amounts in $) |
Base Purchase Price |
$xxx |
plus (a) Closing Working Capital, minus (b) Target Working Capital |
[xxx][(xxx)] |
plus Closing Cash |
(xxx) |
minus Closing Indebtedness |
(xxx) |
minus Closing Transaction Costs |
(xxx) |
[Purchase Price/Closing Payment] |
$xxx |
Net Closing Payment to the Seller |
$xxx |
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The Closing Statement Format set out above describes the format in which the Estimated Closing Statement and the Closing Statement shall be delivered.
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Exhibit A
Debt Financing Commitment
(see attached)
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Exhibit B
Form of Transition Services Agreement
(see attached)
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Exhibit C
Form of Resignations
(see attached)
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Exhibit 5.8(f)
Section 336(e) Agreement
(see attached)
R-4
PetIQ, Inc. Enters Into Definitive Agreement to Acquire Perrigo Animal Health
Diversifies and Expands Branded Pet Health and Wellness Product Offerings to Create an Animal Health Company with Approximately $605 Million in Pro Forma 2018 Net Sales
Combines PetIQ’s and Perrigo Animal Health’s Complementary Product Portfolio and Brands to Significantly Broaden Customer Reach, Increase Manufacturing Scale and Enhance Margin Profile
Strategic Transaction Expected to Generate $3 Million in Run-rate Cost Synergies by 2020 and More Than $5 Million in Cost Synergies by 2021
EAGLE, Idaho and OMAHA, Neb. – May 8, 2019 – PetIQ, Inc. (“PetIQ” or the “Company”) (Nasdaq: PETQ), a leading pet medication and wellness company, and Perrigo Animal Health today announced they have executed a definitive agreement under which PetIQ will acquire Perrigo Animal Health, a leading manufacturer of vet quality products for pet parents, from Perrigo Company plc (NYSE; TASE: PRGO). The $185 million cash transaction has been unanimously approved by PetIQ’s Board of Directors. The purchase price reflects an adjusted EBITDA multiple of 9.0x, based on estimated fiscal year 2020, including potential run-rate cost synergies. PetIQ expects that this acquisition will be accretive to earnings in the first twelve months following the closing and thereafter. The strategic, synergistic acquisition is expected to close during the third quarter of 2019 subject to customary closing conditions, including the receipt of U.S. antitrust approval.
Headquartered in Omaha, Nebraska, Perrigo Animal Health is a leading, diversified manufacturer and marketer of over-the-counter pet health and wellness products with products sold under brands including PetArmor®, Sentry®, and Sergeant’s™. With distribution across pet, grocery, mass, e-commerce, drug, club and specialty retail sales channels, Perrigo Animal Health has sales across the flea and tick, de-wormer, behavioral, dental and other pet health and wellness product categories and is supported by the state-of-the-art manufacturing facility located in Omaha, Nebraska
Cord Christensen, PetIQ’s Chairman and Chief Executive Officer commented, “We believe this strategic transaction will create significant long-term value for all of our stakeholders as we further the execution of our Follow the Pets long-term strategy by combining our companies’ complementary branded pet health and wellness product offerings to create a larger and more diversified business. Similar to PetIQ, Perrigo Animal Health has a track record of building sales and category growth in areas complementary to PetIQ through offering high-quality and affordable veterinarian products to pet parents. This business combination is aligned with our mission to make pets’ lives better through improved access to affordable pet health care. We are excited for the opportunity to welcome Perrigo Animal Health’s team to PetIQ as we capitalize on our opportunities to increase our manufacturing scale, expand product and brand diversity, and improve our customer reach, all while we capture significant cost savings and synergies to fuel greater net sales and profitability.”
Strategic and Financial Benefits
The transaction will create a larger and more diversified animal health company. PetIQ believes the combination will provide the following strategic and financial benefits:
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Diversifies and Expands Pet Health and Wellness Branded Product Offerings: The combination of PetIQ’s existing portfolio of products sold under brands including PetAction™, Advetca ®, PetLock® with the complementary products sold under brands of Perrigo Animal Health, PetArmor®, Sentry®, and Sergeant’s™, creates a combined company with approximately $605 million in pro forma 2018 net sales. The acquisition creates a company with meaningful product category, brand, and sales channel diversity with a focus on accessible and affordable, high-quality pet preventive and wellness veterinary products . |
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Accelerates Whitespace Realization and Enhances Customer Relationships: The acquisition of Perrigo Animal Health allows PetIQ to more rapidly realize the opportunity provided by the macro trends in the pet industry, where there is rising pet ownership, a heightened sensitivity to the rising healthcare costs associated with pet ownership, pet humanization, and increased aging of pets that depend on better healthcare. Complementary distribution channels and sales teams provide actionable whitespace opportunities in new and existing customers representing the potential to accelerate net sales growth for both PetIQ’s and Perrigo Animal Health’s current product portfolios. |
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Increased Operating Scale Provides Significant Future Synergies and Enhances Margin Profile : In addition to benefiting from greater operating scale and increased procurement savings, Perrigo Animal Health adds outstanding manufacturing expertise and marketing capabilities that will provide future cost benefits to PetIQ. Together, the combined company expects to generate more than $3 million in run-rate cost synergies by 2020 and growing to more than $5 million by 2021 primarily from procurement, manufacturing and marketing efficiencies. Beyond these cost benefits, the combined company expects to realize additional benefits of scale via sharing of best practices, leveraging established infrastructure and strengthening retail partnerships. |
Transaction Details
Under the terms of the $185 million cash transaction agreement, Perrigo Animal Health will become an indirect wholly-owned subsidiary of PetIQ. The Company plans to finance the transaction with $25 million of existing cash on hand, $145 million of new term loan financing committed by Ares Capital Management, with the remaining balance to be financed through PetIQ’s existing revolving credit facility with East West Bank. Pro forma for the transaction, net debt-to-Adjusted EBITDA leverage ratio is expected to be approximately 4.5x 1 . PetIQ is committed to reducing the leverage after closing using a combination of organic growth and free cash flow. PetIQ expects to realize cash tax savings related to the depreciation and amortization of assets acquired, of approximately $18 million on a present value basis.
1 Pro forma net leverage defined as PetIQ’s net debt as of March 31, 2019 as adjusted for the proposed transaction, covered by expected 2019 Pro forma Adjusted EBITDA.
PetIQ expects that this acquisition will be accretive to earnings in the first twelve months following closing and thereafter. The transaction is expected to close during the third quarter of 2019, subject to customary closing conditions including the receipt of U.S. antitrust approvals. PetIQ will file with the Securities and Exchange Commission Perrigo Animal Health historical financial statements as well as historical combined company pro forma financial statements no later than 75 days following the closing on the transaction.
Advisors
Jefferies LLC is serving as financial advisor, KPMG as accounting and audit advisor, and Winston & Strawn LLP and Baker Botts LLP are acting as legal counsel to PetIQ.
Conference Call and Webcast
The Company will host a conference call and webcast where members of the executive management team will discuss this transaction and its first quarter 2019 financial results today, May 8, 2019, at 4:30 p.m. ET. The conference call and supplemental investor presentation will be available live over the Internet through the “Investors” section of the Company’s website at www.PetIQ.com . To participate on the live call listeners in North America may dial 855-327-6837 and international listeners may dial 631-891-4304.
A replay of the conference call will be archived on the Company’s website and telephonic playback will be available through May 29, 2019. North American listeners may dial 844-512-2921 and international listeners may dial 412-317-6671 the passcode is 10006676.
About PetIQ
PetIQ is a leading, rapidly growing pet health and wellness company. Through over 60,000 points of distribution across retail and e-commerce channels, PetIQ and VIP Petcare, a wholly-owned subsidiary, have a mission to make pet lives better by educating pet parents on the importance of offering regular, convenient access and affordable choices for pet preventive and wellness veterinary products and services. PetIQ believes that pets are an important part of the family and deserve the best products and care we can give them. For more information, visit www.PetIQ.com .
About Perrigo
Perrigo Company plc is dedicated to making lives better by bringing "Quality, Affordable Self-Care Products™" that consumers trust everywhere they are sold. The Company is a leading provider of over-the-counter health and wellness solutions that enhance individual well-being by empowering consumers to proactively prevent or treat conditions that can be self-managed.
With brands such as PetArmor®, Sentry®, and Sergeant’s®, Perrigo Animal Health brings vet quality solutions to consumers at retail with a commitment to making high quality, affordable pet care products for animals and their owners. Visit Perrigo online at http://www.perrigo.com.
Forward Looking Statements
This press release contains forward-looking statements that involve risks and uncertainties, such as statements about our plans, objectives, expectations, assumptions or future events. In some cases, you
can identify forward-looking statements by terminology such as "anticipate," "estimate," "plan," "project," "continuing," "ongoing," "expect," "believe," "intend," "may," "will," "should," "could" and similar expressions. Forward-looking statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from any future results, performances, or achievements expressed or implied by the forward-looking statements. Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time those statements are made or management's good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to, our ability to successfully grow our business through acquisitions; our dependency on a limited number of customers; our ability to implement our growth strategy effectively; disruptions in our manufacturing and distribution chains; competition from veterinarians and others in our industry; reputational damage to our brands; economic trends and spending on pets; the effectiveness of our marketing and trade promotion programs; recalls or withdrawals of our products or product liability claims; our ability to manage our manufacturing and supply chain effectively; disruptions in our manufacturing and distribution chains; our ability to introduce new products and improve existing products; our failure to protect our intellectual property; costs associated with governmental regulation; our ability to keep and retain key employees; our ability to sustain profitability; and the risks set forth under the “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2018 and other reports filed from time to time with the Securities and Exchange Commission.
Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or operating results. The forward-looking statements speak only as of the date on which they are made, and, except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Consequently, you should not place undue reliance on forward-looking statements.